Judgment:
1. This is a petition filed under Section 111(4)(b) of the Companies Act, 1956, seeking direction of this Bench to the Dhanalakshmi Bank Limited to rectify the register of members of the bank in respect of 164 shares for the reasons stated in the petition.
2. The petitioner is a Confederation of All India Bank Officers registered under the Trade Unions Act, 1926. It had bought 164 shares of the bank from respondent No. 2 through the assistance of respondent No. 3 and lodged the certificates along with transfer forms with the bank. After seeking certain clarifications, the bank sent an intimation that the board of directors of the bank has decided to refuse the transfer on the ground that the transfer was in contravention of the provisions of the Companies Act, 1956. Since the bank had not intimated the provisions of the Act according to which the transfer is in contravention, the petitioner sought clarification on this matter and the bank had informed the petitioner that the petitioner being an organisation registered under the Trade Unions Act, 1926, is not a "person" under Section 41(2) of the Companies Act, 1956.
3. According to the petitioner, the federation is entitled to hold the shares in its own name and as such has sought for the grant of the prayer made in the petition.
The bank had filed its reply. The reasons adduced for refusal as per the reply are as follows : (i) The petitioner is not a person within the meaning of Section 41(2) of the Companies Act, 1956, (ii) Under Section 14 of the Trade Unions Act, the provisions of the Companies Act have no application to registered trade unions.
(iii) Under Section 15 of the Trade Unions Act, the general funds of a trade union shall not be spent in any manner other than as detailed under items (a) to (j) and since purchase of shares is not one of the permissible items of expenditure, the board of directors have ample powers under the articles of association to refuse transfer.
4. The petition was heard today. Shri Rajanna, advocate, appearing for the petitioner, reiterated the pleadings in the petition and submitted that the definition of the word "person" has to be derived from Section 3(42) of the General Clauses Act, 1897, as the Companies Act has not defined the term "person". According to Section 3(42), "person" includes any company or association or body of members whether incorporated or not.
5. Again, as per the provisions of Section 13 of the Trade Unions Act, 1926, the petitioner is a body corporate entitled to hold both movable and immovable properties and to contract and shall by the said name sue and be sued. In other words, according to him, the petitioner can be registered as a shareholder in the bank. Further, he pointed out that the petitioner is already holding shares in the State Bank of India, Federal Bank Limited and that the respondent-bank itself had allotted shares in the name of respondent No. 3 which is also registered under the Trade Unions Act. Therefore, he submitted that the action of the bank in refusing registration in the name of the petitioner was wrong and as such the register of members be ordered to be rectified by removing the name of respondent No. 2 and inserting the name of respondent No. 1.
6. Counsel for the bank reiterated the submissions made in the reply to the petition and also pointed out the provisions of Section 14 of the Trade Unions Act according to which the petitioner-federation is not entitled to spend the money for purposes other than what is mentioned in the section.
7. We have considered the arguments. The issue to be considered is whether the petitioner should be considered to be a person within the meaning of Section 14 of the Trade Unions Act, 1926. As rightly pointed out by counsel for the petitioner, the term "person" has not been defined in the Companies Act. It is an admitted position that the petitioner is registered under the Trade Unions Act with perpetual succession, it can sue and be sued and it can contract in its own name.
The requirement of being a "person" is that it should have a legal personality. The petitioner satisfies the conditions of legal entity by virtue of its registration under the Trade Unions Act as a body corporate with the attendant requirements like perpetuity, succession, etc. While a partnership cannot be a member, not being a legal entity by itself, we have no doubt that a registered trade union under the Trade Unions Act can be registered as a member and it can hold shares in its own name. Therefore, the stand taken by the bank in this regard is erroneous. Regarding the other objection that Section 14 of the Trade Unions Act prohibits spending money for objects other than what is stated in the section, it is to be noted that investment in shares is not an expenditure but is only an investment. Section 14 of the Trade Unions Act deals only with expenditure of revenue nature and not investment or expenditure of a capital nature, which is governed by Section 13 of the said Act according to which a trade union has powers to acquire and hold both movable and immovable properties.
8. Therefore, this objection of the bank can also not be sustained. As regards application of Section 14 that the provisions of the Companies Act are not applicable to a trade union, it relates to registration and functioning of trade union and not its rights to invoke the provisions of the Companies Act to enforce its rights arising therefrom. As such there is no merit in this content.
9. In view of the above, we hereby direct the bank to register the impugned shares in favour of the petitioner within a month from the date of receipt of the transfer forms along with share certificates from the petitioner.