D.K. Kapur, J.
1. This is an application under Section 155 of the Companies Act, 1956, for rectification of the register of members of M/s. Federal Motors (P.) Ltd. The petitioner claims that he is the shareholder of 70 shares of the company and his name has been wrongly removed. The company in question appears to be a family company which was promoted by the late Shri Bharat Singh, step-brother of the petitioner. The said Bharat Singh and the petitioner were also members of a joint family known as Rai Saheb Shyam Singh (this is the name of the father of the petitioner and Shri Bharat Singh). It is stated that the company was established in April, 1935, when the petitioner was allotted 35 shares. In 1959, 35 more shares were allotted to the petitioner. There was some family dispute which led the petitioner to leave the family home situated at 5764 Jogiwara, Nai Sarak, Delhi, in 1961, and later the petitioner who was a director was removed from the board of directors of the company on September 30, 1964. There is also some other litigation still going on between the parties concerning the joint Hindu family, Rai Saheb Shyam Singh, which is mentioned in the petition. In 1974, the petitioner wrote to the company intimating that he was not receiving notices regarding the annual general, meeting for some time. The petition also states that the petitioner could not locate the share scrips and so he wrote to the company in April, 1976, stating that the share certificates had been lost and duplicate share certificates should be issued. It is claimed that it was only as a result of these letters that the petitioner learnt that the shares had been transferred to Smt. Meena Devi in October, 1965. It is claimed that the transfer documents were not genuine and an illegal transfer had been effected in favor of Smt. Meena Devi who is also the mother of Shri Jai Singh, the present managing director of the company. A reference is made in the petition to an affidavit filed by Shri Jai Singh in Suit No. 24 of 1971 in which it was stated as follows :
' Para No. 5 of the application as stated is denied. It is wholly false to allege that the affairs of the company are managed by Shri Jai Singh alone. In fact, the management is looked after by the board of directors. It is not denied that Shri Mahabir Singh is a shareholder of the company but it is emphatically dented that Shri Charat Singh is now the director of the company.....'
2. Another reference made in the petition is to an affidavit filed on December 2, 1970, in C.P. No. 106 of 1970, wherein Shri Ratan Singh, a director of the company, had stated as follows :
' That Shri Jai Singh is also a director of the respondent-company. The 4th director, Shri Charat Singh, is aiding with Shri Mahabir Singh, who is only a shareholder of the respondent-company.'
3. On the basis of these statements it is alleged that the petitioner's name could not have been removed in 1965, and this is a manipulation of the records of the company.
4. There are other statements made in the petition regarding the validity of the transfer by reference to the provisions of the Companies Act. Lastly, it is stated that no shares of a private company can be sold unless they are offered to other members.
5. On notice to the respondent a joint reply was filed on behalf of the respondents Nos. 1, 5 and 6. The stand taken in the reply is an interesting one. It is stated that in fact the petitioner was a benami shareholder on behalf of his late brother, Lala Bharat Singh, and a blank transfer deed had been signed in the name of Smt. Meena Devi, wife of the said Lala Bharat Singh. It is then said that in fact Lala Bharat Singh had lodged the shares for transfer with the company but unfortunately due to his sudden demise these shares were misplaced in the files of the company and were only discovered in 1975. According to the respondent the actual transfer was effected in the name of Smt. Meena Devi on October 10, 1975. It is said that all the other contentions are irrelevant and the transfer is a valid one.
6. In support of the respondents' position, a photostat copy of a transfer document dated October 20, 1965, has been filed as annexure ' D '. This transfer deed states that the transfer fees was received on October 10, 1975, and the noteworthy fact is that the stamps at the back are very old ones as they bear the figure of King George Sixth. This means the stamps must have been purchased before 1950. Along with this document a photostat copy of the affidavit-undertaking of Bharat Singh has been filed, which shows that he had lodged some shares for transfer to the name of his wife, Smt. Meena Devi. This states that the shares were purchased benami in the name of Charat Singh and Mahabir Singh and the transfer deeds were witnessed by himself and his brother-in-law, Shri Anand Parkash. The learned counsel for the petitioner has pointed out that the signatures of Shri Bharat Singh on this undertaking are very much different from the signatures of Bharat Singh appearing on the transfer document. It is also contended that the signatures of Mahabir Singh are also different from his real signatures.
7. In a further rejoinder-affidavit, the petitioner has stated that there were two separate allotments of shares. It has been emphasised that originally 35 shares were allotted, and then 35 more shares were allotted to the petitioner in 1959, which was paid for by cheque No. 48142 dated June 6, 1959, drawn on the Central Bank of India, Kashmere Gate, Delhi. A certificate from the Central Bank has been annexed to the rejoinder-affidavit. It is, thereforee, denied that the shares were held benami. It is also urged that the share transfer form was not valid.
8. Some more documents have been filed later on by the petitioner which consist mainly of correspondence addressed to the company.
9. There is no doubt that the only question in this case is whether the transfer of the shares made by the respondent-company to the name of Smt. Meena Devi in 1975, on the basis of the transfer document executed in October/1965, is valid. The Explanationn of the company is that the transfer documents were filed with the company in October, 1965, but were misplaced and hence the transfer could only be effected in 1975.
10. Leaving aside the factual questions and assuming for the sake of discussion that the company's position is absolutely correct, it still remains to be seen whether this is a valid transfer assuming everything else is valid. The provisions of the Companies Act relating to the transfer of shares is contained in Section 108 of the Companies Act, but this section has been altered from time to time and it was particularly altered by the Companies (Amendment) Act, 1965. Before that Act was passed, a benami-holder of shares could hold shares benami for an unlimited period without any obligation to get them transferred, because the transfer documents remained effective without any restriction regarding time. The principal requirement of Section 108 is that a company can register a transfer of shares, if a proper instrument of transfer duly stamped by the transferor and the transferee has been delivered to the company along with the certificates of the shares. Hence, the only requirement as far as the transferor and the transferee are concerned is the sending of the shares together with the relevant transfer documents to the company. On the coming into force of the Amendment Act of 1965, the instrument of transfer, i.e., the transfer form has validity only for a short period and can only be delivered to the company within the period prescribed by the various provisions which now find their place as Sub-sections (1A), (1B), (1C), etc. It is provided in Section 108(1B) as follows :
' Notwithstanding anything contained in Sub-section (1A), an instrument of transfer of shares, executed before the commencement of Section 13 of the Companies (Amendment) Act, 1965 (XXXI of 1965), or executed after such commencement in a form other than the prescribed form, shall be accepted by a company,--
(a) in the case of shares dealt in or quoted on a recognised stock exchange.....
(b) in any other case, at any time not later than the expiry of sixmonths from such commencement.'
11. Hence, the meaning of this section is that after the said Companies (Amendment) Act, 1965, was passed a six months' period was given by the statute to enable holders of shares to get blank transfer documents, if any, deposited in the company and the shares transferred as required. I have checked up the relevant dates and find that the 6 months' period had not yet expired on October 20, 1965, when the alleged deposit of the shares along with the transfer documents took place. This means that as far as the date mentioned by the company is concerned, it cannot be said that the shares and the transfer documents could not be acted upon.
12. The next question is that can it be accepted as a fact that the company could have delayed the transfer for a period of 10 years merely because it had misplaced the documents If this is a believable story then the transfer could have been made at any time provided the deposit of the requisite documents took place within the 6 months' period I have just referred to.
13. To summarise the legal position, it can be stated that before the Act of 1965 came into effect, there was no restriction on effecting transfers on the basis of old transfer deeds. Such a transfer deed could be kept by the owner in his own possession along with the shares, to be given effect to at any time he liked. This meant that there could be benami holders of shares who had held the beneficial interest in the shares but who had not got the transfer made in the register of the company. The intention of the legislature in making the change in Section 108 by the amendment of 1965 was to do away with this evil of benami shareholdings by placing a time-limit within which the transfer could be made. The time-limit in the case of existing transfer deeds was six months, but in the case of other transfer documents executed after the amendment came into full effect the time-limit was fixed by Sub-section (1 A), except to the extent that the other Sub-sections exclude the operation of Sub-section (1A). However, the Act does not mention anywhere that, the company must make the entry in the register within any given time, so that, strictly speaking, the action of the respondent-company in delaying the transfer is not hit by any provision of the Companies Act.
14. There being no legal impediment on this ground to the validity of the transfer, it remains to be seen whether there is any other objection which would affect the same. One of the principal objections raised is that the transfer document is not properly stamped. I may mention here that though the stamps bearing the figure of King George the Sixth are of the correct denomination, these stamps were not current in the year 1965. This objection becomes even more manifest when one recalls that there are 70 shares involved, 35 of which were issued when the company commenced business in 1935, and the remaining 35 of which were issued in 1959. It cannot seriously be doubted that in the year 1959, the stamps of King George the Sixth were not being used in India and hence the transfer documents could not have been executed on October 20, 1965, with the stamps of George the Sixth. As I had previously stated it was a common practice for transfer deeds being kept in abeyance for long periods, and if this document had been executed when the stamps of King George the Sixth were currently in use which would be before 1950, then these transfer documents would be valid only regarding 35 shares which were then in existence. I am, thereforee, of the view that this transfer cannot be considered to be valid, even though I am not prepared to go to the extent of holding that the document is forged. In my view, one possibility is that 35 shares were originally issued benami in the name of the petitioner because the company was a family firm started by his brother. However, the shares issued in 1959 have apparently been paid for by the petitioner himself as per his cheque issued on the Central Bank of India, Kashmere Gate, Delhi, as mentioned in the certificate of the said Central Bank which has been filed. It cannot be said that even additional shares issued against cash payment can be considered to be benami shares. Furthermore, the alleged affidavit of Bharat Singh dated October 20, 1965, states that all these shares are benami. As at that time Bharat Singh was running the company, I fail to understand why he could not get the shares transferred on that very day. In fact, even the transfer charges were not paid till 1975, which lends support to the petitioner's case.
15. In my view, the proper order in this case has to be on the basis that the transfer was not valid because of a defect in the transfer form and the stamps appearing thereon. I must come to the conclusion that this transfer deed is not ' duly stamped ' within the meaning of Section 108 and, thereforee, could not have been acted upon by the company. However, the real ownership of these shares cannot be determined in these proceedings because the beneficial ownership of the shares cannot be determined in a proceeding under Section 155 of the Companies Act. It may be that these shares belonged to Bharat Singh or it may be that 35 shares belonged to Bharat Singh and 35 were purchased by Mahabir Singh with his own money and, thereforee, could not be considered to be benami or, finally, it may be, that all the shares belonged to Mahabir Singh, and the transfer deed was executed by Mahabir Singh for other purposes.
16. In this connection, I may mention that it is the practice of persons requiring funds to be raised for business purposes to lodge shares of joint stock companies along with transfer documents in banks or with other financial institutions or persons as security for raising funds. It is quite possible that at some time a blank transfer deed may have been executed by Mahabir Singh for this purpose, but the same has been used to bring about this transfer. There is also a possibility that Mahabir Singh actually sold the shares to Bharat Singh but the transfer was not effected due to oversight. As the late Bharat Singh knew the entire story, it is only possible now to speculate about the truth.
17. In my view, on the above analysis, the transfer effected by the company is not in accordance with the Companies Act and that is sufficient to decide this petition, but the beneficial ownership of the shares may be established by the heirs of the late Bharat Singh or by Smt. Meena Devi by means of a regular suit. I cannot decide in these proceedings as to who is the real owner but for the purpose of this petition the register has to be rectified and the petitioner's name has to be placed back on the register of members. Whether he is actually an owner or merely a benami holder of these shares has to be established in some separate proceedings before a civil court. All observations made in this judgment concerning the facts may be treated in any later proceedings to be only a discussion of the possibilities without being a record of any conclusion recorded by myself on the facts. In the circumstances also, I leave the parties to bear their own costs.