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Gauhati High Court · body

1991 DIGILAW 20 (GAU)

Hemendra Prasad Barooah v. Bahadur Tea Company Private Ltd.

1991-01-24

R.K.MANISANA SINGH

body1991
This is an application under section 155 of the Companies Act to rectify register of members of the respondent company on refusal by the company to make entry of the name of the petitioners as members or share holders. 2. Facts,-Mrs. Premada Barooah during her life time was a share holder or member of the respondent company, the Bahadur Tea Company Pvt Ltd. She died on 31.3.78 leaving a will appointing her son-in-law Mr. Hemendra Prasad Barooah and her daughter Mrs. Rosa Kamte as the executors. In the will her shares in the respondent company was also included, the will had been probated. Thereafter, the executors made an application to the respon­dent company for registering the fact of their becoming member of the company as executors or legal representatives of the deceased member Premada, but the respondent company refused to register their membership on the ground that son-in-law or executor cannot be a member of the com­pany under the Memorandum of the Association and Article of Association of the company, for short the 'articles'. 3. Mr. D. N. Choudhurv, the learned counsel for the petitioners has contended the legal representative (the executor) of the deceased member applying for entering his name in the register of members cannot be refused. Mr. N.M. Lahiri, the learned counsel for the respondent company has conte­nded that the petition is not maintainable under section 111 (1) of the Companies Act read with articles of the company. 4. Before dealing with the rival contentions of the parties, I feel it necessary to examine the relevant provisions of the Companies Act relating to transfer of shares. Under section 10 of the mode of transfer of shares is provided. Section 1-8 provides, inter alia, that transfer of shares is to be made by a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee. Therefore, under section 108 is between the living. 5. Section 109 states that, a transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer. 5. Section 109 states that, a transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer. The clause "although the legal representative is not himself a member" shows that although the legal representatives having become a member; or have become entitled to be a member, of the company by operation of law, he shall not be regarded as the member unless his name entered in the register of members. 6. Under section 110, an application for registration of a transfer of the shares or the other interests of a member in a company may be made either by the transferor or by the transferee. Section 111 (1) provides that nothing in sections 108, 109 and 110 shall prejudice any power of the company under its articles to refuse to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in or debenture of the company. 7. The expressions 'transfer' and 'transmission' have been employed in section 111. The word 'transfer' is an act of the parties, or of the law, by which title to property is conveyed from one person to another. Inter vivos transfer is a transfer from one living person to another. It is a transfer of property during the life time of owner and it is to be distinguished from testamentary transfer or succession where the property passes at death. Under section 211 of the Indian Succession Act, the executor of a deceased person is the legal representative for all purposes, and all the property of the deceased person vests in him as such. On reading of sections 108, 109, 110 and 111 together, the word 'transmission' had been used in section 111 in contradiction to the word 'transfer'. 'Transmission' is referable to the devolution or by testamentary transfer. As regards the 'transfer' it has used to mean inter vivos transfer. 8. As already stated, the executor of a deceased person is his legal representative for all purposes, and all the property of deceased vest in him as such. 'Transmission' is referable to the devolution or by testamentary transfer. As regards the 'transfer' it has used to mean inter vivos transfer. 8. As already stated, the executor of a deceased person is his legal representative for all purposes, and all the property of deceased vest in him as such. Therefore, the right to the share or interest of the deceased member in the company devolves on the executor of the deceased by operation of law as distinguished from inter vivos transfer. But the executors do not become members of the company unless their names are registered. In such a situation, on the death of Premada, her right to shares or interest as a member in the company devolved on the petitioners as executors and they are the legal representatives of deceased Premada Barooah, i.e. the right to share or interest in the company of the deceased member Premada had been passed or transmitted to the petitioners as executors. 9. The question then is,-Could the company refuse to register the transmission by operation of law of the right to the share. Under section 111 (1), if the articles provide, the company can refuse to register the trans­mission by operation of law of the right to the share, as already stated. 10. Let me now examine the relevant articles. Article 7(a) provides : "No transfer of any share except to a member or the persons, referred to in the Article 7 (b), (c) shall be made to any person without the previous sanction of the Directors who may without assigning any reason decline to give any such sanction." Article 7 (b) states : ''A share holder may at any time transfer a share to his or her father, mother, wife or husband, son or daughter or to any one of the existing share holders of the Company, provided however that the transferee is not an insolvent or otherwise incapable or discharging his obligations". 11. 11. On reading of Articles 7(a) and (b) together, it appears that transfer of shares by a member of the company to his or her father, mother, wife or husband, son or daughter, or to any one of the existing share holders of the company no previous sanction of the Directors is required, However, transfer to other persons including son-in-law previous sanction will be required and the company without assigning any reason can decline to give any such sanction. In view of the above discussion the word, 'transfer, occurring in Articles 7(a) and 7(b) denotes inter vivos transfer (between the living). Therefore, the previous sanction for transfer of shares would arise when there was or is inter vivos transfer and not in the case of testamentary transfer. Therefore the Articles 7(a) and (b) are not applicable to the present case as the present is a case of testamentary transfer and not of inter vivos transfer. In my view the Article 7(c) is not relevant in this case. 12 Article 7(h) runs : "On the death of a member, and on a notice being received by the Company of the said occurrence, his legal representatives shall be the only persons recognised by the Company as having any title to the interest of the shares of the deceased." 12. Under Article 7(h), on the death of a member of the company, his legal repre­sentative shall be the only person recognised by the company having become a member or have become entitled to be a member, of the company, by operation of law. However, the legal representative shall not have the status of a member unless his name is entered in the register of members, as already stated. On perusal of the Articles, I do not find any Article under which the company can refuse transmission of right to the share by operation of law. In that view of the matter, the petitioners who are executors (legal representatives) of the deceased member Premada Barooah are entitled to registration of their names as members of the company in respect of the shares held by the deceased member Prematta Barooah as executors. Therefore, the refusal was against the law. 13. The next question which arises for consideration is whether the application is maintainable. Therefore, the refusal was against the law. 13. The next question which arises for consideration is whether the application is maintainable. Shri N. M. Lahiri, the learned counsel for the respondents has contended that section 155 is in respect of the power of the High Court to rectify the register of the members, but it does not include such a refusal to register. Section 155 (11 (b) provides that if default is made, or unnecessary delay tikes place, in entering on the register the fact of any person having become, or ceased to be a member, the person aggrieved may apply to the Court for rectification of the register. 14. The meaning of the word 'default' means omission or failure to perform a legal or contractual duty, and the meaning of the word 'refuse' is declination of a request or demand, or omission to comply with some requirement of law. Therefore, section 155 (1) (b) covers all the cases of improper or illegal refusal. Therefore, the contention of Mr. Lahiri cannot be accepted. 15. For the reasons stated, there was no justification for refusing to enter the names of the petitioners as executors on the register of the members in place of the deceased Premada Barooah. 16. In the result, the petition is allowed. Accordingly, it is ordered and directed that the respondent company shall rectify the register of the members of the company in the light of the observations made above. No costs.