1957 (2) TMI 33 - HC - Companies Law

Shares warrants and entries in register of members and Power of court to rectify register of members

Summary

Issues Involved:
1. Whether the respondents Nos. 2, 3, and 4 sold the shares in dispute to the petitioner, the Union of India.
2. If so, whether the petition is maintainable.
3. Whether respondent No. 5, Mrs. G. R. Perry, has a lien on the shares in dispute and the effect of such lien.

Detailed Analysis:

Issue 1: Sale of Shares
The petitioner, the Union of India, claimed that respondents Nos. 2 (Ram Dial), 3 (Gurdial), and 4 (Vidya Vati) agreed to sell their shares to the petitioner. The respondents executed blank transfer deeds and handed over the share scrips. The price was to be fixed by the Railway Administration. The petitioner contended that the sale was complete upon the execution of the transfer deeds and the handing over of the scrips, despite the price not being paid at that time.

However, the court observed that the letters accompanying the transfer deeds indicated that the sale was an offer rather than a completed contract. The letters stated: "I, [seller], hereby submit a signed transfer deed for the sale of [number of shares] shares of the face value of Rs. 4,000 each of the Kulu Valley Transport Ltd., Pathankot, and request the Railway Administration to pay me any amount that it considers just and reasonable. This is in no way binding on the Railway Administration to make the purchase."

The court held that the acceptance of the Railway Administration and the fixation of the price were not communicated to Gurdial and Vidya Vati. Consequently, the proposal could be revoked, and the respondents exercised this right by revoking the proposal before acceptance was communicated. Therefore, there was no completed sale with respect to the shares of Gurdial and Vidya Vati.

Issue 2: Maintainability of the Petition
The court considered whether the transfer deeds were duly stamped and properly executed. The transfer deeds executed by Gurdial and Vidya Vati were not properly stamped, as the stamps were not cancelled. According to Section 12 of the Stamp Act, an instrument bearing an adhesive stamp which has not been cancelled is deemed unstamped. The court rejected the petition concerning the shares of Gurdial and Vidya Vati on this ground as well.

Issue 3: Lien on Shares by Mrs. Perry
Mrs. Perry claimed a lien on the shares Nos. 39 and 40 of Ram Dial, stating that they were pledged with her husband in 1947. The court found sufficient grounds to believe her statement, supported by letters from the company acknowledging the lien. The share certificates for these shares were not handed over to the petitioner, and under Section 108(1) of the Companies Act, the transfer could not be registered without the share certificates. Therefore, the petitioner's claim for these shares was rejected.

Conclusion
The court concluded that the petition was rejected concerning the shares held by Gurdial and Vidya Vati (Nos. 14, 43, 44, and 45) and the shares Nos. 39 and 40 of Ram Dial. The petition was accepted for the remaining two shares (Nos. 41 and 42) held by Ram Dial, directing these shares to be registered in the name of the petitioner upon payment of Rs. 800 to Ram Dial. The petitioner was ordered to pay one set of costs to respondents Nos. 3 to 5 and get proportionate costs from Ram Dial, with counsel fees set at Rs. 200.