1956 (11) TMI 21 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Court
2. Barred by Time
3. Compliance with Articles of Association
4. Title to Shares
5. Bona Fide Refusal by Directors
6. Maintainability of Application under Section 38 of the Companies Act

Detailed Analysis:

1. Jurisdiction of the Court:
The company argued that the court had no jurisdiction over the matter. However, this issue was not elaborated upon in the judgment, implying that the court found it had the necessary jurisdiction to hear the case.

2. Barred by Time:
The company contended that the application was barred by time. The court, however, did not find merit in this argument, as it proceeded to evaluate the substantive issues on their merits.

3. Compliance with Articles of Association:
The company argued that the petitioner's application did not comply with the articles of association, specifically Article 11, which gives the board of directors the right to refuse to register the transfer of any share without showing any cause. The court examined this contention in detail, noting that the directors must act bona fide and in the interests of the company. The court found that the refusal to register the shares was not bona fide and was not in the interests of the company.

4. Title to Shares:
The petitioner claimed title to the shares by virtue of the merger of the State of Mayurbhanj with the State of Orissa. The court reviewed the relevant merger orders and certificates, concluding that the petitioner had established title to the shares by operation of law. The court noted that the company should have requested any additional documents if it had doubts about the petitioner's title.

5. Bona Fide Refusal by Directors:
The company argued that the refusal to register the shares was justified due to the non-execution of an agreement that was part of the memorandum of association. The court found this argument unconvincing, noting that the company could have pursued legal remedies for specific performance or damages. The refusal was deemed not bona fide, arbitrary, and not in the interests of the company.

6. Maintainability of Application under Section 38 of the Companies Act:
The company contended that the application under Section 38 was not maintainable and that the petitioner should seek relief through a civil suit. The court disagreed, stating that Section 38 allows for the determination of questions of title and provides for an appeal in the manner directed by the Code of Civil Procedure. The court found that the issues involved were not complicated and could be decided within the scope of Section 38.

Conclusion:
The court allowed the petition, directing the company to rectify the register by inserting the name of the petitioner as the holder of the shares Nos. 1 to 7,500. The court found that the refusal to register was not bona fide and that the petitioner had established title to the shares by operation of law. The application under Section 38 was deemed maintainable, and the court awarded costs to the petitioner.