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TMI Blog1970 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... y to his deceased father. He has obtained an extension of the succession certificate to cover the shares of his deceased father in the first respondent-company. On October 5,1964, the petitioner applied to the company to transmit the shares of his father to his name. He made another application on February 23, 1968, for the same purpose. A third and final application was made on November 4,1968. He was called upon to produce the necessary succession certificate and other documents to show his right, and on his producing the same on January 10, 1969, the directors, respondents Nos. 2 and 3, informed the petitioner by a letter dated March 31,1969, declining to effect the transfer. The reason given was that in the opinion of the directors the activities of the petitioner were against the interest of the company, and that it was, therefore, not desirable or feasible, in the interest of the company, to permit the transmission of the shares to the name of the petitioner as requested by him. The petitioner was also informed that the company was agreeable to purchase the shares in question according to the prevailing value. It is in these circumstances that the petitioner has come forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and have decided that the; recognition of the petitioner with regard to his father's share wduld be dettimental to the interest of the company. The articles of association are in Tatnil.; There are two articles of which require to be noted in this proceeding, and they are 15 and 19. To understand the real import of these articles, I set them 6tit roily and they are: Article 15, on a reading of it, would show that it is clear and unambiguous. According to that article, a transfer either by a shareholder or by the heir of a deceased shareholder can be made in the name of a relative of the shareholder or heir, as the case may be. If request for such a transfer is made, discretion is given to the board of directors to decide whether it is just and proper that the transfer should be made. If they so decide, then the transfer could be effected subject to the liability of the transferee to discharge any debt or encumbrance subsisting on the share. So far as article 19 is concerned; it is not clearly worded. It refers to transfer by the shareholder and also transfer by the heir of the deceased shareholder. So far as the shareholder is concerned, the expression used is Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples have been enunciated in a number of decisions. In Moodie v. W. J. Shepherd Book Binders Ltd. [1949] All. ER 1044 (HL) , (1) the articles of association provided that any person becoming entitled to a share in consequence of the death of a member shall have the right subject to the directors not exercising their powers as provided therein, to acquire the said shares, either to be registered as a member or to make such transfer of the share as the deceased person could have made. But the directors shall have the same right to decline or suspend registration. Another article provided that it shall be in the absolute discretion of the directors to refuse to register any transfer of shares of which they do not approve. The company had three directors. On the death of one of them, his executors applied for transfer. Out of the two remaining directors, one was in favour of recognising the transfer and the other was opposed to it. But the directors did not pass any resolution. One of the articles of association required a resolution to be passed in case of rejection of request for transfer. As no such resolution had been passed, it was held that the executors were entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be that the directors had acted bona fide and the onus would be on the person challenging their action to establish the lack of bona fides and the impropriety on their part." In Muthappa Chettiar v. Salem Rajendra Mills Ltd. [1955] 25 Comp. Cas. 283 ; [1955] 2 MLJ 535 (Mad.) , it is pointed out that if a discretion as to registering transfers of shares of a company is given by the articles of association of the company to the directors, the court. would not control the exercise of such discretion unless it is proved that the directors are not exercising the discretion bona fide or are acting in other ways oppressively, capriciously or corruptly or in some way mala fide . It is also pointed out that if the directors give their reasons, the court should consider whether they are legitimate or not, that is, with a view to find out whether the directors acted on right or wrong principles. The Supreme Court has pointed out in Harinagar Sugar Mills Ltd. v. S . S. Jhunjhunwala [1961] 31 Comp. Cas. 387 ; [1962] 2 SCR 339 (SC) , that rectification of the register of members of a company under section 155 of the Companies Act, 1956, can be granted only if it is estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in passing the resolution. Certain shareholders of Rajeswari Mills themselves questioned the validity of the resolution and instituted O.S. No. 140 of 1964 on the file of the same court for certain reliefs. Alleging that the action of the petitioner in causing the removal of the first respondent from being the managing agents had caused substantial loss to the first respondent-company, the first respondent-company instituted O.S. No. 132 of 1964 claiming damages against the petitioner and Rajeswari Mills Ltd. It appears that the said suit has been dismissed so far as the petitioner is concerned, but has been decreed for a smaller amount than the amount claimed as against Rajeswari Mills Ltd. It is represented on behalf of the respondent that the first respondent-company is intending to file an appeal not only with regard to the disallowed portion against the Rajeswari Mills but also against the petitioner. It appears that the first respondent-company was indebted to the late father of the petitioner. The petitioner instituted C.P. No. 49 of 1966 on the file of this court to wind up the company alleging that the company was unable to pay its debts and that the substratum of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnam, appearing for the petitioner, family suggested that on account of the inordinate delay in considering the application of the petitioner by the board, it should be deemed that the petition was allowed. No such claim is put forward in the petition, and there is also no merit in this submission. It is true that the petitioner had applied twice on previous occasions, once on October 5, 1964, and again on February 23, 1968. On these occasions, he had not obtained the necessary proof by way of extension of succession certificate to cover his claim to the rights in the shares of his deceased father. It was only in August, 1968, that the petitioner obtained extension of succession certificate and he made a third application on November 4,1968, for recognition of transmission of his right. The board of directors called upon the petitioner to produce proof and he furnished proof on January 10,1969. On March 31,1969, the board decided to reject the request. Thus there was no delay in disposing of the petitioner's application. Mr. Gopalarathnam next contended that under the compromise arrived at between the petitioner on the one hand and the first respondent on the other in C.P. No. 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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