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TMI Blog1964 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... th April, 1954 125 debentures were allotted to one M.K. Jhunjhunwala but before that date on 4th April, 1954, Jhunjhunwala had already sold 50 debentures to the appellant and on 7th April, 1954, transfer deeds in respect of the same were executed. On 17th June, 1954, on the appellant's instructions the Allahabad Bank Ltd. (hereinafter referred to as the bank) requested the company to pay them interest on those fifty debentures. On 6th July, 1954, the company refused to make the payment on the objection that the name of the appellant had not been entered in the registers of the company. On 4th May, 1955, the company went into liquidation and on 8th May, 1956 Jhunjhunwala filed with the official liquidator a claim under section 177A of the Act inclusive of the 50 shares mentioned above. On 10th October, 1957, he sent the debenture scrips and the transfer deeds to the official liquidator with a request that the name of the appellant be entered on them. On 6th November, 1957, the official liquidator sent a reply to the appellant saying that he was unable to do anything in the matter until the orders of the Company Judge had been obtained. On 4th January, 1958, Jhunjhunwala declared bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The question, however, requiring consideration is whether that section also requires entries being made in respect of transfers of mortgages or debentures by their holders in favour of third parties. Mr. Jagdish Swaroop contends that the section cannot be read so as to comprehend the recording of entries relating to the change in the ownership of the debentures and the mortgage deeds. Section 38 of the Act confers on the court the power to rectify a register. The submission of Mr. Rajeshwari Prasad who has appeared for the appellant is that section 123 read with section 38 of the Act confers on the court the power to direct that the transfer made by Jhunjhunwala in favour of the appellant in respect of fifty debentures be entered in the registers of the company. There cannot be any manner of doubt that if section 38 was comprehensive enough to include not only rectification of the register of members but also the register of mortgages including debentures, the court would have the power to grant the prayer made by the appellant. Mr. Jagdish Swaroop, however, submits that the provisions and the scheme of the Act disclose that the legislature made a distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y make such order as to the costs of the application as it thinks fit. (2) Where the court extends the time for the registration of a mortgage or charge, the order shall not prejudice any rights acquired in respect 01 the property concerned prior to the time when the mortgage or charge is actually registered." Mr. Jagdish Swaroop contends that the rectification could only be made in the circumstances enumerated in the section and not for other reasons. The learned counsel submitted that the legislature deliberately maintained the distinction between the register of members and the register of mortgages inclusive of the debenture holders. The reasons which he suggests for the distinction are: (1) It is in the interest of all concerned and the general public to know who the members are in order to facilitate their dealing with them and in order to be known to what extent they can deal with the company. In this connection the learned counsel placed reliance upon the following passage in Palmer's Company Law, 20th edition, page 450, under the heading "Publicity of register" where the famous words of Lord Cranworth have been quoted: " Publicity of Register: It is important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel. It is true that there is a distinction between the register of members and the register of mortgages including the debenture holders. But the outside public would be equally interested in knowing who the members are as in knowing who the mortgagees inclusive of the debenture holders are. We are not prepared to accept the argument of the learned counsel for the liquidator that the public is only interested in knowing who the members are and is indifferent with regard to the names of the secured creditors or debenture holders. There may be some difference in the degree of the importance of the two registers but it cannot be said that it would neither serve public interest nor would it contribute to better management of the affairs of the company if an up-to-date register of mortgages is maintained. The management of the company itself would require an up-to-date register of mortgages to know who its creditors are and in order to deal with them inclusive of payment of interest. Members of a company on liquidation may become contributories and the debenture holders are and continue to remain the creditors of the company. It cannot be disputed that in order to have a correct an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an entry in respect of the transfer of the 50 debenture scrips in favour of the appellant by Jhunjhunwala be made was not legally maintainable. We, therefore, overrule this submission of the learned counsel and hold that the application was competent. We are also not impressed with the connected submission made by the learned counsel that in any case such an application is not maintainable after a winding up order has been passed. Nothing has been brought to our notice which may result in accepting that the provisions of sections 123, 34 and other sections mentioned above stand paralysed or suspended during the period following the passing of the winding up order. In fact, during the winding up proceedings, the court assumes greater responsibility than it has while the company is functioning normally. We are, therefore, unable to accept even this submission of the learned counsel. We also see no merit in the submission of the learned counsel that company has a right to refuse registration. No company has got a right to refuse to do a thing which the law requires it to do. Nothing has been pointed out to us to justify the conclusion that it has any such right. We have already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entures would be allotted to him, there was no legal hurdle in his transferring 50 out of those expected but certain debentures even before the formal allotment in his favour was made. The second suspicious circumstance, according to the learned District Judge and the learned counsel for the liquidator, is that Jhunjhunwala has shown all the 125 debentures in his return filed under section 177A of the Act. This circumstance is clearly explainable. The law requires that unless a transfer is registered for the purposes of the Act, the original holder will retain a right over the shares. Inasmuch as the registers of the company were not corrected either by the company or by the liquidator by showing 50 debentures in the name of the appellant, it was only proper that Jhunjhunwala showed all the 125 debentures in his own name. The learned District Judge was also influenced by the circumstance that the payment of Rs. 50,000 was not made by cheque but by cash. In our judgment this was a completely colourless circumstance and the learned District Judge was not justified in inferring from this that no payment was made. Considering all the material before us, we are of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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