1960 (5) TMI 19 - HC - Companies Law

Summary

Issues:
1. Validity of the allotment of shares
2. Competency of the petition
3. Relief sought

Analysis:

Validity of the Allotment of Shares:
The case involved a petition under section 155 of the Companies Act, 1956, by a company seeking rectification of its register of shareholders and direction to the Registrar of Companies to register the return of allotment. The company had entered into underwriting agreements with several parties for the subscription of shares, but the underwriters failed to fulfill their obligations within the prescribed time. The company then proceeded to allot shares to the underwriters and requested the Registrar to register the allotment. However, the Registrar refused to register the allotment, citing non-payment of at least 5% of the nominal amount of shares as required by section 69 of the Act. The company sought a declaration that the allotments were valid and binding on the underwriters, and their names should remain on the register of shareholders.

Competency of the Petition:
Respondents raised preliminary objections regarding the competency of the petition under section 155 of the Companies Act, 1956. They questioned the validity of the underwriting agreements, citing reasons such as pending criminal cases against the managing agents of the company and non-renewal of a crucial license. The respondents argued that the underwriting agreements had become frustrated, rendering the shares unsellable. The court examined the scope of section 155, emphasizing the need for rectification only when there is an error or defect in the register. The court noted that the names of the underwriters were already on the register as shareholders, and there was no need for rectification initiated by the company.

Relief Sought:
After considering the arguments and evidence presented by both parties, the court dismissed the petition, citing that the register did not require rectification as the names of the underwriters were already included as shareholders. The court refrained from giving findings on the merits of the issues raised, emphasizing that the matter could be resolved based on the competency of the petition. The petition was dismissed without costs.

In conclusion, the court's judgment focused on the procedural aspect of rectification under section 155 of the Companies Act, highlighting the need for a valid basis for seeking rectification of the register. The court found that since the names of the underwriters were already included on the register, there was no need for rectification initiated by the company. The dismissal of the petition was based on the lack of grounds for rectification, rather than the merits of the issues raised.