1949 (9) TMI 11 - HC - Companies Law

Failure to prove company omission delays register rectification; appeal dismissed with costs.

Mahomed Akbar Abdulla Fazalbhoy Versus Official Liquidator

The appellant failed to prove any omission by the company resulting in a delay in registering the names of Dr. Jivraj Mehta and Casamalli Munjee. ... Power of court to rectify register of members and Winding up – Liability as contributories of present and past members Issues Involved:1. Alteration of the list of contributories.2. Rectification of the register of members under the Companies Act.3. Liability of a contributory under section 156 of the Companies Act.4. Omission by the company in registering share transfers.Detailed Analysis:1. Alteration of the List of Contributories:The appellant sought to alter the list 'A' of contributories by excluding his name and substituting it with Casamalli Munjee for 676 shares and Dr. Jivraj N. Mehta for 200 shares. Additionally, he sought to alter list 'B' by excluding his name for 15 shares and substituting it with Casamalli Munjee. The appellant was a director of the Associated Banking Corporation Ltd., which is now in liquidation, and had applied for and was allotted 1000 shares of the company. He claimed that he only needed 500 shares as qualifying shares for being a director and that he had applied for the other 500 shares at the request of Casamalli Munjee. He executed blank transfer forms for these shares and handed them over to Casamalli Munjee. He sold 501 shares in August 1945, received payment, and executed blank transfer forms for these shares.2. Rectification of the Register of Members Under the Companies Act:The appellant argued that the real owners of the 501 shares were Dr. Jivraj Mehta and Casamalli Munjee. He contended that he had sold these shares, received consideration, and paid dividend warrants to these purchasers, who accepted their ownership. According to section 184 of the Companies Act, the court has the power to rectify the register of members, but this power is limited to cases where rectification is required under section 38. Section 38 provides for rectification in two cases: (a) where the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members, or (b) where default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member.3. Liability of a Contributory Under Section 156 of the Companies Act:The liability of a member of the company in the event of its winding up arises under section 156, which is not ex-contractu but ex-lege. This means that the liability is due to the fact that the person's name appears on the register of the company. The Privy Council in Hansraj Gupta v. Asthana emphasized that even if the original contract was void, the liability of the member arises from being on the register. Therefore, if the register cannot be rectified, the appellant's name as a contributory has been rightly included in the list.4. Omission by the Company in Registering Share Transfers:To succeed in having the register rectified, the appellant needed to prove that the company omitted the names of Dr. Jivraj Mehta and Casamalli Munjee without sufficient cause or made default or unnecessary delay in registering the appellant's cessation as a member. The appellant argued that the company's chairman and secretary knew about the share sales, but the court held that mere knowledge was insufficient. The appellant had written a letter to the company on 13th September 1945, stating that he had sold the shares and was no longer a shareholder. However, he did not follow up on this letter or take further action, such as depositing the necessary transfer forms with the company. The court concluded that the appellant had not established any omission by the company that would entitle him to rectification under section 38.Conclusion:The court held that the appellant had failed to prove any omission by the company that resulted in delay in registering the names of Dr. Jivraj Mehta and Casamalli Munjee. As a result, the appellant could not succeed in having the register of the company rectified. Consequently, the list of contributories must be settled according to the register of shareholders of the company. The appeal was dismissed with costs.