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TMI Blog1961 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... the 27th of May, 1955. Thereafter the first respondent purchased from the same party another lot of 89 shares which were similarly transferred and registered by the company on the 6th and nth of October, 1956. After the acquisition of 44 shares, the first respondent was appointed a director on the 27th of February, 1956. At that time, the company had two other directors, Hanuman Pershad and Bisakha Singh, who are appellants Nos. 2 and 3. The first respondent did not feel quite content with the management of the company and filed a suit for restraining it from appointing a managing director and also gave notice of a meeting for discussion of a no-confidence motion against Hanuman Pershad and Bisakha Singh. The company, on its part, asked the first respondent to resign from the directorate under clause 94 (4) of the articles of association requiring a director to vacate his office "on his being requested by his co-directors to do so". These internecine disputes were settled by the addition of two more directors, one of these being the son of the first respondent and the withdrawal of the proceedings initiated at the instance of the first respondent against his colleagues. The ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge, Delhi, on the 22nd of April, 1961. Feeling aggrieved, the company and its directors have again preferred an appeal to this court. It has been contended by Mr. Khanna, the learned counsel for the appellants, that the transfer of shares in favour of the first respondent was in contravention of the articles of association of the company and being a void transaction, there could be no question of any acquiescence on behalf of the company. Reference at this stage may be made to the following relevant clauses of the company's articles of association: "36. A share may be transferred by a member or other person entitled to transfer the same to any other member holding shares who is selected by the transferor but save as aforesaid and save as provided by clauses 40 and 43 hereof no shares shall be transferred to a person who is not a shareholder so long as any shareholder is willing to purchase the same at a price to be fixed as hereinafter provided. 37. Except where the transfer is made to a shareholder selected as aforesaid or pursuant to clauses 40 and 43 hereof the person proposing to transfer any share (hereinafter called 'the proposing transferor') shall give notice in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposing transferor could transfer the shares to any person at any price not less than the price fixed by the proposing transferor. The shares were sold to the first respondent at the face value and the company never demurred in registering the transfer in favour of the first respondent under clause 47 of the articles of association. Mr. Khanna relies on paragraph 427 of Halsbury's Laws of England, volume 15, third edition, where it is stated that: "... a party cannot by representation, any more than by other means, raise against himself an estoppel so as to create a state of things which he is legally disabled from creating. Thus, a corporate or statutory body cannot be estopped from denying that it has entered into a contract which it was ultra vires for it to make." This doctrine cannot, however, apply in the circumstances of the present case. The transfer of shares per se is not prohibited by the articles of association. It is only the manner of transfer which is prescribed. All that can be said is that the transfer of shares was irregular but there is no warrant for the inference that the transaction becomes ultra vires . The transfer would be ultra vires only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; AIR 1946 Mad. 35 , where a company consisting of six members, who were all directors, allotted 5 per cent, of the shares to two outsiders. The allotments were later discovered to be in contravention of the articles of association which required sanction of the general meeting. It was held by Clerk J. that the allotments could not be avoided as the applicants were entitled to assume that the directors were acting regularly and that the sanction of the company had in fact been obtained. On a parity of reasoning, it was not incumbent on the first respondent to make an enquiry whether the directors had complied with the formalities before registering the transfer. I am in respectful agreement with the judgment of Clerk J. which has been mentioned with approval by Tek Chand J., in Dewan Singh v. Minerva Films Ltd. [1959] 29 Comp. Cas. 263 ; 61 PLR 61. Mr. Khanna further contends that the directors can always rectify the register if they discover any patent mistake therein. The power of the court to rectify a register is defined in section 155 of the Companies Act and it cannot be disputed that no rectification could have been made without notice being issued to the first resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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