TMI Blog1994 (7) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent companies'. 2. The respondent companies lodged 4,77,560 shares of the appellant for registration of the transfer of those shares in their names, on 29-6-1991, 11-6-1992 and 21-9-1992. The transfers were approved for registration by the board of directors after the One Man Committee appointed by it, viz., Shri B.P. Saxena approved of the same. The transfers were accordingly registered in the names of the respondent companies. Pursuant thereto, the respondent companies have been receiving dividends. On 15-10-1992 the appellant offered a rights issue of partly convertible debentures (PCDs) to the shareholders in the ratio of one PCD of the face value of Rs. 400 each for every 17 shares held on the expiry of six months from the date of allotment of Rs. 250 to be adjusted towards adjustment of ten equity shares of Rs. 10 each at a premium of Rs. 15 per share. The respondent companies applied not only for the rights but also for addi- tional PCDs before the closure of the issue on 15-12-1992. The appellant claims to have scrutinised the share transfers in favour of the respondent companies and found that the adhesive stamps on most of the transfer deeds had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed an interim order on 5-2-1993 keeping allotment of rights and additional PCDs to the respondent companies in abeyance until the disposal of the main petitions. It gave liberty to the respondent companies to inspect the original instruments of transfer. After such inspection, the respondent companies filed a reply. Their case was that the petitions for rectification were not maintainable in law and barred by limitation. It was also their contention that the board of directors had a discretion to register a transfer under section 22A of the Securities Contracts (Regulation) Act, 1956 (SCRA), which was introduced in 1985 and having exercised such discretion and registered the transfers, it was not open to the appellant to seek rectification of the register by deletion of the names of the respon- dent companies. They had also challenged the bona fides of the appellant in filing the applications for rectifications and contended that the conduct of the appellant disentitled it to get any relief in the petitions. The respondent companies also raised a plea of estoppel. They submitted that the equitable jurisdiction of the Board could not be exercised in favour of the appellant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y." 5. Both parties were aggrieved by the order of the Board with reference to the portions respectively against them. Appeals were filed under section 10F of the Act against the order of the Board. The appeals filed by the appellant were numbered as C.M.A. Nos. 1245 to 1255 of 1993. The appeals filed by the respondent companies were taken on file as CM.A. Nos. 1412 to 1422 of 1993. All the appeals excepting four which were omitted to be posted by oversight were heard by a learned Single Judge of this Court and a common judgment was rendered on 7-4-1994. The learned Judge has allowed the appeals filed by the respondent companies and dismissed the appeals filed by the appellant in the following terms: "( a )the orders of the CLB dated 20-10-1993, directing the rectification of the share register of the appellant company in respect of the shares falling under Lists A and C (Categories I and III) are hereby set aside and the appeal filed by the 11 respondent companies against the directions of the CLB directing rectification of the share registers with regard to the shares falling under Lists A and C, namely, C.M.A. Nos. 1412 to 1422 of 1993 are allowed; ( b )the appeals prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on the said section 22A sought to be placed by the respondent companies is erroneous. ( 4 ) There can be no estoppel against a statute and the fact that the registration was effected by the appellant company earlier will not prevent it from pointing out that the same is void. ( 5 ) There was no mala fide whatever on the part of the appellant company in seeking rectification of the register. There was no pleading in this regard by the respondent companies. ( 6 )The doctrine of laches cannot be applied as no rights have accrued in favour of any third party. 7. In reply thereto, the following contentions are urged on behalf of the respondent companies: ( 1 )Section 22A has been deliberately introduced by the Legislature in the SCRA with a view to govern transfer of shares and provide for free transferability and registration of transfers of securities of listed compa-nies. After the introduction of the said section 22A, the provisions of section 108 cannot be invoked with respect to listed companies as the later legislation on the same subject matter will prevail. It gives a discretion to the company to register or refuse to register any transfer on any one or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant entitled to any relief? IV. List 'B' 9. Before taking up the issues seriatim for consideration, it is easy to dispose of the dispute relating to the shares comprised in List B. It is not in dispute that as it stands, all the relevant transfer instruments are fully cancelled. But, according to the appellant, they were cancelled by the employees of the second respondent and as there was no cancellation at the time of execution of the instruments, they are void. The CLB has rejected the contention of the appellant after giving a finding of fact that the appellant has not proved its case that the stamps were cancelled by the employees of the second respondent. The CLB has taken into account the circumstance that about 2,500 transfer instruments were lodged on 29-6-1991 and only 15 of them remained uncancelled. The Board pointed out that the transfers were approved on 1-7-1991 itself and within two days it was not possible to cancel stamps on all the instruments. Again, about 3,000 transfer instruments were lodged on 11-6-1992 and approved on 15-6-1992. It is pointed out that the stamps on about 500 instruments were only cancelled though there was a gap of four days. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit: Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. (1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and ( a )every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority being a person already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and ( b )every instrument of transfer in the prescribed form with the date of such presentation/stamped or otherwise endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company, ( i )in the case of shares dealt in or quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock exchange but not being a security which is not fully paid-up or on which the company has a lien; ( c )all other words and expressions used in this section and not defined in this Act but defined in the Companies Act, 1956 (1 of 1956), shall have the same meanings as are assigned to them in that Act. (2) Subject to the provisions of this section, securities of companies shall be freely transferable. (3) Notwithstanding anything contained in its articles or in section 82 or section 111 of the Companies Act, 1956 (1 of 1956), but subject to the other provisions of this section, a company may refuse to register the transfer of any of its securities in the name of the transferee on any one or more of the following grounds and on no other ground, namely: ( a )that the instrument of transfer is not proper or has not been duly stamped and executed or that the certificate relating to the security has not been delivered to the company or that any other require-ment under the law relating to registration of such transfer has not been complied with; ( b )that the transfer of the securities is in contravention of any law or rules made there under or any administrative instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some of the transfer deeds were not cancelled and they were not, therefore, duly stamped. It was also found that the share certificates were not produced along with the applications and the provisions of section 108 were not complied with. 14. In Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp. Cas. 185 (SC), the section was held to be mandatory in view of the negative, prohibitory and exclusive words used therein. The Court rejected the argument that the provisions in the section were directory because non-compliance thereof was not declared as an offence. The Court referred to section 629A of the Companies Act prescribing penalty, whereas no specific penalty is provided elsewhere in the Act. Referring to the provisions in section 108, the Court said: "...There are two provisos to section 108 of the Act. We are not concerned with the first proviso in these appeals. The second proviso states that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. The words 'shall not register', are mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, if the company is asked to rectify the Register by accepting such instrument not duly stamped, the company will be acting contrary to law." (p. 791) The Bench had also referred to the observations of Stone CJ. in New Citizen Bank of India v. Asian Assurance Co. Ltd [1945] 15 Comp. Cas. 53 (Bom.) that even if the omission was due to company's own default, the company could not be directed to act in contravention of the statute and rectify the register. The Court rejected the argument that the instrument may be impounded and the penalty provided in the Indian Stamp Act could be collected. The Court said that the only question was whether the company was bound in law to accept any instrument not duly stamped within the meaning of section 108 of the Companies Act or section 12 of the Indian Stamp Act and rectify the register. 16. In Mathrubhumi Printing Publishing Co. Ltd. v. Vardhaman Publish-ers Ltd. [1992] 73 Comp. Cas. 80, the Kerala High Court rendered a similar judgment. That was a case in which the adhesive stamps on the instru- ments of transfer of shares had not been cancelled at the time of execution but only at the time of lodgement with the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter is evenly balanced or fairly arguable on either side, then that interpretation should be preferred which would involve the least alteration of the existing law. (3) If one of the two possible constructions would lead to startling or bizzare results, or to any absurd or harsh consequences, then that construction in one which ought not to be preferred and is one which ought to be avoided. (4) The intention of the Legislature is primarily to be gathered from the actual words used and not from any words not to be found in the statute, but which are required to be added to make the statute clear and to bring out the policy intention." (p. 591) 20. It is further argued that the law declared by the Supreme Court in Mannalal Khetan 's case ( supra ) was clear and categorical and it was not doubted or diluted at any time. The Legislature did not intend to nullify the judgment of the Supreme Court after it held sway for about a decade. There was no reference to or mention of the judgment in the statement of objects and reasons of the Securities Contracts (Regulation) Amendment Act, 1985. Nor was there any reference to it in the speech of the Finance Minister. The learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of this rule is based on the theory that the Legislature while enacting a law has a complete knowledge of the existing laws on the same subject-matter, and therefore, when it does not provide a repealing provision, it gives out an intention not to repeal the existing legislation. When the new Act contains a repealing section mentioning the Acts which it expressly repeals, the presumption against implied repeal of other laws is further strengthened on the principle expressive unique est exclusio alterious. Further, the presumption will be comparatively strong in case of virtually contemporaneous Acts. In the absence of an express provision of repeal, being presumed , the burden to show that there has been a repeal by implication lies on the party asserting the same. The presumption is, however, rebutted and a repeal is inferred by necessary implication when the provisions of the later Act are so inconsistent with or repugnant to the provisions of the earlier Act 'that the two cannot stand together'. But, if the two may be read together and some application may be made of the words in the earlier Act, a repeal will not be inferred." 23. In Life Insurance Corpn. of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater law. 27. In Ratan Lal Adukia v. Union of India AIR 1990 SC 104, the question was whether section 80 of the Moiley Act as introduced by Act 39 of 1961 was a complete Code and it excluded the operation of section 20 of the Code of Civil Procedure, 1908 and section 18 of the Presidency Small Cause Courts Act. The Court traced the case law relating to the doctrine of implied repeal as well as the relevant treatises on statutory interpre- tation and said: "The doctrine of implied repeal is based on the postulate that the Legislature which is presumed to know the existing state of the law did not intend to create any confusion by retaining conflicting provisions. Courts in applying this doctrine are supposed merely to give effect to the legislative intent by examining the object and scope of the two enactments. But in a conceivable case, the very existence of two provisions may by itself, and without more, lead to an inference of mutual irreconcilability if the later set of provisions is by itself a complete code with respect to the same matter. In such a case the actual detailed comparison of the two sets of provisions may not be necessary. It is a matter of legislative i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- ment of objects and reasons of the Amendment Act is in the following terms: "At present, sections 82 and 111 of the Companies Act, 1956, permit board of directors of companies to assume powers under the articles of association to refuse registration of transfer of securities without assigning any reason. Though there is a provision for appeal against such a refusal to the Company Law Board, it places as an undue burden on an aggrieved person who often happens to be a small investor. The present position is also not conducive to the free marketability of listed securities and healthy growth of the capital market. Unrestricted transferability is particularly necessary for securities of public limited companies which are listed on the Stock Exchanges. 2. It was in the above context that it was announced in the Budget Speech dated 16th March, 1985, that the Securities Contracts (Regulation) Act, 1956, would be amended to ensure free transferability of securities of public limited companies whose securities are listed on the Stock Exchanges. For this purpose, it is proposed to incorporate a new section, namely, section 22A, in the Securities Contracts (Regulation) Act, 1956, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non obstante clause in sub-section (3) makes a reference only to sections 82 and 111, and make no mention to section 108 of the Companies Act. But, the Court must have regard to all the relevant circumstances to decide the applicability of the doctrine of 'implied repeal' in the present case. 31. The scheme of the section is also significant in that it contains specific definition for the expressions 'company' and 'security' while adopting the definitions in the Companies Act for the other words and expressions. Section 22A of the SCRA is confined in its application to a company whose securities are listed on a recognised Stock Exchange and to securities which are fully paid up and on which the company does not have a lien. Sub-section (2) contains the key to the new scheme. It declares that securities of companies shall be freely transferable subject to the provi-sions of the section. In other words, the said securities are governed only by the provisions of section 22A and no other provision of law in respect of their transferability. Though sub-section (3) does not expressly refer to section 108 it excludes the operation of section 108 by necessary implica-tion on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use would not be an impediment for an operation of the enactment. See in this connection the observations of this Court in South India Corpn. ( P. ) Ltd v. Secretary, Board of Revenue AIR 1964 SC 207 at p. 215. 69. It is well settled that the expression 'notwithstanding' is in contradistinction to the phrase 'subject to', the latter conveying the idea of a provision yielding place to another provision or other provisions to which it is made subject..." (p. 134) 33. Sub-section (4) of the section prescribes a time limit within which the company shall form, in good faith, its opinion as to whether registration of transfer as applied for ought not or ought to be refused. The sub-section emphasises that refusal can be only on one of the grounds set out in sub-section (3). In fact, sub-section (3) itself permits the company to refuse to register on any one or more of the four grounds set out therein and prohibit the company from refusing registration on any other ground. Under section 111 of the Companies Act, the company had a wide discretion to refuse registration on any ground. Prior to 31-5-1991 there was no necessity for the company to give reason for such refusal. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned specifically therein, while section 108 of the Com-panies Act is a general law applicable to all companies. The maxim specialia generalibus derogant (special excludes general) can be invoked in this case. See: Municipal Board v. Bharat Oil Co. AIR 1990 SC 548 and Yogendra Lal Saha v. State of Bihar AIR 1991 SC 1148. 35. One of the learned senior counsel appearing for respondent compa- nies drew our attention to certain passages in Bharat's Transfer Transmission of Shares, 2nd edn., and submitted that the Amendment Act brought about change of far reaching implications with regard to transfer of shares of the listed companies. Annexure 3 in the book has reproduced recommendations of Sachar Committee on transfer of shares contained in para 7.21 of the report. We do not think it necessary to refer to either the passages in the text book or the contents of the Report of Sachar Committee. We have already set out in detail the contents of section 22A of the SCRA which by themselves show that the Legislature intended to change the law relating to transfer and registra- tion of listed securities. 36. Having regard to the purpose, object sought to be achieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended 'may' to mean 'may' and 'shall' to mean 'shall'. While sub-section (3) uses the word 'may', sub-section (4) uses the word 'shall'. The learned counsel added that if the statutory provisions confer power and if the power is to be exercised in favour of certain persons for their benefit under certain circumstances in a given set of facts, such power is one coupled with a duty to exercise it in their favour. Whenever a statutory provision intends a power coupled with duty, the word used will only be 'may' and not 'shall'. Depending upon the object for which it has to be exercised, the conditions on which it has to be exercised and the types of persons for whose benefit it has to be exercised, the power has to be exercised when the facts establish the circumstances and legal conditions to be fulfilled calling for the exercise of such power. In such situations, 'may' will again mean 'shall'. In section 22A, the word 'may' confer a discretion on the company and it cannot be construed as mandatory. He referred to several rulings in support of his contentions. 39. In Chief Controlling Revenue Authority v. Maharashtra Sugar Mills Ltd. AIR 1950 SC 218, the Court referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was held to mean 'must'. The word 'may' in sub-section (2) was held to mean 'may'. The following passage can be quoted with advantage: "The word 'may' is often read as 'shall' or 'must' when there is something in the nature of the thing to be done which makes it the duty of the person on whom the power is conferred to exercise the power. Section 5(2) is discretionary because it takes into account all cases which may be brought before the Government of persons claiming to be adversely affected by the provisions of section 3 of the Act. Many such persons may have no claims at all though they may in a general way be said to have been adversely affected by section 3. If the power was to be discretionary in every case there was no need to enact further than sub-section (2). The reason why two sub-sections were enacted is not far to seek. That Government may have to select some for consideration under sub- section (3) and some under section 7 and may have to dismiss the claims of some others requires the conferment of a discretion and sub-section (2) does no more than to give that discretion to Government and the word 'may' in that sub-section bears its ordinary meaning. The word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, on a claim, and, thereby to defeat justice. In other words, a stay order, under section 442 cannot be made mechanically, or, as a matter of course, on showing fulfilment of some fixed and prescribed conditions. It can only be made judiciously upon an examination of the totality of the facts which vary from case to case. It follows that the order to be passed must be discretionary and the power to pass it must, therefore, be directory and not mandatory. In other words, the word 'may' used before 'stay' in section 442 of the Act really means 'may' and not 'must' or 'shall' in such a context. In fact, it is not quite accurate to say that the word 'may' by itself acquires the meaning of 'must' or 'shall' sometimes. This word, however, always signifies a conferment of power. That power may, having regard to the context in which it occurs, and the requirements contemplated for its exercise, have annexed to it an obligation which compels its exercise in a certain way on facts and circumstances from which the obligation to exercise it in that way arises. In other words, it is the context which can attach the obligation to the power compelling its exercise in a certain way. The cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to enable free transfer ability and registration of transfers. The power of the company which was not previously statutorily restricted, is expressly restricted by the four grounds set out in sub-section (3). Even with reference to the said four grounds, the company is not allowed to reject the application for transfer straightway. If the company decides in good faith that registration should be granted, it can proceed to register the transfer. On the other hand, if it comes to the opinion, again in good faith, that registration ought to be refused, in one case it has to issue notice to the transferor and transferee about the requirements of law for securing registration and in the other three cases it has to make a reference to the CLB and forward copies of such reference to the transferor and transferee. Thus, in no case, the company can straightway refuse to register. If the ground for refusal falls under clause ( a) of sub-section (3), intimation is to be given to the parties informing them about the requirements which should be fulfilled, for the purpose of registration. That gives an opportunity to the party to rectify the defects in a manner known to law. If the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning given to it in the Industrial Disputes Act, 1947. The Court referred to a passage in Craise on Statute Law, 6th edn., and said that it is hazardous to interpret a word in accordance with its definition in another statute or statutory instrument and more so, when such statute or statutory instrument is not dealing with any cognate subject. The ruling in MSCO (P.) Ltd. 's case ( supra ) will not apply in the present context. 51. We are unable to accept this contention of the respondent companies. The Companies Act and the SCRA use the expression 'duly stamped'. But, there is no provision whatever either in the Companies Act or in the SCRA prescribing stamp duty for any instrument. The only enactment which prescribes stamp duty for instruments referred to in the two Acts is the Indian Stamp Act. In order to find out the stamp duty, one has to refer to the provisions of the Indian Stamp Act. It goes without saying that the expression 'duly stamped' used in the sections can only mean "stamped in accordance with the law prescribing stamp duty for the instruments referred to". It follows that an instrument can be considered to be duly stamped only if it is stamped in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55. We have no hesitation to hold that the expression 'duly stamped' found in section 108 of the Companies Act and section 22A of the SCRA has the same meaning as given to it in section 2(11) of the Indian Stamp Act and that the requirements of section 12 of the Indian Stamp Act should also be satisfied. VIII. Issue 'D' 56. The next question is whether the prayer of the appellant for rectifica-tion can be granted on the ground that the instruments of transfer were not duly stamped. The argument of the appellant is developed as follows: The company does not have any responsibility to see that the transfer deeds are properly executed and duly stamped. It is the duty of the transferee, who presents the instruments of transfer to the company for the purpose of registering the same. Reliance is placed in the judgment of Chagla, CJ. in Jagdish Mills Ltd., In re AIR 1955 Bom. 79, where it was held that the company is not liable to pay stamp duty on the instrument of transfer and the revenue authorities should only proceed against the person who was liable to pay the duty. Reliance is also placed on the judgments in Babulal Choukhani v. Western India Theatres Ltd. [1958 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of section 108 and, therefore, Register should be rectified. The learned counsel referred also to Amrit Kaur Puri v. Kapurthala Flour, Oil General Mills Co. ( P. ) Ltd [1984] 56 Comp. Cas. 194 (Punj. Har.) wherein the Court held that if a transfer is illegal and invalid as it was not done in the manner prescribed by the articles of association, rectification of the register would have to be ordered by the Court. Reference is made to Bhikraj Jaipuria v. Union of India AIR 1962 SC 113 wherein it was observed that if a statute prescribes mandatorily the manner or form for doing a thing, it has to be done only in that manner or form and otherwise it will have no effect or validity. 57. Reliance is placed on Dottie Karon v. Lachmi Prasad AIR 1931 PC 52 and Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh AIR 1977 SC 2149 in support of the contention that there could be no estoppel against the statute. Reference is made to Killick Nixon Ltd v. Dhanraj Mills ( P. ) Ltd. [1983] 54 Comp. Cas. 432 (Bom.), wherein a prelimi-nary objection was raised that the application for rectification was barred by principles if analogous to tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvalidate the transaction between the parties to the instrument. The Indian Stamp Act is a measure to raise revenue for the public exchequer. Its enforcement is primarily ensured by the sanction that a particular document not conforming to the requirements of the said Act, shall not be used in evidence in any proceedings. There are civil, quasi-criminal and criminal sanctions. Even when there is a criminal sanction and the party is liable to be convicted, the instrument could be validated by payment of duty and penalty and the instrument shall take effect from the date of the execution. The transaction is never void or affected. A fortiori in a case where there is no criminal sanction but there is only a civil sanction or a quasi-criminal sanction such as payment of additional duty or fine, the document could still be validated with effect from the date of its execution. Our attention is drawn to the judgment of the Supreme Court of the United States in Guy T. Helvering v. Charles N. Nitchell 303 U.S. 391 and Spies v. United States 317 US 492 wherein different types of sanctions in taxation laws were discussed. It was pointed out that some sanctions are punitive and some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing prescribed format complete in all respects, enclosing therewith all the related transfer deeds in the prescribed format duly executed by the transferors. ( ii )The covering transfer deed shall contain, by way of an Annexure, details of distinctive numbers and corresponding certificate num-bers of shares/debentures involved in transfer. ( iii )The part relating to 'transferee's particulars' in the individual trans-fer deeds (enclosed with the covering transfer deed) need not be signed by the transferee and may be merely stamped with the name and address of the transferee. ( iv )Requisite amount of stamps may be affixed on the covering transfer deed or paid in a manner as otherwise prescribed by the Govern-ment." 62. It is submitted that the Board has not considered the provisions of section 108 of the Companies Act or section 22A(3) of the SCRA to be mandatory. Reliance is also placed on Jagatjit Industries Ltd. v. Mohan Meakin Ltd. [1991] 2 Comp. LJ. 288, wherein the CLB held that in the case of blank transfer, the adhesive stamps have to be affixed only at the stage when the instrument is lodged with the company for transfer as the document is deemed to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e greatest importance that the register of members should be promptly and accurately entered up, as delay or inaccuracy may lead to an expensive law suit. ****** The power of the court is discretionary, and regard must be had to the 'justice of the case'." 65. In Palmer's Company Law, 24th edn., Vol. 1, at page 809 it is stated thus: "The Court has rarely declined, as between a member and the company, to exercise its jurisdiction under what is now section 359; but the Court had and has a discretion, although the words 'if satisfied of the justice of the case' in section 35 of the Act of 1862 were not used in subsequent Companies Act. See per Lord Macnaghton in Trever v. Whitworth [1887] 12 App. Cas. 409, 440 as to the materiality of these words. Where justice requires it, the order to rectify will be made pro tanto. " 66. In Boyle and Birds' Company Law, similar passages are found at page 425. In Halsbury 's Laws of England, 4th Edition, Vol. 7(1), Reissue, at page 253, in paragraph 372, it is stated thus: "The jurisdiction to rectify the register is discretionary. It is not limited by the provisions of the Companies Act, 1985 to the cases mentioned abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: "In the next place, the act to be done under the powers of that section is the 'rectification' of the register, a term which of itself implies that the register, either in what is, or what is not upon it, is wrong; but the register cannot be wrong unless there has been a failure on the part of the company to comply with the directions in the Act as to the kind of register to be kept; for if the Act has been complied with, the register must be right and not wrong." 70. The above observation of Lord Cairns is very relevant in the context of section 22A(4) of the SCRA. We have already pointed out that the sub-section is mandatory in its terms and the company has to form an opinion, in good faith, whether registration ought or ought not to be refused on any of the grounds set out in sub-section (3), before the expiry of two months from the date of lodgement. In the present case, the registration was effected within the period prescribed by the sub-section. It is not the case of the appellant company that it did not act in good faith while forming an opinion that registration ought not to be refused for the respondent's companies. 'Good faith' in the sub-section has to be under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to three other grounds the company has to make a reference to the CLB. It is necessary for the CLB to consider, before granting any relief under section 111(4) of the Companies Act to the applicant, whether the applicant has fulfilled the requirements of section 22A(3) and (4) of the SCRA. As pointed out in the passages extracted from the text books already, the jurisdiction being an equitable one and the Board being obliged to take into account all the facts and circumstances of the case, the requirements of section 22A(3) and (4) cannot be ignored. 72. In Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. AIR 1959 Punj. 232, the words 'sufficient cause' have been considered in detail. Reference was also made to the observations of Lord Cairns, LJ. extracted above. The Court said: "22. The word 'sufficient' means, 'adequate', 'enough', 'as much as may be necessary to answer the purpose intended'. It embraces no more than, that which provides a plentitude which, when done, suffices to accomplish the purpose intended in the light of existing circumstances and when viewed from reasonable standard of practical and cautious men." (p. 235) 73. In T.V. Somasundaram Pil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and flexible in order to meet the challenge of new situation. Our attention is drawn to the following passage in the judgment: "34. Precedents in profusion were cited on both sides bearing on Court deposits as security for decree amounts and for allied positions. While we will presently refer only to a few of them inhibited by space and relevance, it falls to be mentioned at the threshold, contrary to the tenor of Shri Sen's contention, that equity jurisprudence is flexible and meets the challenge of new situations without the law. 'New days may bring the people into new ways of life and give them new outlooks; and with these changes there may come a need for new rules of law. Current Legal Problems, 1952, Vol., 5, Stevers Sons Ltd. London, p. 1'. But legislation lags. Here steps in equity for the role of a judge is to develop the law and adopt it to the needs of the members of his society ( See Modern Law Review, Vol. 34, 1971, p. 28). Nor is Shri Sen right when he contends that his client admittedly not being guilty of any blessable conduct, therefore, should not be deprived of any part of his decree. Equity is not penalty but justice and even where neither party, as here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njust and inequitable to grant the same. IX Issue 'E' 79. It is the contention of the learned counsel for the appellant that there is no specific pleading of mala fide in the pleadings before the CLB. It is well-settled that mala fides should be pleaded with proper particulars. In any event, no particulars have been given in the pleadings as regards mala fides on the part of the appellant. The contentions urged before the Board across the Bar without there being a pleading, ought not to have been entertained. 80. It is vehemently argued that the appellant is guilty of mala fides as it has not disclosed the real reason for which it seeks rectification. One of the arguments advanced by the appellant before the CLB was that the respondent-companies had hidden the fact that they belonged to Reli- ance Group of Companies and had the said fact been known to the company at the time of registration, it would have rejected the request for registration. It is submitted by the respondent companies that the appellant has deliberately omitted to mention the real reason for seeking the equitable relief of rectification. The learned counsel for the appellant submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition is actuated by mala fides such as would render the same liable to be rejected in equity. In para 6B, the same is elaborated in about six pages. The relevant part of it reads thus: "What renders the said motion on the part of the company even more suspect and focuses with startling clarity on the mala fide and oblique motives with which the said petition has been filed is the fact that the petition is sought to be filed and is affirmed by one Mr. D.B. Saxena, a whole-time director of the petitioner-company. Significantly, it is the same Mr. Saxena, who was the One Man Committee who scrutinized the said transfer-deeds and approved the transfer in favour of the first respondents and who now pleads ignorance and/or mistake in permitting such transfer-deeds to have been entertained by the company. It is further significant to note that, in the event of the vested rights of the first respondents being allowed to be thus defeated by the mala fide action on the part of the petitioners, the inevitable result will be that those in management of the petitioner-company, including the said Mr. Saxena and others, who have applied for additional quota of partly convertible debentu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is further stated as follows: "The petitioner submits that the first respondent cannot claim rights in equity they having failed to come with clean hands by cornering the shares of the petitioner-company along with others in the Reliance Group surreptitiously with a view to dislodge the management of the petitioner-company." 84. Excepting drawing our attention to the relevant pleadings, the learned counsel did not refer to any evidence as on record. The CLB after referring to the rival contentions has refrained from expressing any opinion on the matter inasmuch as the rectification is not sought on that basis. 85. In Needle Industries ( India ) Ltd. v. Needle Industries Newey ( India ) Holdings Ltd. AIR 1981 SC 1298, the Court held that it is generally unsatisfactory to record a finding on the question of mala fides on the basis of affidavits and documents without asking the person concerned to submit to cross-examination. When the CLB has chosen to refrain from giving a factual finding on the question, the learned Single Judge ought not to have ventured a finding against the appellant particularly when an appeal under section 10F of the Companies Act is confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle has been accepted in the case of Jai Narayan v. Suraj Mull AIR 1949 PC 211 wherein the Court has held that as a matter of law in case of transfer of share of a company, it is the vendor by whom the stamp duty is payable. The same is the effect of the decision of the Punjab High Court in the case of G.R. Parry v. Union of India [1962] 32 Comp. Law Cases 145. Therefore, I am of the view that equitably the matter does not warrant a discretion to be exercised in favour of the appellant company, because if at this stage rectification is done, that would amount to unsettling various transfers that had taken place long back and that would also create a confusion and instability in the stock market." 89. We are unable to agree with the reasoning of the learned Judge. In Jawahar Mills Ltd. v. Official Receiver, Sha Mulchand Co. Ltd. [1949] 19 Comp. Cas. 138 (Mad.), it was a case of forfeiture of shares and allotment of forfeited shares to third parties. When the company had already allotted the shares to third parties, it was held that in the absence of such allottees whose rights will be affected, the relief of rectification would not be granted. That ruling ..... X X X X Extracts X X X X X X X X Extracts X X X X
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