Shaileswar Mishra vs Technotive Eastern Pvt. Ltd. and Others

K.N. Saikia, J.—This is an application u/s 155 of the Companies Act, 1956, shortly ''the Act'', for rectification of the register of members and for injunction under the following facts and circumstances.

The 1st Respondent, Technotive Eastern Pvt. Ltd., hereinafter referred to as ''the Company'', was incorporated on or about 18th August, 1981 as a Private Limited Company with authorised capital of Rs. 5,00,000/- divided into 500 equity shares of Rs. 100/- each and it has issued share capital of Rs. 1,20,000/- divided into 1200 equity shares of Rs. 100/- each. The main object of the Company, inter alia, is to manufacture plastic films, bags, sleeves and generally to carry on the business of manufacturers, dealers, share-holders and exporters of the said product. Messrs. Sudip Dey, Deepak, Dutt. Alok Mookerjee, and Gautam Dutt were the equity share-holders of the Company, at the relevant time. Wnile Mr. Sudip Do held 204 equity shares, the three others held 132 shares each. Mr. Sudip De was the Managing Director and the other three were Directors. As Mr. Alok Mookerjee had to leave India, the Petitioner Mr. Shaileswar Mishra, was made an alternative Director since 1981.

On or about 12.8.81 the Company required certain financial assistance and it approached the Petitioner for the necessary finance on the specific understanding that shires worth the bulk of the assistance would be transferred to the Petitioner. In particular it was agreed that the Petitioner would pay a sum of Rs. 26,310/- for the purpose of purchase of machinery required by the Company and the amount would be treated as a personal loan given to the 2nd and 3rd Respondents, namely, Mr. Deepak Dutt and Mr. Gautam Dutt, respectively, repayable in the following manner:

(a) Rs. 11,617.80 p. would be treated as a personal loan given by the Petitioner to Mr. Deepak Dutt, the 2nd Respondent, and in exchange thereof, by way of repayment, the latter would transfer 99 equity shares out of the total 132 shares held by him at that time valued at Rs. 9,900.00 and balance of Rs. 1717.80 would be paid back to the Petitioner in cash.

(b) Rs. 11,400/- would be treated as a personal loan from the Petitioner to Mr. Gautam Dutt, the 3rd Respondent, and the latter would repay the same by transferring 99 equity shares valued at Rs. 9,900.00 to the Petitioner and the balance of Rs. 1500.00 would be repaid in cash.

(c) Rs. 3292.20 would be treated as personal loan from the Petitioner to Mr. Sudip De.

The Petitioner states that the financial assignee as arranged was given by him and it was duly acknowledged by the 2nd and 3rd Respondents and the same was occupied and appropriated by the Company on purchase of its machinery for setting up its manufacturing unit as Gauhati. By letter date 12th September, 1981 addressed to the Petitioner the 2nd Respondents agreed to transfer 99 shares of Rs. 100/- each to the Petitioner in repayment of the loan to him. On 25th November 1981 both the 2nd and 3rd Respondents applied to the Managing Director of the Company that each wished to transfer 99 shares valued Rs. 9,900/- to the Petitioner and solicits approval of the Board of Directors of the Company, hereinafter referred to as ''the Board''.

The Board in its meeting held on 6.11.81 and 7.11.81 by a resolution first approved the application of the Petitioner to purchase 99 shares each from the 2nd and 3rd Respondents and then duly and unanimously approved the applications dated 25.11.81 of the 2nd and 3rd Respondents for transfer of 99 shares each to the Petitioner. The meeting was presided over by the 3rd Respondent, Mr. Gautam Dutt and attended by the 2nd Respondent, Mr. Deepak Dutt. This transfer, the Petitioner sub-raits, was in accordance with the provisions of Article 8 of the Articles of the Association of the Company. On 20th January, 1983 the 2nd and 3rd Respondents, accordingly transferred 99 equity shares each to the Petitioner pursuant to the aforesaid arrangement and approval. On 20.1.83 the Petitioner duly lodged with the Company the share scripts bearing distinctive Nos. 634 to 732 (both inclusive) and 766 to 864 (both inclusive) standing in the names of Deepak Dutt and Gautam Dutt, respectively, as vendors and/or transferors thereof along with the duly executed transfer deeds and requested the Company to rectify the share scripts by having the name of the Petitioner entered therein in place and stead of the names of the respective transferors being 2nd and 3rd Respondents. By his letter of the same date the Petitioners also requested the Company to rectify the register of share-holders on the basis of the aforesaid transfers deleting the names of the 2nd and 3rd Respondents from the list of the registered share-holders in respect of the said 198 shares and inserting the same of the Petitioner in place and stead thereof.

The Board in its meeting held on 6.11.81 and 7.11.81 by resolution passed unanimously approved of the transfers; and by letter dated 14th March, the Company informed the Petitioner about the approval and further informed that the Petitioner''s name had been duly entered in its register of share-holders.

The Board, however, in its meeting held on 14.3.83, which was attended by the Managing Director, the 2nd and 3rd Respondents 3rd the Petitioner resolved that the share transfer forms presented by the Petitioner were found incorrect in that the date of stamping by the Registrar of Companies was predated by the date of signing of the parties; and while the Board approved that transfer, the Petitioner was requested to resubmit a fresh set of forms, duly completed, to the Company. The Board also resolved to keep the issue of the Petitioner''s appointment as wholetime Director pending, till the share transfer had been completed.

Pursuant to the aforesaid resolution the Petitioner with his letter of 31st March, 1983 forwarded to the 2nd and 3rd Respondents each the respective fresh share transfer forms (Form No. 7B) duly stamped and signed on 15.3.83 by the Registrar of Companies, Assam, for their signatures; but the Respondents who duly received those fresh forms, failed or neglected or refused to sign them, despite personal request of the Petitioner to do so thus impeding regularisation of the transfer by reason whereof the Petitioner is "suffering irreparable loss and injury and is sustaining damages from day to day." The Petitioner further states that there has been no information from the company as to whether the Petitioner has already been registered as a member of the Company and apprehends that the names of ''the 2nd and 3rd Respondents might have been restored in his place in respect of the transferred shares and hence this application.

Notice of this application was issued to the Respondents on 29.4.83 and Mr. G.N. Sahewalla appears for the company but has not filed any counter affidavit. The 2nd and 3rd Respondents have neither appeared nor filed any counter affidavit.

Mr. N.M. Lahiri, the learned Advocate General, Meghalaya for the Petitioner submits, that the Petitioner is lawfully entitled to rectification of the Register of Shareholders, the transfer of the aforesaid 198 equity shares to him having already been approved by the Board and his name already entered to the Register of Shareholders with information to him ; that the mere discrepancy in the date of stamping should in no way affect the transfer already made and that the Respondents have wrongfully, malafide, arbitrarily and capriciously declined to regularise the matter of transfer.

The first question is whether this application is maintainable or not. u/s 155(1) of the Act if (a) the name of any person (i) is, Without sufficient cause, entered in the register of members of a company, (ii) after having been entered in the register is, ''without sufficient cause omitted there from; or (b) default is made, or unnecessary delay takes place in entering on the register the fact of any person having become, or ceased to be, a member; the person aggrieved or any member of the Company or the Company, may apply to Court for rectification of the register. ''Member'' and ''shareholder'' are generally inter-chargeable in a company limited by shares. Members in such a Company may be ordinary shareholders or preference shareholders. A member may not be owner of shares for the time being e.g., signatories to the memorandum, transferees of shares not yet registered by the company. As defined in Section 2(27) of the Act, ''member'' in relation to a company does not include a bearer of a share-warrant of the company issued in pursuance of Section 114. Thus under this provision the aggrieved person or any member of the Company or the Company itself may make an application to the Court for rectification of the Register of Shareholders. A person who claims to have become a member but whose name has not been entered in the register of members can make such an application. The Petitioner claims to have purchased 198 equity of the company with approval of the Board, and to have lodged the share-transfer forms and the Board once approved the transfer. If his name has not been entered in the Register of Shareholders or there is default or unnecessary delay in entering his name he would be entitled to apply to the Court. The fact of any person having become a member means have become entitled to be a member of having got the right of membership, as was held in Nazamuneesa Begum v. Vidyasagar Cotton Mills Ltd. AIR 1962 Cal 680 . Again the term ''rectification'' implies that there is an error or mistake or defect which is to be corrected. As was observed in Benarsi Das Saraf and Others Vs. Dalmia Dadri Cement Ltd. and Another, if something has been done by operation of law or according to the direction of the Court Section 155 would not apply.

The Petitioner''s averments in the application and the correctness of the annexures to the application have not been denied by the Respondents. To ascertain whether the Petitioner''s averments are correct and whether his names has been duly entered in the Register of Shareholders as the Petitioner was in formed by letter dated 10th March, 1983 (Annexure E) the Register of Shareholders and the ''Minute Book of the Company were sent for and Mr. Sahewalla product the Minute Book of Board Meetings and the Register of Shareholders of the Company. From the minutes of the second meeting of the Board held on 6.11.81 and 7.11.81 it is clear that by resolution No. 10(a) the Board unanimously approved the Petitioner''s application dated 25th November, 1981 to purchase 99 shares each from Mr. Gautam Dutt and Mr. Deepak Dutt and also the application of Mr. Deepak Dutt and Mr. Gautam Dutt dated 25th November, 1981 agreeing to sell the shares to the Petitioner. It is also clear from the minutes of the Board''s meeting held on 12.1.1982 that the minutes of the Board''s meeting held on 6th Nov. 1981 were read and confirmed with the following amendment. The Board resolved to defer the transfer of shares by Messrs. G. Dutt and A. Mukherjee and Mr. S. Mishra''s application for purchase of shares, till such times as the articles of transfer, duly completed, were submitted to the company." By resolution No. 6 of the meeting held on 14th March, 1933 "The Board resolved that the share transfer forms presented by Mr. S. Mishra (the Petitioner) were found in correct in that the date of stamping by the Registrar of Companies was pre-dated by the date of signing of the patties"; and while the Board approved the transfer, Mr. Mishra was requested to re-submit a fresh act of forms, duly completed, to the company." Further, in the Register of Shareholders (in Folio No. 1 in the share register of Mr. Deepak Dutt there is an entry showing date of issue 27.9.1981. Number of Shares 99 Serial Numbers 634-732. Value Rs. 9,996.00, Paid up Rs. 9,900.00 Cert No. 6 Remarks Sold to Mr. Saileswar Mishra on 103.83 and Signature Sudip De. Similarly in Folio No. 2 Name Mr. Gautam Dutt there is so entry showing Date of issue 27.9.81. Number of Shares 99, Cert. No. 8, Serial Numbers 766-864, Value Rs. 9,900 09, Paid up Rs. 9,900.00, Remarks-Sold to Mr. Shaileswar Mishra on 10.3 83, Signature Sudip De. At Folio No. 5, Name-Shaileswar Mishra, there are two entries, first, Date of issue 10.3.83, Number of Shares 92, Cert. No. 6, Serial Nos. 634-732 Value Rs. 9,900.00, Paid up Rs. 9,900. Signature Sudip De, Remarks Transferred from Mr. Deepak Dutt. Second entry Date of issue 10.3.83, Number of shares 99, Cert No. 8, Serial No. 766-864, Value Rs. 9,900, Paid up Rs. 9,900, Signature Sudip De, Remarks Transferred from Mr. Gautam Dutt.

From the above record of minutes and the entries in the Register of Shareholders to my mind; it is clear that the Petitioner''s averments as to the transfer of the shares and approval therefore by the Board and that his name has been duly entered in the Register of Shareholders are substantiated. "A company''s register of members is prima facie evidence of the matter recorded in it " but as Pennington points out, "it is not conclusive evidence, so that if the register does not show the person really entitled to any shares or contains any other incorrect entry, the ''company can be compelled to rectify it" (Pennington''s Company Law 3rd. Ed. p. 288). In the absence of any contrary evidence in the instant case I have no hesitation in accepting the aforesaid entries to show a true and correct state of the transfer of the shares. Section 155 of the Act provides specifically for rectification by a summary procedure of the register of members of a company. Nothing has been produced before me to show that the Register of Shareholders was wrongly written by Mr. Sudip De who signed against the entries. The Board''s resolution deferring the transfer may of course, prima facie indicate that the transfers are not yet complete and the entries made on the basis of the transfers are erroneous.

I have also examined the two share transfer forms (Form No. 78) lodged by the Petitioner''s and found that those were presented to the Register of Companies, Assam, Arunachal Pradesh, Meghalaya etc. shillong on the 9th day of March, 1983. While there are no dates below the signatures of the transferor and the Petitioner the Notary, India Shri Ganguli signed the forms on 19.1.83 nothing that they signed in his presence, and those were registered with the company under Folio 5 on 10.3.83 under signature of Sudip De, Managing Director. It is, therefore, true that the Registrar''s signature and stamp on presentation pre-dated by the signature of the transferor and the Petitioner which were put in presence of the Notary, India, on 19.1.83.

u/s 108(1) of the Act, a company shall not register a transfer of shares in, or debentures of the company unless a proper, instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the names address and occupation, if any, of the transferee, has been delivered to the company along with certificate relating to the shares, or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures. Under Sub-section (1-A) of that section, every instrument of transfer of shares shall be in such form as may prescribed and - (a) every such form shall before it is signed or on behalf of the transferor, and before any entry is made therein, be presented to the prescribed authority, being a person ready in the service of the Government, who shall stamp or otherwise endsore thereon the date on which it is so presented, and (b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by or on, behalf of the transferor and the transferee and completed in all other respects, be delivered to the Company, is case of shares not dealt in or quoted on a recognised stock exchange, within two months from the date of such presentation.

The question then is as to whether the Board was correct in resolving that the share transfer forms presented by the Petitioner were (sic) incorrect in that the date of stamping signing of the parties. Question also arises at this stage as to whether this Court in deciding this application u/s 155 of the Act can decide the above question.

Under Sub-section (3) of Section 155 of the Act, on an application under that section, the Court (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members on the one named and the company on the other hand; (b) generally, may decide any question which it is necessary or expedient to decide connection with the application for rectification. The questions of correctness or otherwise of the share transfer forms, to any mind, is necessary or expedient to decide in this application. The question does not appear to involve any complicated problems necessitating reference to civil Court as was guidelined in Mahendra Kumar Jain v. Federal Chemical Works Ltd. (1960) 1 Comp. L.J. 151. The question involves only right and duty arising out of the provisions of the Companies Act, and it does not involve any amendment of the Articles of Association.

The share transfer forms which were presented to Registrar of Companies on 9.3.83 and after those were filed up and signed by the transferee and transferee in presence of the Notary on 19.1.83 cannot be paid to be in accordance with the requirements of Sub-section (1-A) of Section 108 of the Act. The Board''s finding therefore cannot be said to be incorrect. It is also to be (sic) that (sic) this, the Board has already approval the transfer and (sic) have already been Registrar of Shareholders giving effect to the transfer. There can, therefore, be no does about the transfers. Though presented after the transferred and the transferee and transferee signed the share transfer forms, the Registrar did not raise any objection but instead stamped and (sic)it required by law. The defect may, therefore, reasonably be takes to have been condoned by the Registrar. The provisions of the 108 of the Act, as it is known, have been amendment by the Companies (Amendment) Act, 1965 In pursuance of the (sic) the (sic) inquiry Commission with (sic)by the currency of black transfers of currency to prohibit seen transfers altogether. The instant forms. We lodged with the company on the very next date of presentation after signature of the transfer and the transferee No. (sic) of black transfer is involved in this case. Besides under (sic) proviso to Sub-section (1) of Section 108. when the (sic) of the instrument of transfer is proved to the satisfaction the (sic) the company may register the transfer on such forms to (sic) as the Board may think fit. Under the second. Provision that Section the Company has the power to register as shareholders any person to whom the right to shares has been transferred by law. There is no doubt that the Petitioner has because rightful owner of the shares transferred to him.

It is were settled that the remedy u/s 155 of the Act is discretionary. Even so, on consideration of all the facts and circumstances of the case, I consider it just and proper and accordingly order certification of the Register of Shareholders of the Company by hearning the entries made in Folio No. 5 recording the name of the Petitioner, Mr. Shaileswar Mishra as holder of (sic)members of shares in Certs. 6 and 8, bearing serial Nos. 534-732 (both inclusive) and 766-864 (both inclusive), Total Value Rs. 19,800 totally paid up, as final and not subject to any regularisation (sic) effect from the date of entry, that is, 10.3.83. This application is accordingly allowed. Under the facts and circumstances of the case I do not award any damages or costs.