1957 (9) TMI 26 - HC - Companies Law

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

Issues Involved:
1. Whether the company had the right to refuse the registration of share transfers.
2. The effect of the Central Government's order under section 111 of the Companies Act.
3. The validity of the transfer deeds and the company's objections to them.
4. Compliance with the company's articles of association regarding the transfer process.
5. Whether the transferors needed to be parties to the proceedings.

Detailed Analysis:

1. Right to Refuse Registration of Share Transfers:
The petitioners sought an order directing the opponent company to register the transfer of shares in their favor under section 155 of the Companies Act, 1956. The company refused to register the transfer of shares, alleging that the petitioners were litigious and would act against the interests of the company. The court noted that section 82 of the Companies Act provides that shares are transferable as per the company's articles. The articles did not expressly reserve the power to refuse registration of shares except for shares not fully paid up. Therefore, the company had no power to refuse registration of the shares, and the court held that the company could not justify their refusal.

2. Effect of Central Government's Order under Section 111:
The petitioners had previously appealed to the Central Government under section 111, which ordered the company to register the shares. The company argued that the court should not interfere, as the Central Government's order was binding. However, the court held that section 155 of the Companies Act grants the court overriding powers to decide any question necessary for rectification, independent of any previous order by the Central Government. The court emphasized that section 155 is the controlling section and gives the court broad powers.

3. Validity of Transfer Deeds and Company's Objections:
The company argued that the transfer deeds were not valid and that there was no cash consideration for the transfer. The court found that the transfer deeds were duly attested and there was no indication of fraud or forgery. The company had not disputed the fact of transfer before the Central Government and failed to appear to substantiate their allegations. The court held that a company's denial of a transfer, which on its face is proper, should not oust the court's jurisdiction under section 155. The court also noted that the objection regarding the lack of cash consideration was irrelevant, as shares could be transferred as a gift.

4. Compliance with Articles of Association:
The company contended that the transfer deeds were not lodged in compliance with article 39, which requires the instrument of transfer to be deposited with the company. The court found this objection too technical and noted that section 51 of the Companies Act allows documents to be served by registered post. The petitioners had sent the transfer deeds by registered post, which was sufficient compliance. The company's refusal to accept the registered envelope was deemed frivolous and not indicative of bona fides.

5. Necessity of Transferors as Parties:
The company argued that the proceedings must fail because the transferors were not parties. The court held that there is no legal requirement for transferors to be parties in proceedings where the transferee seeks registration of shares. The normal procedure is to notify the transferor, and if no objection is received, to accept the transfer as genuine. The court concluded that the transferors were not necessary parties to the proceedings.

Conclusion:
The court allowed the petitions and ordered the opponent company to register the transfer of shares in the petitioners' names as per the transfer deeds dated May 24, 1956, and June 13, 1956. The company was also directed to notify the Registrar under section 156 of the Act and to pay the costs of the proceedings to the petitioners.

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