Court rules Company not obliged to register share transfer despite Law Board order. Trust deed prevails. The court held that the Company was not obligated to register the transfer of shares to the respondent, despite the Company Law Board's order. The trust ...
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Court rules Company not obliged to register share transfer despite Law Board order. Trust deed prevails.
The court held that the Company was not obligated to register the transfer of shares to the respondent, despite the Company Law Board's order. The trust deed provisions clearly indicated ongoing benefits for the beneficiary, established since 1957, and designated the eldest son as trustee. The court emphasized the company's non-involvement in trust relations regarding shares and set aside the order for share transfer, directing the company to recognize the trust outside the register.
Issues involved: Company Law Board's order to transfer share, interpretation of Companies Act u/s 111, trust deed provisions, beneficiary rights, legal heirs' claim, recognition of trust by company.
The respondent filed a petition u/s 111 of the Companies Act, 1956, seeking registration of a share transfer from legal heirs. The company refused, citing long-standing dividend enjoyment by a beneficiary and legal precedents. The respondent claimed rightful transfer based on a trust deed provision naming a son as trustee. The Company Law Board directed transfer, but the company argued against it, emphasizing the company's non-involvement in trust relations regarding shares.
The court analyzed the trust deed, noting the share's long-standing benefit to a leprosy treatment institute. The trust, established in 1957, designated the eldest son as trustee, indicating a clear intention for continued benefits to the beneficiary. The court found no valid right for legal heirs to transfer the share, as the trust's provisions indicated ongoing benefits for the beneficiary even after the author's death.
While acknowledging the trust's existence, the court held that the Company Law Board erred in directing the share transfer to the respondent. The company was not obligated to register the transfer, but it should recognize the trust outside the register. Therefore, the court allowed the appeal, setting aside the Company Law Board's order for share transfer.
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