Share transfer complaints by a purchaser and prima facie summoning of a managing director were upheld at cognizance stage

A purchaser of shares may maintain a complaint for non-transfer where she has paid consideration and forwarded the shares for transfer, because a restrictive reading that limits complaints to an already-registered shareholder would defeat the object of the Companies Act. The complaint and supporting statement naming a person as managing director were also sufficient for cognizance and issuance of summons, since the Magistrate could proceed on the prima facie material without a detailed trial at that stage. The challenge under section 482 of the Code therefore failed, and the summoning order remained undisturbed.

---

---

Issues: (i) whether a purchaser of shares could maintain a complaint for default in transfer of shares under the Companies Act, and (ii) whether the allegations in the complaint and statement under section 200 of the Code were sufficient to summon the person described as managing director.

Issue (i): Whether a purchaser of shares could maintain a complaint for default in transfer of shares under the Companies Act.

Analysis: Section 113 of the Companies Act, 1956 imposed a duty on the company and its officers in default to transfer shares and deliver them within the prescribed period after receipt. The respondent had purchased the shares, paid the price, and forwarded them for transfer, so the failure to transfer affected her rights as the real owner. A restrictive reading of section 621 that confined the right to complain only to a person already entered as shareholder would defeat the object of the provision and enable the company to avoid liability.

Conclusion: The complaint by the purchaser was maintainable, and the objection to cognizance on that ground was rejected.

Issue (ii): Whether the allegations in the complaint and statement under section 200 of the Code were sufficient to summon the person described as managing director.

Analysis: The complaint and the supporting statement specifically described the person concerned as the managing director of the company. At the stage of issuing summons, the Magistrate was entitled to proceed on the materials before him and was not required to conduct a detailed trial on that question. The allegations constituted sufficient material for taking cognizance and issuing process.

Conclusion: The summoning order was upheld and the challenge to the proceedings against the alleged managing director failed.

Final Conclusion: The petition under section 482 of the Code failed in entirety, and the summoning order remained undisturbed.

Ratio Decidendi: A restrictive construction of the complaint provision that would deny the purchaser of shares the right to complain of non-transfer is impermissible where such construction would defeat the object of the statute, and at the stage of summoning the Magistrate may rely on the complaint and supporting statement if they disclose a prima facie case.

---