Laxminarayan Bhayya vs The Praga Tools Corporation Ltd.

This is an application filed u/s 38, Companies Act on behalf of Laxminarayan Bhayya, a share-holder in the Respondent Company, The Praga Tools Corporation Ltd., holding 100 shares. The Petitioner''s prayer is for the rectification of the Register of share-holders maintained by the Respondent Company. The facts alleged by the Petitioner are that he purchased 100 shares of the Respondent Company in the Hyderabad Stock Exchange on 28-7-1948, and obtained the share scrip as also a transfer form duly filled and verified. He averred that he submitted the share scrip of the Respondent Company on 8-12-1948, requesting the Company to effect the transfer and enter the Petitioner''s name in the Register of share-holders. He alleged that in pursuance of this request the Petitioner''s name was entered in the shareholders'' Register on 14-12-1948, and that thereafter he was in receipt of the balance sheet and the profit and loss accounts from the Company as a share holder would do. His grievance is that the share scrip that was lodged with the Company for the purpose of effecting the transfer was not returned to him after recording the transfer, although he repeatedly asked the Company to send the same.

Finally the Petitioner stated that all of a sudden on 18-12-1951, he was informed by the Respondent Company that the transfer deed sent by him was a forged document and that therefore the transfer could not be effected by the Respondent Company and that that transfer which had been made previously had been cancelled. On these allegations the Petitioner contended that the unilateral cancellation of the transfer originally effected by the Company was void and not binding upon him. He alternatively pleaded that if for any reason it be held that the transfer form submitted by him was a forged document, he should be compensated by the allotment of shares of equal value as there was estoppel against the Respondent Company in that they made him believe that the shares had been transferred in his name. The Respondent Company in response to the notice issued to it filed a counter wherein it stated that the Petitioner was not entitled to the relief and that no transfer could be effected in his name in as much as the transfer in his favour was a bogus one and the signature on the transfer form was forged. It was also urged by the Respondent Company that the Plaintiff was not entitled to the relief in this Court.

We heard the arguments of the respective counsel. The various processes through which the shares passed and the steps that were taken at the Respondent Company and at the Stock Exchange are matters which require a detailed and thorough investigation and we are of opinion that the proceedings before us being in the nature of summary proceedings, there is no warrant for us to go into a detailed investigation into the matters alleged by one party and denied by the other. It was argued by the learned Vakil for the Petitioner that in this case the Company is estopped by reason of its having entered the name of the Petitioner in the Register of: share-holders; and it was not open to the Company to cancel the same subsequently. As observed by us above whether really the original transfer deed was a faked one or it bore a forged signature are matters pre-eminently lit for an enquiry in a regular suit.

It was urged by the Counsel for the Respondent Company that the original transfer was effected on account of the mistake of a Clerk in the Office and that when the Company came to realise the mistake it forthwith cancelled the transfer. These are matters which require proper evidence and enquiry and we think that it would not be proper to grant the prayer of the Petitioner in these summary proceedings. Where the facts requiring consideration are complicated and not simple a separate action alone would be the proper remedy: - In Re: Sussex Brick Co. (1904) 1 Ch 598. If the Petitioner has been wronged he may have his remedy, otherwise than in an application for rectification of the Register u/s 38, Companies Act. There is discretion vested in us either to exercise or not in a particular case the power u/s 38, Companies Act. Having regard to the facts and circumstances of this case we are not inclined to exercise our power under this Section . The Petitioner will be at liberty to take such steps as he may be advised to do. This petition is, therefore, dismissed. Having regard to the facts of this case we make no order as to costs. Each party will bear his own costs.