MATHEW MICHAEL Vs. TEKOY RUBBERS (INDIA) LTD.

JUDGEMENT

(1.) THESE ten appeals arise out of a common order of the learned Single Judge(M.P.Menon J.) dismissing the applications filed by the appellants under S.155 of the Indian Companies Act.All appeals involve common questions.That was why the applications were dealt with by a common judgment by the learned Company Judge.We propose to deal with all these appeals in the same manner.Counsel on both sides agreed that this may be so.

(2.) THE facts which are necessary are only just a few.The first respondent is a company limited by shares.Regulation No.24 of the Articles of Association of the Company provides that: "The Board of Directors may,in their absolute discretion and without assigning any reason,decline to register, (a)the transfer of shares to a person of whom they do not approve,................" The authorised capital of the Company is Rs.16,00,000 made up of 60,000 Cumulative Preference Shares of Rs.10 and one lakh Equity Shares of Rs.10 each.The Company is listed in the Madras Stock Exchange and its shares are quoted.The appellants,who were applicants before the Company Judge,purchased equity shares of the Company at prevailing market rates.They forwarded such shares to the Company along with share transfer deeds duly executed by the transferors for registration of transfer.By letter dated,14th August 1979,the Company informed the transferees that the Board of Directors has declined to register the transfer.The share certificates were returned along with those letters.But the share transfer deeds were kept back.

(3.) THE first respondent company resisted the application.The Company maintained that the Directors had only exercised their discretion under Regulation.24 of the articles of association in the interests of the Company and the shareholders,and they did not act on wrong principles or for collateral purposes or with oblique motives,that the Directors knew the applicants for a long time and they bona fide believed that the transferees were persons who could not be approved of.It was also stated that some of the transfer deed were incomplete and defective,and they were rightly rejected.The concerned share transfer deeds were produced in evidence as Exts.A -1 to A -10.Copies of the annual returns of the first respondent Company made upto 14th September,1974 and 29th September,1979 were produced as Exts.A -12 and A -11 respectively.Exts.A -13 and A -14 were resolutions of the Company dated,10th May 1979 and 25th September 1979.Respondents produced Ext.B -1 copy of the Memorandum and Articles of Association of the Company and Ext.P -2 resolution regarding transfer of shares passed on 14th August, 1978. Two of the transferees/appellants were examined as P.W.1 and P.W.2.The Office Manager of the first respondent Company was examined as P.W.1.On an examination of all the materials available before him,the learned Company Judge held that the directors had exercised the discretion properly,that they were not obliged to give reasons for refusal to register transfer of shares because of the terms of Regulation No.24 of the Articles of Association of the Company which bound the Company as much as the transferor members,that the refusal to register the transfer of shares was not arbitrary or capricious or malicious or oppressive or against the interest of the Company or its shareholders and that the transferees had significantly failed in making out their case against the refusal by the Board of Directors by absolute proof or positive evidence.The appellants assail the above orders of the Company Judge.