TMI Blog1966 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... member. The name of the State of Orissa has, without sufficient reason, been omitted from the register and there is default in not entering on the register the fact of the Maharaja having ceased to be a member. The court's jurisdiction under section 38 is, therefore, attracted. The High Court rightly ordered the rectification in the exercise of its summary powers , under section 38. The jurisdiction created by section 38 is very beneficial and should be liberally exercised. We see no reason why the court should deny the applicant relief under section 38. The directors of the appellant company on the most frivolous of objections have prevented the State of Orissa from becoming a member for the last 16 years. It is a matter of regret that justice has been obstructed so long. There is no merit in this appeal. - 303 OF 1963 - - - Dated:- 5-5-1966 - J.R. MUDHOLKAR, R.S. BACHAWAT AND RAGHUBAR DAYAL, JJ. N.C. Chatterjee, Ranadev Chaudhuri, G.S. Chatterjee and S.C. Majumdar for the Appellant. C.K. Daphtary, N.D. Karkhanis and R.N. Sachthey for the Respondent. JUDGMENT Bachawat, J. On November 29, 1947, the Indian Chemical Products Ltd., a limited company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y operation of law ; (2) the refusal of the board of directors to register the transfer was mala fide ; (3) the State of Orissa was entitled to rectification of the share register and a proper case for the exercise of the court's jurisdiction under section 38 of the Indian Companies Act, 1913, had been made out; (4) the petition was not liable to be dismissed on the ground that the State had asked the company to register the name of the Secretary to the Government of Orissa as the shareholder in place , of the Maharaja. The appellate court also held that under the articles of association of the company the board of directors had no power to refuse registration of a transfer where the transfer was by operation of law. The appellant challenges the correctness of these findings. The courts below concurrently found that the 7,500 shares were held by the Maharaja in his capacity as Ruler of the State of Mayurbhanj. This finding is amply supported by the documentary evidence on the record and is no longer challenged. The State of Mayurbhanj was one of the feudatory States of Orissa under the suzerainty of the British Crown, As from August 15, 1947, with the declaration of independenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer of any share or shares to any person without showing any cause or sending any notice to the transferee or transferor. The board may refuse to register any transfer of shares on which the company has lien." Article 1A attracts the regulations in Table A of the First Schedule to the Indian Companies Act, 1913, so far as they are applicable to private companies and are not inconsistent with the articles. The regulations in Table A make a distinction between transfer and transmission of shares. In respect of a transfer, they require that the instrument of transfer shall be executed both by the transferor and the transferee. A transmission by operation of law is not such a transfer. In In re Bentham Mills Spinning Company [1879] 11 Ch.D. 900, 904 , James L.J. said : "In Table A the word 'transmission' is put in contradistinction to the word 'transfer'. One means a transfer by the act of the partners, the other means transmission by devolution of law. Article 11 refers to transfers. A devolution of title by operation of law is not within its purview. Being a restrictive provision, the article must be strictly construed. In the instant case, the title to the shares ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluable rights on the company and the State of Orissa had failed to honour this obligation. Reliance was placed on clause 6 of the company's memorandum of association, which stated that the company and the Maharaja proposed to enter into an agreement and a copy of the proposed agreement was annexed. Clause 6 shows that there was a proposal between the parties to enter into an agreement, but there was no concluded agreement between them, nor was there any binding obligation on the Maharaja to execute an agreement. The directors could not use their power of declining to register the transfer under article 11 for the purpose of forcing the State of Orissa to enter into the proposed agreement. Actually, the reason given at the trial was an afterthought. The Imperial Bank of India representing the Maharaja was pressing for registration of the transfer. By its letter dated March 17, 1953, the company assured the bank that the registration would be effected shortly. Nevertheless, on May 16, 1953, the directors capriciously refused to register the transfer. The power under article 11 to refuse registration of the transfer is a discretionary power. The directors must exercise this power r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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