Limited discretion to refuse share transfer applies only to authorised grounds; extraneous reasons make refusal ultra vires.

Directors under limited transfer-restriction articles may refuse share registration only on grounds authorised by the articles, such as a lien or a personal objection to the transferee. A refusal based on alleged cornering of shares, banking policy concerns, or section 12(2) of the Banking Regulation Act was outside that discretion, because section 12(2) restricts voting rights and does not prohibit transfer. The court's power to rectify the register under section 155 of the Companies Act, 1956 was not excluded by the alternative appeal remedy under section 111(1), and the transferee could proceed under either route. The refusal was therefore ultra vires and the register was liable to be rectified.

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Issues: Whether the directors of the company could validly refuse registration of the transfer of shares on grounds of alleged cornering of shares, supposed contravention of banking policy, and section 12(2) of the Banking Regulation Act, and whether such refusal could be challenged by a petition for rectification of the register under section 155 of the Companies Act, 1956.

Analysis: Section 111(1) of the Companies Act, 1956 and the corresponding remedy by appeal to the Central Government did not exclude the court's power under section 155 to rectify the register of members. The transferee could elect to proceed under either provision. Under regulation 42 of the articles, the directors' power to refuse registration was not an unfettered power. It could be exercised only on grounds permitted by the articles, such as lien on the shares or a personal objection to the transferee. The reasons recorded by the board were not personal to the transferee and did not fall within the limited discretion conferred by the articles. Alleged cornering of shares was not a valid ground under the articles, section 12(2) of the Banking Regulation Act only restricted voting rights and did not restrict transfer of shares, and the Reserve Bank circular could not enlarge the directors' powers under the articles.

Conclusion: The refusal to register the transfer was ultra vires and invalid, and the register was liable to be rectified in favour of the transferees.

Ratio Decidendi: Where the articles confer only a limited discretion to refuse transfer, the directors may decline registration only on grounds authorised by the articles, and a refusal based on extraneous, non-personal, or otherwise impermissible reasons is ultra vires and liable to be set aside under the court's rectification power.

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