Judgment :- 1. These Company Petitions were filed under S.155 of the Companies Act, 1956 for rectification of share register of the Travancore Rubber & Tea Company Ltd., which is a company limited by shares incorporated under the Travancore Companies Act, 9 of 1114 and having its registered office at Trivandrum. The Company is now governed by the provisions of the Companies Act, 1956. It is hereinafter referred to as the Company. Two brothers have filed these Company petitions, one brother figuring as the petitioner in each of these petitions. 2. The authorised capital of the Company is Rs.1 crore divided into 3,00,000 6% cumulative preference shares of Rs.10/- each and 7,00,000 equity shares of Rs.10/- each. The issued and subscribed and paid up capital of the company is Rs.57 lakhs consisting of 1,60,000 cumulative preference shares and 4,10,000 equity shares. These Company Petitions cover a total number of 5000 equity shares. The petitioner purchased from the respective 2nd respondent in the Company Petitions certain shares in the Company at the prevailing market price through his brokers and forwarded the share transfer deeds duly executed by the transferor and the transferee together with the share certificates relating to the said shares, to the registered office of the company on 12-7-1979 and other dates for registering the transfer and entering his name in the register of members of the company as the holder of the said shares. Subsequently the company informed the petitioner that the transfer application was considered by the Board of Directors of the company and that they have declined to transfer the said shares in exercise of their powers under Art.24 of the Articles of Association of the Company read with S.111 of the Companies Act, 1956 and returned the respective share certificates to the petitioner. According to the petitioner, in refusing to register the transfer of shares the Board of Directors of the Company has acted unreasonably and with improper motives and on wrong principles. In the Company Petitions the petitioner had challenged the validity of Regulation.24 and it was also contended that in any view of the case the power of the Directors under Regulation.24 to decline to register the transfer of shares could be exercised only in respect of transfer of shares on which the Company has a lien, or where the transfer was to persons whom the Board of Directors does not approve. According to the petitioner the Board did not exercise its discretion properly or judicially. They did not act for the paramount interest of the Company and the general interest of the shareholders. Accordingly, the prayer in the company petitions is to rectify the register of members of the company by entering the name of the respective petitioner as the holder of the respective number of equity shares regarding which these Company Petitions were filed. 3. There were other two Company petitions, C.P. Nos.21 and 24 of 1980, which were also filed along with these petitions. Those petitions were dismissed as not pressed. 4. Joint trial of these Company Petitions were allowed by order on C.A.No.1108 of 1980. It was also directed in that order that C.P.No.8 of 1980 will be the leading case. 5. Agreed issues were framed. Issues 1 and 2 were taken up for consideration at the first instance. Oral and documentary evidence were adduced. M.P. Menon, J. by order dated 23-10-1982 held on Issue No.l that it was not competent for the petitioners to challenge the validity of Regulation.24 in the present proceedings and that Issue No.2 does not arise for consideration in the above view. (Issue No.l: Are the petitioners competent to challenge the validity of Art.24 (as amended in 1965) of the 1st respondent company's Articles of Association in these proceedings. (2) If so, is Art.24 (as amended in 1965) invalid, as alleged). This order was confirmed by a Division Bench of this Court in M.F. A.No.466 of 1982 and connected appeals by judgment dated 22nd December, 1983. Although the petitioners challenged the judgment before the Hon'ble Supreme Court in S.L.P.No.6874 of 1984 that petition was dismissed on 3-9-1984. 6. Subsequently the Company Petition was again taken up for trial and further witnesses were examined and documents marked. On behalf of the petitioner P.Ws.1 to 8 were examined and Exts. A-1 to A-15 were marked. On behalf of the respondents, Exts.B-1 to B-13 were marked and R.Ws. and 2 examined. 7. Application Nos.1109/1980,610/1981 and 137/1982 were disposed of by this Court by order dated 30-9-1988. By that order among other things this Court refused to issue summons to the two Directors of the respondent-company or to direct the Company to disclose to the court the reasons for declining to register the transfer of shares applied for by the applicants. 8. 7. Application Nos.1109/1980,610/1981 and 137/1982 were disposed of by this Court by order dated 30-9-1988. By that order among other things this Court refused to issue summons to the two Directors of the respondent-company or to direct the Company to disclose to the court the reasons for declining to register the transfer of shares applied for by the applicants. 8. The remaining issues are as follows: (3) Is the refusal of the 1st respondent's Board of Directors to register the transfer of shares in favour of the petitioners capricious, mala fide or otherwise invalid or illegal as alleged? (4) What, if any, reliefs are the petitioners entitled to? (5) Are the petitioners entitled to rectification of the Register of Members as prayed for? (6) What should be the order as to costs? Although S.21 of the Companies Amendment Act 31 of 1988 repeals S.155 of the Companies Act, 1956, that repeal is not yet brought into force. Notification GSR 559/E dated 10-6-1988 brought only certain other amendments into force. 9. Issue 3 is the most important issue, yet to be considered. 10. The respondent raised a preliminary objection laying stress on the provision contained in S.155(1)(b) that the remedy under S.155 is available only to a member of the Company. The submission is that in so far as the petitioners will not come within the definition of 'member' under S.41 of the Act, these petitions are not maintainable. Learned Counsel drew a distinction between the provisions contained in S.111 and S.155 and contended that remedy under S.155 is a restricted one and is available only to a member of the Company. This contention cannot be accepted. In Vidyasagar Cotton Mills Ltd. v. Mussamat Nazhunnessa Begum (34 Company Cases 704 (708) the Calcutta High Court held as follows: "But Mr.Sen contends that the court has no power under S.155 of the Companies Act, 1956, as amended by Act LXV of 1960 to pass an order of rectification of the register of members in cases of transmission or transfer of shares. Our attention has been drawn to the definition of "member" in Ss.41 and 2(27) of the Act and to S.155(1)(b) which enables rectification of the register of members in cases of default or delay in entering on the register "the fact of any person having become a member", and it is argued that a person claiming title to the shares by transfer or transmission cannot claim registration of the fact of his "having become a member", considering that such a person is not a member, his name never having been entered on the register of members We cannot imagine that the legislature intended to confine the summary remedy of 5.155(1)(b) to the very few cases of subscribers to the memorandum of association and to exclude from its purview the vast majority of the cases of persons claiming title to the shares by transfer or transmission. Other considerations point to the same conclusion." 11. In Harinagar Sugar Mills v. Shyam Sunder (ALR.1961 S.C.1669, at 1674) the Supreme Court observed as follows: "The power given to the court under S.38 is now confirmed with slight modification by S.155 of the Companies Act, 1956. Under that section, the court may rectify the register of shareholders if the name of any person is without sufficient cause entered in or omitted from the register of members of a company, or default is made, or unnecessary delay has taken place in entering on the register the fact of any person having ceased to be a member. The court is in exercising this jurisdiction competent to decide any question relating to the title of the person claiming to have his name registered and generally to decide all questions which may be necessary or expedient to decide for the rectification." No doubt there is no specific discussion of this question in this judgment but the Supreme Court has proceeded on the basis that any person may move the court under S.155. In Sadashiv v. Gandhi Sewa Samaj (AIR 1958 Bombay 247) (para.8) the Bombay High Court held that S.155 is the controlling section and gives the court an overriding power notwithstanding any previous order of the Central Government. Since S.155 has conferred on the court very wide powers to decide all questions, the preliminary objection raised by the respondent is without merit. The above cited rulings also support this view. Hence the preliminary objection is overruled. 12. Since S.155 has conferred on the court very wide powers to decide all questions, the preliminary objection raised by the respondent is without merit. The above cited rulings also support this view. Hence the preliminary objection is overruled. 12. The petition to direct the company to disclose to the Court the reasons for declining to register the transfer of shares is already rejected by the order referred to in Para.7 above. It is for the petitioners to prove that the decision to decline transfer was oppressive and capricious and that the Court has to rectify that decision. Petitioner has given evidence in support of his case. According to him, there are no possible or viable reasons for refusing to register the transfer. According to learned counsel for the petitioners since the respondent has not given any reasons for refusal, the only possible evidence that can be adduced by the petitioners to prove a negative fact is his own oral evidence. In case there was any positive evidence that could be adduced, that could have been done only by the respondent. Therefore, according to learned counsel, only this type of evidence is possible in this case. 13. It is now settled that if the Articles permit the Directors to decline to register transfer of shares without stating the reasons, the Court would not draw any unfavourable inference against the Directors because they did not give reasons (see Bajaj Auto v. N.K. Firodia 1971 (2) SCR 40 = AIR 1971 S.C. 321). However, the petitioners did not avail of the provision to file an appeal under S.111 of the Companies Act, sub-section 5A of which section empowers the Central Government to require the company to disclose to it the reasons for such refusal. In these cases the petitioners have chosen to proceed under S.155 of the Companies Act, where there is no such provision to direct the company to disclose its reasons. In South Indian Bank Ltd. v. Joseph Michael (1977 KLT 820 = I.L.R. 1977(2) Kerala 638 = 48 Company Cases 368) this Court in Para.6 referred to both these provisions and held that if the company chose to give reasons for refusal of registration of transfer, the court would look into such reasons to find out whether they were legitimate or otherwise. This Court also held that the court would not draw any unfavourable inference against the Directors merely because they did not give their reasons and the court will under those circumstances assume that they acted reasonably and in good faith and for a valid reason. It was also held that the burden is upon the person who alleges to the contrary to substantiate his allegations by evidence. (see also Mathew v. Tekoy Rubbers (India) Ltd. (I.L.R.1988(2) Kerala 255) by which judgment a Division Bench of this Court confirmed the judgment of M.P.Menon, J. in Mathew Michael v. Teekoy Rubbers (India) Ltd. (54 Company Cases 88). At page 98 of 54 Company Cases 88, M.P. Menon, J. after reviewing the case law on this subject held as follows: "I would, therefore, have to proceed on the basis that in view of regln. 24, the Directors in this case had a right to reject the transfer applications without giving reasons. There is a presumption that they have acted bonafide, in the interests of the company and the share holders. This court cannot compel them to place their cards on the table, unless there is a positive evidence to show that they have acted arbitrarily, capriciously or corruptly." In view of the fact that the petitioners were unable to adduce any positive evidence to show that the respondent acted arbitrarily, capriciously or corruptly, the court is to draw a presumption in favour of the respondent that they have acted bona fide and" in the interest of the company and its shareholders. Therefore the first part of Issue No.3, namely whether the refusal was capricious or mala fide, has to be found in favour of the 1st respondent-company. 14. Then it has to be examined whether such refusal is otherwise invalid or illegal. The contention of the learned counsel for the petitioners is that there was considerable delay in refusing to register the transfer. In the original counter affidavit filed by the 1st respondent (See para 2) there was no specific denial of the averment in Para.5 and 6 of the company Petition that the transfer applications were filed on 12-7-1979 and the communication of refusal was on 29-1-1980. In C.P.Nos. 8,10,11,13,14,15,23 and 26 to 30 the communication of refusal was on 29-1-1980. In C.P.Nos.17 and 20 the communication was on 28-1-1980. In C.P.Nos.21 and 24 the communication was on 26-1-1980. In C.P.Nos. 8,10,11,13,14,15,23 and 26 to 30 the communication of refusal was on 29-1-1980. In C.P.Nos.17 and 20 the communication was on 28-1-1980. In C.P.Nos.21 and 24 the communication was on 26-1-1980. Therefore it was contended that the refusal was beyond two months of the lodgment of transfer applications and so the court has to exercise its jurisdiction under S.155 of the Companies Act. However, subsequently after verification the 1st respondent filed an additional counter affidavit along with C.ANo.750 of 1988 to receive the additional counter affidavit. In the additional counter affidavit the dates of lodgment of transfer applications and the dates of refusal and communication of the refusal were mentioned. The refusal was communicated within two months of the receipt of the shares for transfer. Learned counsel for the petitioners after verification of the records does not dispute this factual averment. However, his further contention is that the refusal ought to have been communicated within one month in view of the fact that under the listing agreement the respondent ought to have communicated the refusal within one month. It was further contended that this is another circumstance to be considered by this Court while considering whether there was unreasonable delay in disposing of the application for registration of transfer. 15. Under the Securities Contracts (Regulation) Act, 1956 (Act 42 of 1956) and the rules thereunder there are provisions for listing of security by the public companies with any recognized stock exchange. R.19(3)(e) of the Securities Contracts (Regulation) Rules, 1957 provides that the company applying for listing shall, as a condition precedent, undertake to issue certificates in respect of shares lodged for transfer within a period of one month of the date of lodgment of transfer. Learned counsel for the petitioners also referred to the following paragraph in circular letter No.9/37/SE/79 issued by Stock Exchange Division, Department of Economic Affairs, dated 31-12-1979 (page 462 of Circulars and Clarifications on Company Law by Bhargava & Bhargava, 1985 Edn.). "4. Recognised stock exchanges owe a duty to the investing public and they are advised to ensure that listed companies duly comply with the listing requirements. "4. Recognised stock exchanges owe a duty to the investing public and they are advised to ensure that listed companies duly comply with the listing requirements. Government, therefore, directs that recognised stock exchanges should specifically draw the attention of listed companies to the following mandatory requirements; (a) that listed companies should register transfers, endorse calls and sub-divide and consolidate share certificates and return them to the parties concerned within two to three weeks of the date of lodgment and that in any case it is mandatory on them under the listing agreement to do so within a month." 16. In Re Swaledale Cleaners, Ltd. (1968(3) Al1.E.R.619) Harman, Q. held as follows: "As to unreasonable delay I take the view of the judge (1968) 1 All E.R. 1136) (and it seems to me merely, if I may say so, common sense), that, as there is an obligation on directors who refuse to register a transfer to inform the persons who are aggrieved within two months of such a refusal, the Act of 1948 quite clearly indicates that a reasonable time, other things being equal, within which directors must make up their minds either to accept the transfer or to refuse it must be the two months within which they have to make an answer. Therefore it does seem to me that waiting four months without any decision at all was an unreasonable delay. One has, however, to go one step further than that; one has to say that unreasonable delay has destroyed the right so that when, in December, 1967, the new board purported to refuse, they were no longer in a position to exercise that discretion which, if they had acted promptly, undoubtedly would have been theirs, to consider and, if they thought fit in the interests of the company, to refuse registration of the transfers." 17. No doubt there cannot be any dispute about the proposition that the rules cannot alter the section which proposition was urged by learned counsel for the company in answer to the contention that there was unreasonable delay in communicating the refusal to register the transfer. S.155(1)(b) of the Companies Act refers to 'unnecessary delay' in effecting the transfer. What is 'unnecessary delay' is not defined in the Act. S.155(1)(b) of the Companies Act refers to 'unnecessary delay' in effecting the transfer. What is 'unnecessary delay' is not defined in the Act. Whether under the circumstances of a case there was unreasonable or unnecessary delay has to be decided on the basis of the evidence in that case. But the court while considering whether there was unnecessary delay or not, may infer from the rules as well as the circular which were referred to earlier as to how the government, the Stock Exchanges and the companies listed with the Stock Exchanges have understood the words 'unnecessary delay'. To that extent the rules under the Securities Contracts (Regulation) Act as well as the circular issued by the Government have considerable importance. The company did not comply with the requirement of R.19(3)(e) of the Securities Contracts (Regulation) R.1957 and there is no evidence on behalf of the company that there were any sufficient grounds for the delay over the one month which was a condition precedent for listing the company with the Madras Stock Exchange. From the circular letter of the Government of India referred to above, it is clear that all the concerned parties were also being reminded that the listed companies should register the transfers etc. in any case within a month of the date of lodgment. 18. On behalf of the company the present President of the Madras Stock Exchange was examined as P.W.7. From his evidence it is clear that the company is a company listed in the Madras Stock Exchange since 1944. Original listing agreement was produced as Ext.A-12. Clause.12 of Ext.A-12 provides for contingencies where registering of shares is refused. To a specific question whether according to that clause, the company had informed the President of the Stock Exchange regarding refusal, P.w.7 replied that the companies do not inform the Stock Exchange of the refusals unless and until required by the Stock Exchanges. P.W.7 also stated that the Advocate for the petitioner by his letter dated 26th January 1987 wrote to the Stock Exchange about the refusal of transfer of shares by the company to the petitioners. On the basis of that information the Madras Stock Exchange wrote to the company on 5th February 1987 referring to Clause.12 of the Listing Agreement and asking them to advise the President the reasons for the refusal of transfer of shares to the petitioner. On the basis of that information the Madras Stock Exchange wrote to the company on 5th February 1987 referring to Clause.12 of the Listing Agreement and asking them to advise the President the reasons for the refusal of transfer of shares to the petitioner. So far the Stock Exchange did not receive any reply from the company. The letter of the Advocate was marked as Ext.A-13 and the office copy of the letter of the Stock exchange was marked as Ext.A-14. The reply sent to the Advocate from the Stock Exchange is marked as Ext. A-15. He also gave evidence that there is nothing in the correspondence file to show that the company ever brought to the notice of the Stock Exchange the refusal mentioned in Ext.A-13. The President of the Madras Stock Exchange from 1-7-1978 to 3-6-1981 was examined as P.W.B. Ext.A-13 letter was shown to him. P.W.8 also mentions that the company did not take the. Stock Exchange into confidence at the time of refusal of the share transfer. 19. So much so since the company did not inform the reasons for rejection inspite of the requisition from the President of the Stock Exchange, it has violated the provisions contained in Clause.12(a) of the listing agreement. No precedent considering the Securities Contracts Regulation Act 1956 was brought to my notice. 20. From the above circumstances I hold that there was unnecessary delay on the part of the company in rejecting the share transfer applications filed by the petitioners and on this ground the petitions are to be allowed. The second part of issue No.3 is found in favour of the petitioners. 21. I may also observe that the present trend in the development of company law restricting the powers of the Board of Directors to refuse registration of transfer can also be kept in mind for interpreting the existing provisions. Under the 1988 amendment of the Companies Act the company has no right to refuse to disclose its reasons for refusal. In 1985 the Securities Regulation Act was also amended adding S.22A providing for free transferability and registration of transfer of listed securities of companies. However those grounds are not available to the petitioners in these petitions. 22. The Company Petitions are accordingly allowed. In 1985 the Securities Regulation Act was also amended adding S.22A providing for free transferability and registration of transfer of listed securities of companies. However those grounds are not available to the petitioners in these petitions. 22. The Company Petitions are accordingly allowed. The 1st respondent is directed to register the transfer of shares in favour of the petitioners as requested by them in the share transfer applications referred to in these Company Petitions and to rectify their share register accordingly within three weeks from this date. The company will also give notice to the Registrar of the rectification as required under S.156 of the Companies Act within 30 days as prescribed in S.156 of the Companies Act. The company will also file a copy of this order before the Registrar of Companies along with Form No.21 set out in the Companies (Central Government's) General Rules and Forms, 1956 within 30 days from this date. There will be no order as to costs.