Indoor Management Rule protects a transferee for value; company must give notice and follow procedure before cancelling registration.

Directors irregularly cancelled a registered transferee's entry for 133 shares without notice or required formalities; the transferee had paid value and lacked notice of any informality, entitling him to protection under the indoor management rule. The cancellation was therefore illegal and the transferee's registration and rights were reinstated. Separately, the transferor ceased to be a member on registration and was not a necessary party to a suit for rectification and reinstatement; omission to implead the transferor did not bar the claim. An irregular act within corporate power cannot be annulled against an equitable transferee for value absent proper procedure and notice.

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Issues: (i) Whether the cancellation by the company of registration of 133 shares in the name of the respondent was valid; (ii) Whether the transferor (Chhote Lal Sanwal Das) was a necessary party to the respondent's suit for rectification and reinstatement.

Issue (i): Whether the directors validly cancelled the respondent's name in the company's register in respect of 133 shares.

Analysis: The articles prescribed a procedure for transfer but did not impose an absolute prohibition on transfers to non members; the company itself registered the transfers and appointed the respondent as director. The respondent paid value and had no notice of any irregularity, entitling him to rely on the presumption that the company and its directors acted regularly (indoor management rule). Section 155 permits court rectification but directors, upon discovering irregularity, were required to give notice before cancelling entries. The board's meeting was irregularly convened and the cancellation was effected without giving the respondent notice or following requisite formalities; facts indicate mala fides in the directors' action.

Conclusion: The cancellation of the respondent's registration of 133 shares was illegal and unjustifiable; the respondent's registration and rights are upheld.

Issue (ii): Whether Chhote Lal Sanwal Das was a necessary party to the suit seeking rectification of the register and reinstatement.

Analysis: After transfer and registration the transferor ceased to be a member; the dispute was between the company (and its directors) and the registered member whose name was struck off. The company's unilateral cancellation without notice made the contest one between the company and the respondent, not a direct contest requiring the transferor's presence.

Conclusion: The transferor was not a necessary party and omission to implead him did not preclude the suit.

Final Conclusion: The appeal is dismissed; the respondent's suit for rectification and reinstatement succeeds and the directors' cancellation is set aside.

Ratio Decidendi: Where a company possessing power to register transfers irregularly registers a transferee who pays value and has no notice of informality, the transferee is protected by the indoor management rule and the company cannot cancel the registration without giving notice and following proper procedure; an act irregular but within corporate power is not ultra vires and cannot be annulled against an equitable transferee for value.

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