1994 (3) TMI 396 - HC - Companies Law

Court dismisses appeal, upholds share transfers as valid under Companies Act. Appellants' conduct bars relief.

The court dismissed the appeal, ruling in favor of the respondents. It held that the share transfers were valid, complying with the Companies Act and the ... - Issues Involved:1. Validity of share transfers.2. Compliance with Articles of Association.3. Waiver and acquiescence.4. Discretionary nature of relief under Section 155 of the Companies Act.5. Suppression of material facts.Issue-wise Detailed Analysis:1. Validity of Share Transfers:The appellants challenged the transfer of shares on the grounds that the share transfer forms were stale, violating Sections 108 and 108(1A) of the Companies Act. They argued that the forms were more than two months old from the date of their presentation, making the transfers invalid. The respondents countered by claiming that the transfers were based on a second set of valid forms. The court upheld the respondents' contention, finding that the transfers were indeed registered on the basis of fresh forms, as supported by the affidavit of the company secretary.2. Compliance with Articles of Association:The appellants contended that the transfer of 1,318 shares violated Article 7 of the company's Articles of Association, which requires the board to offer shares to other shareholders before transferring to third parties. The court found that Articles 7 and 8 must be read together. Article 8 provides an exception for transfers among existing members, their spouses, children, or legal heirs, not requiring prior board sanction. The court concluded that the transfers in question, being among existing members, were governed by Article 8 and did not violate Article 7.3. Waiver and Acquiescence:The respondents argued that the appellants had waived their right to object by participating in meetings without raising any objections. The court noted that the appellants were present and participated in the board meetings on March 31, 1990, and April 14, 1990, as well as the extraordinary general meeting on April 4, 1990, and the annual general meeting on September 17, 1990. The court found that the appellants' conduct indicated acquiescence and waiver of their rights to object to the transfers.4. Discretionary Nature of Relief under Section 155 of the Companies Act:Section 155 provides discretionary and equitable relief for rectification of the register of members. The court emphasized that relief under this section is not granted ex debito justitiae and is subject to considerations like delay, laches, and acquiescence. The court referenced several precedents, including Benarsi Das Saraf v. Dalmia Dadri Cement Ltd., to support its view that the discretionary nature of Section 155 allows the court to refuse relief based on the petitioners' conduct.5. Suppression of Material Facts:The respondents contended that the appellants had suppressed material facts, including their participation in the relevant meetings. The court found merit in this argument, noting that the petition was silent about the appellants' involvement in the meetings and the transferees' participation in the general meetings. The court held that this suppression of material facts disentitled the appellants from claiming relief.Conclusion:The court dismissed the appeal, holding that the appellants had not made out a case for relief under Section 155 of the Companies Act. The court found that the appellants had acquiesced in the transfers, waived their rights to object, and suppressed material facts. The discretionary and equitable nature of Section 155 further justified the refusal of relief. The court left open other questions, including the mandatory nature of Section 108(1A) of the Companies Act, deeming it unnecessary to pronounce upon them in light of the findings.