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TMI Blog1992 (9) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... nd petroleum products. The first petitioner's husband and the father of petitioners Nos. 2 to 7 Mr. Channabasappa was one of the director-members and a shareholder of the respondent-company. He died on August 16, 1988, leaving behind him the petitioners, the legal heirs. Petitioner No. 1 after the death of her husband, made an application on October 30, 1988, to the respondent-company for the transmission of his shares and other interest in her name. The true copy of the application is produced and marked as annexure-C. The petitioners were asked to comply with certain requirements by the company, such as production of the succession certificate. It was accordingly complied with and they have produced the succession certificate issued by the competent authority along with the application. The true copy of the same is produced and marked as annexure D. Petitioners Nos. 2 to 7 have given their no objection letter for transmission of shares in the name of petitioner No. 1. The copy of the said letter is produced and marked as annexure-E. The petitioners had sent several reminders to the respondent-company for transmission of Shares of the deceased Channabasappa but no action was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters and the second petitioner is taking advantage of the situation. The petition lacks bona fides and, therefore, there is absolutely no ground made for interference at the hands of this court. It is denied that the respondent-company illegally and in contravention of the articles of association have refused to act as sought to be made out by the petitioner. It is further stated that the company is not bound to transfer the shares in favour of the first petitioner in the absence of any article available in the articles of association. It is further stated that the respondent is not depriving illegally the rights of the petitioners, as stated in their petition. The allegation of deprivation of dividends and other profits is also denied. Finally it was stated that there was no proper application for transfer of shares in the name of petitioner No. 1 as required under section 108 of the Companies Act. The application for transfer of shares was not in the proper form, no stamp affixed, and, as such the question of effecting a transfer of shares in the name of petitioner No. 1 or any one claiming to be the legal representative of the deceased member, Channabasappa, does not arise fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with the transfer of shares as provided under section 108 of the Companies Act. They are mandatory. The articles of the company provide that every instrument of transfer must accompany a certificate for the shares to be transferred. In this case, there is no application for registration of transfer of share made by complying with these requirements. As such, no instrument of transfer along with the share application and registration fee are delivered or left at the office of the company. That being so, no question of consideration by the directors of the transfer of shares arises in the matter. Let me consider the controversy involved in the petition regarding the transfer/transmission of shares in the name of petitioner No. 1, the legal representative of the deceased Channabasappa, one of the director-members and shareholder of the respondent-company. The undisputed facts are that the respondent-company is a private limited company incorporated under the Companies Act. Petitioner No. l's husband and father of petitioners Nos. 2 to 7, Channabasappa, died on August 16, 1988. Petitioners Nos. 1 to 7 are the legal representatives of the deceased Channabasappa. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures : Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit. Provided further that nothing in this section shall prejudice any power of the company to register as shareholder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law." Article 16 of the articles of association reads as follows : "16. The directors may refuse to register any transfer of a share- ( a )Where the share is not fully paid up, or where monies due to the company are covered by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already indicated the shares of Channabasappa the deceased member devolved on his legal representatives (legal heirs) evidenced by the succession certificate filed by the petitioners. In cases like this, there could be no transferor to execute any instrument of transfer and get it attested and stamped. By operation of law, the shares of the deceased member get transmitted in favour of his legal heirs. Thus, the only question, therefore, to be considered is whether subsection (1) of section 108 of the Act' or the second proviso applies to the instant case. As already noticed, this is not a case of transfer of shares by act of parties. It is a well laid principle of law that a "transmission by operation of law" is not a transfer. Transmission by operation of law takes place where a person acquires an interest in property by operation of law such as by right of inheritance or succession, while a transfer is effected by act of parties. Sub-section (1) of section 108 requires the instrument of transfer to be duly stamped, for it is an essential condition for registering a transfer of shares. The instant case is not covered by Sub-section (1) of section 108 of the Act, but it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of the respondent-company was that the petitioners' application under section 155 is not maintainable for section 155(1) is meant only in case of mistake or misstatement. It was further argued that the articles of association provides for refusal to register the transfer of shares under article 16 of the articles of association. The petitioners' counsel has controverted this contention of the respondent's counsel .and submitted that the application of the petitioners under section 155 is maintainable, as the power of the company court is very wide under section 155, and the power of rectification is not confined only to correct the mistake or misstatement as contended by the respondent's counsel. Section 155 reads as follows : "155. Power of court to rectify register of members. (1) If ( a )the name of any person ( i )is without sufficient cause, entered in the register of members of a company, or ( ii )after having been entered in the register is, without sufficient cause, omitted therefrom ; or ( b )default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, or-ceased to be, a member ; the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication to have his name entered in or omitted from the register and the court would have further jurisdiction to decide the question of title even when it arises between members or alleged members, or between members or alleged members on the one hand and the company on the other. Sub-clause ( b ) of sub-section (3) further widens the jurisdiction of the court under section 155 when it permits or enables the court generally to decide any question which it is necessary or expedient to decide in connection with the application for rectification." I am in full agreement with the opinion expressed by the High Court of Gujarat. The power of the company court under section 155 is very wide. It makes it clear that not only any member of the company, but also a "person aggrieved" may apply to the court for rectification of the register of members. In clause ( b ) of section 155(1) the words "the fact of any person having become a member" have been construed to mean "having become entitled to be a member" or having got the right of membership, as observed by the Calcutta High Court in Nazamunnesa Begum v. Vidya Sagar Cotton Mills Ltd. [1963] 33 Comp Cas 356 (Cal). In my view having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . transfer/transmission of shares, and send the intimation of refusal to the person giving intimation of such transfer/transmission. In the present case, the respondent has not refused to register the shares, nor sent any intimation of refusal to register the shares within two months from the date of delivery of intimation for transmission of shares. Mere silence by the directors of company may not be. acquiescence, but sub-section (2) of section 111 of the Act requires the company to notify the person delivering intimation of transmission of shares, within two months of the refusal to register. Therefore, if two months elapsed, it would be clear that the directors can no longer refuse to register/ effect the transmission of shares. Since the respondent-company has not refused to effect transmission of shares, in pursuance of its power under its articles within two months from the date of delivery of intimation of transmission of shares by the petitioners, the directors of respondent-company cannot now refuse the transmission of shares in favour of petitioners. It is pointed out by the petitioners' counsel that article 16 of the articles of association is inapplicable to the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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