1998CLC 1157 (PLP)

Shahana Pervez and Kamran Pervez, petitioners Nos. l and 2, are persons of unsound mind. They, through their mother, alongwith petitioner No.3, have filed this petition under section 152 of the Companies Ordinance, 1984 seeking rectification of the register of the members of respondent No.l company.

2. Both petitioners Nos.1 and 2 owned 500 shares each of the value of Rs.100 per share in respondent No. l company, which according to them, were transferred by them to petitioner No.3 who also claims to have purchased 1210 shares from respondent No.5 on 2‑8‑1990. When petitioner No.3 approached respondent No. l‑company for giving effect to the transfer of 1210 shares in its books in his favour, it transpired that in the books of the company, these shares already stand transferred in the names of respondents Nos.2, 3 and

7. According to the petitioners, neither petitioners Nos. l and 2 nor respondent No.5 had ever transferred their share holding to respondents Nos.2, 3 and 7 and as such respondent No.1 company had no jurisdiction or authority to make changes in the register of its members.

3. In the written statement filed by respondents Nos. l to 4 and 6 to 7, it has been averred that the father of petitioners Nos. l and 2, S. E. I. Pervez had on behalf of petitioners Nos. l and 2 transferred the shares held by them to respondents Nos.2 to 4 which was given effect to by the company in its books. It is also claimed that respondent No.5 also sold his 1000 shares to respondent No.7 in September, 1991.

4. On 25‑10‑1994 this Court had directed the respondents to produce the instrument, of transfer on the basis of which names of petitioners Nos. l and 2 and respondent No.5 were omitted from the register of members and substituted by names of respondents Nos.2, 3 and

7. On 13‑12‑1994, Muhammad Afzal Mughal, one of the directors of the company produced the original share certificates before this Court, the photostats of which were placed on record. However, no transfer deed was produced on 19‑9‑1995 and then again on 11‑3‑1997, the respondents were directed to produce instrument of transfer which they again failed to do. The learned counsel appearing on their behalf stated before this Court on 7‑4‑1997 that no such instrument was in possession of the respondents. 4‑A. In the above background, the first question arises as to whether in the absence of any duly stamped instrument of transfer, respondent No. I ‑company was authorized to recognize the alleged transfer of shares by petitioners Nos. l and 2 and the other alleged transfer by respondent No.5 in favour of respondent No. 7 and whether the names of the petitioners Nos. l and 2 and respondent No. 5 could be omitted from the register of the members by the company.

5. This question has to be answered with reference to section .76 of the Companies Ordinance, 1984 which reads as under:‑‑‑ "

76. Transfer of shares and debentures. ‑‑‑(I) An application for registration of the transfer of shares and debentures in a company may be made either by the transferor or the transferee and subject o the provisions of this section, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application was made by the transferee: Provided that the company shall not register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company alongwith scrip. (2) Where a transfer deed is lost, destroyed or mutilated before its lodgement, the company may on an application made by the transferee and bearing the stamp required by an instrument of transfer, register the transfer of shares or debentures if the transferee proves to the satisfaction of the directors of the company that the transfer deed duly executed has been lost, destroyed or mutilated: Provided that before registering the transfer of shares or debentures the company may demand such indemnity as it may think fit. (3) All references to the shares or debentures in this section shall in case of a company not having share capital, be deemed to be references to interest of the members in the company. (4) Every company shall maintain at its registered office a register of transfers of shares and debentures made from time to time and such register shall be open to inspection by members and supply of copy thereof in the manner stated in section 150. (5) Nothing in subsection (1) shall prevent a company from registering as shareholder or debenture holder a person to whom the right to any share or debenture of the company has been transmitted by operation of law. (6) In the case of a public company, a financial institution duly approved by the Authority may be appointed as the transfer agent on behalf of the company. (7) If a company makes default in complying with any of the provisions of subsections (1) to (4), it shall be liable to a fine not exceeding five thousand rupees and every officers of the company who is knowingly or wilfully a party to such default shall be liable to a like penalty." From proviso to subsection (1) of section 76 of the Companies Ordinance, 1984, it is obvious that no company can register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the company alongwith scrips. Admittedly, no such instrument of transfer was ever produced by the respondents before the company which, accordingly, could not give effect to the alleged transfer of shares in favour of the respondents.

6. The learned counsel for the respondents has, however, contended that if the transfer is proved to the satisfaction of the company, the same can be recognized by it. This contention stands negated by the wording of the proviso itself which leaves no room for doubt that the provisions contained therein are mandatory in character. It was so held in Akbar Ali Sharif and 2 others v. Sayed Jamaluddin and 2 others (1991 MLD 203). In a recent case, (Nisar Ahmad Chaudhry v. Suleman Spinning Mills Ltd. C.O. No.6 of 1993), this Court has examined this aspect in detail and after reviewing the entire law on the subject came to the conclusion that the proviso to subsection (1) of section 4 is mandatory and no company can recognize transfer of shares unless proper instrument of transfer duly stamped and executed by the transferor and the transferee is produced before the company alongwith scrips.

7. It follows from the above that in the absence of any instrument of transfer having been delivered to the respondent No. l‑company, the company was not justified in omitting the names of petitioners Nos. l and 2 and respondent No.5 ‑from the register of members and entering the names of respondents Nos.2 to 4 in their place as transferees.

8. As in the written statement respondent No.5 has admitted that he has transferred his shares in favour of petitioner No.3 by executing the necessary documents, the petitioner No.3 is clearly entitled to have his name entered in the register of members in place of respondent No.5 as transferee of 1210 shares. Further claim of petitioner No.3, however, is that the petitioners Nos. l and 2 had transferred their shares in the company also. The petitioner No.3 admits that petitioners Nos. l and 2 are persons of unsound mind. The transfer deed is said to have been executed by their mother who is neither natural or legal guardian appointed by any Court of competent jurisdiction. She has absolutely no right to transfer the shares of petitioners Nos. l and 2 in favour of the petitioner No.3 or the so‑called transfer deeds in favour of the petitioner No.3 is wholly void.

9. It may be stated that in the original written statement, dated 29‑1‑1995 respondents Nos.2 to 4 had raised a plea that petitioners Nos.2 and 3 were only 'benami' and not real and beneficial owners of the shares of the company which were in fact owned by their father , S.E.I. Pervez. This plea has, however, been abandoned in the subsequent written statement jointly filed by respondents Nos.2, 3, 4, 6 and 7 in which the ownership of petitioners Nos. l and 2 was not disputed. Similarly,‑in the written statement of respondent No. 1, the petitioners Nos. l and 2 are admitted to be the shareholders of the company. It is also to be noted that in the Form‑A which the company filed before the Registrar Joint Stock Companies as required by section 156 of the Companies Ordinance, 1984 on 31‑12‑1992, 1000 shares were shown as being in the ownership of petitioners Nos. 1 and 2 who are alleged to have transferred the same to Rukhsana Afzal and Rizwan Afzal, respondents Nos.2 and

3. Consequently, the plea raised by the respondents in the first written statement cannot be accepted. In view of the above this petition is allowed; the removal of the names of petitioners Nos. l and 2 and respondent No.5 from the register of members by the company is declared to be illegal and unlawful. The transfer of 1210 shares made by respondent No.5 in favour of petitioner No.3 shall be effected in the register of members. The respondent company is directed to rectify its register in the above terms. There shall be no order as to costs. A.A./S‑195/L Order accordingly