1956 (12) TMI 28 - HC - Companies Law

Transfer of Shares Power to refuse registration and appeal against refusal and Directors - Power of

Summary

Issues Involved:
1. Whether the transfer deed was duly completed.
2. Whether the directors acted mala fide in refusing to register the transfer of shares.
3. The reliefs to which the plaintiff is entitled.

Detailed Analysis:

1. Whether the transfer deed was duly completed:
The plaintiff claimed that he obtained shares from defendant Hemmad, executed the relevant transfer deed, and applied for registration, which was refused by the board of directors. The defendant company argued that the transfer deed was not duly stamped as required by law. The court emphasized that the obligation to deliver a duly stamped transfer deed lies with the transferee. Since the transfer deed was not stamped at the time of delivery, the company was justified in refusing registration. The court held that the transfer deed was not duly stamped as required by Section 34(3) of the Companies Act and the relevant provisions of the Stamp Act, thus supporting the company's refusal to register the transfer.

2. Whether the directors acted mala fide in refusing to register the transfer of shares:
The plaintiff alleged that the refusal was wrongful and not bona fide, claiming that Modi, a director, influenced the board to refuse registration to pressure the plaintiff into selling the shares to him. The court examined the resolutions passed by the board, which did not state any specific reason for the refusal. The court found no evidence of mala fides or bad faith, noting that the directors exercised their discretion as per Article 52 of the company's articles of association. The court also rejected the plaintiff's argument based on an unused draft letter suggesting Hemmad's indebtedness as a reason for refusal, as the letter was neither signed nor sent. Furthermore, the court dismissed the relevance of the transaction involving the Sahas as evidence of mala fides, stating that a single instance does not constitute a "series of similar occurrences" under Section 15 of the Evidence Act.

3. The reliefs to which the plaintiff is entitled:
The plaintiff sought rectification of the company's register and an injunction against defendant Hemmad. The court found no basis for granting an injunction, as there was no pleading that Hemmad invaded or threatened to invade the plaintiff's rights. The court affirmed the trial judge's decision to dismiss the suit with costs, as the plaintiff failed to establish mala fides or bad faith on the part of the directors.

Conclusion:
The court dismissed the appeal, upholding the company's refusal to register the transfer of shares due to the transfer deed not being duly stamped and finding no evidence of mala fides or bad faith by the directors. The appeal was certified fit for the employment of two counsel.