Rectification of the share register under Sec. 38 of the Companies Act is discretionary and should not be granted when there is a serious dispute over the title to shares and ongoing civil suits involving the same issues.

Ramaswami, J.

1. This is an implication dated 14-7-1954 made by Sri Devakumar Mishra for rectification of the share register under Sec.38 of the Companies Act. The case of the petitioner is that two thousand ordinary shares Nos. 1 to 2,000 of Rs. 10 each were standing in the share register in the name of his father Ramadhin Mishra, and after the death of the said Ramadhin Mishra on 1-12-1952, the title to the shares devolved on the petitioner who is his only son and heir. The petitioner further alleged that he applied to the company for entering his name as a snare-holder in respect of the 2000 shares, but the company refused to enter his name on arbitrary grounds. A counter affidavit is filed on behalf of the Rupak Limited. Tae contention pat forward on behalf of the company is that the title to the shares is the subject-matter of dispute between the parties in the court of the Subordinate Judge, Patna, and the question cannot be decided in a summary way by this Court acting under Sec.38 of the Companies Act. Reference was made to the resolution of the company dated 26-2-1951, from which it appears that the company agreed that a sum of Rs. 1,00,000.00 would be paid to Sri Devakumar Mishra, his lather Ramdahin Mishra and his wife Shrimati Ramsundari Devi in lieu of the shares which they held and on condition that they retired from the company.

It appears that in pursuance of this agreement, a sum of Rs. 50,000.00 was paid by the company to the petitioner. It also appears that on 8-5-1953, the petitioner presented a winding up petition to the High Court claiming that he was entitled to the balance of Rs. 50,000.00 from the company in addition to Rs. 2,50,000.00 which he had advanced as loan.

The position taken by the company was that the resolution of the company dated 26-2-1951 was illegal and ultra vires, since the transaction was tantamount in law to a trafficking in shares. The petitioner claimed on the contrary that the resolution was intra vires and that he was entitled to the balance of Rs. 50,000.00 which was due from the company as consideration for the transfer of shares.

The petition for winding up was heard by the Court and it was agreed by the parties in the course of the hearing that the petition should be stayed pending the determination of the title to the shares and also of the other disputed questions in a properly constituted civil suit.

2. The submission made by Mr. Chaudhury on behalf of the company is that there should be no rectification of the share register since there is a complicated question in dispute between the parties and since the matter is actually sub judice in the court of the Subordinate Judge. Mr. Choudhury pointed out in the first place that on 7-7-1953 the company had brought a suit for accounts against Sri Devakumar Mishra, and in the written statement filed in that suit the petitioner asserted that the resolution dated 26th of February, 1951 was valid and enforceable.

Counsel also pointed out that in the statutory notice to the company given before the winding up petition the petitioner had claimed that he was creditor of the company for a sum of Rs. 2,50,000/-in addition to the sum of Rs. 1,08,000.00 which was the consideration for the transfer of the shares and also a sum of Rs. 8,000.00 which was the consideration promised by the company for giving up his connection with the company.

The company had also filed Title Suit No. 109 in the court of the Subordinate Judge and one of the reliefs claimed by the company was rectification of the share register relating to these very shares. As I have said, the position taken by the company was that the resolution of the company dated 26-2-1951 was ultra vires and illegal, but in the written statement filed in that suit the petitioner re-affirmed his position as the creditor of the company and also asserted that the resolution dated 26-2-1951 was valid and intra vires.

It is also admitted that the petitioner had filed Money Suit No. 34