1961 (4) TMI 47 - HC - Companies Law

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

Summary

Issues Involved:

1. Compliance with Article 48 of the Articles of Association.
2. Applicability of Section 155 of the Companies Act, 1956.
3. Requirement of "duly stamped" instruments under Section 108 of the Companies Act, 1956.
4. Definition and cancellation of "duly stamped" under the Indian Stamp Act.
5. Interpretation of "instrument" under Section 2(14) of the Indian Stamp Act.
6. Notification regarding cancellation of "share transfer" stamps.

Issue-wise Detailed Analysis:

1. Compliance with Article 48 of the Articles of Association:

The company objected that the transfer forms used were not in accordance with Article 48 of the Articles of Association. Article 48(b) sets out a form for transfer or transmission of shares. The court found that there was substantial compliance with the requirement, if not verbatim. Moreover, Article 48(b) allows the transfer to be recorded "in any usual or common form which the board shall have approved." The court noted that it was within the board's discretion to approve the forms used by the petitioner and her transferors, and thus, the company's objection was deemed unreasonable.

2. Applicability of Section 155 of the Companies Act, 1956:

The company contended that only a member of the company could make an application under Section 155 of the Companies Act, 1956, suggesting that the remedies lay under Section 111 with an appeal to the Central Government. The court found this argument untenable, stating that Section 155 provides that any person aggrieved by default or unnecessary delay in entering on the register the fact of becoming a member may apply to the court for rectification. The court referenced the case of Sadaskiv Skankar Dandige v. Gandhi Sewa Samaj Ltd., affirming that Section 155 gives the court overriding power, notwithstanding any previous order of the Central Government.

3. Requirement of "duly stamped" instruments under Section 108 of the Companies Act, 1956:

The company argued that under Section 108, a transfer of shares could not be registered unless a proper instrument of transfer "duly stamped" was delivered. The court agreed, noting that the instruments in question were not "duly stamped" as the stamps affixed were not cancelled. Section 2(11) of the Indian Stamp Act defines "duly stamped" as an instrument bearing an adhesive or impressed stamp of not less than the proper amount, affixed in accordance with the law, which includes cancellation of the stamp as per Section 12 of the Stamp Act.

4. Definition and cancellation of "duly stamped" under the Indian Stamp Act:

The court rejected the petitioner's argument that the cancellation requirement under Section 12 of the Stamp Act was irrelevant for determining whether an instrument was "duly stamped" under Section 108 of the Companies Act. The court emphasized that for an instrument to be considered "duly stamped," it must comply with the cancellation requirements of Section 12. Since the stamps on the instruments of transfer were not cancelled, they were deemed unstamped.

5. Interpretation of "instrument" under Section 2(14) of the Indian Stamp Act:

The petitioner argued that the instruments of transfer were not "instruments" under Section 2(14) of the Stamp Act until the board of directors approved the transfer. The court disagreed, stating that an "instrument" includes every document by which any right or liability is created, transferred, limited, extended, extinguished, or recorded. The court cited In re Copal Varnish Co. Ltd., noting that an instrument of transfer passes an equitable interest in the shares to the transferee, making it an "instrument" under Section 2(14).

6. Notification regarding cancellation of "share transfer" stamps:

The petitioner relied on a notification published in the Calcutta Gazette on July 24, 1941, arguing that it was the company's duty to cancel the stamps at the time of registration. The court interpreted the notification as requiring a second cancellation by the company to render the stamps permanently unfit for reuse, even if previously cancelled under Section 12 of the Stamp Act. The court concluded that the initial cancellation as per Section 12 was still required.

Conclusion:

The court found that the company was justified in refusing the registration of the shares due to the instruments not being "duly stamped." The application for rectification of the share register was dismissed. No order as to costs was made, but the company was directed to return the relevant share scrips and instruments of transfer to the petitioner within a fortnight.