Bombay High Court
Sulphur Dyes Ltd. vs Hickson And Dadajee Ltd. on 20 February, 1992
Equivalent citations: [1995]83COMPCAS533(BOM)
JUDGMENT D.R. Dhanuka, J.
1. Sulphur Dyes Limited has filed this petition under section 155 of the Companies Act 1 of 1956, seeking an order and direction of this court to Hickson and Dadajee Ltd. to delete the petitioner's former name "Hickson and Welch Limited" and substitute in its place the present name of the petitioner in respect of 20,872 shares held by the petitioner in the said company.
2. It is not disputed that Hickwon and Welch Ltd. is shareholder of Hickson and Dadajee Ltd. holding 20,872 ordinary shares of Rs. 100 each constituting 34 per cent. of the equity share capital of the respondent-company. A statement of the distinctive numbers of the share certificates held by the said company is annexed as exhibit "A" to the petition. The particulars of these shares along with certificate number and distinctive numbers are mentioned hereinafter :
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Certificate Number of Distinctive
number shares numbers
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4 612 4 615
6 816 746 1561
11 130 5002 5131
12 65 5132 5196
28 628 7197 7824
312 952 8873 9824
144 45 10249 10293
40 250 11517 11766
62 443 13180 13622
65 70 14489 14558
73 498 14559 15056
103 2,756 15630 18385
201 6,650 22651 29300
324 1,739 40688 42426
382 5,218 45761 50978
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20,872
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3. The petitioner has averred in paragraph 9 of the petition that, by a special resolution passed on June 23, 1989, at an extraordinary general meeting of Hickson and Welch Limited, the name of the said company was changed to Sulphur Dyes Ltd. The petitioner relies on a copy of the certificate of incorporation of change of name dated July 3, 1989, issued by the Companies Registration Office, Cardiff, U. K., certifying the change of name of Hickson and Welch Ltd. to Sulphur Dyes Ltd. A copy of the said certificate dated July 3, 1989, is annexed to the petition as exhibit "G". The petitioner requests for rectification of register of members of the respondent-company in respect of the shares held by it by showing its changed name as a shareholder.
4. The respondent-company refuses to effect the change in its record and amend the share certificates in respect of the shares held by the petitioner in its former name Hickson and Welch Ltd. The petitioner has, therefore, filed this petition under section 155 of the Companies Act, 1 of 1956, seeking rectification of the register of members in terms of prayers (a) and (b) of the petition.
5. Clause 37 of the articles of association of the company known as Hickson and Dadajee Ltd. reads as follows :
"37. Except where the transfer is made pursuant to article 43 or article 54, the person proposing the transfer any share (hereinafter called 'the proposing transferor') shall give notice in writing (hereinafter called a 'transfer notice') to the company that he desires to transfer the same. Such notice shall specify the sum he fixes as the fair value and shall constitute the company his agent for the sale of the share to any member of the company approved or selected as being willing to purchase the share (hereinafter called the 'purchasing member') at the price so fixed, or at the option of the purchasing member at the fair value to be fixed by the auditors of the company in accordance with article 39 hereof. A transfer notice may include several shares and, in such case, shall operate as if it were a separate notice in respect of each. A transfer notice shall not be revocable except with the sanction of the directors."
6. The petitioner contends that the instant case is merely a case of change of name of the company and not a case where the existing shareholder seeking transfer of shares held by it to a different or another party. The petitioner has relied upon the relevant provisions of law contained in the Companies Act 1 of 1956. Section 23 of the said Act provides that, where a company changes its name in pursuance of section 21 or section 22, the Registrar shall enter the new name on the register in place of the former name and shall issue a fresh certificate of incorporation with the necessary alterations embodied therein and the change of name shall be complete and effective only on issue of such a certificate. Section 23(3) of the Act provides that the change of name shall not affect any right or obligation of the company or render defective any legal proceeding by or against it. Section 35 of the Act provides that a certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of the Act have been complied with in respect of registration and matters precedent and incidental thereto and that the association is a company authorised to be registered and duly registered under the Act. Therefore, when a fresh certificate of incorporation is issued by the Registrar on a change of name of the pre-existing company, such fresh certificate of incorporation is liable to be treated as conclusive evidence of the fact that all the requirements of the Act for effecting the change of name have been complied with. Since the petitioner is a foreign company registered under the U. K. Companies Act, the attention of the court is also invited to identical provisions contained in the English Companies Act, 1985, and in particular to section 13(7) of the said Act. Section 13(7) of the English Companies Act, 1985, reads as under :
"13(7). A certificate of incorporation given in respect of an association is conclusive evidence -
(a) that the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with, and that the association is a company authorised to be registered, and is duly registered, under this Act, and
(b) if the certificate contains a statement that the company is a public company, that the company is such a company."
7. There were identical provisions in the English Companies Act, 1948, also.
8. Shri Bharucha, learned counsel for the company, has submitted that the petitioner has resorted to a device so as to circumvent the provisions of clause 37 of the articles of association of the company. Shri Bharucha submits that the petitioner is indirectly trying to manoeuvre and manipulate transfer of shares to a third party without following the mandate of clause 37 of the articles of association of the company. It is not possible to accept the submission of Mr. Bharucha. However, it is necessary to refer to a few more facts in order to appreciate the contentions urged on behalf of the company by its learned counsel. The relevant facts having a bearing on this aspect of the matter are as under :
(a) On December 22, 1987, Hickson and Welch Ltd. agreed to transfer its assets to Alvin Morris Ltd. By clause 2 of the said agreement, it was provided that Hickson and Welch Ltd. shall transfer its entire business as a going concern to Alvin Morris Ltd. By clause 2(g) of the said agreement, it was provided that such transfer of assets will include, inter alia, the entire issued share capital of the shares held by Hickson and Welch Ltd. in Hickson and Dadajee Ltd. Hickson and Dadajee Ltd. were not made aware of the said agreement at any point of time. Prior to October 10, 1989, the name of Alvin Morris Ltd. was changed to Hickson and Welch Ltd. By July 3, 1989, the name of Hickson and Welch Ltd. was changed to Sulphur Dyes Ltd. The above referred agreement dated December 22, 1978, was never acted upon in respect of the intended transfer of shares held by Hickson Welch Ltd. in the respondent-company. The proposal to transfer the said shares as aforesaid was not even communicated to the respondent-company. By an agreement dated October 10, 1989, arrived at between Sulphur Dyes Ltd. and Hickson Welch Ltd. it was clarified between the parties that clause 2(g) of the agreement dated December 22, 1978, was never intended to be acted upon. In any event, the said agreement dated December 22, 1987, was abandoned in respect of the proposed transfer of shares.
9. Shri Bharucha has submitted that it would be clear from the above facts that the so-called change of name of the company from Hickson and Welch Ltd. to that of Sulphur Dyes Ltd. was effected not with a bona fide intention but with an intention to circumvent clause 37 of the articles of association of the company. Shri Bharucha has further submitted that clause 37 of the articles of association becomes applicable as soon as the proposed transferor intends to effect transfer of the shares held by it. Shri Bharucha submits that clause 37 of the articles of association of the company became applicable as soon as the above-referred agreement dated December 22, 1987, was entered into. Shri Bharucha has further submitted that the agreement dated October 10, 1989, is not a genuine agreement. I am not persuaded to accept any of these submissions urged on behalf of the company for the reasons which I would just indicate. To my mind, this case is plain and is a simple case of a mere change of name of an existing shareholder duly supported by a fresh certificate of incorporation.
10. It is true that Hickson and Welch Ltd. entered into an agreement of sale dated December 22, 1987. Hickson and Welch Ltd. could always modify or abandon a part of the agreement dated December 22, 1987. The company cannot claim to be an agent of the petitioner for sale of the said shares. The petitioner cannot be deprived of its rights as an existing shareholder merely because it has changed its name. If the court does not grant this petition, what would happen to the exercise of rights in respect of 20,872 shares. If the petitioner is not to exercise the rights of a shareholder in respect of these shares in its present name, who else can exercise these rights ? Can it be said that no one should exercise the shareholder's rights in respect of these shares ? Mr. Bharucha, with respect, has no real answer to these questions. Clause 37 of the articles of association would become applicable when the shareholders approach the company with a proposal to transfer the share. An uncommunicated proposal does not and cannot confer any right on the company so as to affect the rights of the existing shareholders. Alvin Morris Ltd. or Hickson Ltd. is not even a shareholder of Sulphur Dyes Ltd. Sulphur Dyes Ltd. is merely the changed name of Hickson and Welch Ltd. The provisions of the statute that the fresh certificate of incorporation is to be treated as conclusive evidence of the change of name effected must be given full effect. The provisions of the statute to the effect that the rights of the existing shareholders are not affected merely by change of its name must also be given full effect. I am not satisfied that a case of alleged fraud or circumvention is made out. The case is merely of change of name of the existing shareholder.
11. It is then contended that Sulphur Dyes Ltd. would perhaps dispose of its shares in future and indirectly the new shareholders of Sulphur Dyes Ltd. would become entitled to the shares of Hickson and Dadajee Ltd. I need not express any opinion on this eventuality in this petition. If Sulphur Dyes Ltd. is entitled to dispose of its shares in accordance with law, the court cannot affect the rights of Sulphur Dyes Ltd. to act in accordance with law.
12. Mr. Bharucha has then submitted that the remedy provided under section 155 of the Companies Act, 1 of 1956, is discretionary and discretion should not be exercised in favour of the petitioner having regard to facts and circumstances of this case. Learned counsel has further submitted that the petitioner should be relegated to the remedy of a suit. The facts are plain and simple. The certificate of incorporation issued on change of name is conclusive. The company has no sufficient cause to refuse rectification of register. I do not see any good reason for rejecting this petition in exercise of my jurisdiction under section 155 of the Companies Act, 1 of 1956.
13. Learned counsel for the company has ultimately submitted that, in case the court is inclined to allow this petition, the order of this court should be stayed for some time in order to enable the company to file a civil suit. It is not possible to accept this submission either. Courts must endeavour to put an end to the disputes and prevent multiplicity of litigation. I see no merit in the case of the company. The company cannot be encouraged to start a fresh round of litigation in respect of the same subject-matter.
14. In the result, I allow the petition in terms of prayers (a), (b) and (c) of the petition. The company is directed to rectify the register of members and implement this order within four weeks from today.
15. Cost payable by the company to the petitioner is quantified at Rs. 1,000.
16. Issue of certified copy is expedited.