9911796707
TMI Blog1990 (8) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... as the share transferors) who transferred their shares to Vardhaman and Dharmayug. That is also a petition under Section 155 of the Companies Act, for rectification of share register of Mathrubhumi. C. P. No. 46 of 1989 is another company petition filed by Vardhaman for similar reliefs in respect of some other shares of Mathrubhumi purchased by them. 2. Mathrubhumi is a company registered as a public company limited by shares on February 15, 1922, under the Indian Companies Act, 1913. 3. The share transferors transferred their shares to Vardhaman and Dharmayug and lodged the share transfer applications with Mathrubhumi for registration of transfer. The details of the shares and the respective dates of lodgment etc., are given in Appendix I, II and III to this judgment. The date of lodgment of shares to effect registration of transfer in respect of the shares involved in C. P. Nos. 29 and 30 of 1989 was February 1, 1989. In C. P. No. 46 of 1989 the dates of lodgment were April 2, 1989 and March 8, 1989. C. P. Nos. 29 and 30 of 1989 were filed on March 7, 1989. C. P. No. 46 of 1989 was filed on May 23, 1989. C. P. No. 42 of 1989, which is a petition filed by some of the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay in registering the transfer. Certain directors of Mathrubhumi were spreading a misleading propaganda that the purchase of shares by Vardhaman was an attempt of The Times of India to take over Mathrubhumi through its subsidiaries. This allegation was strongly denied. These was no such intention or design behind the purchase of shares. The board of directors of Mathrubhumi owns and controls about 75% of the subscribed equity share capital of Mathrubhumi. The board of directors of Vardhaman has authorised the purchase of only 10% of the subscribed equity capital of Mathrubhumi. Vardhaman and Dharmayug can thus purchase not more than 20% of the equity share capital. Under Section 372 of the Companies Act, Vardhaman and Dharmayug cannot purchase more than 10% each in the subscribed equity capital of Mathrubhumi. Therefore, the story of taking over is absolutely baseless and legally impossible. A suit was filed by one shareholder, Pot-tengadi Chandu, as O. S. No. 156 of 1989 on February 15, 1989, before the Munsiff's Court, Kozhikode, for a permanent injunction restraining Mathrubhumi from transferring the shares. He also obtained an ex parte interim injunction to that effect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, to consider the applications for transfer. So, there was no delay on the part of the company or its directors. In the extraordinary general meeting of Mathrubhumi held on March 13, 1989, the articles of the company were altered adding Article 17 which conferred power on the board to decline to register the transfer of any equity share, under the circumstances mentioned in that article. The averment in the petition that some of the directors of Mathrubhumi were spreading a propaganda that The Times of India's attempt was to take over Mathrubhumi was totally incorrect and malicious. Any such statement may be the personal opinion of the directors and not the opinion of the board. All these matters will be considered by the board of directors. The allegation that O. S. No. 156 of 1989 was filed before the Munsiffs Court at the instance of Mathrubhumi was also denied. Accordingly, the respondent prayed for dismissal of the company petition. 7. In the additional counter-affidavit on behalf of Mathrubhumi filed on March 22, 1989, it was mentioned that the board of directors met on March 20, 1989, and unanimously decided to decline to register the transfer of shares. The decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1989 was filed by the plaintiff therein at the instance of Mathrubhumi. 9. On behalf of respondents Nos. 4 to 7 who are some of the share transferors, their constituted attorney, P. R. Krishnamoorthy, who is the executive director of The Times of India filed an affidavit dated March 24, 1989, adopting and accepting the various contentions and averments of the petitioners and denying every allegation in the counter-affidavits on behalf of Mathrubhumi, which are inconsistent with the facts contained in the petition and statements in rejoinders. It was also stated therein that they have received the consideration for the transfer of shares in full and have executed the documents and papers necessary for such transfer conferring full title on the transferees in respect of the relevant shares. The contentions regarding the illegalities and mala fides of the notice of the extraordinary general meeting held on March 13, 1989, and the decision of the board of directors were also adopted by them. 10. On behalf of Mathrubhumi an additional counter-affidavit dated March 29, 1989, was filed. In the said counter-affidavit it was mentioned that on March 20, 1989, the board of directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-affidavit. It was submitted that the two principal purported grounds were not valid, bona fide or legitimate. It was not true that the Times of India was desirous of starting Malayalam versions of Illustrated Weekly and Filmfare. A quotation from an article in the Illustrated Weekly was made out of context. The very said article points out that an understanding had been reached between the managements of Mathrubhumi and The Times of India to share each other's printing and publication facilities. If the said article and the contents are correct then they are correct in toto and not in patches. However, it was emphatically denied that the Times of India had any intention to start a Malayalam edition of Illustrated Weekly or Filmfare. The Times of India cannot be considered as a competitor to Mathrubhumi. The board of directors of Mathrubhumi wrongly referred to various past events to draw support for its allegation that the Times of India was an undesirable person. The reliance placed on the Vivian Bose Commission report and the judgment of the Bombay High Court in Bennet Coleman and Co. v. Union of India [1977] 47 Comp Cas 92 was not justified and it was uncalled for. Nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that The Times of India is holding a high respect in journalistic circles were also produced along with the affidavit It was also alleged that the present chairman and managing director of Mathrubhumi, M. P. Veerendrakumar is a planter. He is a politician and a member of the Legislative Assembly. Thus, the present management of Mathrubhumi has large business interests and is also politically connected. Another director and principal shareholder, P. V. Chandran, was a director of Kerala Rubber Plantations P. Ltd. He has other large business interests including transport and film production. This is clear from the auditor's report for the year ending July 31, 1988. The petitioners also contended that in the context of freedom of the press guaranteed by the Constitution the question of big business or monopoly is totally irrelevant. The allegation that the shares were purchased in order to destabilise Mathrubhumi was also strongly repudiated. The directors of Mathrubhumi, their friends and relatives and employees themselves control more than 75 per cent, of the shares. So, the contention that the transferees' desire was to get control of the management of Mathrubhumi w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Dr. Sulochana Unnikrishnan are one and the same person. The address is the same. Mathrubhumi has issued a receipt in her name, produced as annexure A-20. The resolution passed in the extraordinary general meeting was substantially different from the resolution proposed in the notice. 13. Mathrubhumi filed a counter-affidavit dated November 9, 1989, on the amended petition reiterating their contentions. In the affidavit it was stated that the inclusion of Clause 17 in the articles was in the larger interests of Mathrubhumi and that it was only by a sheer accident that the decision to call the extraordinary general meeting to amend the articles was taken at the time when the applications for share transfer from the petitioners were pending. The holding of the extraordinary general meeting was valid and it was properly convened. The shareholding of the present board and their members put together may be just above 50% of the capital. No individual director owns more than 7% of the total equity capital. 14. The petitioner filed an affidavit in reply dated December 1, 1989, in answer to the averments in the affidavit of Mathrubhumi wherein they reiterated their earlier allega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is brother are his grandsons. The said Krishna Gounder had bequeathed all his shares solely to his son, M. K. Jinachandran. Mr. Veerendrakumar's father, M. K. Padmaprabha, was not given any shares. 50 shares held by late V. M. Nair were transferred to the first petitioner on the death of Sri V. M. Nair. Thereafter, the first petitioner was appointed a member of the board of directors on June 18, 1977. After the death of Sri V. M. Nair the present chairman started acquiring large blocks of shares from various shareholders of the company. At about the same time another director, Sri P. V. Chandran, also started acquiring shares in the company in large numbers and subsequently became a director. Thus the diffused shareholdings of the company started getting concentrated basically in the hands of Sri Veerendra Kumar and Sri P. V. Chandran and their associates. The turning point in the history of Mathrubhumi was the passing away of Sri V. M. Nair when commercial and political interests got control of the company with their own objectives of controlling the newspaper for their own purposes. In 1979, Sri M. P. Veerendra Kumar took over as managing director. Ever since his object was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are absolutely irrelevant and have no bearing on the issue to be decided by this court. The averments in paragraph 5 about the alleged hostile conduct on the part of the present management towards the petitioners was denied. The petitioners got a fantastic price for the shares they held and that might have prompted them to sell their shares. The policy and ideals of the newspaper evolved by the original founders are maintained even now. Mr. Veerendrakumar became a director of the company in 1978. He was appointed as managing director in 1979 on the premature and untimely death of Sri M. J. Krishnamohan. There was no design or intention on the part of any one to get control over the management of the company. The allegation that Mr. Veerendrakumar interfered with the editorial matters was not true. The further averments in the petition are all incorrect and cannot constitute oppressive acts as alleged. The first petitioner did not function properly as director, News Paper Development, and was misusing his office and abusing his powers. This ultimately led to the abolition of that post. 18. A reply affidavit dated January 15, 1990, was filed by the first petitioner controverting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms have been cancelled; (a) Transfer form dated February 6, 1989, of T. S. Javandheeswaran in favour of Vardhaman for 5 shares. (b) Transfer form dated February 6, 1989, of T. S. Eswaran in favour of Vardhaman for 9 shares, (c) Transfer form dated February 6, 1989, of T. S. Ramakrishnan in favour of Vardhaman for 9 shares. These are shown as the first three items in annexure (C. P. No. 29 of 1989). Since those transfer forms are not duly stamped as required under Section 108 of the Companies Act read with Section 12(2) of the Stamp Act, the decision of the board of directors refusing to register transfer of those shares is valid. 22. No stamps were affixed on the transfer forms which were dealt with in defect No, 2 of the board resolution, but were furnished separately by affixing the stamps on separate sheets of paper. The board considered this as not duly stamped since the stamps were not affixed on the transfer form itself. A perusal of the share transfer applications is sufficient to show that it is physically impossible to affix the required stamps on the forms themselves. The stamps were affixed on separate sheets of paper and produced along with the share transfer form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retary. The cancellation was done on February 1, 1989, only. 25. Another objection is that cancellation was done by drawing a single line across the stamps. According to the board of directors of Mathrubhumi, this was not proper cancellation. 26. Under Section 10 of the Stamp Act, except as otherwise expressly provided in the Act, all duties with which any instruments are chargeable shall be paid and such payment shall be indicated on such instruments by means of stamps according to the provisions in the Stamp Act. Section 11 provides for the use of adhesive stamps and Section 12 provides for cancellation of adhesive stamps. Under Section 12(1)(a), whoever affixes any adhesive stamp to any instrument shall cancel the same so that it cannot be used again. It is true that stamping and cancelling the stamp should be done simultaneously. But that does not mean that the stamp must be invariably put before the signature is made. 27. In Sumitra Debi Gour v. Calcutta Dyeing and Bleaching Works , AIR 1976 Cal 99, a learned single judge of the Calcutta High Court held that although the signature, stamping and cancelling the stamp could be done simultaneously, that does not mean tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial defect under the Stamp Act. There may be some difference in respect of negotiable instruments where the subsequent stamping or cancellation may be a material alteration of the instrument, but that is not the case in respect of share transfer applications. The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The provisions of the Act are conceived in the interests of the revenue. It is well known that in commercial practice the system of transferring shares and debentures by blank transfer deeds prevails. When a person transfers shares or debentures a duty amounting to a certain percentage of the consideration is to be paid. But the practice is that the deed is filled up blank and passes with shares or with certificate of shares from hand to hand until occasion arises to make use of it and then the person in whose hands at the time the certificate happens to be, fills up the transfer deed in his own favour and the transfer deed then becomes effectual. It may thus cover a very large number of transfers. The validity of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 16, 1989. The affidavit on behalf of Mathrubhumi sworn to by its secretary and dated November 9, 1989, or any other affidavit does not specifically reply to the averment in the affidavit of the executive director of Times of India, Sri Krishnamoorthy, that the managing director of Mathrubhumi, Sri Veerendrakumar, told him that the company had in its meeting held on February 3, 1989, decided not to transfer the shares. It was also submitted that if at all this statement was to be denied, the denial ought to have been made by Sri Veerendrakumar himself because the statement was in respect of the personal conversation between Sri Krishnamoorthy and Sri Veerendrakumar. It was further submitted that the reason for the holding of the extraordinary general meeting, namely, the request from one of the shareholders, Sri Chandu, to empower the board of directors to reject share transfer applications was not in existence on February 3, 1989. The main circumstance relied on in support of the argument that the letter from Chandu was not in existence on February 3, 1989, is that the letter refers to some false reports in newspapers about Mathrubhumi. According to the petitioner, the paper rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion before acceptance. 31. Whether the notice and explanatory statement of the extraordinary general meeting are legal and valid. Annexure A-4 in C. P. No. 29 of 1989 is the notice and explanatory statement for the special resolution of the extraordinary general meeting of March 13, 1989. Section 171(1) of the Companies Act requires 21 days' notice for a general meeting of the company. The notice in question was dated 3rd February, 1989, and the date of the meeting was fixed on 13th March, 1989. It would appear that the petitioners are mainly attacking the explanatory statement in the notice. In paragraph 17 of C. P. No. 29 of 1989, it is stated that the notice was issued on February 3, 1989. Although the petitioners have pointed out some circumstances to show that the notice was actually issued only after 14th of February and that there was no 21 days' notice and, therefore, the notice was not proper, such a contention is not pointedly urged or established by the petitioners. No objection regarding the contents and manner of service of notice and the persons on whom it was served were also urged. So much so, it has to be held that Mathrubhumi has complied with the requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of business to be transacted must be placed before the shareholders. The provisions contained in Section 173 are mandatory and not directory and any disobedience of the provisions in that section must lead to the nullification of the action taken--see Firestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd [1971] 41 Comp Cas 377 33. According to the petitioners, the explanatory statement did not disclose the entire facts and the real purpose of the alteration was not mentioned therein. According to them, the alteration was intended only for refusing the registration of transfer of shares to the Times of India. The alteration was for such a collateral purpose and the alteration is illegal on that ground also. It was also contended that the letter of Sri Chandu was misquoted in the statement. It was also submitted that the statement did not disclose the nature of the concern or interest of the directors in the special resolution. The submission is that by the alteration of the articles the directors will get absolute power to reject any share transfer thereby forcing the shareholders to sell the shares to themselves or their nominees. I am of the view that these objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting (annexure R-l(e) to the counter-affidavit on behalf of the first respondent in C. P. No. 29 of 1989, dated November 9, 1989) shows that the alteration as proposed in the notice was proposed, duly seconded and the chairman said that the formal special resolution was before the meeting. Subsequently, Dr. N. V. Krishna Warrier as well as Sri P. Kumaranunni moved amendments to the special resolution. The amendment proposed by Sri Kumaranunni was supported by the transferors of shares as well as Sri P. R. Krishnamoorthy, executive director of the Times of India and Dr. Ram S. Tarneja, who were allowed to participate in the meeting on the basis of the powers of attorney in their favour. The amendment proposed by Sri Kumaranunni was rejected after putting it to vote. The amendment proposed by Dr. Krishna Warrier was approved by the general body. The proposed Clause (b) in Article 17 was accordingly not approved. There was also some variation in the wording of Clause (a) by which the board was given absolute discretion to decline to register the transfer without assigning any reasons. This was an amendment which was duly moved in the extraordinary general meeting in which the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drum on 4th February, 1989, Sri Veerendra Kumar made it absolutely clear to him that the board of directors had unanimously decided not to register the transfer of shares. Krishnamoorthy requested Veerendrakumar to reconsider the decision in the light of his discussions and in view of the categorical statement made by Krishnamoorthy that there was no intention to take over the company or to destabilise the company in any manner. The telex referred to earlier was sent on February 13, 1989. Annexure A-16 was a telegram from Vardhaman conveying the same message to Mathrubhumi. Annexure A-17 was the reply dated February 21, 1989, from Mathrubhumi to Krishnamoorthy with copies to Vardhaman and Dharmayug. In that letter the secretary of Mathrubhumi did not deny the statement that the board of directors had decided not to register the share transfers but only called for some further information. In annexure A-17, it was stated that he had completed scrutiny of the papers and certain documents and clarifications mentioned in the letter were required. No defects other than those pointed out in the letter were found out at that stage. Therefore, the argument on behalf of the petitioners is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty towards the public, whose money and local business they administer. 38. Vanghan Williams L.J. in Westminster Corporation v. London and North Western Railway Co. [1904] 1 Ch 759: You are acting mala fide if you are seeking to acquire land for a purpose not authorised by the Act. 39. The words bad faith are often used as interchangeable with unreasonableness and with extraneous considerations. Since it cannot be said that the decision to alter the articles was unlawful or unreasonable and the dominant object (according to the petitioners) which is to assume power, to reject the transfer cannot be termed as an extraneous consideration, the contention that the alteration of articles and refusal to register transfer of shares are mala fide and not in good faith, cannot be accepted. Accordingly, I hold that the alteration of articles of Mathrubhumi is valid. 40. Point No. 3 : On February 1, 1989, the petitioner in C. P. No. 29 of 1989 lodged with the company 82 shares for transfer in their favour. On the same date the petitioner in C. P. No. 30 of 1989 deposited 318 shares for transfer in their favour. On March 7, 1989, the petitioners filed C. P. Nos. 29 and 30 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Table A in Schedule I to the Companies Act, to decline to register the transfer of these shares. There is no contention that the shares in question were not fully paid shares. 44. Section 82 of the Companies Act provides that the shares of any member shall be movable property transferable in the manner provided by the articles of the company. Being movable property, normally transfer will be complete by delivery. However, transfer of shares requires to be entered in the share register in order to complete the transfer as provided under sections 106 - 108 of the Companies Act, It is well-settled that there is no inherent power to refuse to register a transfer and that any power to refuse to register transfers must be conferred by law or the articles of association. It is also settled that registration of transferred shares is not to be refused arbitrarily or for collateral purposes (see Luxmi Tea Co. Ltd. v. Pradip Kumar Sarkar [1990] 67 Comp Cas 518. The transfers of shares in question were completed in January and February, 1989, and were lodged with the company before March 8, 1989, on which date the company had no power to decline to register the transfer of those share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferee he will not be able to exercise the rights of a shareholder until his name is entered in the books of the company. All these provisions assure free transferability of shares which is a necessary requirement for attracting savings towards corporate investment. 46. The contention on behalf of Mathrubhumi is that the articles contained a provision for amendment and the members of the public must be deemed to have known about that provision also. So, when the articles are altered, the altered provisions will apply. Under Section 31(2) of the Companies Act, any alteration of the articles shall be as valid as if originally contained in the articles. Therefore, the alteration will have retrospective effect. Such a contention cannot be accepted. The provisions in Section 31(2) of the Companies Act can only relate to the procedural validity of the altered articles. The form and other formalities to be complied with for framing articles are contained in Sections 26 - 30 of the Companies Act. Section 31(2) of the Companies Act cannot mean that the altered article will take effect with retrospective effect. The alteration of articles will not affect concluded transactions. As per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndor by way of purchase money for the property acquired by the company. At the time of his death he held 27,885 fully paid-up shares. The company had also allotted to him 60,000 ordinary shares not paid-up. Calls were made from time to time in Zuccani's life-time on these unpaid-up shares, but he did not pay the calls when they became due. Zuccani died on April 4, 1897, leaving a will. The plaintiffs were his executors. At the time of his death he owed the company the arrears of call amounts for the unpaid-up shares, besides interest. The plaintiffs did not get themselves registered as members of the company in respect of any of Zuccani's shares. On February 9, 1897, a notice was issued by the company for an extraordinary general meeting to be held on February 18, 1897, for the purpose of altering Article 29 of the articles of association, by which the words not being fully paid was to be omitted. The meeting was held on 18th February and the special resolution was then passed. Thus, the company claimed to extend their lien to all fully paid-up shares. On June 4, 1897, the company sent a notice requiring payment of the balance call amount and interest. It was also stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with contracts referring to revocable articles, and especially with contracts between a member of the company and the company respecting his shares, care must be taken not to assume that the contract involves as one of its terms an article which is not to be altered. 48. Vaughan Williams L. J., in his judgment, stated as follows [1900] 1 Ch : But I think that we are all agreed that cases might occur in which a member might have acquired, by contract or otherwise, special rights against the company which would exclude him from the operation of the altered article. (iii) In Arthur Francis Whinney v. Gulf Line Ltd. [1909] SC 732 the holder of fully paid shares in a limited company, and also of partly paid up shares on which a call was due, transferred the fully paid shares to a third party for consideration. The transferee presented the transfer for registration. According to the existing regulations of the company the transferee was entitled to be put on the register. Thereafter the company, by a special resolution altered the articles of association with the effect of giving the company a lien on all shares registered in the name of a member for all calls due o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. In Sidebottom v. Kershaw, Leese and Co. Ltd. [1920] 1 Ch 154, the company passed a special resolution to alter its articles by introducing a power for the directors to require any shareholder who competes with the company's business to transfer his shares at their full value to the nominees of the directors. The plaintiffs who were carrying on a competing business brought this action for a declaration that the resolution was invalid. After referring to Alien v. Gold Reefs of West Africa Ltd. [1900] 1 Ch 656 and other cases, Lord Sterndale M.R. posed the following question and answer [1920] 1 Ch : When the directors of this company introduced this alteration giving power to buy up the shares of members who were in competing businesses did they do it bona fide for the benefit of the company or not ? It seems to me quite clear that it may be very much to the benefit of the company to get rid of members who are in competing businesses. 50. The authors of different text bonks have considered this question in the following manner. Buckley on the Companies Acts, 14th (1981) Edition, Volume 1, Page 203. In the absence of restrictions in the articles, or by agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken not to assume that the contract involves as one of its terms an article which is not to be altered'. Vaughan Williams L.J. (at p. 676) said: 'A resolution may alter the regulations of the company but cannot retrospectively affect existing rights. I take it to be clear that the alteration must be made in good faith, and I take it that an alteration in the articles which involved oppression of one shareholder would not be made in good faith'. Romer L.J. (at p. 679) shows that the articles alone may confer on classes of shareholders rights which are unalterable without their consent. 53. Halsbury's Laws of England, 4th Edition, page 381 : 554. How far articles may be altered.--Only such alterations are valid as would have been valid if originally contained in the articles. Any alteration must be made in good faith for the benefit of the company as a whole, that is of the corporators as a general body. Subject to this, articles may be freely altered. It is for the shareholders and not the court to determine whether or not the alteration is for the benefit of the company, and the court will not readily interfere with an alteration made in good faith unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer or whether the grounds themselves are ultra vires Article 17 : The minutes of the meeting of the board of directors dated March 20, 1989, is produced as annexure R-1 (f) to the counter-affidavit in C. P. No. 29 of 1989 on behalf of Mathrubhumi dated November 9, 1989. At item 4 in the agenda the applications for transfer of shares were considered by the board. The first portion of the minutes deals with the defects in the transfer applications themselves. That aspect is discussed elsewhere in this judgment. Thereafter, the board considered the reasons for refusing the share transfer. This court has already held in another part of this judgment that Article 17 will not apply to the transfers in question. Even in case Article 17 is applicable, the further question whether the grounds relied on by the board are extraneous, irrelevant and ultra vires Article 17 requires consideration. 60. Generally, the court will not interfere where the directors have applied their mind and come to the conclusion that it would be against the interest of the company to register a particular person as a member (see M. G. Amirthalingam v. Gudiyatham Textiles Pvt. Ltd . 1972 42 Comp Cas 350 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings stood transferred to the Bombay High Court which thought it fit to reconstitute the company's board of directors and the court handed over the management of the company to the reconstituted board for a period of 7 years. The company unsuccessfully challenged this order before a Division Bench of the Bombay High Court. 62. A copy of the report of the Vivian Bose Commission was made available to the court. No member of the present management was subject to scrutiny by the Vivian Bose Commission. No member of the present management was subject to scrutiny by the Bombay High Court except Sri Narendrakumar, who was accepted as a director by that court. The Bombay High Court order proceeded on the footing that none of the charges made in the petition before that court against the then management were admitted (See Bennet Coleman and Co. Ltd. v. Union of India [1977] 47 Comp Cas 92 Therefore, it is clear that the statement in the resolution that a commission of enquiry was appointed in 1956 to enquire into the alleged malpractices of the group which is now controlling the company is factually incorrect. The allegations against the former directors which itself was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1989 (paragraph 7-XI), it is mentioned that the Second Press Commission found that Mathrubhumi has also business interests anchor is connected with business interests such as plantations. The press commission clearly found that the present chairman and the managing director of the company is a planter, while another director and principal shareholder, Mr. P. V. Chandran, was a director of Kerala Rubber Plantations (P) Ltd. In the affidavit it was also stated that Mr. Chandran has other large business interests including transport and film production. That is clear from the auditors' reports for the year ended 31st July, 1988. Mr Chandran and his brother, Gangadharan, have large business interests. The chairman and the managing director is also a politician and is a member of the Kerala Legislative Assembly elected on the Janata Party ticket. He was also a Minister for a short period in the present Kerala Ministry. It is clear that the present managing director and most of the other directors had no part in the running of the paper at its early stages. They came in only much later. T'here is some force in the argument that they are interested in purchasing further shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bilise the company or to get control of its management. 66. The Times of India is not publishing any Malayalam publication. They have denied that they intend to start any Malayalam publication. Reliance was placed on a statement in an article published in the Illustrated Weekly of India, which is one of the publications of the Times of India, to the effect that the Times of India was intending to publish Malayalam versions of the Illustrated Weekly of India and Film. Fare, using Mathrubhumi's distribution net work. The answer to this contention is that the quotation from the article was extracted out of context. The very said article pointed out that an understanding had been reached between the management of the Times of India and Mathrubhumi to share each other's printing and publication facilities. The article also pointed out that Times of India's executive director, Mr. Krishnamoorthy, informed Mr. Veerendrakumar about the purchase of shares of Mathrubhumi and Mr. Veerendrakumar welcomed the decision. Thus, if the said article and the contents thereof are correct, then they are correct in toto and not in patches. Even so, it was emphatically denied that the Time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer and that itself is a ground for setting aside the decision of the board. It was pointed out that at the first board meeting after lodging of shares itself the board considered the applications and decided to reject the same. However, that decision was not recorded in the minutes since the board had no power to reject share transfers at that time. It was also submitted that subsequently the company colluded with Sri Chandu and obtained a stay from the munsiff's court in order to avoid taking a decision. It was also submitted that even after stay from the appellate court the board did not take a decision till Article 17 was added to the articles of association. Although there is some force in these arguments I am not inclined to accept the ground of delay as a ground for interfering with the decision of the board. On the face of the materials available, Mathrubhumi is entitled to say that scrutiny of the shares was not complete before the first board meeting after lodgment of shares. So also there was in fact a stay order from a civil court. The petitioners have not established that the delay in taking a decision on the transfer applications justifies interference by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989, is set aside in respect of the shares, details of which are given at items 1, 2 and 3 of Appendix V of this judgment. Mathrubhumi is directed to register the transfer of these shares in the name of Vardhaman Publishers Ltd. and to rectify its register of members accordingly. Mathrubhumi will give notice of the rectification to the Registrar under Section 156 of the Companies Act within 30 days of this judgment. They will also file a copy of this order before the Registrar of Companies along with Form No. 21 set out in Appendix I of the Companies (Central Government) General Rules and Forms within thirty days. Time taken for drawing up the judgment of the court and in obtaining a copy of this judgment shall be excluded in computing the period of 30 days. If they fail to comply with the above-said directions within the time specified, the petitioners will be entitled to have this judgment executed and the acts required to be done by Mathrubhumi done so far as practicable through an officer appointed by the court at the cost of Mathrubhumi. The prayer for setting aside the resolution in respect of shares which are detailed as serial Nos. 1, 2 and 3 to Appendix IV to this judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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