The court affirmed that claimants can seek share transfer rectification under Companies Act provisions despite objections about membership status.

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. 1 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. 1: Are the petitioners c