- (1.) THIS is a petition under Section 155 of the Companies Act, 1956 (Act No. 1 of 1956), hereinafter to be referred to as the Act. The petitioner is Arjan Singh, who is a shareholder in the Panipat Woollen and General Mills Company Ltd. (respondent No. 1 to the petition), hereinafter to be referred to as the company, and holds 1000 fully paid up shares of the face value of Rs. 10,000/- in it. Sita ram, respondent No. 2, formerly held shares of the face value of Rs. 40,000/- in this company but in November 1958 he transferred his entire holding in the company. It is alleged in the petition that sometime in November 1960 Sita Ram had purchased 10 shares in the company of the face value of Rs. 100/- from darshan Lal, respondent No. 3. An application was made by him for the transfer of these shares and the relevant share certificate was also presented to the company. The matter of transfer of these shares was considered by the Board of directors of the company in their meeting held on the 12th March, 1961, but they rejected the application for transfer. Thereupon, Sita Ram filed an appeal under the provisions of Section 111 of the Act with the Secretary, Ministry of Finance, central Government, Department of Company Law Administration, New Delhi. The deputy Secretary to the Government of India in the Department of Company Law administration, by his order dated the 13th July, 1962, accepted the appeal and directed the company to register the transfer of the aforesaid shares in the name of Sita Ram within a period of 10 days from the date of receipt of the order. Messrs. Indian Industries Company, which ate the Managing Agents of the company, implemented the order of the Deputy Secretary on the 28th July, 1962.
(2.) THE present petition is directed against the transfer of shares so made in pursuance of the order dated the 13th July, 1962. It is alleged that the transfer entries were effected by the Managing Agents without referring the matter to the board of Directors and on that account the transfer of shares is characterised as illegal. It is further alleged that Sita Ram was an undesirable person and during the period he was connected with the company he had troubled it and its managing agency firm in various ways.
(3.) ON behalf of the company, Shri Mahavir Gupta, Deputy Managing Partner of the managing Agents (Indian Industries Company) has put in a written statement It is admitted that the Board of Directors of the company, which considered the question of transfer of the shares on the 12th March, 1961, did not sanction it because they considered that it was not in the best interests of the company to admit Sita Ram as a member of it. It is further stated that Shri Mahavir Gupta as a partner of the Managing Agents effected the transfer of 10 shares from the name of Darshan Lal to Sita Ram with a view to avoid the penalty provision of law. The reference obviously is to Sub-section (9) of Section 111 of the Act, which is as follows: "if default is made in giving effect to the order of the Central government within the period specified in Sub-section (5) or to a direction of that Government given under the proviso to Sub-section (5), the company, and every officer of the company who b in default, shall be punishable with fine which may extend to one thousand rupees, and with a further fine which may extend to one hundred rupees for every day after the first during which the default continues". ;