S.K. Roy Chowdhury, J.
1. This is an application under Section 155 of the Companies Act, 1956, inter alia, for rectification of the register of shares of the respondent No. 1 in the names of the respective transferees mentioned in Schedule ' A ' to the petition and return the share scrips after such rectification and for various other directions.
2. The facts of the case shortly are that the petitioners allege that they are the holders of the equity shares in the respondent No. 1 company being Luxminarayan Cotton Mills Ltd. of the face value of Rs. 10 each fully paid up for valuable consideration and the particulars of the said shares are set out in annexure ' A ' to the petition. The petitioners allege to have acquired the said shares from the respective transferors as mentioned in Schedule ' A ' to the petition who are also made respondents in this application. The petitioners after paying the consideration in respect of the said shares as mentioned in Schedule ' A' to the respective registered holders thereof, being the transferors of the said shares, received the relative share scrips together with the relative transfer deeds executed by the respective transferors in favour of the respective petitioners. Thereafter, on or about 16th of June, 1969, all the petitioners excepting petitioner No. 5 who on the 23rd of June, 1969, lodged their respective shares together with the relative transfer deeds duly stamped and signed by the respective transferors and transferees with the respondent No. 1 Luxminarayan Cotton Mills Limited, hereinafter referred to as the respondent-company, along with the relevant amounts of transfer fees for which the respondent-company duly granted the receipts to the respective petitioners which are annexed to the petition and marked with letter 'B'. The respondent-company failed to intimate either the transfer or the refusal to do so within two months from the date of lodgment of the said shares for registration of the transfer and the said time expired on the 16th of August, 1969, in respect of all the petitioners except the petitioner No. 5 whose time expired on the 23rd of August, 1969. Thereafter, the petitioners addressed letters dated 13th October, 1970, requesting the respondent-company to transfer the said shares and specimen copies of such letters are annexed to the petition and marked with letter ' C '. No replies were received by the petitioners- from the respondent-company to the said letters and, consequently, the petitioners preferred an appeal under Section 111 of the Companies Act, 1956, to the Company Law Board, Central Government, New Delhi, in February, 1972, and the particulars of the said appeal are also set out in Schedule ' A ' to the petition and a specimen copy of the petition of appeal is annexed to this petition and marked with letter ' D '. Thereafter, notices were issued by the Company Law Board to the petitioners to show cause as to why the said appeals were not filed within time as prescribed under the Companies Act, that is, within two months from the lodgment of the shares for registration with the respondent-company. Thereafter, the petitioners made an application under Section 637(b) of the Companies Act, 1956, for condonation of delay in filing the said appeal. Ultimately, the Company Law Board being satisfied with the ground shown by the petitioners for delay in making the appeal before the Company Law Board beyond the statutory periods, the delay was condoned by an order of the Company Law Board in Calcutta being dated 2nd/3rd of November, 1973, The petitioners have set out the facts showing the reasons which prevented them from making the application earlier, in paragraph 9 of the petition. It appears that since 1968 various proceedings were taken against the company including winding-up petition and ultimately an application was made by the State of West Bengal being the mortgagee of the assets and the properties of the respondent-company in a suit and a receiver was appointed of the mortgaged properties of the said company and thereafter by an order dated the 9th of October, 1972, the Central Government issued an order under Section 18A of the Industries (Development and Regulation) Act, 1951, for taking over the management of the undertaking of the respondent-company and appointed an authorised body of persons mentioned therein for the said purpose. The said authorised body immediately thereafter took possession of the undertaking and is still in possession of the same. On the 12th of December, 1972, the State of West Bengal by a notification declared the said undertaking as a 'State Industrial Undertaking' and also declared the undertaking to be a relief undertaking for one year. Thereafter, on the 1st of December, 1973, by further notification the period was extended till 11th of December, 1974. It appears that no objection was filed by the respondent-company before the Company Law Board in the appeals filed by the petitioners under Section 111 of the Companies Act, 1956, disputing the merits of the said appeals. The respondent-company subsequently took objection for rectification of the share register by registering the names of the petitioners, inter alia, on the ground that the Company Law Board had no jurisdiction to condone the delay in filing the appeal under Section 111 of the Companies Act, stamps affixed on the transfer deeds were not duly cancelled and consequently the said transfer deeds could not be acted upon and lastly, the particulars in some of the applications for transfer were incomplete and as such it could not be effected. By an order and decision of the Company Law Board dated the 22nd of November, 1973, the Company Law Board after holding that the condonation of delay was duly granted in favour of the petitioners dismissed the applications on the ground that the transfer deeds lodged by the petitioners were not duly stamped in view of the decision of S.P. Mitra J. (as he then was) in In re Coronation Tea Co. Ltd. : AIR1961Cal528 . The petitioners in these circumstances contend that it is not possible to obtain fresh transfer deeds from the respective transferors of the said shares by the petitioners and there are bona fide omissions in filling up the particulars in certain transfer deeds. Therefore, the petitioners should be given an opportunity to rectify the discrepancies or omissions, if any, in the transfer deeds as otherwise they would be seriously prejudiced. The relative share scrips and the transfer deeds are still lying with the respondent-company which is being controlled by an authorised body as hereinbefore stated. In these circumstances, as common questions of law and fact arise in these applications all the petitioners have been joined and the respective transferors have also been made party respondents along with the company and the members of the authorised body who are now managing the affairs of the company are also made respondents and the present application was made on the 11th of April, 1974, and after affidavits were filed, the matter was heard at length.
3. Mr. S.B. Mukherjee with Mrs. Padma Khastgir appearing for the petitioners after drawing my attention to the facts of this case as stated in the petition and the affidavit-in-opposition submitted that the petitioners have the right to apply under Section 155(2)(b) of the Companies Act, 1956, and as such the court has wide power and should liberally exercise the same to do justice in a particular case. Mr. Mukherjee dealing with the question of the application being barred by limitation submitted, firstly, that there is no question of the petitioners' remedy being barred. He referred to a recent Supreme Court decision in Vasudev Ramchandra Shelat v. Pranlal Jayanand Thakar [1975] 45 Comp Cas 43, where in a case of gift of shares the deed of gift was registered by the donor and the share certificates delivered to the donee together with the blank transfer form duly signed by the donor but such transfer was not registered with the companies after complying with the formalities prescribed by the Companies Act, for transfer of shares. Dealing with the question of the validity of the transfer of the said shares by gift in the absence of registration after the death of the donor, it was observed by the Supreme Court in the said decision in paragraph 13 AIR 1974 SC 1734, as follows :
' A share certificate is a prima facie evidence, under Section 29 of the Companies Act (1913), of the title to a share. Section 34 (1913 Act) of the Act does not really prescribe the mode of transfer but lays down the provisions for ' registration ' of a transfer. In other words, it presupposes that a transfer has already taken place. The manner of transfer of shares, for the purposes of Company Law, has to be provided, as indicated by Section 28, by the articles of the company, and, in the absence of such specific provisions on the subject, regulations contained in Table ' A ' of the. 1st Schedule of the Companies (1913 Act) Act apply.'
4. Relying on the said decision Mr. Mukherjee submitted that titles to the said shares were complete but due to a technical defect in the transfer deeds, the stamps were not being cancelled, the Company Law Board dismissed the petitioners' application by way of appeal under Section 111 of the Companies Act, 1956, preferred before it as hereinbefore stated. Mr. Mukherjee cited various decisions reported in Daddy S. Mazda v. Irani (K. R.) : 78CWN872 , Moni Mohan Mukherjee v. Jalpaiguri Cinema Ltd. [1975] 79 CWN 512, Ramesh Chandra Mitter v. Jogin Mohan Chatterjee ILR [1920] (Cal) 901, Indian Chemical Products Ltd. v. State of Orissa [1966] 36 Comp Cas 592 (SC), Maneckji Pestonji Bharucha v. Wadilal Sarabhai and Co. [1926] 53 I.A. 92; AIR 1926 PC 38, whereby the power of the court under Section 155 of the Companies Act, 1956, and corresponding section of 1913 Act have been defined and it has been held that the said power is very wide and should be exercised in the facts and circumstances of a case if so demanded for the ends of justice. Mr. Mukherjee further submitted that the share scrips and the transfer deeds are lying with the company with whom it was duly tendered and in fact produced in court at the time of hearing. Mr. Mukherjee also submitted that under Section 111 of the Companies Act, 1956, the Company Law Board has no jurisdiction to decide the title to the said shares but can go only into the question of the right or if reasons are given for rejecting the said transfer by the company for registration. He further submitted that there is no question of limitation as the petitioners' right or the cause for application for registration cannot be said to be barred. He referred to a decision of the Division Bench of this court in Techno Metal India (P.) Ltd. v. Prem Nath Anand : 77CWN957 , dealing with the question of limitation in an application under the Companies Act and submitted that the application cannot be said to be barred by limitation. He further submitted that the decisions cited by Mr. P. N. Chatterjee appearing on behalf of the company have no application to the facts of this case as the application before the Company Law Board under Section 111 of the Companies Act, 1956, by way of appeal against the refusal by the company to register the shares, is an alternative remedy to an application for registration of shares. He submitted that in the facts of this case the application should be allowed.
5. Referring to the Sick Textile Undertakings (Nationalisation) Act, 1974, which came into force from 21st of December, 1974, and the appointed day under the said Act is the 1st of April, 1974, Mr. Mukherjee submitted that the said Act has not affected in any way the right of the petitioners to apply under Section 155 of the Companies Act, 1956, for rectification of the share register. The said Nationalisation Act has acquired the right of the owners in respect of the said company which was declared to be a sick undertaking and now vests in the National Textile Corporation of West Bengal, Assam and Bihar Ltd.
6. Mr. P. N. Chatterjee appearing for the company and the custodian first referred to Section 108 of the Companies Act and submitted that the company rightly rejected the said transfer. Mr. Chatterjee referred me to Section 108(1A) of the Companies Act, 1956, and as such Section 155 of the Companies Act, 1956, has no application and the petitioners have no locus standi. Mr. Chatterjee took three objections to this application: (1) the petitioners have no locus standi, (2) the application is barred by res judicata, and (3) it is barred by the law of limitation. Mr. Chatterjee further submitted that as there is no violation of the Companies Act, 1956, the court has no jurisdiction to entertain this application. Mr. Chatterjee referred to the judgment of the Company Law Board where it has been admitted that the transfer deeds were not duly stamped within the meaning of Section 108 of the Companies Act, 1956, as admittedly the stamps were not cancelled. The transfer deeds were produced before me and it appears on the face of it that the said stamps were not formally cancelled. Therefore, Mr. Chatterjee relied on the decisions of this court in In re Coronation Tea Co, Ltd. : AIR1961Cal528 . Mr. Chatterjee also referred to the Supreme Court decisions in Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala [1961] 31 Comp Cas 387 and Kedar Nath Motani v. Prahlad Rai, : [1960]1SCR861 . Thereafter, Mr. Chatterjee referred to various other decisions on the question of the application being barred by limitation and also regarding the question of alternative remedy being availed of by the petitioners by preferring an appeal before the Company Law Board under Section 111 of the Companies Act, 1956. He referred to the decisions in Satyadhyan Ghosal v. Smt. Deorajin Debi, : [1960]3SCR590 , Mussammat Chand Kaur v. Pratap Singh [1887] 15 IA 156, New Citizen Bank of India v. Asian Assurance Co. Ltd. [1945] 15 Comp Cas 53 (BoM). Arjan Singh v. Panipat Woollen & General Mills Co. Ltd. , Ramchandra Gupta v. Kanpur Iron Scrap Merchants Association Ltd., : AIR1964All45 and Kumar Kalanand Singh v. Syed Sarafat Hossein [1908] 12 CWN 529. Mr. Chatterjee has drawn my specific attention to the several Supreme Court decisions dealing with the question of the application of the Limitation Act, in respect of the application under Section 155 of the Companies Act, 1956. Those decisions are Sha Mulchand and Co. v. Jawahar Mills Ltd. : [1953]4SCR351 , Martin Burn Ltd. v. Corporation of Calcutta : [1966]1SCR543 , Town Municipal Council, Athani v. Presiding Officer Labour Court, Hubli, : (1969)IILLJ651SC , D. Cawasji & Co. v. Stale of Mysore : 1978(2)ELT154(SC) and Ramchandra Keshav Adke v. Govind Joti Chavare, : [1975]3SCR839 , paragraph 20. Lastly, Mr. Chatterjee submitted that the petitioners having availed of the alternative remedy by way of appeal before the Company Law Board and obtained an order therefrom, no further proceeding lies as it would be barred by the principles of res judicata. He referred to the decisions in Daryao v. State of U.P., : [1962]1SCR574 , Hemlata Saha v. Sladmed Private Ltd. [1964] 34 Comp Cas 875 (Cal), G.R. Parry v. Union of India, and Sushil Kumar Sen v. State of Bihar, : [1975]3SCR942 . Relying on these decisions Mr. Chatterjee submitted that the present application is not maintainable and should be dismissed with costs.
7. Considering the respective contentions very carefully, I am of the view that the petitioners are entitled to an order as asked for under Section 155 of the Companies Act, 1956. It is now well settled that the power under Section 155 of the Companies Act, 1956, should be liberally exercised and the court should not hesitate to grant the relief by rectification having regard to the facts of each particular case when it warrants the interests of justice and circumstances of the case. The principle has been laid down in a series of cases which both the counsel have referred. I will only refer to the two decisions which have crystallised the said principle and would be sufficient for the purpose of disposing of this matter. The first one being a Division Bench decision of this court under the corresponding provisions of the Companies Act, 1913, being Ramesh Chandra Mitter v. Jogini Mohan Chatterjee ILR [1920] Cal 901, where in an application by a shareholder for removal of his name from the register of the company under Section 38 of the Companies Act, 1913, a mortgagee of the uncalled capital of the shares intervened and opposed the said application. Ashutosh Mukherjee J. observed at page 904 regarding the power of court under Section 38 of the Companies Act, 1956, which corresponds to Section 155 of the Companies Act, 1956, as follows:
' It is now well settled that although persons are not entitled to an order ex debito justitiae, the jurisdiction under Section 38 is unlimited, with a discretion in the court in the circumstances of each case.................. [at pages 904-905 of 47 Calcutta]...,.....in a simple case where an immediate rectification is essential, it may be desirable under the section, but if the case is at all complicated, an action should be brought.........the legislature obviously intended that the court should have the widest possible power to determine, in its discretion, questions which may appear to it to be necessary or expedient for decisions before the order for rectification is made or refused.'
8. The next is the Supreme Court decision in Indian Chemical Products Ltd. v. State of Orissa, : AIR1967SC253 where a block of shares in the company belonging to Maurvanj vested in the State of Orissa by operation of law. The State of Orissa lodged the share-scrips and the transfer deed with the company for registration but the company declined to do so. Consequently, an application under Section 38 of the Indian Companies Act, 1913, was made in the High Court at Orissa which was allowed by the High Court and an appeal from the same was dismissed by the Division Bench of the High Court and the company appealed to the Supreme Court. Bachawat J., dealing with the court's power under Section 38 of the Companies Act, 1913, which corresponds to Section 155 of the Companies Act, 1956, : AIR1967SC256 , as follows :
' The court's jurisdiction under Section 38, is, therefore, attracted. The High Court rightly ordered the rectification in the exercise of its summary powers under Section 38. The jurisdiction created by Section 38 is very beneficial and should be liberally exercised. We see no reason why the court should deny the applicant relief under Section 38. The directors of the appellant-company on the most frivolous of objections have prevented the State of Orissa from becoming a member for the last 16 years. It is a matter of regret that justice has been obstructed so long. There is no merit in this appeal.'
9. Therefore, the only question to be considered is whether, in the facts of the present case, the petitioners are entitled to an order of rectification as asked for in the application under Section 155 of the Companies Act, 1956 Regarding the objection that in view of the Sick Textile Undertakings (Nationalisation) Act, 1974, the petitioners have no locus standi and the application is not maintainable, in my view, the said contention is utterly baseless, as the corporate existence of the company which has been acquired under the said Nationalisation Act is not affected and the company is defined as the owner of the Sick Textile Undertakings which have been nationalised under the said Act, as defined under Section 2(h) of the said Act, and would receive payment from the Central Government as provided under Chapter 3 of the said Act. Therefore, the said Nationalisation Act has not affected the said corporate existence in any way, but has taken over all its assets and liabilities according to the said Nationalisation Act, and would pay in cash in the manner provided in the said Chapter 3 of the said Act. Therefore, in my view, the petitioners are entitled to maintain this application under Section 155 for rectification of the share register by deleting the names of the transferors and substituting the names of the petitioners as the transferees under Section 155 of the Companies Act, 1956. Regarding the title of the petitioners to the said shares which have been purchased by the petitioners for valuable consideration, it is not in dispute that the Company Law Board rejected the appeal of the petitioners on the ground which, in my view, is merely a formal defect of the transfer deed not being stamped within the meaning of the said Calcutta decision of S.P. Mitra J. in : AIR1961Cal528 , as the stamps were not cancelled and that is clear from the judgment and order of the Company Law Board, copy of which is annexed to the petition and are at pages 57 to 70. Therefore, in my view, the said decision of the Company Law Board summarily rejecting the appeal merely on a formal defect cannot constitute a bar to the present application either under Section 11 of the Civil Procedure Code as being res judicata or under any principles analogous thereto. Factually, there cannot be any dispute as to the title of the petitioners to the said shares by purchase and, as such, their rights to get their names registered by rectification of the share register of the company cannot be questioned by the company at this stage. It is now well settled that the shares are ' goods ' under the Sale of Goods Act, and is a kind of movable property as defined in Section 2(7) of the Sale of Goods Act, and a sale of shares is complete after the buyer pays the price of the said shares to the sellers who in its turn delivers the shares together with the blank transfer deed and the buyer becomes entitled to a right to be placed on the register of the company in place and stead of the seller as a member of the said company whose shares have been sold. Here, I may refer to the Privy Council decision in Maneckji Pestonji Bharucha v. Wadilal Sarabhai & Co. [1926] 53 I. A. 92. Viscount Dunedin, dealing with the principle regarding the sale of shares and the respective title and right of registration with the company, observed at page 97 of 53 Indian Appeals as follows:
' But, further, there seems to their Lordships a good deal of confusion arising from the prominence given to the fact that the full property in shares in a company is only in the registered holder. That is quite true. It is true that what Bharucha had was not the perfected right of property, which he would have had if he had been the registered holder of the shares which he was selling. The company is entitled to deal with the shareholder who is on the register, and only a person who is on the register is in the full sense of the word owner of the share. But the title to get on the register consists in the possession of a certificate, together with a transfer signed by the registered holder. This is what Bharucha had. He had the certificates and blank transfers, signed by the registered holders.'
10. In the Supreme Court decision in Howrah Trading Company Ltd. v. Commissioner oj Income-tax : [1959]36ITR215(SC) , it has been held that a transferee of shares holding the share-scrips together with the blank transfer deed signed by the transferor, if he chooses, completes the transfer by entering his name in the transfer deed and signing the same as transferee and applies to the company for registration of his name in place of the previous holder of the shares being the transferor. The company recognises no person except one whose name is in the register of members. Of course between the transferor and the transferee certain equity arises even on execution and handing over of a blank transfer and among those equities is the right of the transferee to claim dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hand and fails to pay it to him. Therefore, it is quite clear that if a petitioner under Section 155 of the Companies Act, 1956, establishes his title to the shares and there is no ground whatsoever for refusal of such transfer by the company, the court would order the company to rectify its register of members by putting in the name of the petitioners in place of the registered shareholders who have sold their shares to the petitioners for valuable consideration as in this case. I may also refer to the latest Supreme Court decision in which the said principle has been laid down and cited by Mr. S.B. Mukherjee, on behalf of the petitioners. It is the decision in Vasudev Ram Chandra Shelat v. Pranlal Jayanand Thakar : [1975]1SCR534 , where by a registered deed of gift signed by the donor and the donee, the shares in question were gifted to the donee by the donor and the donor undertook to have the name of the donee put on the register of the company concerned. The donor delivered the registered gift deed together with the share certificate to the donee and, subsequently, also handed over blank transfer forms duly signed by the donor to the donee. Before the donee got the said shares registered with the company in his own name, the donor died. A dispute was raised as to the right of the donee to the said shares in an administration suit on the ground that the said shares belonged to the donor as the stamps were not registered with the company. Dealing with said question Beg J. observed after holding that the gift was complete and was in compliance with Sections 122 and 123 of the Transfer of Property Act and the title in the said shares vested in the donee, at page 54 of [1975] 45 Comp Cas 43 (SC) as follows:
' There is nothing in Regulation 18 or anywhere else in our company law to indicate that, without strict compliance with some rigidly prescribed form, the transaction must fail to achieve its purpose. The subservience of substance of a transaction to some rigidly prescribed form required to be meticulously observed savours of archaic and outmoded jurisprudence.'
11. and then again, at page 55, as follows:
'In other words, the fields of operation of the provisions of Sections 122 and 123 of the Transfer of Property Act and the provisions of the Companies Act, 1913, were different. Each had different objects and legal consequences. The Companies Act did not prevent the completion of a gift of the right to obtain the shares which could, in common parlance or loosely speaking, be spoken of as a gift of shares themselves even before the gift is acted upon so that the donee obtains share certificates in his own name. The Transfer of Property Act could not enable the donee to exercise the rights of a shareholder vis-a-vis the company, until a transfer of shares is made in accordance with the company law.'
12. and, lastly, at page 59, as follows:
' There was no question here of competing equities because the donee-appellant was shown to have obtained a complete legal right to obtain shares under the gift deed and an implied authority to take steps to get his name registered. This right could only be defeated by showing some obstacle which prevented it from arising or which could defeat its exercise. No such obstacle having been shown to us to exist, the rights of the donee-appellant would prevail as against any legal rights which could have accrued to others if the donee had not already acquired the legal right which, as held by us above, had become vested in him.'
13. Therefore, applying the principles to the facts of this case I have no hesitation in holding that there is no dispute whatsoever as to the title of the petitioners in the relative shares lodged by them for registration of the transfer in their respective names. The transferors are parties to this application and have been duly served with the notices of this application and none of them has appeared and objected to this application and, as such, there cannot be any question as to the title of the petitioners in the respective shares transferred to them by the respective transferees. The company has no right to question the said transfers or validity of the same, in any way, other than what is provided in Section 308 of the Companies Act. It is an admitted position that the appeal of the petitioners before the Company Law Board under Section 111 of the CompaniescAct, was rejected solely on the formal defect that the stamps on the transfer deeds were not cancelled and, as such, according to the decisions of this court referred to above, the transfer deeds were deemed to be not duly stamped and, therefore, the said appeal was rejected. As I have already observed, there is no question of res judicata or application under Section 155 being barred by limitation as contended on behalf of the respondent-company. The said two questions, that is, the question of res judicata or the question of the petitioners having availed of the alternative remedy under Section 111 of the Companies Act, 1956, are not entitled to maintain this application and the application is barred by limitation are fully covered by the decision of R.M. Datta J. in Mani Mohan Mukherjee v. Jalpaiguri Cinema Co. Ltd. [1975] 79 CWN 512, where identical questions were raised by Mr. P. N. Chatterjee, as junior counsel, appearing with Mr. Bikash Sen, and were rejected. I respectfully agree with the said decision of R. M. Dutta J. Moreover, the appeal of the petitioners under Section 111 of the Companies Act was dismissed by the order of the Company Law Board dated the 22nd November, 1973, and, therefore, the present application was filed on the 4th of April, 1974, and kept pending in this court by obtaining adjournments after adjournments till it was finally heard. In the facts of this case, there is no question of the petitioners' application being barred by limitation and, in any event, the petitioners having diligently pursued their remedies in different Tribunals, there was no question of making an application under Section 155 of the Companies Act, earlier. These points are fully covered by the said decision of R. M. Dutta J. in [1975] 79 CWN 512 with which I have respectfully agreed. There is no substance or merit in the contentions of Mr. P. N. Chatterjee, appearing for the respondents, and I reject the same.
14. In the result, there will be an order in terms of prayer ' B ' subject to this that the respondent Nos. 1 to 4 would return the transfer deeds with the relative shares to the respective petitioners within a fortnight from date. There will be an order in terms of prayer ' A ' subject to this that the petitioners would return the said documents within a month from date. There will be an order in terms of prayers ' D ' and ' E' subject to this that such rectification of register of members of the respondent-company is to be made within two months from date. Having regard to the facts of this case that the petitioners having not cancelled the stamps on the transfer deeds when the relative share-scrips were lodged for transfer with the respondent-company, I do not think that it is fit for making any order for costs of this application, and, therefore, there will be no order of costs.