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Judgment
Mockett, J.—This is a matter of some importance to companies and it has been dealt with very summarily in the lower Court. The action is
by the plaintiff against the defendant company in respect of the non-registration of a transfer in which he was interested. Under Article 6 of the
Company''s Articles of Association it is stated that the company reserves to itself the right of refusing any transfer if it appears to be against the
interests of the company. The plaintiff by his plaint alleges that the defendant company refused to recognise the transfer under the evil advice and
guidance of the second defendant. The company justified its refusal for reasons given and also because under Article 6 of the Articles of
Association it claims to have unfettered discretion. The issues as originally framed were:
(3) Are defendants entitled to refuse to recognise the transfer of shares as stated by them in their written statement?
(4) Whether the suit is not maintainable for reasons alleged by the defendants?
that is to say it put the burden of proof upon the defendants. The defendants sought to have the issues recast as follows:
(3) Whether the refusal of the defendants'' company to recognise the plaintiff as transferee is not bona fide and valid?
(4) Whether the suit is maintainable?
That was dealt with by the learned District Munsif as follows:
I do not consider that there are sufficient grounds for recasting the issues already framed.
The burden of proof in these matters is upon the plaintiff, as has been held in a number of cases one example of which is In re Coalport China
Co. (1895) 2 Ch. 404 and another is In re Gresham Life Assurance Society. Ex parte Penney (1872) 8 Cha. App. 446. The same principle has
been recognised in the Madras High Court in Sree Mahant Kishore Dossjee v. The Coimbatore Spinning and Weaving Co. (1902) ILR 26 Mad.
79 at 84, 85 : 12 M.L.J. 439. The issues were therefore wrongly framed and this Civil Revision Petition must therefore be allowed.
But it has been argued on behalf of the respondent that I should not interfere in this matter. The power of interference in revision in a matter of
this sort is naturally sparingly used. But when the burden of proof as in this case, is definitely wrongly placed and where the matter is, as I have
said, one of considerable importance to companies and a local precedent might possibly be caused, I think this is a matter in which I am properly
asked to interfere. The matter has been dealt with though not without jurisdiction certainly with material irregularity. A bench of this High Court
composed of Oldfield and Venkatasubba Rao, JJ. in Rajagopala Aiyangar v. Ramanuja Aiyangar AIR (1923) Mad. 607 has taken the view that
discretion may be used in that way.
The costs of this revision petition will abide and follow the result of the suit.