TMI Blog1959 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned the transfer of ten shares held by Bachittar Singh in favour of Jarnail Singh defendant No. 11, and had also sanctioned transfer of five shares held by Milkhi Ram in favour of Behari Lal, defendant No. 12. These transfers besides some other transfers which are no longer the subject-matter of any dispute were challenged by the plaintiff and a relief by way of declaratory decree was prayed and has been granted. On the parties' pleadings, the following four issues were framed, but at this stage we are concerned with the first issue in so far as it affects the case of the contesting defendants Nos. 11 and 12 1.Whether the transfer of shares in favour of defendants Nos. 2 to 12 is illegal and ultra vires for the reasons given in paragraphs 5 to 7 of the plaint, if so, its effect ? 2.Is the suit within time ? 3.Whether the plaintiff is estopped by his conduct from suing ? 4.Relief ? On the register of members of this company, there are two sets of joint shareholders, (1) Karnail Singh and Jarnail Singh, (2) Girdhari Lal and Behari Lal. The two transfers sanctioned by the company on 26th of May, 1954, were in favour of Jarnail Singh and Behari Lal respectively eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholder for purposes of private companies. Mr. Tuli, learned counsel for the appellants, has drawn our attention to regulations 6, 13, 21, 61 and 100 of Table A of the First Schedule to the Indian Companies Act, 1913, which are applicable to this company. According to regulation 6, delivery of one certificate specifying the shares held by joint holders to one of several joint holders shall be sufficient delivery to all. Under regulation 13, the joint holders of a share are jointly and severally liable to pay all calls in respect thereof. Under regulation 21, in the case of a share registered in the name of two or more holders, the survivors or survivor, or the executors or administrators of the deceased survivor, shall be the only persons recognised by the company as having any title to the share. Regulation 61 provides that in the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders ; and for this purpose seniority shall be determined in the order in which the names stand in the register of members. Lastly, regulation 100 lays down that if several pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Saunders Co. Limited [1908] 1 Ch. 415, 423 , were cited with approval. He said : "It seems to me that the joint holders of shares are entitled to arrange among themselves which of them shall stand first on the register of members and exercise on behalf of all the right of voting which belongs to them collectively." Our attention has also been drawn to an Australian case Transcontinental Hotel Ltd., In re [1947] SASR 49 , referred to in Volume I of Palmer's Company Precedents, Seventeenth Edition, at page 488, in the footnote. In that case the articles of association of a limited company required that a quorum of two members should be personally present at a meeting of the company to pass a special resolution. It was held that the presence of two persons who were registered as joint holders was a sufficient compliance with the articles of association. In other words, for purposes of quorum, two joint holders were treated as two members of the company. In Narandas Munmohandas Ramji v. Indian Manufacturing Co. Ltd. [1953] 23 Comp. Cas. 335, 340 , which was a case of a public company, it was held that every joint shareholder was a member and it was not correct to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd discharging duties attaching to a member, with the exception of those specifically mentioned in the Act and in the articles of association. Under the Indian Companies Act, 1913, the expression "shareholder" or "holder of a share" in so far as that Act is concerned, denotes no other person than "a member", vide Howrah Trading Co. Ltd. v. Commissioner of Income-tax [1959] 29 Comp. Cas. 282 . Section 2(1)(13) of the Indian Companies Act, 1913, defines "private company" as under : " 'Private company' means a company which by its articles ( a )restricts the right to transfer the shares, if any ; and ( b )limits the number of its members to fifty not including persons who are in the employment of the company ; and ( c )prohibits any invitation to the public to subscribe for the shares, if any, or debentures of the company : Provided that where two or more persons hold one or more shares in a company jointly they shall, for the purposes of this definition, be treated as a single member." The learned counsel for the respondent places emphasis on the proviso and contends that two or more persons who hold shares jointly have to be treated as a single member and from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the articles of association forbids transfer of shares to persons who are not already shareholders of the company. Such a provision is usually contained in the articles of association of private companies and the underlying object of incorporating restrictions on the right of transfer of shares is that the ownership should be confined to a close circle of members connected with one another by ties of kinship or friendship or closer relationship of a similar character, and with a view to avoid the intrusion of a stranger unless his admission is acceptable to the existing members. The restrictions which a private company is obliged to require by its articles have been left undefined as they may be of wide and varied character. The articles of association also confer a right on the directors to refuse to register transfers of shares in the capital of the company without the previous sanction of the directors and who may withhold their sanction without assigning any reason. The directors of this company have such an absolute discretion under article 9 of the articles of association of this company. Pre-emption clauses of various types are usually found in the articles of private compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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