1962 (10) TMI 18 - HC - Companies Law

Power of court to rectify register of members and Winding up Liability as contributories of present and past members

Summary

Issues Involved:
1. Validity of the allotment of shares to V. Rajagopal.
2. Inclusion of V. Rajagopal's name in the list of contributories.
3. Timeliness and propriety of Rajagopal's application for rectification of the share register and list of contributories.
4. Legality of the transfer of shares during winding-up proceedings.

Detailed Analysis:

1. Validity of the Allotment of Shares to V. Rajagopal:
The court examined the allotment of 406 shares to V. Rajagopal and 160 shares to his wife during the liquidation proceedings. Rajagopal contended that the allotment was irregular and invalid as it occurred after the filing of the petition for winding up the company. The official liquidator, however, argued that the allotment was recognized by the Controller of Insurance and Rajagopal's name was included in the share register. The court noted that Rajagopal himself applied to the Controller of Insurance to validate the irregularities in the allotment of shares, and the Controller recognized this allotment (Exhibit B-5).

2. Inclusion of V. Rajagopal's Name in the List of Contributories:
The official liquidator followed the procedure laid down in the Companies Act and Insurance Act to settle the list of contributories, including Rajagopal's name. Despite being served multiple notices and having ample opportunity to object, Rajagopal did not take timely steps to remove his name from the list. The court emphasized that Rajagopal was aware of his inclusion in the list and failed to act promptly, thereby waiving his right to object.

3. Timeliness and Propriety of Rajagopal's Application for Rectification:
Rajagopal filed applications for rectification of the share register and list of contributories long after the winding-up order was passed. The court referred to several precedents, including Scottish Petroleum Co., In re [1883] LR 23 Ch. D. 413 and Lakshmi Narasa Reddi v. Official Receiver, Sree Films Ltd. [1951] 21 Comp. Cas. 201, which establish that a delay in seeking rectification can be fatal. The court held that Rajagopal's applications were not maintainable due to the significant delay and the intervening winding-up order, which created rights for third parties (creditors).

4. Legality of the Transfer of Shares During Winding-Up Proceedings:
The court addressed the legality of the transfer of shares during winding-up proceedings in C.M.A. No. 166 of 1960. The transfer of shares by L. Balasubramania Sastriar to three individuals was found to offend section 227(2) of the Companies Act, which prohibits such transfers without the court's sanction. The court upheld the removal of the transferees' names from the register, affirming the District Judge's decision.

Conclusion:
The appeals filed by the official liquidator (C.M.A. Nos. 168, 165, and 167 of 1960) were allowed, and the applications for rectification by Rajagopal were dismissed due to the delay and the winding-up order. C.M.A. No. 166 of 1960 was dismissed, upholding the removal of names from the register for transfers made during winding-up proceedings. C.M.A. No. 119 of 1960, filed by Rajagopal for further rectification, was summarily dismissed. The costs of the liquidator were ordered to come out of the assets of the company.