LexLUXMI TEA COMPANY LIMITED versus PRADIP KUMAR SARKAR
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
A B LUXMI TEA COMPA."<Y LIMITED v. PRAD!P KUMAR SARKAR NOVEMBER 7, 1989 [M.N. VENKATACHALIAH, N.D. OJHA AND J.S. VERMA, JJ.] Companies Act, 1956: Section 108---Share Transfer-Considera- tion-Power of Company to examine correctness-Company-Whe- ther can refuse registration of transfer of shares if transfer deeds are not C properly stamped. Section 111(2)/Article 42 of Articles of Association-Expression "Or otherwise"-Scope of-Whether recognises existence of inherem power to refuse registration of shares. D Company Law-Share Transfer-Board of Directors-Whether has inherent power to refuse registration of transfer of shares-Resi- duary, implied or incidental power of corporate existence-Whether include power of refusal to register transfer of shares. Section 155-Share Register-Application for rectification of- E Transferor-Whether a necessary party. The respondent lodged certain fully paid-up shares with the appellant company for transfer in his name. The Board of Directors of the Appellant company disapproved the registration of the shares. The respondent filed an application under section 155 of the Companies Act, F 1956 for rectification of the share register i.e. for inserting his name in the share register as a registered share-holder which was allowed hy a single judge of the High Court. The Compnay preferred an appeal which was dismissed hy the Division Bench of the High Court. In appeal to this Court it was contended on behalf of the company O that (i) the Company had residuary inherent power to refuse the regist- ration Of the transfer of shares; (ii) the words ''or otherwise'' ill Article 42 of the Articles of Association and section 111(2) of the Companies Act recognise the existence of an inherent power to refuse registration of the I transfer of shares; (iii) the application under section 155 was not main- tainable as the transferor had not been made parties therein; and (iv) H the company was entitled to examine the correctness of transfer consi· 82 • LUXMI TEA CO. v. P.K. S~RKAR 83 deration shown in the transfer deeds and refuse registration of the transfer of shares if the transfer deeds were not duly stamped. Dismissing the appeal, this Court, A HELD: 1. Unless there is any impediment in the transfer of a share of a public limited company, a shareholder has the right to trans- B fer his share. Correspondingly, in the absence of any impediment in this behalf the transferee of a share is entitled to have a rectification of the share register of the company hy inserting his name therein as a registered shareholder of the share transferred to him. To have such rectification carried out is the right of the transferee and can be defeated by the company or its Directors only in pursuance of some power vested in them in this behalf. Such power has to be specified and provided for. It may even be residuary but in that case too it should be provided for and traceable either in the Act or the Articles of Associa- tion. Even if the power of refusal is so specified and provided for the registration of a transferred share cannot be refused arbitrarily or for c 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 share- holders. 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 compay or its Directors take the view that in the interest of the Com- pany and the general interest of the shareholders, registration of the transfer of shares should be refused. Indeed making a provision in the D E Act or the Articles of Association etc. conferring power of refusal would become futile if existence of an inherent power 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 share. Assumption of such a power would result in leaving the matter of F transfer of share and its registration at the mercy and sweet will of the company or its Directors, as the case may be. [86E-H; 87A-B] 2. The objects or purposes for which a company is created should be distinguished from the powers which it can exercise. So far as refusal to register the transfer of a share is concerned the power has to be G specified and within the fra
Excerpt shown. Read the full judgment & AI analysis in Lexace.