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TMI Blog1976 (11) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 25-11-1976 - A.N. RAY, M.H. BEG AND JASWANT SINGH, JJ. R.S. Gae, K.J. John and K.J John for the Appellant JUDGMENT Ray, CJ. - These four appeals by certificate raise two questions. First, whether the provisions of section 108 of the Companies Act, 1956, are mandatory in regard to transfer of shares. Second, can a company having been served with notice of attachment of shares register transfer of shares in contravention of the order of attachment. The appellant, Mannalal Khetan and the respondents, Kedar Nath Khetan and Durga Prasad Khetan, are members belonging to two branches of the Khetan family. The respondent, Lakshmi Devi Sugar Mills Private Ltd. is a private company. It was incorporated on 7th April, 1934, under the Indian Companies Act, 1913. The Khetan family held shares in the respondent-company and in two other companies, Maheshwari Khetan Sugar Mills Private Ltd. and Ishwari Khetan Sugar Mills Private Ltd. The shares stood in the names of: (1) M/s. Ganeshnarayan Onkarmal Khetan, (2) M/s. Sagarmal Hariram Khetan, (3) Sri Mannalal Khetan, and (4) Sri Radhakrishna Khetan. The members of the Khetan family did partnership b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment of the income-tax authorities, and, therefore, they could not be immediately transferred. The agreement was that as soon as the transfer of the shares became permissible or if the income-tax authorities so permitted, transfers as agreed and contemplated would be effective. On 8th April, 1958, and 3rd October, 1959, the board of directors of the respondent-company passed a resolution for transfer of the shares belonging to the appellant group to the group of respondents Nos. 1 and 2. These resolutions were passed on the applications made on behalf of respondents Nos. 1 and 2 and others of their group. The shares were thereafter entered in the respondent-company's register in the names of respondents Nos. 1 and 2 and others of their group. On 14th January, 1962, the appellant along with Kamla Prasad Khetan and Mataden Khetan gave notice to respondent No. 1 and Durga Prasad Khetan that the shares of the Ishwari Khetan Sugar Mills Private Ltd. which were under attachment of the income-tax authorities had been sold by the Additional Collector of Bombay on 23rd September, 1961. The notice stated that the agreements had become impossible of performance and the considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares in the respondent-company's register were illegal because the transfers were without any proper instrument of transfer. The appellant also contended that the transfers were in contravention of the mandatory provisions of section 108 of the Act and articles of the respondent-company. The second contention of the appellant was that no legal transfer of the shares in question should have been made because at the time of the alleged transfer the shares had been surrendered along with blank transfer forms to the receiver appointed by the Collector of Bombay in execution proceedings for recovery of the income-tax dues. The appellant also alleged that other shares had been attached by the Collector of Deoria in pursuance of the two certificates issued by the Collector of Bombay under Order 21, rule 46, of the Code of Civil Procedure. The learned single judge directed the respondent-company to rectify the register of its members by removing the names of respondents Nos. 1 and 2 and to restore the names of the original shareholders. The learned single judge rejected the contention of the respondents that it was a case of transmission of shares. The learned judge said that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall prejudice any power of the company to register as shareholder or debenture-holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. The words shall not register are mandatory in character. The mandatory character is strengthened by the negative form of the language. The prohibition against transfer without complying with the provisions of the Act is emphasised by the negative language. Negative language is worded to emphasise the insistence of compliance with the provisions of the Act. (See State of Bihar v, Maharajadhiraja Sir Kameshwar Singh of Darbhanga [1952] SCR 889, 988-89, K. Pentiah v. Muddala Veeramallappa [1961] 2 SCR 295, 308 (SC) and in reported decision dated 18 April, 1976, in Criminal Appeal No. 279 of 1975, etc.- Additional District Magistrate, Jabalpur v. Shivakant Shukla, AIR 1976 SC 1207). Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statutory provision imperative. In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur [1965] 1 SCR 970 (SC), this court referred to various tests for finding out when a provision is man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n contracts entered into with the object of committing an illegal act and contracts expressly or impliedly prohibited by statute. This distinction is that in the former class one has only to look and see what acts the statute prohibits ; it does not matter whether or not it prohibits a contract; if a contract is made to do a prohibited act, that contract will be unenforceable. In the latter class, one has to consider what act the statute prohibits, but what contracts it prohibits. One is not concerned at all with the intent of the parties ; if the parties enter into a prohibited contract, that contract is unenforceable ( See St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 QB 267 (OB)). (See also Halsbury's Laws of England, third edition, volume 8, page 141). It is well established that a contract which involves in its fulfilment the doing of an act prohibited by statute is void. The legal maxim a pactis privatorum publico juri non derogatur means that private agreements cannot alter the general law. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect. [See Melliss v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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