Hemendra Prasad Barooah Vs.

Bahadur Tea Co. Pvt. Ltd. 1991 Company Case 792 (Gauhati)

Case Presenter &Role Player• Rahul Kumar Verma• Navaneeta Banik• Bapan Mukherjee• Rana Dev• Rahul Newar

Jurisdiction by :

• Prof. Monika Saxena

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Foundation of case

Legal heir’s right to an order for rectification of register of members to get on the register in place of

a deceased shareholder

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Basic understanding of case

Application under Section 156 of the Companies Act, 1956

For rectification of the register of members of the respondent-company

Refusal by the company to enter the names of the petitioners as members or shareholders.

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facts

Mrs. Premada Barooah

She was a shareholder of respondent company : The Bahudur Tea Company Pvt.Ltd during her lifetime

She died on March 31, 1978

WillMr. Hemendra Prasad Barooah (son-in-law) Mrs. Rosa Kamte(daughter)

In the will, her shares in the respondent-company were also included

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The executors made an application to the respondent-company

Facts continue…

Company refused to register their membership

Company said that a son-in-law or executor cannot be a member of the company under the memorandum of association and articles of association of the company

The case was filed by the executor in court

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Mr. D.N.Chaoudhary Mr. N.M. Lahirilearned counsel for the petitioners learned counsel for the respondent-com.

Contended that the legal representative (the executor) of the deceased member applying for entering his name in the register of members cannot be refused

Contended that the petition is not maintainable under Section 111(1) of the Companies Act tead with the articles of the company

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Legal aspect of case

• Companies Act relating to transfer of shares

Section 108 of Company Act

Inter vivos shares is to be made by a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee

• An inter vivos transfer is a transfer by one living person to another

• It is a transfer of property during the lifetime of the owner and it is to be distinguished from testamentary transfer of succession where the property passes by death

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Contradistinction to word “ TRANSFER” with “TRANSMISSION”

Transfer : An act of the parties or of the law, by which title to property is conveyed from one person to another

Transmission : Transfer of share that occurs by operation of law upon bankruptcy or upon death

TRANSFER TRANSMISSION

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• Section 109 of Company Act

States that a transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer

Section 211 of the Indian Succession Act, 1925

• The executor of a deceased person is the legal representative for all purposes and all the property of the deceased person vests him as such

• But the executor do not become members of the comp. unless their names are registered in the register of members

Sale of shares in court auction is also a case of transmission of shares

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TEXT TEXTTEXT TEXT

On a reading of Sections 108, 109, 110 and 111 together • The word "transmission" has been used in Section 111 in contradistinction to the

word "transfer"

• "Transmission" is referable to devolution of title by operation of law. It may be by succession or by testamentary transfer

• “Transfer", it has been used to mean inter vivos transfer.

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On the death of Premada, her right to the shares or other interest as a member in the company devolved on the petitioners as executors and they are the legal representatives of the deceased

In the case

• Legal aspect from company point of view

Could the company refuse to register the transmission by operation of law of the right to the shares ?

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Test with article 7(A) & 7(b)

A shareholder may, at any time, transfer a share to his or her father, mother, wife or husband, son or daughter or to any one of the existing shareholders of the company, provided however that the transferee is not an insolvent or otherwise incapable of discharging his obligations"

"No transfer of any share except to a member or the persons referred to in Article 7(b), (c) shall be made to any person without the previous sanction of the directors who may without assigning any reason decline to give any such sanction"

Article 7(b)

Article 7(a)

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On a reading of Article 7 (a) and (b) together

• It appears that for the transfer of shares by a member of the company to his or her father, mother, wife or husband, son or daughter, or to any one of the existing shareholders of the company, no previous sanction of the directors is required

• However, for transfer to other persons including a son-in-law, previous sanction will be required and the company, without assigning any reason, can decline to give any such sanction

Articles 7(a) and 7(b) denotes inter vivos transfer

Therefore, Articles 7(a) and 7(b) are not applicable to the present case

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back to case

The petitioners who are executors (legal representatives) of the deceased member, Pre-mada Barooah, are entitled to registration of their names as members of the company

Therefore, the refusal was against the law

• Section 155(1)(b)

If default is made or unnecessary delay takes place in entering in the register the fact of any person having become, or ceased to be a member, the person aggrieved may apply to the court for rectification of the register

• Shri N. M. Lahiri, learned counsel for the respondents, has contended that Section 155 is in respect of the power of the High Court to rectify the register of members, but it does not include such a refusal to register

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verdict

The petition is allowed

It is ordered and directed that the respondent-company shall rectify the register of members of the company in the light of the observations made above

The executor is liable to get the benefits of shareholder

Company can’t refuse for above

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Thank you

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