Mandatory share transfer compliance bars registration of transfers made in breach of attachment or receiver-controlled possession.

Section 108 of the Companies Act, 1956 is mandatory because its prohibitory wording requires strict compliance before a company can register a share transfer; absence of an express penalty does not make the provision directory. A transfer made without a duly stamped and executed instrument is therefore invalid. Shares under attachment, or shares held by a receiver with blank transfer forms, cannot be validly transferred or registered in breach of a prohibitory order, since such registration would defeat the attachment and have no legal effect.

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Issues: (i) whether section 108 of the Companies Act, 1956, governing registration of transfer of shares, is mandatory; and (ii) whether shares under attachment, or shares held by a receiver with blank transfer forms, could be validly transferred and registered in contravention of the prohibitory orders.

Issue (i): whether section 108 of the Companies Act, 1956, governing registration of transfer of shares, is mandatory.

Analysis: The provision used negative and prohibitory language stating that a company shall not register a transfer unless a proper instrument of transfer duly stamped and executed is delivered. The presence of section 629A of the Companies Act, 1956, showed that absence of a specific penalty did not make the provision directory. Statutory language framed in prohibitory terms ordinarily indicates a command that must be obeyed, and a transaction done in contravention of a statutory prohibition cannot be enforced.

Conclusion: Section 108 of the Companies Act, 1956, is mandatory, and registration of transfer without compliance with it is invalid.

Issue (ii): whether shares under attachment, or shares held by a receiver with blank transfer forms, could be validly transferred and registered in contravention of the prohibitory orders.

Analysis: Shares attached under Order 21, Rule 46 of the Code of Civil Procedure, 1908, stood subject to a written prohibition against transfer. Registration of transfer despite that prohibition would defeat the attachment and was contrary to law. As to shares surrendered to the receiver, possession of the scrips and transfer forms meant that the original holders could not exercise ownership rights or effect a valid transfer. The agreements and purported transfers were therefore incapable of legal effect.

Conclusion: The transfers made in violation of the attachment and receiver-controlled possession were invalid and could not be registered.

Final Conclusion: The appellate challenge succeeded, the High Court's contrary view was set aside, and the rectification order restoring the original shareholders was reinstated.

Ratio Decidendi: A company cannot register a share transfer unless the statutory requirements for transfer are strictly complied with, and any purported transfer made in breach of a statutory prohibition or attachment order is void and unenforceable.

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