1978 (4) TMI 162 - HC - Companies Law

Shares warrants and entries in register of members, Powers of Court to rectify register of members

Summary

Issues Involved:
1. Validity of the transfer of shares.
2. Compliance with the Companies Act, 1956, specifically section 108.
3. Allegation of benami shareholding.
4. Proper stamping and execution of transfer documents.
5. Rectification of the register of members.

Detailed Analysis:

1. Validity of the Transfer of Shares:
The primary issue is whether the transfer of shares to Smt. Meena Devi in 1975, based on a transfer document allegedly executed in October 1965, is valid. The company claimed that the transfer documents were misplaced and only discovered in 1975, which led to the delayed transfer. Despite assuming the company's position as correct, the court had to determine if such a delay invalidated the transfer.

2. Compliance with the Companies Act, 1956, Specifically Section 108:
The court examined the provisions of section 108 of the Companies Act, which mandates that a proper instrument of transfer, duly stamped and executed, must be delivered to the company along with the share certificates. The amendment in 1965 introduced a time limit for the validity of transfer documents, which was six months from the commencement of the amendment. The court noted that the alleged deposit of the shares and transfer documents occurred within this six-month period, thus technically complying with the timeframe.

3. Allegation of Benami Shareholding:
The respondents argued that the petitioner was a benami shareholder for his late brother, Lala Bharat Singh, and that a blank transfer deed had been signed for Smt. Meena Devi. The petitioner denied this, emphasizing that he had paid for the shares issued in 1959 with his own funds. The court acknowledged the possibility of benami shareholding but stated that the beneficial ownership could not be determined in this proceeding under section 155 of the Companies Act.

4. Proper Stamping and Execution of Transfer Documents:
The court scrutinized the transfer document, noting that the stamps on the document bore the figure of King George the Sixth, which were not current in 1965. This raised doubts about the document's authenticity. The court concluded that the transfer deed was not "duly stamped" as required by section 108, rendering the transfer invalid.

5. Rectification of the Register of Members:
Given the invalidity of the transfer, the court ordered the rectification of the register of members to reinstate the petitioner's name. However, the court clarified that the determination of actual ownership or whether the petitioner was a benami holder must be established in separate civil proceedings. The court left the parties to bear their own costs and emphasized that the factual observations in this judgment should not be considered conclusive in any subsequent proceedings.

Conclusion:
The court concluded that the transfer of shares was invalid due to improper stamping and execution of the transfer documents. The petitioner's name was ordered to be reinstated in the register of members, with the actual ownership to be determined in separate civil proceedings. The court's observations on the facts were not to be treated as conclusive in any future litigation.