The restriction in the Articles of Association regarding the transfer of shares applies to all transfers, including those resulting from court auctions.

( 1 ) THIS is a plaintiffs second appeal. Plaintiff herein filed a suit for mandatory injunction directing the defendant-company M/s. Union theatres Private Limited to transfer the share held by late A. Bheemappa naika into their names and effect necessary changes in the registers of the company.

( 2 ) THE facts leading to the filing of the suit are, Vijaya Bank had filed a suit against M/s. Asiatic Films Corporation in O. S. No. 43 of 1961 for recovery of certain money. The said suit came to be decreed. Execution proceedings were initiated by the Bank against one Bheemappa Naika, the shareholder of Asiatic Film's Corporation by bringing into sale his share of the value of Rs. 5,000/ -. In the Court's sale, appellants/plaintiffs were the auction purchasers i. e. , jointly purchased the shares for Rs. 6,000/ -. A 'sale certificate' was issued completing the transfer. Later they applied to the defendant's company for transferring the share of Bheemappa naika to their name and accordingly register in the Company registers. Since respondents/defendants refused to do so relying on Article 7 of their Articles of Association, they filed the present suit.

( 3 ) THE suit was contested. Respondent/defendant contended that by clause 7 of 'articles of Association', there is a prohibition for transfer of shares from shareholders to non-shareholders. Since the plaintiffs were not the shareholders of the defendant-company the share of Bheemappa naika cannot be transferred, therefore prayed for dismissal of the suit.

( 4 ) LEARNED Trial Judge after trial decreed the suit. By relying on the decision of the Calcutta High Court in Mahadeo Lal Agarwala and Another v the New Darjeeling Union Tea Company Limited and Others, held that restrictions in the "articles of Association" regarding transfer of shares has no application to Court auction sales and the company therefore was bound to transfer.

( 5 ) AGGRIEVED by the said judgment and decree, respondent/defendant appealed to the Civil Judge, Chitradurga. Learned Appellate Judge has reversed the judgment and decree of the Munsiff and consequently dismissed the suit. He has held that there is a restriction in the "articles of association", regarding the transfer of shares. Merely because a share is sold in Court auction, it has no effect of effacing the said restriction.

( 6 ) IT is this judgment and decree of the Appellate Court that is under challenge.

( 7 ) THIS second appeal was admitted to consider the following substantial question of law as arising for consideration:"whether the lower Appellate Court is right, in law, in holding that Article 7 (1) of the Articles of Association at Exhibit D. 1 prohibited transfer of shares to any persons other than the shareholders and therefore, the plaintiffs, who were not the shareholders, could not be recognised as the shareholders of the respondent-company (Private Limited), though they had purchased the suit share in Court auction?"

( 8 ) HEARD Sri Kantharaj, learned Counsel appearing for the appellant and Sri Pradyumna, learned Counsel appearing for the respondent.

( 9 ) FACTS stated above are not in dispute. It is also not in dispute that appellants are the "auction purchasers of the share of Bheemappa Naika" nor is in dispute that the appellants are not the shareholders of the defendant-company "m/s. Union Theatres Limited".

( 10 ) THE defendant-company was incorporated under the Mysore Companies Act (18 of 1938) with the object stated in the Memorandum of Association. The "articles of Association" provide various clauses in the matter of business of the company. Article 7 which is relevant for the present purpose reads as under:"7. No transfer of shares shall be made to any person other than the shareholder (member) of the company. Such transfers of shares are to be made only among the existing members of the company. No transfer of any share shall be made or registered without the previous sanction of the Directors who may wi