1990 (8) TMI 408 - HC - Companies Law

Share transfer refusal overturned, company to rectify register within 30 days.

Vardhaman Publishers Limited, Dharmayug Investments Limited and Madhava Das Nalapat and Ors. Versus Mathrubhumi Printing and Publishing Co. Ltd. and Ors.

The court held that the refusal to register share transfers due to improper stamping was valid for some forms but not for others. It deemed the alteration ... - Issues Involved:1. Whether the instruments of transfer were proper and duly stamped.2. Whether the alteration of the articles of Mathrubhumi was valid.3. Whether the alteration of the articles and refusal to register the transfer of shares was mala fide and not in good faith.4. Whether Article 17 is applicable to this case.5. Even if Article 17 is applicable, whether there were sufficient grounds under that article to refuse transfer.6. What is the order to be passedRs.Detailed Analysis:1. Whether the instruments of transfer were proper and duly stamped:The board of directors of Mathrubhumi refused to register the transfer of shares on the ground that the instruments of transfer were not duly stamped or properly cancelled. The court held that the transfer forms where stamps were not cancelled at all were validly refused. However, for the other forms, the court found that the stamps affixed on separate sheets of paper and produced along with the transfer forms were sufficient. The court emphasized that the purpose of the Stamp Act is to collect revenue, not to arm litigants with technicalities. Therefore, the applications dealt with in reason No. 2 were deemed duly stamped, and the decision of the board regarding these was set aside.2. Whether the alteration of the articles of Mathrubhumi was valid:The court examined whether the extraordinary general meeting held on March 13, 1989, and the subsequent alteration of the articles were valid. The court found that the notice and explanatory statement for the meeting were legal and valid. The court rejected the contention that the alteration was mala fide, noting that the alteration was made in good faith for the benefit of the company. The court held that the alteration of the articles of Mathrubhumi was valid.3. Whether the alteration of the articles and refusal to register the transfer of shares was mala fide and not in good faith:The court considered the argument that the alteration of the articles and the refusal to register the transfer of shares were done with a collateral purpose to prevent the Times of India from gaining control over Mathrubhumi. The court found that the dominant purpose of the alteration was to empower the board to reject share transfers, which was not an unlawful purpose. The court held that the alteration and refusal to register the transfer were not mala fide and were done in good faith.4. Whether Article 17 is applicable to this case:The court examined the applicability of Article 17, which was introduced on March 13, 1989, to the transfers in question. The court held that Article 17, which conferred power on the board to decline to register the transfer of shares, was not applicable to the transfers that were lodged before its introduction. The court noted that the transfers were completed and the applications were lodged before March 8, 1989, when the company had no power to decline the transfer. Therefore, the court held that Article 17 was not applicable in this case.5. Even if Article 17 is applicable, whether there were sufficient grounds under that article to refuse transfer:The court scrutinized the reasons provided by the board for refusing the transfer of shares. The court found that the reasons were not legitimate or valid. The court noted that the allegations against the Times of India group were based on historical events and were not relevant to the present management. The court also found that the price paid for the shares was not excessive and that the Times of India had no intention to start a Malayalam publication. The court held that even if Article 17 were applicable, there were no proper grounds for rejecting the transfer applications.6. What is the order to be passed:The court set aside the resolution of the board of directors of Mathrubhumi dated March 20, 1989, in respect of the shares that were duly stamped and directed Mathrubhumi to register the transfer of these shares in the names of Vardhaman Publishers Ltd. and Dharmayug Investments Ltd. The court also directed Mathrubhumi to rectify its register of members accordingly and to give notice of the rectification to the Registrar of Companies within 30 days. The court disallowed the prayer for setting aside the resolution in respect of shares where stamps were not cancelled at all and directed Mathrubhumi to return these shares with the share transfer applications and uncancelled stamps to the petitioner within 30 days. There was no order as to costs.Summary of the findings:Point No. 1: All the applications for transfer except the applications where stamps were not cancelled at all were proper and duly stamped.Point No. 2: The notice and explanatory statement of the extraordinary general meeting of Mathrubhumi of March 13, 1989, were legal and valid. The contention that alteration of the articles and refusal to register shares were mala fide, cannot be accepted. The alteration of the articles of Mathrubhumi is valid.Point No. 3: Article 17 is not applicable in this case.Point No. 4: Even if Article 17 is applicable no proper grounds were available for rejecting the application for share transfers.Orders:C.P. No. 29 of 1989: The resolution of the board of directors of Mathrubhumi dated March 20, 1989, is set aside in respect of the shares mentioned. Mathrubhumi is directed to register the transfer of these shares in the name of Vardhaman Publishers Ltd. and rectify its register of members accordingly. Mathrubhumi must comply with the necessary formalities within 30 days, failing which the petitioners may have the judgment executed through an officer appointed by the court at the cost of Mathrubhumi. The prayer for setting aside the resolution in respect of shares where stamps were not cancelled is disallowed.C.P. Nos. 30 and 42 of 1989: The resolution of the board of directors of Mathrubhumi dated March 20, 1989, is set aside in respect of the shares mentioned. Mathrubhumi is directed to register the transfer of these shares in the name of Dharmayug Investments Ltd. and rectify its register of members accordingly. Mathrubhumi must comply with the necessary formalities within 30 days, failing which the petitioners may have the judgment executed through an officer appointed by the court at the cost of Mathrubhumi.C.P. No. 46 of 1989: The resolution of the board of directors of Mathrubhumi dated March 20, 1989, is set aside in respect of the shares mentioned. Mathrubhumi is directed to register the transfer of these shares in the name of Vardhaman Publishers Ltd. and rectify the register of members accordingly. The petitioner must pay the transfer fee for certain shares and re-present the application for others as directed. Mathrubhumi must comply with the necessary formalities within 30 days, failing which the petitioners may have the judgment executed through an officer appointed by the court at the cost of Mathrubhumi.