Strict construction of share transfer duties under company law defeats prosecution where certificates were already delivered

Section 113 of the Companies Act, 1956 required a company, after transfer of shares, to deliver share certificates duly transferred in favour of the transferee. The provision did not impose any further duty to issue or re-issue the certificates in marketable lots, and the penal consequence under Section 113(2) had to be strictly construed. On that reading, no additional obligation could be implied beyond the express wording of Section 113(1). The prosecution was therefore unsustainable, and the summoning order was liable to be quashed insofar as it concerned the petitioner.

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Issues: Whether a prosecution under Section 113 of the Companies Act, 1956 could be sustained where the share certificates had already been transferred and delivered to the transferee, but were not split into marketable lots.

Analysis: Section 113(1) obliges a company, after transfer of shares, to deliver the share certificates duly transferred in favour of the transferee. The provision does not impose any further requirement that the certificates must be issued or re-issued in marketable lots. As Section 113(2) creates a penal consequence for breach of Section 113(1), the provision must be strictly construed, and no additional obligation can be read into its express wording.

Conclusion: The prosecution under Section 113 of the Companies Act, 1956 was unsustainable and the summoning order was liable to be quashed in so far as it concerned the petitioner.

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