High Court allows special appeals, sets aside Company Judge's orders. Section 155 rectification dismissed. Companies not illegal.

The High Court allowed all four special appeals, setting aside the Company Judge's orders. The applications for rectification under Section 155 were dismissed, leaving it open for applicants to seek remedies in civil court. The court emphasized that the companies' actions were not illegal or void, and the burden of proof lay on the applicants, who failed to establish their case. Costs were imposed on the parties throughout the proceedings.

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Issues Involved:
1. Rectification of Registers of Members under Section 155 of the Companies Act, 1956.
2. Validity of the Transfer of Shares under Attachment.
3. Compliance with Section 108 of the Companies Act, 1956.
4. Burden of Proof in Rectification Applications.
5. Role of the Receiver and Impact on Share Transfers.

Detailed Analysis:

1. Rectification of Registers of Members under Section 155 of the Companies Act, 1956:
The judgment addresses applications for rectification of registers of members under Section 155, which allows rectification if a person's name is entered or omitted without sufficient cause. The Company Judge initially directed rectification by restoring the names of original shareholders as they stood before 1959. However, the High Court found that the applications involved complicated questions of title, which are not suitable for summary proceedings under Section 155. The court emphasized that such disputes should be resolved in regular civil suits.

2. Validity of the Transfer of Shares under Attachment:
The judgment scrutinizes the transfer of shares that were under attachment due to income tax recovery proceedings. The Company Judge had declared these transfers void under Order XXI, Rule 46 CPC and Section 64 CPC. However, the High Court clarified that such transfers are not wholly void but are void against claims enforceable under the attachment. If the attachment is eventually withdrawn, the transfers would be valid. The court harmonized Section 64 and Order XXI, Rule 46, stating that the transfer is void only to the extent necessary to enforce the attachment.

3. Compliance with Section 108 of the Companies Act, 1956:
Section 108 prohibits the registration of share transfers without a proper instrument of transfer. The Company Judge found the transfers in 1959 non-compliant and thus illegal. The High Court, however, held that Section 108 is directory, not mandatory, as the Companies Act does not prescribe penalties for non-compliance. The court noted that substantial compliance is sufficient and that the companies acted in good faith based on family agreements, thus the transfers were not mala fide.

4. Burden of Proof in Rectification Applications:
The court discussed the burden of proof in rectification cases, stating that it lies on the applicant to show that the name was entered or omitted without sufficient cause. If the company acted fraudulently or illegally, the burden shifts to the company. In this case, since the companies acted in good faith and complied substantially with legal provisions, the burden remained with the applicants, who failed to discharge it.

5. Role of the Receiver and Impact on Share Transfers:
The judgment examines the role of the Receiver appointed under Order 40 Rule 1 CPC. The property does not vest in the Receiver; he only manages it. Thus, the transfer of shares to the Receiver with blank instruments of transfer does not constitute a legal transfer until the instruments are filled. The court likened these shares to those under attachment, which are valid unless required to satisfy claims.

Conclusion:
The High Court allowed all four special appeals, setting aside the Company Judge's orders. The applications for rectification under Section 155 were dismissed, leaving it open for applicants to seek remedies in civil court. The court emphasized that the companies' actions were not illegal or void, and the burden of proof lay on the applicants, who failed to establish their case. Costs were imposed on the parties throughout the proceedings.

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