Pre-emption valuation by auditors prevents collateral challenge; court refused rectification or unwinding of share allotment.

Dispute concerned validity of executor transfers, a fresh allotment of shares, and entitlement to relief to rectify the members register or unwind allotment. The HC held that transfers by executors were effective where will and trust instruments authorised majority action and transfer forms were valid; auditor-certified valuation under the company's pre-emption rules was binding absent proof of fraud or collusion, so collateral attack failed. The fresh issue, though procedurally irregular in notice, was effectively ratified by members and could not be unwound via the statutory remedy where majority rights were exercised and restoration proved impractical. Failure to satisfy a deposit condition precluded equitable relief.

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Issues: (i) Whether transfers of 3,417 and 93 shares by executors were void or required rectification of the register of members; (ii) Whether the fresh issue and allotment of 17,666 shares at par was invalid and susceptible to rectification under section 155 of the Companies Act, 1956; (iii) Whether the petitioners were entitled to relief under section 155 when they failed to deposit the sum directed by the trial court and whether extension of time should have been granted.

Issue (i): Validity of transfer of 3,417 and 93 shares and entitlement to rectification of the register.

Analysis: The executors were authorised by the will and related trust deeds to act by majority and had passed a resolution empowering implementation of the sale; transfer forms signed by three executors were therefore effective notwithstanding absence of an explicit endorsement that they acted on behalf of all executors. The auditors' certificate under the company's pre-emption articles operated as expert valuation binding on parties unless fraud or collusion was proved. No material established fraud, collusion, or denial of natural justice in the auditors' valuation; the auctioned price exceeded the auditors' valuation and petitioners failed to show a provable inability to have purchased at the certified price.

Conclusion: Issue (i) decided against the petitioners; transfers are valid and rectification of the register is not warranted in respect of these transfers.

Issue (ii): Validity of the fresh issue and allotment of 17,666 shares at par and availability of relief under section 155.

Analysis: The annual general meeting's agenda omission constituted an irregularity but not one that vitiated the corporate decision where the majority were entitled in substance to the course adopted; section 81(3) excludes private companies from pro rata pre-emptive offers under section 81(1) so the allotment method was permissible subject to articles. The issue was subsequently ratified at an extraordinary general meeting called with proper notice; even discounting votes of the newly issued shares, votes in favour exceeded votes against. Subsequent utilisation of funds and commercial changes rendered restoration impractical and section 155 was not an appropriate remedy to unwind the issue.

Conclusion: Issue (ii) decided against the petitioners; the fresh issue and allotment of 17,666 shares are not invalidated by the court under section 155.

Issue (iii): Effect of petitioners' failure to deposit Rs. 80,73,000 and correctness of refusal to extend time.

Analysis: The learned single judge conditioned relief on deposit of the specified sum within time; petitioners failed to deposit and their applications for extension were rejected. The appellate court observed that readiness and willingness to purchase must be judicially established in any suit for specific performance and the trial court will assess this on evidence; where the conditional term was not satisfied, equitable relief under section 155 could not be granted effectively.

Conclusion: Issue (iii) decided against the petitioners; no extension or remedy under section 155 is available given non-compliance with the conditional order.

Final Conclusion: The appeals resolve into a mixed outcome: certain appeals by purchasers and the company are allowed in part, while the petitioners' principal appeal for rectification and related appeals are dismissed; overall, the matters do not warrant rectification of the register or invalidation of the allotment under section 155 in the circumstances of this case.

Ratio Decidendi: Where company articles confer pre-emption with valuation by the company's auditors acting as experts, the court will not permit collateral attack on that expert valuation in absence of proof of fraud, collusion or such malfeasance; curable procedural irregularities and corporate ratification by properly convened meetings preclude relief under section 155 to unwind transfers or allotments when substantive majority rights have been exercised and conditional equitable relief has not been complied with.

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