INDIAN CHEMICAL PRODUCTS versus STATE OF ORISSA & ANR.

Citation: [1966] SUPP. 1 S.C.R. 380 · Decided: 05-05-1966 · Supreme Court of India · Bench: RAGHUBAR DAYAL · Disposal: Dismissed

Judgment (excerpt)

380 
INDIAN CHEMICAL PRODUCTS 
v. 
ST A TE OF ORISSA A ANR. 
May 5, 1966 
(J. R. MUDHOLKAR, R. S. BACHAWAT AND RAGl!UBAR DAYAL.. JJ.J 
Compan11 Law-DijJe1"ence between "transmission" and "trans-
fer" of shares-Ownership of shares passing by operation of !au.~ 
Board of directors whether can refu.se amenclment of share register. 
Indian Companies Act, 1913, s. 38- Court's power under-Pro-
per exercise of. 
B 
c 
As a result of constitutional changes following the Indian In-
dependence Act, 1947, the ownership of the public propertiea of the 
Y:aharaja of the Mayurbhanj includins certain shares in the appel-
lant company passed to the State of Orissa. Although tb.e State had 
acquired title to these shares by operation of law, it also obtained 
D 
from the Maharaja by way of abundant caution, a deed transfer-
ring these shares to it. In 1950, the State Government lodged 
the 
share scrip and transfer deed with the company and requested it to 
make the necessary chanies in the share register. Despite repeated 
requests, however, the directors of the 
company refused to do so. 
In 1955 the State filed an appliootion under s. 38 of the l.ndian Com-
panies Act, 1913 in the High Court of Orissa, asking for re<:,tificu-
tion of the share l'E'(!,ister by inserting its name as the holder or the 
share in place of the Maharaja. The High Court allowed the appli-
E 
cation and passed a supplemental order directing the filing of the 
notice of rectification with the Re~istrar within a fortnight. The 
company's appeal before the Division Bench failed, whereupon it 
appealed to this Court by special- leave. 
It was urged on behalf of the appellant company, inter alia, 
that under Art. 11 of its Articles of Association as well as under cl. 
22 of Table A read with art. 1-A the diredorn has power to refuse 
registration of the transfer. 
P 
HELD: (i) In Table A which was attracted by art. 1-A of the 
company's Articles of Association, the word 'transmiaaion' is put in 
contradistinction to the word 'transfer'. One means a transfer 
by 
the act of the parties, the other a transmission by devolution of law. 
Art. If refers to transfers. A devolution of title by operation of law 
is not within its purview. Being a restricth-e provision the article 
must be strictly construed. In the instant case, the title to the shares 
6 
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 docs not confer upon the Board of directors a power 
to refuse recognition of such a devolution of title. [383G-384Cl. 
In re Beritham Mills Spinning Compan11. (1879) 11 Ch. D. 900. re-
ferred to. 
(ii) Clause 22 of the regulations in Table A read with Art. 1-A B 
confers power on the Board of directors to decline registration of 
transmission of title In consequence of the death or insolvency of a 
• 
• 
A 
. 
B 
a 
D 
E 
.~· 
F 
G 
H 
INDIAN CHm.t:. l'RODTJCTS v. ORISSA (Bachawat, J.) 
381 
member. In the instant cas'e there was no transmission of title in 
consequence of death or insolvency and clause 22 had, therefore no 
appiicatwn. [384 DJ 
(iii). In so far as the claim of the State was based on the trans-
fer deed it fell within the purview of Art. 11. But the refusal of the 
board of directors to register the transfer under that article was 
ma!a fide. The power under that article was a discretionary power. 
The directors must exercise thaV power reasonably and in good 
faith. The Court can control this discretion if they act capriciously 
or in bad faith. [384 E-F; 385 C-D] 
(iv) The name of the State of Orissa had without sufficient 
reason, been omitted from the register, and there was default in not 
entering on the register the fact of the Maharaja having ceased to 
be a member. The Court's jurisdiction under s. 38 was, there-
fore, attracted. The High Court rightly ordered the rectification in 
the exercise of its summary powers under s. 38. The jurisdiction 
created by s. 38 is very beneficial and should be liberally exercised. 
[385G] 
CIVIL APPELLATE JURISDICTION; 
Civil Appeal No. 303 of 
1963. 
Appeal from the judgment and order dated September 5, 
1960 of the Orissa High Court in Appeal under Orissa High 
Court Order No. 4 of 1956. 
N. C. Chatterjee, R:111adev Chaudhuri, G. S. Chatterjee and 
S. C. Majumdar, for the appellant. 
C. K. Daphtary, Attorney-General, N. D. 
Karkhanis and 
R. N. Sachthey, for respondent No. 1. 
The Judgment of the 

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