9911796707
TMI Blog1972 (1) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... is letter dated July 5, 1969, informed the appellant that he had sold the shares to the respondent on payment of full consideration, and also that he had no objection to registration of the shares in the name of the respondent. A similar letter was written by another transferor. By 3 letters dated June 2, 1969, June 18, 1969, and July 5, 1969, the appellant informed the respondent that, as the transfer of the shares seemed to be questionable, the mutation applied for could not be allowed in the facts and circumstances of the case. On his refusal to register the transfer of the shares, the respondent made an application for rectification of the share register under section 155 of the Companies Act, 1956 (hereinafter referred to as "the Act"). On this application the trial court made the order appealed against. The only question involved in this appeal is whether the appellant's refusal to register the transfer in favour of the respondent was lawful. For the purpose of ascertaining the extent and scope of the powers of the appellant in the matter of registration of transfer of shares, it is necessary to refer to article 29 of the articles of association of the appellant. This art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferor or to the person giving intimation of such transmission, as the case may be". Mr. S. Mookerjee appearing for the appellant raised two points in support of this appeal. The first point urged by him was that, although the articles did not confer upon the company the power to refuse registration of fully paid-up shares, such power could be exercised by virtue of amendment to sub-section (2) of section 111 of the Act by addition of the words "or otherwise". The second point urged by him was that the respondent was intent upon ruining the company, and for that reason he was a very undesirable person so far as the company was concerned, and therefore the directors had rightly refused to register the shares in his name. In support of the first point mentioned above, counsel for the appellant submitted that by virtue of the amendment, the Indian law with regard to registration of shares has become altogether different from the corresponding provision in the English law. He argued that the words "or otherwise" in sub-section (2), introduced by the amendment in 1965, clearly indicated that the legislature contemplated giving to the company a power to refuse registration de h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolute discretion decline to register a transfer of shares. It was held that the discretion did not mean a bare affirmation or negation of a proposal but that it implied just and proper consideration of the proposal by the board. It seems to me that this decision is also of no assistance to the appellant. Reliance was next placed on a Bench decision of the Delhi High Court in Jalpaiguri Cinema Co. Ltd. v. Pramatha Nath Mukherjee [1971] 41 Comp. Cas. 678 (Delhi). In construing the words " or otherwise", which were introduced by the Amending Act of 1965 to sub-section (2) of section 111 of the Companies Act, it was held that those words could not have the effect of enlarging the power to refuse registration of transfer of shares as given by sub-section (1) and that sub-section (2) could not be construed so as to confer power on a company, a power to refuse registration of transfer, even though such power is not conferred by the articles of the company. It seems to us that the first contention of the counsel for the appellant is without any merit. The law, on the question of a right to transfer shares, is well settled, and an application for registration of transfer of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal has been preferred against the judgment of the Sealdah Court and the appeal is now pending. Thereafter, the elder brother Sudhindra, it was contended, filed an application for winding up of the company for non-payment of an alleged claim. According to the appellant this claim was not genuine but the winding up petition was compromised in order to avoid litigation. Relying on these facts, counsel for the appellant contended that the respondent was an extremely undesirable person as far as the company was concerned, and, therefore, the company had rightly refused to register the shares which he. had acquired. In our view, the second contention raised on behalf of the appellant must also fail. A purchaser of shares in a company has uncontrolled right to have the shares registered in his name in the company's share register, unless the articles of the company give an absolute discretion to the directors of the company to refuse registration and such power has been exercised bona fide . Even in exercising the power to refuse registration, the ground on which this exercise of power can be upheld is the interest of the company and the interest of the shareholders as a whole. M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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