According to Section 88 of Companies Act, 2013 every company shall maintain certain registers in manner prescribed. The forms of register are discussed below.
Register of debenture holders
Register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India;
Register of any other security holders. The contents of such registers, their form and manner are now to be prescribed under the rules.
Earlier under Section 150 of the 1956 Act, the Register of Members had to contain the following particulars:
- Members name, address and occupation;
- Amount of shares held by every member and the amount of shares that have been paid;
- Here all shares shall be distinguished by its appropriate number;
- The date of joining as members;
- The date at which any person ceased to be a member;
The register usually a computer record or a bound book. Companies are usually required to maintain an index of members. Generally the register is kept in the form of an index or a separate card index is usually used for these purposes. This is required to enable entries relating to a particular member to be readily found. If any changes are made in the register they shall be noted on the index within fourteen days. 1
The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved.
The provisions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal.
Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992 or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the Securities and Exchange Board, direct any company or a depository to set right the contravention and rectify its register or records concerned.
Register and index of beneficial owners
According to Section 88(3) of Companies Act, 2013 at a point where shares and debentures are held in the demat form, the register and index of beneficial owners maintained by a depository under Section 11, Depositories Act, 1996 is to be deemed as an index and register of members and that of debenture holders, as the case may be. 2
Foreign register of members
According to Section 88(4) of Companies Act 2013, If a country has issued shares or debentures to people who are residents of another country, the company shall maintain a branch of the register in that country. This shall be termed as a “foreign register”. It is required to be maintained in the prescribed manner. The foreign register is generally a part of the company’s home register which is to be called as the principal register. The foreign register is bound by the same rules as of the principal register. Usually an advertisement for closure must be published in a newspaper that is circulated in the district where the foreign register is maintained . Entries made in the foreign register shall be transmitted to the home office and a duplicate register shall be maintained in the home office. Generally when entries are made in the foreign register are not to be reflected in the principal register. When the foreign register is discontinued they shall be shifted either to some other foreign register or to the principal register. 3
Rectification of register of members
According to Section 59 of Companies Act 2013, states that if any persons name appears in the registry of members and they are presumed to be shareholders or members even if they aren’t so. On the contrary if a person’s name isn’t in the register, then it shall be considered that he isn’t a member even although he might have done everything in order to entitle him to become a member. The company is has the responsibility to keep the register up to date in order to provide accurate and correct position as to particulars of shareholding. If the company fails to abide by these guidelines an order shall be sought from the Tribunal in respect of all matters falling within Section 59. 4
The power to order rectification of the register has, therefore been conferred on the Tribunal . Generally an aggrieved person or any member or the company itself can apply for rectification on any of the stated grounds:
If a person’s name has been entered in the register without sufficient cause. In this case rectification has been ordered on the basis that a person was induced or instigated to become a member by misleading circumstances, where the allotment was held as invalid or where a forged transfer is registered or where the allotment was subject to shareholders’ approval and they did not do so or where a transfer could be effected only with the approval of the Board of directors and there was no evidence of any such approval.5
If a persons name is in the register without a sufficient cause is deleted.6
Wherein a person has fulfilled every requirement of law in order to enable him to become a member , but there is default or delay on part of the company that would have led to “unnecessary delay” while placing his name in the register. This also includes where a person is denied registration to a transfer within the meaning of Section 58 and where a person has been rightly ceased to be member but his name has not been removed with due promptitude from the register. 7
Matters dealing with foreign members or debenture holders who are residing outside of India, the petition for rectification has to be made to a competent court outside India as specified by the Central Government, as per Section 59(1) of Companies Act 2013.
In the year 1988 , according to Section 155, a regular suit for rectification can also be filed and this would be the only appropriate remedy where tricky scenarios were involved.
Even though the court was granted elaborate discretionary powers in order to decide all questions those are necessary in order to determine with an application for rectification, yet a petition under this section was not considered in favour with certain cases.
In the case of Jayashree Shantaram Vankudrev Rajkamal Kalamandir (P) Ltd, the Bombay High Court held that : Where discovery and inspection are necessary and complicated questions such as forgery and fabricated documents arise, the summary procedure trial under Section 155 i.e, Section 59 should not be allowed.
Delhi Court has rejected a petition under this section as it involved ascertainment of a number of facts like the value of imported machinery against which shares were allotted and which required expert opinion and its cross examination and the Madhya Pradesh High Court did not entertain a petition which required as to whether there was a free consent or one under undue influence or fraud.8
Limitation act not applicable
Though the period of limitation is not applicable, an action which is initiated several years after the cause of action may not be entertained because of inordinate delay. An aggrieved person shall not be prevented from approaching the NCLT by reason of delay in exercising his rights, the period of limitation being not applicable. 9
Spot delivery contract
In the case of spot delivery contract, the consideration is offered much after the date of the sale. The transfer was held to be void and refusal of registration justified.10
Director’s power of rectification of entries
It is open to the discretion of the directors to rectify members registered even when an entry has been detected. There is no certain requirement in this scenario to apply to the tribunal for an order of rectification.
“If there is no dispute, and if the circumstances are such that the Tribunal would order rectification”, the Board may itself effect the necessary corrections. “An application to the court is only essential when the company disputes the right to rectification. There is no certain reason as to why the directors if they bona fide agree and that a shareholder has the right to avoid a contract should not thereupon assent to the rescission of the contract and rectify the register in the appropriate manner.
However, the directors have no power to rectify the register by substituting he name of another person in the place of an existing member, except on an application for transfer duly made in compliance with the provisions of the Act.”