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Issues: (i) whether a member had locus standi to seek rectification of the register of members and whether an interlocutory injunction could be granted in proceedings under section 155 of the Companies Act, 1956; (ii) whether the entries relating to shares Exs. A and B were illegal because they were made during closure of the register and without an estate duty clearance certificate; (iii) whether the entries relating to shares Ex. F were invalid because the transfer was accepted after the death of one joint transferee and without prior Central Government approval under the MRTP-linked restrictions, and whether the transfer related back to the date of the transfer deed.
Issue (i): whether a member had locus standi to seek rectification of the register of members and whether an interlocutory injunction could be granted in proceedings under section 155 of the Companies Act, 1956.
Analysis: The statutory language of section 155 expressly permits an application by "any member" of the company, and the remedy is not confined to a person who can show special prejudice. The summary nature of the proceeding does not exclude the court's inherent power to grant interim relief in an appropriate case, although the nature of the remedy remains relevant when exercising discretion.
Conclusion: The objection to maintainability failed, and interim relief was not barred in principle.
Issue (ii): whether the entries relating to shares Exs. A and B were illegal because they were made during closure of the register and without an estate duty clearance certificate.
Analysis: Closure of the register under section 154 is enabling and does not, by itself, prohibit the company from making entries relating to transmission. The statutory scheme does not compel suspension of all transfers or transmissions during the closure period. Further, the prohibition in section 84 of the Estate Duty Act, 1953, is directed to transfer of shares of a deceased member and not to transmission by operation of law. The company also relied on a governmental clarification treating transmission to legal heirs or surviving joint holders as outside that prohibition, and its action was supported by legal advice.
Conclusion: The entries in respect of Exs. A and B were not shown to be without sufficient cause and did not warrant rectification.
Issue (iii): whether the entries relating to shares Ex. F were invalid because the transfer was accepted after the death of one joint transferee and without prior Central Government approval under the MRTP-linked restrictions, and whether the transfer related back to the date of the transfer deed.
Analysis: The company accepted the transfer on the basis of the executed transfer deeds, and the legal effect of such acceptance is to recognise the transfer from the date of execution of the instrument. The transferee acquires rights against the company upon the transfer deed being lodged, and the company is not required to treat acceptance of the transfer as a fresh contract with the transferee. A deceased joint transferee does not invalidate a transfer otherwise validly effected under the deed, and the later deletion of the deceased holder's name reflected the true position. The alleged MRTP restriction did not justify disturbing the register, particularly where the company acted on legal advice and was later deregistered.
Conclusion: The entry in respect of Ex. F was also not shown to have been made without sufficient cause, and rectification was unwarranted.
Final Conclusion: The interim restraint on the shareholder's rights could not be sustained, and the challenge to the register entries failed on the merits as well as on discretion.
Ratio Decidendi: In proceedings for rectification of the register under section 155 of the Companies Act, 1956, the court will not interfere where the entry was made on a legally supportable basis and is not shown to have been made without sufficient cause; acceptance of a transfer by the company relates back to the date of the transfer deed, and transmission by operation of law is distinct from a transfer for the purposes of statutory restrictions.
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