1966 (10) TMI 79 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the register of members under Section 155 of the Companies Act.
2. Legality of the transfer of shares without a proper instrument of transfer.
3. Delay in filing the petition.
4. Application of Section 108 and relevant articles of the company's memorandum of association.
5. Jurisdiction and summary proceedings under Section 155.

Detailed Analysis:

1. Rectification of the Register of Members under Section 155:
The petitioner sought an order under Section 155 of the Companies Act to rectify the register of members of the company by inserting his name as the holder of two fully paid-up equity shares. The petitioner's case was that his name had been transferred without authority and illegally to the second respondent, necessitating rectification.

2. Legality of the Transfer of Shares without a Proper Instrument of Transfer:
The petitioner argued that the transfer of shares was executed without a proper instrument of transfer, contrary to Section 108 of the Companies Act and the company's articles of association. The relevant articles (53, 54, 55, 58, 59, 62, and 63) and Section 108 mandate that a duly stamped and executed instrument of transfer must be submitted for the transfer to be valid. The company had transferred the shares without such an instrument, making the transfer prima facie illegal.

3. Delay in Filing the Petition:
The respondents contended that the petition was filed after a significant delay. However, the court noted that the petitioner had lost the right to file a suit due to the law of limitation, making the petition under Section 155 the appropriate remedy.

4. Application of Section 108 and Relevant Articles of the Company's Memorandum of Association:
The court emphasized the mandatory nature of Section 108 and the relevant articles, which require a proper instrument of transfer for the registration of share transfers. The court referred to several precedents, including Public Passenger Service Ltd. v. M. A. Khadar and Associated Clothiers v. Union of India, to support the petitioner's contention that the burden was on the company to show sufficient cause for the transfer.

The court found that the company had transferred the shares without a proper instrument of transfer and without the petitioner's application, in violation of Section 108 and the articles. The company had relied on statements made by Gordhanbhai Patel without sufficient evidence of his title to the shares, leading to an unlawful transfer.

5. Jurisdiction and Summary Proceedings under Section 155:
The court held that the jurisdiction under Section 155 is beneficial and should be liberally exercised. The court noted that complicated questions of title or facts, if present, would necessitate a suit. However, in this case, the court found no such complications and deemed it unnecessary to refer the petitioner to a suit.

The court rejected the respondents' contention that the transfer without an instrument was justified by the company's articles or that there was no completed contract between the petitioner and the company. The court found that the company had acted without sufficient cause in transferring the shares and omitting the petitioner's name from the register.

Conclusion:
The court ordered the rectification of the register of members by inserting the petitioner's name as the holder of the two shares and directed the respondents to pay costs fixed at Rs. 500. The judgment underscores the mandatory nature of Section 108 and the necessity for a proper instrument of transfer in share transactions.