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TMI Blog1989 (11) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... in shares transferred in his favour. These shares were fully paid-up and the company had no lien over them. According to the respondent, notwithstanding the shares being duly lodged with the company along with the transfer deeds and requisite fees for registration being paid, the board of directors of the company disapproved of the registration of the said shares. This disapproval led the respondent to make an application under section 155 of the Act for rectification of the share register. The case of the respondent was that the shares in question being fully paid-up and the company having no lien over them, the registration of the transfer of the shares in his favour could not be refused under article 39 of the articles of association of the company which was the article relevant for the purpose. The aforesaid application was contested by the company on various grounds. Overruling the objections raised by the company, a learned single judge allowed the application. Aggrieved, the company preferred the appeal aforesaid before a Division Bench of the High Court which has been dismissed by the judgment appealed against. It has been urged by learned counsel for the appellant that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be residuary but in that case too it should be provided for and traceable either in the Act or the articles of association. Even if the power of refusal is so specified and provided for, the registration of a transferred share cannot be refused arbitrarily or for any collateral purpose and can be refused only for a bona fide reason in the interest of the company and the general interest of the shareholders. If neither a specific nor residuary power of refusal has been so provided, such power cannot be exercised on the basis of the so-called undeclared inherent power to refuse registration on the ground that the company or its directors take the view that, in the interest of the company and the general interest of the shareholders, registration of the transfer of shares should be refused. Indeed, making a provision in the Act or the articles of association, etc., conferring power of refusal would become futile if existence of an inherent power such as claimed by the company in the instant case is assumed for the simple reason that the amplitude of the so-called undeclared inherent power would itself take care of every refusal to register the transfer of shares. Assumption of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refuse registration of the transfer of a share even otherwise than in accordance with law. This would be tantamount to putting a premium on taking the law into one's own hands. The Legislature cannot be imputed with any such intention. For these reasons, we are of the view that, in the context in which the words "or otherwise" have been used in sub-section (2) of section 111, they only purport to cast a duty or impose an obligation of giving notice of refusal to register the transfer of a share irrespective of the fact whether such refusal is under the articles of association of the company or de hors the articles, which would include even a case where such refusal has been made arbitrarily or for any collateral purpose. A fortiori, this would be the interpretation of even article 42 of the articles of association of the company inasmuch as, on its plain language which, except for the provision for punishment, is in pari materia with sub-section (2) of section 111 of the Act, the purpose of this article is the same as that of the said sub-section (2). Even the marginal note of article 42 lends support to this interpretation. At this point, we may point out that it has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s usually recognised in all corporations, (2) general powers usually recognized in corporations of the particular type, (3) powers inherent in or limited by the purposes or business as stated in the charter, and (4) implied powers to do all things reasonably and properly incidental to the specified purpose and business (Modern Corporation Law by Howard L. Oleck, volume 1, page 865). It is a well-recognised rule that a corporation is not restricted to the exercise of the powers expressly conferred upon it by its charter but has the implied or incidental power to do whatever is reasonably necessary to effectuate the powers expressly granted and to accomplish the purposes for which it was conferred unless a particular act sought to be done is prohibited by the law or its charter (American Jurisprudence, 2nd edition, volume 19, page 431). Every corporation is of course created with certain express powers but in addition to those, every corporation has also certain powers which attach to it as incidental to its corporate existence. The powers which are incidental to corporate existence and which are always implied in the absence of express restrictions are : (1) the power to have perpet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld take land by succession and not by inheritance, although they were not created a corporation by express words, they were so by implication and that being so, they were entitled to sue in their corporate name for an injury done to their real property. In our opinion, on the basis of this decision, it is difficult to cull out any power in the board of directors of the company in the instant case to refuse to register the transfer of a share by implication. Reliance was also placed on Attorney-General v. Lord Mayor, etc., of the City of Leeds [1929] 2 Ch 291, where it was pointed out that a corporation incorporated by royal charter stands on a footing different from a statutory corporation, the difference being that the latter species of corporations can do only such acts as are authorised directly or indirectly by the statute creating them whereas the former can, speaking generally, do anything that an ordinary individual can do. If, however, the corporatin by charter, be a municipal corporation, then it is subject to the restriction imposed by the Municipal Corporations Act, 1882. The question in connection with which the above observations were made was whether the Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the company and, indeed, it was bound to refuse to register the transfer of shares of an Indian company in favour of a non-resident where the requisite permission under the Foreign Exchange Regulation Act was not obtained, once permission was obtained, whether before or after the purchase of the shares, the company could not thereafter refuse to register the transfer of shares. The third submission made by learned counsel for the appellant that the application under section 155 of the Act was not maintainable as the transferors had not been made parties therein may now be considered. A similar submission had been made before the Division Bench of the High Court also and was repelled by holding that the transferor is not a necessary party to an application under section 155 of the Act unless the transfer was disputed by him. It was pointed out that even though, in the instant case, the transferors had been served with notice and in any event had knowledge of the proceedings for registration of transfer of shares, they had not disputed the transfer of the shares. We do not find any infirmity in the order of the High Court on this point. Likewise, we find no substance even in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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