Fraudulent share transfer and rectification of register upheld where transferees failed to prove consideration or bona fide purchase.

Rectification of the register of members was held maintainable under the summary remedy where the dispute was sufficiently simple for determination. The alleged transfer of 780 shares was found invalid because no reliable proof of consideration or genuine transfer was produced, and the evidence indicated a colourable, benami and fraudulent transaction. Later transferees also failed to prove that they were bona fide purchasers for value, as the relevant documents and credible testimony were lacking. The register was therefore ordered to be rectified by removing the impugned transferees and restoring the petitioner-company's name, with consequential refund of dividends received on the shares.

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Issues: (i) whether the petition for rectification of the register of members was maintainable under the summary remedy; (ii) whether the transfer of 780 shares in favour of respondents Nos. 2 to 9 was valid and supported by consideration; (iii) whether respondents Nos. 10 to 13 were bona fide transferees for consideration.

Issue (i): whether the petition for rectification of the register of members was maintainable under the summary remedy

Analysis: The controversy, though contested, was found to be sufficiently simple for determination under section 155. The remedy was not treated as unavailable merely because objections were raised; the court considered the facts fit for rectification proceedings rather than relegating the parties to a civil suit.

Conclusion: The petition was maintainable and the objection to maintainability failed.

Issue (ii): whether the transfer of 780 shares in favour of respondents Nos. 2 to 9 was valid and supported by consideration

Analysis: The evidence showed that no reliable proof of payment or genuine transfer existed. The managing director's own testimony discredited the alleged sale and indicated that the shares were dealt with benami for personal control. The surrounding circumstances, the absence of supporting documents, and the failure of the alleged transferees to testify showed that the transaction was colourable and fraudulent. A fraudulent or forged transfer does not divest the true owner, and the company may be required to restore the original name on the register.

Conclusion: The transfer in favour of respondents Nos. 2 to 9 was invalid and without consideration, and this issue was decided in favour of the petitioner.

Issue (iii): whether respondents Nos. 10 to 13 were bona fide transferees for consideration

Analysis: The materials on record did not establish bona fide purchase for value. The witnesses relied upon were found unreliable, the transfer deeds and original share scrip were withheld, and the circumstances indicated that the later transfers were part of the same fraudulent scheme. No satisfactory proof of consideration or good faith was produced.

Conclusion: Respondents Nos. 10 to 13 were not bona fide transferees for consideration, and this issue was decided in favour of the petitioner.

Final Conclusion: The register of members was ordered to be rectified by removing the subsequent transferees and restoring the petitioner-company's name, with consequential refund of dividends received on the shares.

Ratio Decidendi: A fraudulent or colourable transfer of shares does not defeat the title of the true owner, and the register of members may be rectified to restore the owner's name where the alleged transferees fail to prove a valid transfer for consideration.

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