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of <h1>Share Transfer Compliance Upheld Despite Certificate Discrepancy</h1> The court held that the petitioners complied with Section 108 of the Companies Act by submitting duly executed share transfer forms and a composite share ... Shares warrants and entries in register of members, Transfer to shares – Power to refuse registration and appeal against refusal Issues Involved:1. Whether the application for transfer of shares complied with section 108 of the Companies Act, 1956.2. Whether the company was justified in refusing to register the shares in favor of the petitioners due to the lack of sub-division of the share certificate.3. The validity of the share transfer forms given the absence of witness signatures and the original share applications being with the police.4. The entitlement of the petitioners to seek rectification of the register of members under section 155 of the Companies Act, 1956.Issue-Wise Detailed Analysis:1. Compliance with Section 108 of the Companies Act, 1956:The petitioners submitted the share transfer forms duly executed by Bansal along with the share certificate to the company. The company argued that the application was not in accordance with section 108 of the Companies Act, which mandates the submission of a proper instrument of transfer duly stamped and executed along with the share certificate. The court noted that the instrument of transfer was duly executed and stamped by Bansal and delivered to the company along with the composite share certificate. The court held that the mere fact that the share certificate contained more shares than those transferred did not negate compliance with section 108. The larger share certificate included the shares sought to be transferred, thus satisfying the requirements of section 108.2. Justification for Refusal Due to Lack of Sub-division:The company contended that the transfer could not be registered unless the share certificate was split up. The court examined section 112 of the Companies Act, which provides for certification of transfers, indicating that certification is a statement by the company that certain documents have been delivered for the purpose of transfer. This provision facilitates the sale of smaller numbers of shares from a larger share certificate. The court found no prohibition in the Companies Act against applying for transfer with a larger share certificate without prior sub-division. The court also referred to the Companies (Issue of Share Certificates) Rules, 1960, which allow for recording transfers from a composite certificate. Therefore, the court concluded that the company unjustifiably refused to register the transfers.3. Validity of Share Transfer Forms:The company argued that the signatures on the transfer deeds could not be verified as the original share applications were with the police and that the absence of witness signatures invalidated the transfer forms. The court noted that Bansal admitted in his counter-affidavit that he had signed the share transfer forms. Therefore, the court held that the absence of witness signatures and the unavailability of original applications did not invalidate the transfer forms or justify the company's refusal to register the transfers.4. Entitlement to Rectification under Section 155:Section 155 of the Companies Act allows a person to apply to the court for rectification of the register if the company defaults in entering the fact of any person having become a member. The court found that the company failed to rectify the register without any legal justification. Consequently, the court directed the company to register the names of the petitioners in place of Bansal for the respective shares. The petitions were allowed, and the petitioners were entitled to their costs from the company.Conclusion:Petition No. 3 of 1981 was allowed, directing the company to register the name of petitioner No. 1 for 2,500 equity shares. Petition No. 4 of 1981 was also allowed, directing the company to rectify the register and record the name of the petitioner for 2,793 equity shares. The petitioners were awarded costs from the company.
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