1981 (4) TMI 189 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the register of members under Section 155 of the Companies Act, 1956.
2. Refusal by the board of directors to transfer shares to the petitioner.
3. Interpretation and application of Articles 36 to 39 of the company's Articles of Association.
4. The interests of the company and minor children in the decision-making process of the board.
5. The legal rights of heirs under the Hindu Succession Act.

Issue-Wise Detailed Analysis:

1. Rectification of the Register of Members under Section 155 of the Companies Act, 1956:
The petitioners sought rectification of the register of members to include the name of Petitioner No. 1 in place of her deceased husband. The court examined whether the board of directors was justified in withholding consent for the transmission of shares despite the extended succession certificate.

2. Refusal by the Board of Directors to Transfer Shares to the Petitioner:
The board of directors refused to transfer the shares to Petitioner No. 1, citing the long-term interests of the company, the circumstances leading to the death of Dhrubajyoti Barua, and the interests of the two minor children. The court noted that the board's decision must be exercised reasonably, bona fide, and for the company's benefit, not arbitrarily or capriciously.

3. Interpretation and Application of Articles 36 to 39 of the Company's Articles of Association:
Articles 36 to 39 deal with the transmission of shares. Article 37 stipulates that the heirs or executors of a deceased member shall be recognized by the company. Article 38 allows for the registration of shares in the name of the heir with the consent of the directors. Article 39 entitles the person to receive dividends but not to exercise other rights until registered as a member. The court emphasized that the transmission of shares is by operation of law, not by voluntary transfer, and the directors' consent is required for registration.

4. The Interests of the Company and Minor Children in the Decision-Making Process of the Board:
The board considered the interests of the company and the minor children in refusing to transfer the shares. The court found no clear evidence of how the company's interests would be adversely affected by the transmission. However, the circumstances surrounding the death of Dhrubajyoti Barua and the potential familial discord were noted, although these factors alone were not sufficient to deny the transfer.

5. The Legal Rights of Heirs under the Hindu Succession Act:
The court recognized that under the Hindu Succession Act, the property of a deceased male Hindu devolves upon his heirs, including his widow and children. The succession certificate obtained by Petitioner No. 1 included all 900 shares, but the court noted that it would not be consistent with Article 37 to register all shares in her name alone, as it would violate the rights of other heirs, including the minor children.

Conclusion:
The court refused to direct the rectification of the register of members to include the entire 900 equity shares in the name of Petitioner No. 1 alone. It left it open for the directors to register the names of all heirs, including Petitioner No. 1, to the extent of their respective shares if required by the heirs. The petition was rejected without costs due to the peculiar facts and circumstances of the case.