9911796707
TMI Blog1999 (10) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... he R-l company to the bank and the company had registered the transfer on 21 -3 -1976 and entered the name of the third respondent in the register of members of the company. In January, 1987, the third respondent released the security of 360 equity shares in the company and executed three instruments of transfer dated 14-1-1987 transferring the 360 shares in favour of the petitioner. The petitioner lodged with the R-l company the three instru- ments of transfer dated 14-1-1987 accompanied by the eighteen share certificates on 15-1 -1987 along with the petitioner's letter of the same date together with a cheque for Rs. 6 on account of the transfer fees. By letter dated 16-3-1987, the company refused to transfer the 360 equity shares in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to this aspect of the case because the relief asked for is extremely limited in so far as only corrective action has been prayed for. There are averments in the petition that article 15 is untenable and not valid in law but, there is no relief asked for from this Court by way of either a declaration that the article is bad in law or that it should be struck down. Further more, the prayer clause itself is restrictive in so far as the only relief prayed for is what has been reproduced by me above but I shall take a charitable and a broad view of prayer (a) in so far as I shall assume that the relief asked for is that the shares should be transferred to the petitioner's name as otherwise, there can be no question of entering the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio laid down in the case of Lallan Prasadv. Rahmat AH AIR 1967 SC 1322 and in the case of Shatzadi Begum Saheba v. Girdharilal Sanghi AIR 1976 AP273 that the residuary interest in the share always continued with the petitioner in so far as the shares were only pledged to the bank as and when by way of collateral security for the over draft, that the interest of the petitioner in the shares was never extinguished and that, therefore, the re-transfer to his name is a mere formality. This last argument is fallacious because the respondents learned advocate is right when he points out that once the petitioner had executed the documents of transfer in favour of the bank and the company had given effect to the transfer, irrespective of the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to acquire shares in the names of nominees and to corner the majority holding in a company and then take it over or paralyse the operation. I do see considerable justification in this submission and consequently, in the absence of any definite challenge which is capable of being upheld, article 15 will have to construed as being valid. 5. The real difficulty has arisen because where as the first part of article 15 prescribes a limitation whereunder there is a prohibition on any shareholder acquiring or holding more than 10 per cent of the shares, the latter part of article 15 clearly prescribes that if such a person holds more than the prescribed number that the only disqualification would be that the party would not be entitled to voting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel pointed out to me that by virtue of the decision of the Supreme Court in the case of Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd AIR 1971 SC 422 the articles of association are a contract between the company and a share-holder and are binding on the share-holder. In this background, it was submitted that the only rational interpretation of article 15 would be that the petitioner cannot hold more than 501 shares and since he is already holding of that number, that the 360 shares cannot be transferred to him. 6. I do not dispute that article 15 is worded rather peculiarly and that it would normally appear that the two parts of it cannot be reconciled. The rules of interpretation, however, require that wherever p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from claiming voting rights in respect of the number of shares that exceed the limit of 10 per cent as provided for in article 15. 7. The two learned counsel have gone into various other aspects of the law which to my mind do not require to be re-assessed by me as the point for decision is within a narrow compass, ie., the interpretation and effect of article 15 and whether or not the petitioner is entitled to a relief. 8. In the aforesaid circumstances, the petitioner is entitled to succeed but to a limited extent. The respondent-1 company is directed to transfer the 360 shares to the name of the petitioner within an outer limit of ninety days from today on the petitioner complying with the requisite transfer formalities but this trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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