1963 (1) TMI 30 - HC - Companies Law

Transfer to Shares Power to refuse registration and appeal against refusal and Power of court to rectify register of members

Issues Involved:
1. Locus standi of the petitioner.
2. Maintainability of the petition under section 155 of the Companies Act, 1956, in view of the orders of the Central Government under section 111 of the Act.
3. Validity of the transfer of ten shares made by the managing partner of the managing agents.
4. Validity of the company's reasons for excluding respondent No. 2 from being a registered shareholder.
5. Allegation of mala fide exclusion of Sita Ram by the directors.
6. Relief.

Issue-wise Detailed Analysis:

Issue No. 1: Locus Standi of the Petitioner
The objection was that the petitioner could have no grievance if Sita Ram's name was entered in the register of members. However, under sub-section (1) of section 155 of the Act, any member of the company can move the court to rectify the register of members. The petitioner, being a member and director of the company, has locus standi to file the petition.

Issue No. 2: Maintainability of the Petition under Section 155 in View of the Orders of the Central Government under Section 111
The court found that section 155 of the Act, which allows for rectification of the register of members, does not override section 111, which provides for an appeal to the Central Government in case of refusal to register a transfer of shares. The court noted that section 111 is a new provision and includes penal consequences for non-compliance with the Central Government's orders. The court referred to several cases, including Sadashiv Shanka Dandige v. Gandhi Sewa Samaj Ltd., and found that section 155 does not confer overriding powers on the court against the appellate authority of the Central Government. The court held that the two sections provide alternative remedies, and since the Central Government had already directed the registration of the transfer, the petition under section 155 was not maintainable. The court answered this issue in the negative and dismissed the petition.

Issue No. 3: Validity of the Transfer of Ten Shares by the Managing Partner
The court noted that the deputy managing partner of the managing agents effected the transfer of shares to avoid penalties under sub-section (9) of section 111. The court found that the managing partner had the authority to comply with the Central Government's order within the stipulated time to avoid penal consequences, even though the board of directors did not expressly authorize the transfer. The function of the directors to approve the transfer ended with the Central Government's order.

Issue No. 4: Validity of the Company's Reasons for Excluding Respondent No. 2
The court did not specifically address this issue in detail, as the maintainability of the petition under section 155 was already decided against the petitioner.

Issue No. 5: Allegation of Mala Fide Exclusion of Sita Ram by the Directors
The court did not specifically address this issue in detail, as the maintainability of the petition under section 155 was already decided against the petitioner.

Issue No. 6: Relief
The petition was dismissed, and no order as to costs was made, considering the legal question was one of first impression.

Conclusion:
The petition was dismissed on the grounds that section 155 of the Companies Act, 1956, does not confer overriding powers on the court against the appellate authority of the Central Government under section 111. The court held that the two sections provide alternative remedies, and since the Central Government had already directed the registration of the transfer, the petition under section 155 was not maintainable.

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