MADHAVA RAMACHANDRA KAMATH, SON OF ANKOLA RAMACHANDRA KRISHNA KAMATH Vs. CANARA, BANKING CORPORATION LIMITED, A BANKING COMPANY

JUDGEMENT

(1.) This is a petition by a shareholder of the Canara Banking Corporation, Ltd., under Section 38 (1) of the Companies Act. This section, so far as it is material, provides that if the name of any person is without sufficient cause entered in or omitted from the register of members of a company, the person aggrieved may apply to the Court for rectification of the register. The petitioner is the holder of one share only and ( the company at a general meeting purported to act under Art. 173 of the Articles of Association and expelled him from membership. This Art. provides to the effect that if any shareholder unjustly or unlawfully has recourse to law in any matter whatever connected with the Corporation, he shall render himself liable to expulsion and on such expulsion he shall never again be admitted into the Corporation.

(2.) The petitioner preferred a complaint to the District Magistrate of South Canara seeking sanction under Section 196-A of the Criminal P. C. to prosecute some Directors and ex-Directors of the company for conspiracy in the preparation of a balance sheet or balance sheets of the company. The learned Magistrate refused to grant the process sought and in the course of his order he gave the following reasons for his decision. The respondents (Directors) were all highly respectable gentlemen; the balance sheet has been accorded sanction at a general body meeting of the shareholders; petitions to the Registrar of Joint Stock Companies and to Government to initiate an enquiry into the affairs of the company had been rejected, and he had been forced to think that the petitioner was working against the Bank out of sheer malice. He added that from the attitude of the Registrar and the Government it was apparent that there was no reason to think that the respondents in the proceedings before the Magistrate had any reason whatever to conspire to cheat the shareholders. It is said and not disputed that a copy of the order of the Magistrate was circulated to all the shareholders of the company. A meeting was called on the 20 July, 1939. The petitioner attended and objected to the meeting continuing, nevertheless a resolution was passed that, in view of his conduct in filing an application before the District Magistrate of South Canara seeking sanction to prosecute some of the Directors and ex-Directors, thereby acting contrary to Art. 173 as seen from the order of the District Magistrate, he be expelled from the membership of the Corporation. On the date when this resolution was passed the petitioner was undoubtedly a member of the company. There was no power for the company to deal with the share or shares which were held by a person whom the company at a general meeting purported to expel from membership. The Articles provide for forfeiture of shares by members in certain contingencies but these contingencies do not include purported expulsion of a member under Art. 173. Ordinarily, a company is unable to sell its own shares but when shares are forfeited it can resell or dispose of them as provided in the Articles.

(3.) Subsequent to the passing of the resolution of expulsion the company has altered its Articles by making an addition to Art. 173. - Notice of the meeting at which these Articles were changed was not given to the petitioner. Under the additional Articles provision is made by which the company can, in effect, force an expelled member to sell his shares to any person at a price which is fixed under the provisions of the Articles and the company is enabled to authorise a Director to sign the necessary transfer instrument on behalf of such transferor if he fails to do so. Section 34(3) of the Companies Act provides that it shall not be lawful to register a transfer of shares unless a proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company. There are of course occasions when the transferor does not or cannot sign, such as when a Court sale has been held., In that event Order 21, Rule 80 of the Civil P. C. provides for the Judge or an officer of Court directed by him signing the transfer instrument. Art. 52(3) of the Companies Articles, it would seem, purports to confer upon the Directors of the company power to transfer shares in spite of the absence of an instrument of transfer. It says: Unless sanctioned by the Board of Directors, it shall not be lawful for the Corporation to register a transfer of shares unless a proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the Corporation.