1965 (4) TMI 78 - HC - Companies Law

Court Upholds Company Judge's Order for Share Registration Despite Appellant's Arguments

Kotah Transport Ltd. Versus State of Rajasthan

The court dismissed the appeal and upheld the company judge's order directing the company to register the State of Rajasthan's name for the disputed ... Shares – Power to issue of at discount Issues Involved:1. Limitation period for filing the application under section 155 of the Companies Act.2. Maintainability of the application under section 155 of the Companies Act.3. Validity of the forfeiture of shares by the company.4. Authority of the State of Rajasthan to file the application under section 155 of the Companies Act.Issue-wise Detailed Analysis:1. Limitation Period for Filing the Application under Section 155 of the Companies Act:The primary contention was whether the application was time-barred under Article 181 of the Indian Limitation Act, 1908. The appellant's counsel argued that Article 181, being a residuary article, applied to all applications not covered elsewhere in the Limitation Act. The respondent's counsel countered that Article 181 applied only to applications under the Code of Civil Procedure, based on the principle of ejusdem generis. The court referred to the Privy Council's decision in Hansraj Gupta v. Dehra Dun-Mussorie Electric Tramway Co. Ltd., which impliedly approved the view that Article 181 applied only to applications under the Code of Civil Procedure. The Supreme Court's observations in Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd. were also considered, which reinforced that Article 181 governed only applications under the Code of Civil Procedure. Consequently, the court held that Article 181 did not apply to the application under section 155 of the Companies Act, and there was no other provision to render the application time-barred.2. Maintainability of the Application under Section 155 of the Companies Act:The appellant argued that the application under section 155 was not maintainable due to the involvement of complicated questions of fact and law, which required a regular suit. The court, however, found no substance in this objection, noting that there was no dispute on the relevant facts. The main question was whether the appellant had the authority to forfeit the shares and whether the register of members could be rectified. The court concluded that it had the power to order rectification under section 155 and that the learned company judge did not exceed his jurisdiction in entertaining and deciding the application.3. Validity of the Forfeiture of Shares by the Company:The appellant contended that the forfeiture of shares was justified due to the breach of contract by the State of Rajasthan. The court examined Articles 29 and 34(A) of the company's Articles of Association, which dealt with the forfeiture of shares for non-payment of calls or instalments. It was found that these articles were inapplicable to the shares allotted in consideration of the monopoly grant, as there was no requirement for the grantor to pay any call or instalment. The court further referred to the Deed of Covenant, which provided for arbitration in case of disputes, and concluded that the appellant had no authority to unilaterally forfeit the shares. The forfeiture was thus deemed void.4. Authority of the State of Rajasthan to File the Application under Section 155 of the Companies Act:The appellant faintly argued that the shares were allotted to the erstwhile Kotah State, and the respondent (State of Rajasthan) could not file the application. The court dismissed this contention, citing Article 295 of the Constitution of India, which vested all rights of the Kotah State in the State of Rajasthan. The company's resolution dated 24th November 1951, also acknowledged the devolution of title in the shares to the present Government of Rajasthan.Conclusion:The court dismissed the appeal, upholding the learned company judge's order directing the company to register the State of Rajasthan's name regarding the disputed shares upon payment of the prescribed transmission fee. The arguments advanced by the appellant were found to be untenable, and the appeal was dismissed with costs.