H.L Agrawal, J.:— This is an application under section 155 of the Companies Act, 1956, filed by the petitioner, Basudeb Kataruka, against Messrs Dhanbad Automobiles Private Ltd. (hereinafter referred to as “the company”) and five other persons, including the managing director and the other director, for rectification of the share register of the company.

2. The company is a private limited company, having its registered office at Dhanbad. The petitioner claims to be a shareholder as also a director of the company, the other two directors being opposite parties Nos. 2 and 3. The authorised share capital of the company was as follows:

Rs. 1. 1,000 cumulative preference shares of Rs. 100 each 1,00,000 2. 1,000 ordinary shares of Rs. 75 each 75,000 3. 2,000 equity shares (Series A) of Rs. 75 each 1,50,000

3. The company had issued only 150 cumulative preference shares, 1,000, ordinary shares and 480 equity shares fully paid up and the rest of the shares were unissued. Out of these unissued shares, 450 equity shares have been issued by the company to opposite parties Nos. 4, 5 and 6 by its resolution dated the 3rd January, 1974, which action is being challenged by the petitioner, and he has come to this court for the rectification of the share register.

4. In order to appreciate the points raised, it will be useful to quote the relevant articles of the articles of association of the company:

“22. Transfer of shares.—A share may be transferred by a member or other persons entitled to transfer to such member as will be approved by the directors but no share shall be transferred to a person who is not a member, so long as any member (or any person selected by the directors as one whom it is desirable in the interest of the company to admit to membership) is willing to purchase the same at a fair value to be determined by the directors………

23. Original shares unissued to be offered to members.—Unless otherwise determined by the directors by the resolution authorising an increase of capital, any original shares for the time being unissued, and any new share from time to time to be created, shall before they are issued, be offered to the members in proportion as nearly as may be to the number of shares held by them. Such offer shall be made on notice specifying the number of shares offered, and limiting a time within which the offer if not accepted, will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may, subject to these articles, dispose of the same in such manner as they think most beneficial to the company. The directors may, in the like manner, dispose of any such new or original shares as aforesaid which by reason of the proportion borne by them to the number of persons entitled to such offer as aforesaid or by reason of any other difficulty in apportioning the same, cannot in the opinion of the directors be conveniently offered in manner hereinbefore provided.”

5. The contention of the petitioner is principally based upon article 23, according to which any original share for the time being unissued, or any new share to be created, before they are issued, is to be offered to the existing members of the company in proportion to the number of shares held by them. The petitioner's case is that the allotment of 450 equity shares to opposite parties Nos. 4, 5 and 6 in the meeting held on the 3rd January, 1974, was in complete violation of the aforesaid restrictions in the article, on transfer of shares, at the instance of opposite parties Nos. 2 and 3, who happen to be their close relations, for the purpose of acquiring a majority vote in the company's affairs and meetings so as to grab the management of the company itself, inasmuch as opposite party No. 5 is the son of opposite party No. 3, opposite party No. 4 is the son of his brother and opposite party No. 6 is the son of opposite party No. 2. Opposite parties Nos. 2 and 3, after making the allotment of shares, also got it registered. The petitioner challenges the allotment of shares on a further ground that the meeting in question was itself illegal because no meeting of the board of directors was convened on the 3rd January, 1974. Alternatively, it has been contended that, at any rate, the petitioner, who happened to be a director of the company, was not given any notice to attend the said meeting. On these allegations the petitioner has prayed to rectify the register of the members in so far as the allotment of 450 equity shares in favour of opposite parties Nos. 4 to 6 as it was made without a sufficient cause within the meaning of section 155(1)(a)(i) of the Companies Act.

6. The application is mainly opposed by opposite parties Nos. 1 to 3, who have filed a counter-affidavit. Later on, when the petitioner filed a reply to the counter-affidavit, a rejoinder was filed on behalf of opposite party No. 6 as well only a day before the matter was taken up for hearing after some adjournments. Originally, this case was listed for hearing on July 1, 1975, in view of an earlier order. On that date, Mr. Amla Kant Choudhary, who was appearing on behalf of opposite party Nos. 1 to 3, had pressed for the decision on a preliminary point and to adjourn the hearing to some other date. The preliminary objection that was taken on that date was on the basis of a petition for dismissing the company petition itself, or, in the alternative, for staying the same, pending the disposal of a title suit in the court of the Munsif, Dhanbad, by another shareholder for a similar relief, that is, for rectification of the register of members. In support of the said petition, it was contended that as the matter raised for decision in this case related to serious and disputed questions, this court should not decide the same in this summary proceeding and direct the petitioner to seek his remedy in the civil court where the matter could be gone into in a more proper way. The preliminary objection was overruled, the petition was rejected and the case was placed for final hearing.

7. Mr. S.C Ghose, who appeared at the time of the final hearing of this application, raised the same preliminary objection that this application under section 155 of the Companies Act was not maintainable as it involved complicated questions and that the application itself was defective as all the shareholders were not impleaded as party to this application by the petitioner. It is not disputed that there are 10 shareholders of the company, whose names have been mentioned by the petitioner in his application itself. He has, however, impleaded in the category of opposite party only the two directors and the allottee members of the share in question.

8. The preliminary objection raised on behalf of the opposite party has got no substance and must be overruled on merits as well as on technical points. No objection regarding the defect of parties in the petition was taken when the question of maintainability of this application and its dismissal was prayed for on behalf of the opposite party on the earlier occasion on July 1, 1975. The other ground of maintainability that the case involved complicated questions was considered and negatived. The same question, therefore, cannot be reagitated over and over again. However, I propose to consider both the objections and dispose them of on merits as well.

9. The second objection with respect to the defect of parties can be disposed of very shortly. It is apparent that the only persons who are likely to be affected by the decision in this case will be opposite parties Nos. 4 to 6. Besides them, the company as well as the persons who are alleged to be guilty of the violation of the articles, namely, article 23, the two directors have also been impleaded as opposite party. There is no provision of law, much less any such provision was shown to me, which makes it essential that all other members of the company should have been made parties. In the case of Ratan Lal v. Jagadkari Light Raihvay Co. Ltd., [1946] 16 Comp Cas 21 (Lah) it was held that even the directors of a company were not necessary or proper parties to an application for rectification of registers. In another case of Jawahar Mills Ltd. v. Sha Mulchand and Co. Ltd., [1949] 19 Comp Cas 138 (Mad), it has been held that the third parties whose right is to be affected by the order of rectification are necessary parties to the proceeding and the court cannot order rectification in their absence. The petitioner has impleaded all those persons. I do not think, therefore, the second contention has got any substance.

10. Coming to the first question which was canvassed at great length on behalf of the opposite party by Mr. S.C Ghose, it has got to be dealt with in some greater detail. The “seriousness” of the question and the question of dispute has been sought to be based on the fact that in this summary proceeding, it will not be possible to come to a decision as to whether the meeting held on the 3rd January, 1974, was valid or invalid and as to whether there was a compliance of article 23 of the articles which required investigation of various facts. The “seriousness” was also attributed in view of the plea in the counter-affidavit of the opposite party that the allotment of shares to the petitioner, which were made for the first time in a meeting of the company held on December 8, 1973, was itself invalid, that is, the basis on which the petitioner claims to be a member of the company, claiming advantage or benefit of the conditions contained in article 23 of the articles, and, therefore, these matters should not be disposed of in this summary proceeding.

11. It is true that the proceeding contemplated by section 155 of the Act is summary in nature and the court has to adopt a summary procedure. In my opinion, the questions falling for decision in this case are not so complicated which would justify a refusal of the right of the petitioner to avail of this summary procedure and seek his remedy under the common law through a regular suit. Simply because the application is contested and some questions which, although apparently appear to be little complicated, none the less can be conveniently decided on the basis of the very petitions and rejoinders and the annexures thereto, without the necessity of embarking upon a protracted investigation, the jurisdiction of the company court will not be ousted. As the jurisdiction, although summary in nature, is wide enough to provide a quick decision, otherwise it will be very easy for any contesting party to raise any frivolous question and then contend that this court should not decide the matter, thereby practically ousting the jurisdiction of the High Court and making the provision of section 155 of the Companies Act redundant.

12. Sub-section (3) of section 155 of the Act is relevant in this connection which provides as follows:

“(3) On an application under this section, the court—

(a) may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and

(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification.”

13. The order passed by the court has also been made appealable.

14. I shall now refer to some of the authorities on this question. It is, no doubt, true and recognised by a long line of judicial decisions that the court is not bound to give the relief under that section if it finds that complicated questions of fact and law were involved.

15. None the less, from the provision of sub-section (3) of section 155 itself, it is clear that a court is competent to decide any question relating to the title of any person, where the question arises between members or alleged members, and such other questions which may be necessary or expedient to decide in connection with the application for rectification. In my opinion, therefore, by reason of the provision made under section 155, it is open to the aggrieved party to avail of the procedure laid down by that section and proceed by way of an application, unless by reason of its complexity, it cannot be conveniently decided in the proceeding.

16. The Supreme Court in the case of Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala, [1961] 31 Comp Cas 387, 395 (SC), while considering the scope of the powers under this provision, has held that the court in exercising this jurisdiction is competent to decide any question relating to the title of the person claiming to have his name registered and generally to decide all questions which may be necessary or expedient to decide for the rectification. It has been further held:

“It is common ground that in the exercise of the powers under section 155, the court has to act judicially: to adjudicate upon the right exercised by the directors in the light of the powers conferred upon them by the articles of association.”

17. The Supreme Court had again occasion to consider the scope of section 155 of the Act in the case of Public Passenger Service Ltd. v. M.A Khadar, [1966] 36 Comp Cas 1 (SC) and it was observed that where by reason of its complexity or otherwise the matter can more conveniently be decided in a suit, the court may refuse relief under section 155 in exercise of the discretionary jurisdiction and relegate the parties to a suit. At the same time, in this case it was held that the point as to the invalidity of the notice could well be decided summarily under section 155. Having found that the notice was defective and the forfeiture of the share was invalid, the court could not arbitrarily refuse the relief to the respondents and the decision of the court below in exercise of the power was confirmed.

18. In a case before the Rajasthan High Court in the case of Kolah Transport, Ltd. v. State of Rajasthan, [1967] 37 Comp Cas 288 (Raj), where an objection was taken regarding the maintainability of an application under section 155, on the ground that important questions of fact and law were involved in that case, and the learned judges repelled the objection as on the facts of that case, it was found that there was no dispute between the parties on all important and relevant facts. It was admitted by the appellant in his reply that 300 preference shares, 6,000 ordinary shares and 2,000 deferred shares were allotted, free of cost, as fully paid shares to the Government of Kotah State in consideration of its having given to the company the sole monopoly of transport in the State, which allotment was later on forfeited by a notice, and the only question which fell for determination before the learned judges was whether the company possessed the requisite authority to forfeit the shares.

19. The Madras High Court also in the case of Public Passenger Service Ltd. v. M.A Khadar, AIR 1962 Mad 276, where the question for consideration was as to whether the notice issued to the shareholders contained all the minute details and particulars and whether the rules and procedure provided in the Act and the articles of the company have been strictly complied with, held that no evidence was needed to be let in, nor the matter involved was a very complex one, and the matter involved was purely one which could be decided by the court itself without referring the parties to a suit.

20. In the case of Hunter v. Hunter, [1936] AC 222 : [1937] 7 Comp Cas 36 (HL), it has been held that where shares in a private company are registered in the name of a transferee, in breach of the company's articles restricting transfer of its shares, a member of the company may obtain an order for rectification under the Act.

21. The simple question in issue before me in the present case is as to whether the allotment of 450 unissued equity shares have been validly allotted to opposite parties Nos. 4, 5 and 6, or not, the ground of challenge being the restrictions under the articles of association of the company. I do not, therefore, think that the question in issue is so complex which should not be decided in this summary proceeding and the petitioner should be relegated to a sait. I do not, therefore, find any substance in the objection regarding the maintainability of this application as raised by the opposite parties.

22. Having decided the preliminary objections, now I would proceed to examine the case of the petitioner on its merits and to see as to whether he is entitled to an order of rectification of the register.

23. The relevant article prescribing the mode for issuance of unissued shares, namely, article 23, has already been quoted above. It lays down that unless otherwise determined by the directors, a company, before such shares are issued, has got to make an offer of those shares purported to be issued, to the members of the company in proportion, as far as possible, to the number of shares held by them. This article also prescribes the procedure to be followed for issue of the notice in question. The notice has got to specify the number of shares offered to the member concerned, and limiting a time within which the offer, if not accepted, will be deemed to be declined. Of course, there is a provision also in this very article, giving powers to the directors to dispose of the shares in such manner as they think most beneficial to the company, much support on which part of the article was sought to be derived by Mr. Ghose. In my view, this power is only contingent in its nature to be exercised in a situation where the existing members decline to accept the shares offered and do not come forward to purchase the shares in question.

24. In this contingency, provision should have been made for issue of shares so that the company's business or needs may not be adversely affected. It is difficult to accept that this contingent authority conferred upon the directors could be exercised by them in supersession of the mandatory requirement and the main intention of the article in question restricting the transfer of shares. According to the admitted case of the opposite party, no such notice was issued to any of the members, much less to the petitioner, in terms of article 23. All that has been asserted on their behalf is that the company had issued a genera 1 notice to the shareholders intimating them that as the company was very badly in need of funds for liquidation of certain debts, it was decided to issue 450 (A Series) equity shares, calling upon the shareholders to apply within seven days for such number of shares as he or she desired, otherwise it would be allotted to others. It has been claimed on behalf of the contesting opposite parties that this notice dated December 27, 1973, was sent to the petitioner under a certificate of posting, a true copy of which has been made annexure B to the supplementary affidavit filed on behalf of opposite parties Nos. 1 to 3. The notice, however, has not been annexed. Mr. Amla Kant Choudhary has, however, produced an authenticated copy of the same purporting to have been issued to the different shareholders. I have earlier referred to the contents of the said notice. Even assuming that the notice was circulated, as claimed, it is not in terms of article 23 itself, as, according to that article, the company should have fixed the number of shares which each member was entitled to be offered in proportion to the number of shares held by him or her. In the circulated notice, however, the members have been given free hand to purchase any number of shares, irrespective of the number of shares already held by them, defeating the very purpose for which the article in question was incorporated in the articles of association.

25. Coming to the claim of the opposite party that a copy of this notice was issued to the petitioner under certificate of posting, the matter is still worse. On my direction, opposite party Nos. 1 to 3 produced the original certificate of posting. In that certificate the names of two addressees have been mentioned: (1) Sri H.S Gundappa, Deputy Chief Engineer, Bokaro Steel Ltd., and (2) Sri Basudeb Kataruka, the petitioner. From a scrutiny of the original certificate of posting, it is abundantly apparent that the Second addressee's name, that is, that of the petitioner has been subsequently inserted in the certificate. The insertion was very convenient to be made as the columns were blank. The ink and the writings are apparently different even to the naked eye, and could not have been written at the time when the name of the first addressee was incorporated in the certificate. That apart, the most glaring and positive proof of the subsequent insertion is the existence of only one seal of the post office. According to rules and regulations relating to the inland and foreign post of the Posts and Telegraph Department contained in Post Office Guide, Part I, a certificate of posting written in ink must be presented to an officer on duty at the post office along with the articles to be posted, during the hours fixed for the grant of such certificates with the requisite postage stamp thereto, clearly mentioning the actual number of articles in respect of which the certificate is required, invariably at the foot of the certificate, for which a column has been prescribed. The officer on duty is to, after satisfying himself, obliterate the stamps and impress the date stamp impressing against each entry made in the certificate of posting in the space provided for the purpose. In view of this specific procedure and the rule of the postal department, there should have been two postal seals on this certificate of posting had it contained two addresses and two articles to which it is supposed to be related when it was presented on the 27th December, 1973. I have, therefore, no hesitation in taking the view that the opposite parties have deliberately kept the petitioner uninformed of this fact with a sinister motive, as alleged by the petitioner, that is to say, to issue the shares to their relations in order to acquire majority vote in the company and have a controlling power in its affairs.

26. The scheme of the opposite parties is also manifested from a further fact that the next meeting that was held on the 4th of February, 1974, after the meeting of the 3rd January, 1974, in which the shares in question were allotted to opposite parties Nos. 4 to 6, the petitioner was deliberately avoided as in that meeting of the 4th February, 1974, the minutes of the preceding meeting, that is, of the 3rd January, 1974, had to be read out and confirmed. It was, therefore, conveniently thought by the opposite parties that the petitioner be not informed of this meeting to obviate any trouble on his part.

27. Mr. S.C Ghose at one stage had also contended that the petitioner himself was not a member qualified to receive an offer or a notice under article 23 of the articles of association as claimed by him in this petition, inasmuch as the manner in which he was allotted some shares by the opposite parties Nos. 1 to 3 was itself in violation of the requirement of article 22. This argument has been advanced simply to be rejected as it has never been the case of the opposite parties that the petitioner was disqualified to receive a notice or offer under article 23. Rather they themselves claimed that the petitioner was actually given a notice and in support of this case they wanted to prove it by production of the certificate of posting, already discussed in detail earlier.

28. However, opposite parties Nos. 2 and 3, the two directors of the company, who had invited the petitioner at the meeting which was held on the 8th December, 1973, at its registered office, where the application of some other shareholders desiring to sell their shares was to be considered, and who approved the sale of those shares to the petitioner and sanctioned the same, are estopped in law to challenge the transaction. It has been specifically mentioned in the long resolution drawn up in the meeting of the 8th December, 1973, that it was recorded and the sanction was given under the provision of the articles of association of the company and that it did not entail any contraventions.

29. Apart from the fact that the contesting opposite parties who themselves had convened the meeting and had invited the petitioner to purchase shares in question, are estopped now from retreating from their stand and action, article 22 of the articles of association of the company itself gives the directors ample power to select a person who is considered to be desirable in the interest of the company to be admitted to the membership of the same. It was, therefore, open to the directors of the company to select the petitioner as a person suitable to be so admitted as a member of the company. In the course of argument, it had been contended before me on behalf of the opposite parties that the petitioner was taken in as he had promised to contribute sufficient money to the company to tide over its financial stringencies. This argument itself is indicative of the fact that there was sufficient ground for the directors to take the petitioner as a new member of the company. I have simply discussed this fact to show the hollowness of this part of the contention of the learned counsel for the opposite parties. Even assuming for the sake of argument that there was any infirmity in the meeting convened on the 8th December, 1973, in which the petitioner was selected as a new member of the company for the first time, that resolution stands and factually the petitioner stood recorded during the relevant period as a member of the company, without any action having been taken by any of the opposite parties or any other person challenging the action of the directors in regard to the selection of the petitioner as a member for allotment of any shares to him.

30. Having discussed all the questions raised before me, I feel satisfied that the petitioner has made out a proper case that the names of opposite parties Nos. 4 to 6 have been wrongly entered in the register of members with respect to 450 equity shares (“A” series) and the register must be rectified.

31. I would, accordingly, direct opposite parties Nos. 1 to 3 to take appropriate steps for reissue of those 450 equity shares to all the members of the company in terms of article 23 of the articles of association and allot the said shares in pursuance thereto and rectify the share register accordingly by removing the allotment of those shares in favour of opposite parties Nos. 4 to 6.

32. In the result, this application succeeds. The petitioner will be entitled to his costs. Hearing fee Rs. 250.