SMT. CLAUDE-LILA PARULEKAR versus M/S. SAKAL PAPERS PVT. LTD. AND ORS.

Citation: [2005] 2 S.C.R. 1063 · Decided: 18-03-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Disposed off

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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SMT. CLAUDE-LILA PARULEKAR 
A 
v. 
MIS. SAKAL PAPERS PVT. LTD. AND ORS. 
MARCH l 8, 2005 
[RUMA PAL AND P. VENKATARAMA REDDI, JJ.] 
B 
Companies Act, 1956-Sections 36, 108, 155 and 188: 
Company Shares-Transfer, issue and allotment of-Joint shares and 
shares of two of the shareholders-Transfer of-By 3 of the 4 shareholders- C 
To third party skipping the hierarchy of purchasers of shares provided under 
Artir:les of Association of Company-Despite acceptance of offer made to first 
category of purchasers-Validity of transfer-By virtue of the transfer of shares, 
third party got majority of shares-Issue of increased share capital by the 
third party-Without compliance of Articles of Association and Section 188 of D 
the Act-Allotment of the same in favour of the third party-Validity of issue 
and allotment of increased share capital-Held : The transfer of the shares to 
third party was invalid being violative of Articles of Association of Company 
and Section 108 of the Act-The transfer was in breach of concluded contract 
between the transferors and the first category of purchasers~The issue and 
allotment of the shares in favour of third party was invalid being without E 
compliance of the Articles of Association and Section 188-In view of the 
facts of the case the relief of rectification cannot be granted-Hence 
compensation awarded-Sale of Goods Act, 1930-Section 9(1)-Transfer of 
Property Act, 1882. 
Section 108-Provision under-Nature of-Held : It is mandatory-
F 
Non-compliance of the same is not a technicality. 
Section 155-Petition under-Challenging transfer of shares, issue of 
increased share capital and allotments of the same to third party-Seeking 
rectification of Register of Members-Maintainability of-Held : Maintainable. G 
Appellant's father and her mother 'S' promoted respondent No. 1 
company. Appellant's father died after executing a will and appointing 
'S' and respondent Nos. 2 to 4 as Executors thereof. The will empowered 
the Executors, inter alia, to sell the properties vested in them by the Will 
10~ 
H 
1064 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A and invest the same as the Executors and the Trustees thought fit. All the 
four executors were entered in the register of members of the Company 
as joint shareholders of 3417 shares of the Company held by the Appellants 
father. Respondent Nos. 2 and 3 also had 93 shares of the compa~y. 
The Articles of Association of the Respondent-Company gave the 
B hierarchy of the persons entitled to purchase the shares upon transfer. 
First right is a preemptive right under Article 57 A claimed by the 
appellants, second is 'any member who is willing to purchase' the shares 
at a fair value as given under Article 58 r/w Article 64, third is a 'person/ 
persons selected by Directors as being desirable in the interest of the 
C Company to admit to membership, and the last category is 'person to 
whom the transferor may choose to sell the shares'. 
Respondent Nos. 3 and 4 offered to sell 93 shares to 'S' or her 
nominee under Article 57 A at a price of Rs. 2250 per share. In ttie letter 
written by them to 'S' it was stated that if she was not agreeable to pay 
D the price the letter would be treated as notice to the Directors calling upon 
them to fix the price under Article 61; that if she was not agreeable to 
pay the price the letter would be treated as notice to the Directors calling 
upon them to fix the price under Article 61; and that if she would not 
exercise her right und~r Article 57-A, or not willing to pay the price or 
not willing to complete the transaction in accordance with .\rticle 61, 
E respondent Nos. 3 and 4 would be free to sell the shares to any other person 
in accordance with the Articles of the Company. In a Board meeting 
attended by two of the four executors, one of the executors was authorized 
to sell the sliares. The request of 'S' to adjourn the meeting due to her 
illness was not accepted by the respondent-executors on the ground that 
F she would be given notice under Article 57-A. In the meeting, in respect 
of 93 shares it was resolved to offer the same to the other members of the 
Company subject to the preemptive right of 'S'. In respect of 3417 shares 
it was resolved that if 'S' did not exercise her rights or did not pay the 
price fixed under Article 61, then the Executors could sell them to any 
other person/persons for the price of Rs. 2250 per share. Executors gave 
G the notice to 'S' in respect of the shares

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