9911796707
TMI Blog1975 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 each 1,00,000 2. 1,000 ordinary shares of Rs. 75 each 75,000 3. 2,000 equity shares (Series A) of Rs, 75 each 1,50,000 The company had issued only 150 cumulative preference shares, 1,000, ordinary shares and 480 equity shares fully paid up and the rest of the shares were unissued. Out of these unissued shares, 450 equity shares have been issued by the company to opposite parties Nos. 4, 5 and 6 by its resolution dated the 3rd January, 1974, which action is being challenged by the petitioner, and he has come to this court for the rectification of the share register. In order to appreciate the points raised, it will be useful to quote the relevant, articles of the articles of association of the company : "22. Transfer of shares. A share may be transferred by a member or other persons entitled to transfer to such member as will be approved by the directors but no share shall be transferred to a person who is not a member, so long as any member (or any person selected by the directors as one whom it is desirable in the interest of the company to admit to membership) is willing to purchase the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question was itself illegal because no meeting of the board of directors was convened on the 3rd January, 1974. Alternatively, it has been contended that, at any rate, the petitioner, who happened to be a director of the company, was not given any notice to attend the said meeting. On these allegations the petitioner has prayed to rectify the register of the members in so far as the allotment of 450 equity shares in favour of opposite parties Nos. 4 to 6 as it was made without a sufficient cause within the meaning of section 155(1)( a )( i ) of the Companies Act. The application is mainly opposed by opposite parties Nos. 1 to 3, who have filed a counter-affidavit. Later on, when the petitioner riled a reply to the counter-affidavit, a rejoinder was filed on behalf of opposite party No. 6 as well only a day before the matter was taken up for hearing after some adjournments. Originally, this case was listed for hearing on July 1, 1975, in view of an earlier order. On that date, Mr. Amla Kant Choudhary, who was appearing on behalf of opposite party Nos. 1 to 3, had pressed for the decision on a preliminary point and to adjourn the hearing to some other date. The preliminar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilty of the violation of the articles, namely, article 23, the two directors have also been impleaded as opposite party. There is no provision of law, much less any such provision was shown to me, which makes it essential that all other members of the company should have been made parties. In the case of Ratan Lal v. Jagadhari Light Railway Co. Ltd. [1946] 16 Comp. Cas. 21 (Lah.) it was held that even the directors of a company were not necessary or proper parties to an application for rectification of registers. In another case of Jawahar Mills Ltd. v. Sha Mulchand and Co. Ltd [1949] 19 Comp. Cas. 1 38 (Mad.), it has been held that the third parties whose right is to be affected by the order of rectification are necessary parties to the proceeding and the court cannot order rectification in their absence. The petitioner has impleaded all those persons. I do not think, therefore, the second contention has got any substance. Coming to the first question which was canvassed at great length on behalf of the opposite party by Mr. S.C. Ghose, it has got to be dealt with in some greater detail. The "seriousness" of the question and the question of dispute has been sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company on the other hand ; and ( b )generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification". The order passed by the court has also been made appealable. I shall now refer to some of the authorities on this question. It is, no doubt, true and recognised by a long line of judicial decisions that the court is not bound to give the relief under that section if it finds that complicated questions of fact and law were involved. None the less, from the provision of sub-section (3) of section 155 itself, it is clear that a court is competent to decide any question relating to the title of any person, where the question arises between members or alleged members, and such other questions which may be necessary or expedient to decide in connection with the application for rectification. In my opinion, therefore, by reason of the provision made under section 155, it is open to the aggrieved party to avail of the procedure laid down by that section and proceed by way of an application, unless by reason of its complexity, it cannot be conveniently decided in the proceeding. The Supreme Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich fell for determination before the learned judges was whether the company possessed the requisite authority to forfeit the shares. The Madras High Court also in the case of Public Passenger Service Ltd. v. M. A. Khadar AIR 1962 Mad. 276, where the question for consideration was as to whether the notice issued to the shareholders contained all the minute details and particulars and whether the rules and procedure pro-vi led in the Act and the articles of the company have been strictly complied with, held that no evidence was needed to be let in, nor the matter involved was a very complex one, and the matter involved was purely one which could be decided by the court itself without referring the parties to a suit. In the case of Hunter v. Hunter [1936] AC 222 ; [1937] 7 Comp. Cas. 36 (HL), it has been held that where shares in a private company are registered in the name of a transferee, in breach of the company's articles restricting transfer of its shares, a member of the company may obtain an order for rectification under the Act. The simple question in issue before me in the present case is as to whether the allotment of 450 unissued equity shares have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir behalf is that the company had issued a general notice to the shareholders intimating them that as the company was very badly in need of funds for liquidation of certain debts, it was decided to issue 450 (A Series) equity shares, calling upon the shareholders to apply within seven days for such number of shares as he or she desired, otherwise it would be allotted to others. It has been claimed on behalf of the contesting opposite parties that this notice dated December 27, 1973, was sent to the petitioner under a certificate of posting, a true copy of which has been made annexure B to the supplementary affidavit filed on behalf of opposite parties Nos. 1 to 3. The notice, however, has not been annexed. Mr. Amla Kant Choudhary has, however, produced an authenticated copy of the same purporting to have been issued to the different shareholders. I have earlier referred to the contents of the said notice. Even assuming that the notice was circulated, as claimed, it is not in terms of article 23 itself, as, according to that article, the company should have fixed the number of shares which each member was entitled to be offered in proportion to the number of shares held by him or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking the view that the opposite parties have deliberately kept the petitioner uninformed of this fact with a sinister motive, as alleged by the petitioner, that is to say, to issue the shares to their relations in order to acquire majority vote in the company and have a controlling power in its affairs. The scheme of the opposite parties is also manifested from a further fact that the next meeting that was held on the 4th of February, 1974, after the meeting of the 3rd January, 1974, in which the shares in question were allotted to opposite parties Nos. 4 to 6, the petitioner was deliberately avoided as in that meeting of the 4th February, 1974, the minutes of the preceding meeting, that is, of the 3rd January, 1974, had to be read out and confirmed. It was, therefore, conveniently thought by the opposite parties that the petitioner be not informed of this meeting to obviate any trouble on his part. Mr. S.C. Ghose at one stage had also contended that the petitioner himself was not a member qualified to receive an offer or a. notice under article 23 of the articles of association as claimed by him in this petition, inasmuch as the manner in which he was allotted some shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convened on the 8th December, 1973, in which the petitioner was selected ns a new member of the company for the first time, that resolution stands and factually the petitioner stood recorded during the relevant period as a member of the company, without any action having been taken by any of the opposite parties or any other person challenging the action of the directors in regard to the selection of the petitioner as a member for allotment of any shares to him. Having discussed all the questions raised before me, I feel satisfied that the petitioner has made out a proper case that the names of opposite parties Nos. 4 to 6 have been wrongly entered in the register of members with respect to 450 equity shares ("A" series) and the register must be rectified. I would, accordingly, direct opposite parties Nos. 1 to 3 to take appropriate steps for reissue of those 450 equity shares to all the members of the company in terms of article 23 of the articles of association and allot the said shares in pursuance thereto and rectify the share register accordingly by removing the allotment of those shares in favour of opposite parties Nos. 4 to 6. In the result, this application suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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