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TMI Blog1975 (11) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... erors as mentioned in Schedule " A " to the petition who are also made respondents in this application. The petitioners after paying the consideration in respect of the said shares as mentioned in Schedule " A" to the respective registered holders thereof, being the transferors of the said shares, received the relative share scrips together with the relative transfer deeds executed by the respective transferors in favour of the respective petitioners. Thereafter, on or about 16th of June, 1969, all the petitioners excepting petitioner No. 5 who on the 23rd of June, 1969, lodged their respective shares together with the relative transfer deeds duly stamped and signed by the respective transferors and transferees with the respondent No. 1 Luxminarayan Cotton Mills Limited, hereinafter referred to as the respondent-company, along with the relevant amounts of transfer fees for which the respondent-company duly granted the receipts to the respective petitioners which are annexed to the petition and marked with letter "B". The respondent-company failed to intimate either the transfer or the refusal to do so within two months from the date of lodgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and appointed an authorised body of persons mentioned therein for the said purpose. The said authorised body immediately thereafter took possession of the undertaking and is still in possession of the same. On the 12th of December, 1972, the State of West Bengal by a notification declared the said undertaking as a "State Industrial Undertaking" and also declared the undertaking to be a relief undertaking for one year. Thereafter, on the 1st of December, 1973, by further notification the period was extended till 11th of December, 1974. It appears that no objection was filed by the respondent-company before the Company Law Board in the appeals filed by the petitioners under Section 111 of the Companies Act, 1956, disputing the merits of the said appeals. The respondent-company subsequently took objection for rectification of the share register by registering the names of the petitioners, inter alia, on the ground that the Company Law Board had no jurisdiction to condone the delay in filing the appeal under Section 111 of the Companies Act, stamps affixed on the transfer deeds were not duly cancelled and consequently the said transfer deeds could not be acted upon and lastl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates delivered to the donee together with the blank transfer form duly signed by the donor but such transfer was not registered with the companies after complying with the formalities prescribed by the Companies Act, for transfer of shares. Dealing with the question of the validity of the transfer of the said shares by gift in the absence of registration after the death of the donor, it was observed by the Supreme Court in the said decision in paragraph 13 AIR 1974 SC 1734, as follows : "A share certificate is a prima facie evidence, under Section 29 of the Companies Act (1913), of the title to a share. Section 34 (1913 Act) of the Act does not really prescribe the mode of transfer but lays down the provisions for ' registration ' of a transfer. In other words, it presupposes that a transfer has already taken place. The manner of transfer of shares, for the purposes of Company Law, has to be provided, as indicated by Section 28, by the articles of the company, and, in the absence of such specific provisions on the subject, regulations contained in Table " A " of the. 1st Schedule of the Companies (1913 Act) Act apply." 4. Relying on the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application should be allowed. 5. Referring to the Sick Textile Undertakings (Nationalisation) Act, 1974, which came into force from 21st of December, 1974, and the appointed day under the said Act is the 1st of April, 1974, Mr. Mukherjee submitted that the said Act has not affected in any way the right of the petitioners to apply under Section 155 of the Companies Act, 1956, for rectification of the share register. The said Nationalisation Act has acquired the right of the owners in respect of the said company which was declared to be a sick undertaking and now vests in the National Textile Corporation of West Bengal, Assam and Bihar Ltd. 6. Mr. P. N. Chatterjee appearing for the company and the custodian first referred to Section 108 of the Companies Act and submitted that the company rightly rejected the said transfer. Mr. Chatterjee referred me to Section 108(1A) of the Companies Act, 1956, and as such Section 155 of the Companies Act, 1956, has no application and the petitioners have no locus standi. Mr. Chatterjee took three objections to this application: (1) the petitioners have no locus standi, (2) the application is barred by res judicata, and (3) it is barred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be barred by the principles of res judicata. He referred to the decisions in Daryao v. State of U.P., [1962]1SCR574 , Hemlata Saha v. Sladmed Private Ltd. [1964] 34 Comp Cas 875 (Cal), G.R. Parry v. Union of India, and Sushil Kumar Sen v. State of Bihar, [1975]3SCR942 . Relying on these decisions Mr. Chatterjee submitted that the present application is not maintainable and should be dismissed with costs. 7. Considering the respective contentions very carefully, I am of the view that the petitioners are entitled to an order as asked for under Section 155 of the Companies Act, 1956. It is now well settled that the power under Section 155 of the Companies Act, 1956, should be liberally exercised and the court should not hesitate to grant the relief by rectification having regard to the facts of each particular case when it warrants the interests of justice and circumstances of the case. The principle has been laid down in a series of cases which both the counsel have referred. I will only refer to the two decisions which have crystallised the said principle and would be sufficient for the purpose of disposing of this matter. The first one being a Division Bench decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy 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." 9. Therefore, the only question to be considered is whether, in the facts of the present case, the petitioners are entitled to an order of rectification as asked for in the application under Section 155 of the Companies Act, 1956 ? Regarding the objection that in view of the Sick Textile Undertakings (Nationalisation) Act, 1974, the petitioners have no locus standi and the application is not maintainable, in my view, the said contention is utterly baseless, as the corporate existence of the company which has been acquired under the said Nationalisation Act is not affected and the company is defined as the owner of the Sick Textile Undertakings which have been nationalised under the said Act, as defined under Section 2(h) of the said Act, and would receive payment from the Central Government as provided under Chapter 3 of the said Act. Therefore, the said Natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the respective title and right of registration with the company, observed at page 97 of 53 Indian Appeals as follows: " But, further, there seems to their Lordships a good deal of confusion arising from the prominence given to the fact that the full property in shares in a company is only in the registered holder. That is quite true. It is true that what Bharucha had was not the perfected right of property, which he would have had if he had been the registered holder of the shares which he was selling. The company is entitled to deal with the shareholder who is on the register, and only a person who is on the register is in the full sense of the word owner of the share. But the title to get on the register consists in the possession of a certificate, together with a transfer signed by the registered holder. This is what Bharucha had. He had the certificates and blank transfers, signed by the registered holders." 10. In the Supreme Court decision in Howrah Trading Company Ltd. v. Commissioner of Income Tax 36ITR215(SC) , it has been held that a transferee of shares holding the share-scripts together with the blank transfer deed signed by the transferor, if he choo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 123 of the Transfer of Property Act and the title in the said shares vested in the donee, at page 54 of [1975] 45 Comp Cas 43 (SC) as follows: " There is nothing in Regulation 18 or anywhere else in our company law to indicate that, without strict compliance with some rigidly prescribed form, the transaction must fail to achieve its purpose. The subservience of substance of a transaction to some rigidly prescribed form required to be meticulously observed savours of archaic and outmoded jurisprudence." 11. and then again, at page 55, as follows: "In other words, the fields of operation of the provisions of Sections 122 and 123 of the Transfer of Property Act and the provisions of the Companies Act, 1913, were different. Each had different objects and legal consequences. The Companies Act did not prevent the completion of a gift of the right to obtain the shares which could, in common parlance or loosely speaking, be spoken of as a gift of shares themselves even before the gift is acted upon so that the donee obtains share certificates in his own name. The Transfer of Property Act could not enable the donee to exercise the rights of a shareholder vis-a-vis the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of R.M. Datta J. in Mani Mohan Mukherjee v. Jalpaiguri Cinema Co. Ltd. [1975] 79 CWN 512, where identical questions were raised by Mr. P. N. Chatterjee, as junior counsel, appearing with Mr. Bikash Sen, and were rejected. I respectfully agree with the said decision of R. M. Dutta J. Moreover, the appeal of the petitioners under Section 111 of the Companies Act was dismissed by the order of the Company Law Board dated the 22nd November, 1973, and, therefore, the present application was filed on the 4th of April, 1974, and kept pending in this court by obtaining adjournments after adjournments till it was finally heard. In the facts of this case, there is no question of the petitioners' application being barred by limitation and, in any event, the petitioners having diligently pursued their remedies in different Tribunals, there was no question of making an application under Section 155 of the Companies Act, earlier. These points are fully covered by the said decision of R. M. Dutta J. in [1975] 79 CWN 512 with which I have respectfully agreed. There is no substance or merit in the contentions of Mr. P. N. Chatterjee, appearing for the respondents, and I reject the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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