Bona fide discretion in share transfer refusals requires current facts, not stale reasons from an earlier rejected transfer.

The Banking Regulation Act, 1949 did not prohibit the appellant from holding the respondent bank's shares, because the holding was only 50 shares and remained within the statutory ceiling; a voting restriction did not amount to a bar on ownership. The alleged prior directions were not supported by documentary material and could not create a continuing legal prohibition. The earlier refusal of a much larger block of shares in 1982, based on apprehended control and the size of that holding, could not be mechanically applied to the fresh 1987 transfer of 50 shares. The board was required to exercise its discretion bona fide on the facts then prevailing, and the refusal to register the transfer was therefore unjustified.

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Issues: (i) Whether the appellant was prohibited under the Banking Regulation Act, 1949 from holding the respondent bank's shares; (ii) whether the reasons that led to refusal of transfer of a larger block of shares in 1982 continued to justify refusal of transfer of the 50 shares lodged afresh in 1987.

Issue (i): Whether the appellant was prohibited under the Banking Regulation Act, 1949 from holding the respondent bank's shares.

Analysis: The relevant provisions permitted a banking company to hold shares up to the statutory ceiling, and the voting restriction on a shareholder did not create a prohibition on such holding. The present holding involved only 50 shares, far below the statutory limit. The respondent's reliance on alleged prior directions was not supported by documentary material and could not be treated as establishing a continuing legal bar to the fresh transfer.

Conclusion: No prohibition was made out against the appellant holding the shares.

Issue (ii): Whether the reasons that led to refusal of transfer of a larger block of shares in 1982 continued to justify refusal of transfer of the 50 shares lodged afresh in 1987.

Analysis: The earlier refusal was founded on the size of the block, apprehended control, and related considerations arising from a substantially larger holding. Those reasons lost force in relation to the later transfer of only 50 shares, which represented a negligible percentage of the capital. The board was required to exercise its discretion bona fide and on a just and proper consideration of the fresh facts, and could not refuse transfer merely by mechanically relying on the earlier decision.

Conclusion: The earlier grounds did not justify refusal of the fresh transfer and the rejection was unjustified.

Final Conclusion: The refusal to register the transfer was set aside and the respondent was directed to register the 50 shares in favour of the appellant.

Ratio Decidendi: A board's discretion to refuse registration of share transfer must be exercised bona fide on the basis of the facts then prevailing, and a fresh transfer cannot be rejected merely by mechanically relying on stale reasons from an earlier refusal when the legal bar and factual foundation no longer exist.

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