9911796707
TMI Blog1966 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... seven shareholders. The Maharaja of Mayurbhanj subscribed and paid for 7,500 shares. The remaining six shareholders hold 150 shares only, All the shareholders are signatories to the memorandum of association of the company. The State of Orissa claims that by reason of the constitutional changes since the declaration of independence, all the shares held by the Maharaja of Mayurbhanj have now vested in it by operation of law The State also based its claim to the shares on a formal instrument of transfer executed by the Maharaja. On March 16, 1950, the Government of Orissa lodged the share scrip and the transfer deed with the company and requested it to make the necessary changes in the share register. The Government as also the Maharaja, thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elegated to the Government of Orissa the power to administer the territories of the merged State. On August 1, 1949, the States Merger (Governors' Provinces) Order, 1949, came into force, and in consequence of section 5(1) of the Order, all property vested in the Dominion Government for purposes of governance of the merged State become from that date vested in the Government of Orissa, unless the purposes for which the property was held were central purposes. By a certificate dated November 10, 1953, the Government of India declared that the 7,500 shares were not held for central purposes. Under the Constitution, which came into force on January 26, 1950, the territories of the merged State were included in the State of Orissa. By reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution 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 vested in the State of Orissa by operation of law, and the State did not require an instrument of transfer from the Maharaja to complete its title. Article 11 does not confer upon the board of directors a power to refuse recognition of such a devolution of title. We may add that we express no opinion on the question whether such an article applies to an involuntary transfer of shares by a court sale having regard to the provisions of Order 21, rule 80, of the Code of Civil Procedure, with regard to the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the company. For over three years, the directors delayed registration of the transfer on frivolous pretexts. On May 16, 1953, the directors without assigning any reason declined to register the transfer. Before the High Court, the company asserted that the registration was refused because the Maharaja of Mayurbhanj was under an obligation to execute an agreement conferring valuable 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 ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definitely called upon the company to record the name of the State as the owner of the shares in the share register. In spite of this letter, the company refused to make the necessary registration. The Maharaja of Mayurbhanj has ceased to be the owner of the shares. The State of Orissa is now their owner, and has the legal right to be a member of the company and is entitled to say that the company should recognise its membership and make an entry on the register of the fact of its becoming a member and its predecessor-in-title having ceased to be a 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 cease ..... X X X X Extracts X X X X X X X X Extracts X X X X
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