Strict compliance with articles governs share transfers to outsiders; invalid transfers require rectification of the register.

Contemporaneous documents and board records were treated as decisive in finding that the shares were held jointly by the petitioner's husband and Raghbir Singh, so the surviving joint ownership continued after death. The articles of association were applied strictly: transfer to an existing shareholder was valid, but transfer to an outsider without effective notice and compliance with the pre-emption procedure was invalid. An onward transfer by a transferee who acquired no valid interest was also ineffective, and the register of members had to be rectified to reflect the lawful joint holding. The ratio also recognises that articles may prescribe a higher directors' quorum if not repugnant to the Act.

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Issues: (i) Whether the shares in question were held jointly by the petitioner's husband and Raghbir Singh or separately as claimed by the petitioner; (ii) Whether the transfer of shares by Raghbir Singh to Smt. Raj Rani and Smt. Usha Rani was valid in accordance with the articles of association and the requirement of notice to shareholders; (iii) Whether the onward transfer of shares to Parkash Chand Aggarwal was valid and whether the register of members required rectification.

Issue (i): Whether the shares in question were held jointly by the petitioner's husband and Raghbir Singh or separately as claimed by the petitioner;

Analysis: The contemporaneous letter signed by Madho Ram Puri and Raghbir Singh, the board resolution recording that both sets of shares had previously been held jointly, and the surrounding circumstances showed that the two were joint holders. The later entries and returns were treated as inaccurate or of limited value because they were inconsistent with the admitted request for splitting the shares and with the board's resolution. On the evidence, the petitioner's husband and Raghbir Singh were joint owners of the shares.

Conclusion: The shares were held jointly, and after the death of Madho Ram Puri the petitioner and Raghbir Singh became joint owners.

Issue (ii): Whether the transfer of shares by Raghbir Singh to Smt. Raj Rani and Smt. Usha Rani was valid in accordance with the articles of association and the requirement of notice to shareholders;

Analysis: The articles restricted transfer to outsiders unless the prescribed notice procedure was followed and shareholders were given an opportunity to purchase the shares. The alleged notice to the petitioner was held ineffective, the resolution authorising the notice was found to be vitiated by interpolation, and the meeting lacked the quorum required by the articles. However, a transfer in favour of an existing shareholder was permissible under the articles. The transfer to Smt. Raj Rani, being a shareholder, was therefore valid, while the transfer to Smt. Usha Rani, an outsider, was invalid.

Conclusion: The transfer to Smt. Raj Rani was valid, and the transfer to Smt. Usha Rani was invalid.

Issue (iii): Whether the onward transfer of shares to Parkash Chand Aggarwal was valid and whether the register of members required rectification.

Analysis: Since the transfer to Smt. Usha Rani was invalid, she acquired no interest capable of being transferred onward. The transfer to Parkash Chand Aggarwal, who was also an outsider, was not preceded by the procedure required by the articles. In consequence, the entries in the register reflecting the invalid transfers required correction, while the register could properly continue to reflect the joint holding of the petitioner and Raghbir Singh.

Conclusion: The transfer to Parkash Chand Aggarwal was invalid, and the register of members was liable to be rectified accordingly.

Final Conclusion: The petition succeeded in part: the court upheld the joint ownership finding, sustained the transfer to the shareholder, invalidated the transfers to the outsiders, and ordered rectification of the register to that extent.

Ratio Decidendi: A share transfer to a non-shareholder is invalid unless the company strictly complies with the transfer-notice procedure in the articles, and company articles may validly prescribe a higher quorum for directors' meetings than the statutory minimum if not repugnant to the Act.

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