Directors' discretion to refuse share registration must be bona fide; court-auction purchasers remain subject to the articles.

Where company articles vest absolute discretion in directors to refuse registration, that power is a fiduciary discretion reviewable only for mala fides; the challenger bears the burden of proof, and evidence that admission would prejudice company interests sustains a lawful refusal. A court sale transfers the vendor's rights but does not bypass the articles or automatically effect registration; purchasers at execution sales must comply with the articles and available court transfer mechanisms, and remain subject to directors' discretionary registration powers. Operatively, refusal to register stands if bona fide, and court-auction purchasers obtain no automatic right to be registered.

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Issues: (i) Whether the directors' refusal to register a transferee is within their powers or vitiated by mala fides; (ii) Whether a purchaser of shares at a court auction is automatically entitled to registration irrespective of the articles governing transfer.

Issue (i): Whether the directors' refusal to register the transferee was bona fide and within the scope of the articles conferring discretion.

Analysis: The articles vested an absolute and uncontrolled discretion in the directors to refuse registration. Such a fiduciary power must be exercised bona fide in what the directors consider to be the interests of the company. The burden of proving mala fides lies on the person challenging the directors' decision. The directors gave reasons indicating concern that the proposed transferee was associated with a member whose conduct and actions were prejudicial to company interests; the surrounding facts supported the directors' view that admission would be adverse to the company's interest.

Conclusion: The directors' refusal was within their fiduciary discretion and was not shown to be mala fide; therefore the refusal stands.

Issue (ii): Whether purchase of shares at a court auction confers an automatic right to be registered as a member, bypassing the articles regulating transfers.

Analysis: A court sale transfers the vendor's right, title and interest but does not automatically effect the formal transfer under the company's articles. Order 21 Rules 79 and 80, Code of Civil Procedure, 1908 provide mechanisms to effect transfer if the judgment-debtor refuses to execute transfer documents, but they do not enlarge the purchaser's rights beyond those subject to the articles. Consequently, purchasers at execution sales must comply with the articles' requirements and remain subject to the directors' discretionary powers concerning registration.

Conclusion: A purchaser at a court auction is not automatically entitled to registration; the articles governing transfer apply and the directors' discretion under those articles remains operative.

Final Conclusion: The appeal succeeds on both issues: the directors lawfully exercised their fiduciary discretion in refusing registration and a court-auction purchaser does not obtain an automatic right to registration; accordingly the lower court's order is reversed and the application for registration is dismissed.

Ratio Decidendi: Where articles confer an absolute discretion to refuse registration, that fiduciary power is judicially reviewable only for mala fides, and a purchaser at a court auction acquires no automatic right to registration but must comply with the articles and available court processes to effectuate a transfer.

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