JAGDISH PRASAD Vs. PTPARAS RAM

JUDGEMENT

(1.) This is an application which is, in my view, quite hopeless. It appears that a company called the General Transport Company Ltd. was incorporated in 1938 with shares divided into two classes, A and B respectively. The General Transport Company Ltd. was incorporated as a private company with articles of association which restricted the right of transfer in a not unusual form. Articles 16 to 22, inclusive, provide in a very usual way that, except in the case of a transfer by a member to an immediate relative, no member was to be entitled to transfer his or her shares without giving the directors an opportunity as therein provided for finding a purchaser or purchasers from among the existing members themselves. I need not set out the actual articles, because they are there to read and, in fact, nothing actually turns on them in this case. There then follows Art. 23, which again is a very common form of article and which is the material one in this case. It is in these words: The directors may in their discretion, refuse to register the transfer of any share to any person whom it shall, in their opinion, be undesirable in the interest of the company to admit to membership, but such right of refusal shall not be exercisable in the case of any transfer made pursuant to Art. 16, except for the purpose of ensuring that the number of members does not exceed the limit prescribed by Art. 2. The directors may refuse to register any transfer of shares on which the company has a lien.

(2.) It happened that 90 of the shares of the General Transport Company Ltd. were held by another company called the Commercial Finance Company Ltd. This latter company on 12 January 1941 went into voluntary liquidation and the present applicants Messrs. Prasad and Chatterji, are its liquidators. On the liquidation of the Commercial Finances Company Ltd., it seems that its liquidators cast about to find a purchaser or purchasers for the shares it held in the General Transport Company Ltd., and, on 14 January 1941, the liquidators wrote a letter to the directors of the General Transport Company Ltd. in which they said that they had succeeded in obtaining purchasers for the shares and, in pursuance of Art. 19, they required the company within 21 days either to find a member or members willing to purchase them or in the alternative to register the transfer. It purported to be, in short, a "sale notice" pursuant to Art. 18. The proposed transferees were, in fact, three in number and were, I understand, actually shareholders and directors of the Commercial Finance Company Ltd. What the directors of the General Transport Company Ltd., did on receiving the letter of 14 January was to hold a board meeting to consider the matter and on 5th February 1941 the General Transport Company Ltd. wrote a letter to the liquidators. It was in these terms: Dear Sirs, With reference to your letter No. 23/41 of the 14 January 1941 we enclose herewith the true copy of Resolution No. 1 of the Board of Directors of this Company held on the 3 day of February 1941. Please acknowledge and oblige. Thanking you. Yours faithfully,for the General Transport Ltd.(Sd.) General Manager.

(3.) The actual resolution enclosed was in this language: Resolved that the directors in their discretion under Art. 23 of the Company, are not inclined to register the names of the intending purchasers named in their abovesaid letter, as they consider them unsuitable for admission as members in the interest of the company.