Court orders company to register shares in deceased husband's name, rectify register, and pay costs

The court held that the respondent-company's refusal to register the shares in the name of petitioner No. 1 was unjustified. The court directed the respondent-company to rectify its register of members by entering the name of petitioner No. 1 in respect of the shares held by her deceased husband and to file the notice of rectification with the Registrar of Companies within thirty days. Additionally, the respondent-company was ordered to pay the petitioner costs quantified at Rs. 1,500.

---

---

Issues Involved:
1. Necessity of submitting transfer forms for transmission of shares by operation of law.
2. Entitlement of legal representatives to be recorded as members and maintain an application under section 155 of the Companies Act.

Issue-Wise Detailed Analysis:

1. Necessity of Submitting Transfer Forms for Transmission of Shares by Operation of Law:

The court examined whether it was necessary to submit transfer forms in compliance with section 108(1) of the Companies Act for transmission of shares by operation of law. The relevant section 108 states that a company shall not register a transfer of shares unless a proper instrument of transfer duly stamped and executed is delivered to the company. However, the second proviso to section 108 clarifies that this does not prejudice the power of the company to register as a shareholder any person to whom the right to shares has been transmitted by operation of law.

The court noted that in the case of transmission by operation of law, such as inheritance, there is no transferor to execute an instrument of transfer. The shares of the deceased member, Channabasappa, devolved on his legal representatives by virtue of the succession certificate. The court concluded that the requirement of an instrument of transfer under section 108(1) does not apply to transmissions by operation of law. The second proviso to section 108 allows the company to register the legal heirs as shareholders without the need for a stamped instrument of transfer.

2. Entitlement of Legal Representatives to be Recorded as Members and Maintain an Application under Section 155 of the Companies Act:

The court addressed whether the legal representatives of a deceased member could maintain an application under section 155 of the Companies Act if the company refuses to record them as members. Section 155 provides the court with the power to rectify the register of members if the name of any person is entered or omitted without sufficient cause, or if there is unnecessary delay in entering the name of a person who has become a member.

The court referenced previous decisions, including Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel and Nazamunnessa Begum v. Vidya Sagar Cotton Mills Ltd., which established that the jurisdiction under section 155 is broad and includes the power to decide questions of title to shares. The court held that the legal representatives, as persons aggrieved by the company's refusal to register them as members, could invoke section 155 for rectification of the register.

Conclusion:

The court found that the respondent-company's refusal to register the shares in the name of petitioner No. 1 was unjustified. The company had not acted within the two-month period specified under section 111 for refusing registration. Therefore, the court directed the respondent-company to rectify its register of members by entering the name of petitioner No. 1 in respect of the shares held by her deceased husband, Channabasappa, and to file the notice of rectification with the Registrar of Companies within thirty days. The respondent-company was also ordered to pay the petitioner costs quantified at Rs. 1,500.

---