LALITHAMBA BAI v HARRISONS MALYALAM LTD.

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Petitioner: Lalithamba Bai

Respondent: Harrisons Malyalam

Citation: (1988) 63 Comp Cas 662

Decided in: Kerala High Court

Before: Varghese Kalliath, J.

INTRODUCTION

The Companies Act isolates the definition of the term “members” into three classes. As indicated by Sec. 41 of the Companies Act, the three classes of members are:

  1. The people who have bought into the Memorandum of a company (MOA).
  2. Each and every other member who has concurred recorded as a hard copy to turn into a member from the organization and whose name has been entered in the Register of Members.
  3. Each member holding value share capital of an organization and whose names are recorded as beneficial proprietors in the storehouse records are considered as members from the concerned organization.

One of the ways of acquiring membership in a company is through Registration: it implies the participation register which is kept by the Company at its chief office or by a properly named specialist of the Company presenting the name, address, the quantity of Units, and Capital Contributions of every Member of the Company, which will be altered occasionally as extra Units are given and as Units are moved as per this Agreement.

In the present case the petition is filed under section 155 of the Companies Act of 1956.

FACTS

  • In the present case the petitioner along with the second respondent together claim that they are legally eligible heirs of Ramavarma Valiakoil Thampuran.
  • He died on 29th December 1975.
  • As per the will left behind by Thampuran, the shares which he holds in Malayalam Plantations (Holding) Limited (UK) has been passed on under the name of the petitioner and the second respondent in the share ratio of 2:1. 
  • As per the record he had 3,750 shares in the above-mentioned plantation.
  • Till the time of his death there was no dispute regarding the shares he had in the company and its distribution among the petitioner and the second respondent of the case.
  • In this case the petitioner has filed a case under Section 155 of the Companies Act with the plea to make changes in the register of the share in regards to the first respondent who is Messrs. Harrisons Malyalam Ltd.
  • Now the point which was brought before the court is in regard to the why the name of the petitioner should be included in the books of Messrs. Harrisons and Crosfield in the company of Malayalam Plantations (Holdings) Ltd. (UK) which were just acting as the agent and secretary of the Plantation Company and the deceased hold shares in the plantation company only.
  • After sometime it was presented in the court that Messer and Crosfield have used their right giver by Section 209 (1) of the Companies Act through which they have acquired a portion if share in Plantation company.
  • The deceased had purchased 340 ordinary shares in each of the above-mentioned companies along with his share in Plantation one whose cash representation of sale of fractions, £3.

ISSUES

  • Whether the shares which are transferred to the name of the petitioner along with the first respondent of the case are of both Messer and Crosfield or not?
  • Whether the case lies under Section 155 of the Companies Act, 1956?

JUDGEMENT

In the present case the court has dismissed the petition filed by the petitioner and was of the view that since the facts are not clear on the point of transfer of shares of Harrisons and Crosfield company (UK) Ltd. under Section 155 of the Act, 1956.

ANALYSIS

This is an application recorded by the court under Section 155 of the Companies Act, 1956. It offers the court the right to rectify the register of members in a company. Section 150 orders that each organization will keep a register of its members.

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Section 109 of the Companies Act provides 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.”

In this case, it is said regardless of whether the petitioner has the share of her dad which are transferred to the name of petitioner and the first respondent and those were share of Messrs. Harrisons and Crosfield (UK) Ltd., the petitioner in the case, and the first respondent both can’t guarantee there share in Messrs. Harrisons Malayalam Ltd. Thus, the present court wasn’t in a situation to redress the share register of the first respondent-it was also submitted by the council before the court that there is no obvious proof for this situation that the applicant has gotten a share of Messrs. Harrisons and Crosfield (UK) Ltd. also, in the event that they have not acquired portions of Messrs. As it is said before, that by itself isn’t adequate for the court to act as per section 155 of the Companies Act and amend the offer register. As the facts are not clear the court found it inappropriate to discuss this issue.

To start with the analysis, it is important to take the most important note into consideration as both the companies are not Indian Companies.  The provision of Indian legal system can be used to deal with the produced petition in the court of law. To answer this both the companies Harrisons and Crosfield had enormous resources and liabilities in India. Since an unfamiliar organization was holding huge resources in India, as a strategy measure, a plan was developed by the country to procure the resources of both the above-mentioned companies by an Indian organization, and for that reason, both Harrisons and Crosfield (India) Ltd. was framed and the resources and the business liabilities of Messrs. Harrisons and Crosfield (UK) Ltd. in India were taken over by Messrs. Harrisons Crosfield (India) Ltd. what’s more, this was done in the wake of fulfilling the arrangements of the Indian Companies Act by recording all the required documentation. According to the plan, plainly in Messrs. Harrisons and Crosfield (India) Ltd. 60% of the given share capital ought to be held by Indian inhabitants and the leftover 40% of the given share capital by Messrs. Harrisons and Crosfield (UK) Ltd. This 40% of the given share capital was given based on the valuation of the resources and liabilities of Messrs. Harrisons and Crosfield (UK) Ltd. in India.

One of the most important terms which needs to be understood while dealing with this case is Section 41 of the Companies Act which defines the term ‘member’ under the legal provision. It incorporates the subscriber of the MOA of a company and each and every other individual who concurs recorded as a hard copy to turn into an individual from the company and whose name is entered in its register of members which a company holds. On account of who can be a member of a company other than the one who has subscribed for it, two fundamental conditions must be fulfilled to establish an individual as a part of a company: (1) An arrangement recorded as a hard copy to turn into a part, and (2) an entry on the register of the company. These two conditions are total. Both these conditions must be fulfilled and if both these conditions are not fulfilled, the individual being referred to can’t guarantee the situation with a part. The situation in the English Act is likewise practically indistinguishable.

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The principal question which is necessary to be analyzed before moving forward is whether, the petitioner and the second respondent of the present case have access to the shares of the Malayalam Plantations (Holdings) Ltd. (UK) which are transferred to them as shares of Messrs. Harrisons and Crosfield (UK) Ltd., those shares can be treated as the shares of the first respondent-of the case as contended by his counsel. It is presented before the court that Harrisons and Crosfield (UK) Ltd. have been taken over by Messrs. Harrisons Malayalam Ltd. in regard to its Indian business. The question in this case is whether that the distribution is far-reaching enough to say that the shares of the company are held by Indian shareholders in Messrs. Harrisons and Crosfield (UK) Ltd. additionally have been taken as liabilities of Messrs. Harrisons and Crosfield (India) Ltd. in the principal case and afterward by Messrs. Harrisons Malayalam Ltd. To which the court thought  that it was hard to acknowledge the conflict of insight for the applicant. Accepting that the candidate prevails with regards to setting up the shares held by her dad in Malayalam Plantations (Holdings) Ltd. (UK) had been changed over into portions of Messer.

Harrisons and Crosfield (UK) Ltd. also added in the future claims that shares have been sent to the petitioners and the first respondent, even, all things considered, it is hard to say that the shares held by the candidate in Messrs. Harrisons and Crosfield (UK) Ltd. must be treated as the shares of Messrs. Harrisons Malayalam Ltd. as one of the business liabilities of Messrs. Harrisons and Crosfield (UK) Ltd. in India. The shares held by Indian residents in Messrs. Harrisons and Crosfield (UK) Ltd. may comprise an obligation of that company.

In the situation of winding up of the company, it is the right of the member in the dissemination of the organization’s resources as per the rights given to him under the articles of the company. The members of the company have no other interest in the resources of the organization. These views were given by the court while relaying on the judgement of Mrs. Bacha F. Guzdar v CIT[1] “A share in a company cannot properly be likened to a sum of money settled upon and subject to executory limitations to arise in the future; it is to be regarded rather as the interest of the shareholder in the company, ensured, for the purposes of liability and dividend, by a sum of money but consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with section 16 of the Companies Act, 1862, and made up of various rights and liabilities contained in the contract, including the right to a certain sum of money.”

CONCLUSION

In the present case the court dealt with some basic issues which helped to clear the notion of acquiring membership of a company through the process of registration. It has been made clear through the above discussion that it is one of the most popular ways of airing membership in a company, the person whose name is registered can be the member and can transfer only his share to his heirs. This transfer of shares is only limited to the extent it is mentioned in the articles of the company and cannot be negotiated to any extent.


[1] Mrs. Bacha F. Guzdar v CIT, (1955) 27 ITR 1; AIR 1955 SC 74

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