Law: Companies Act (VII of 1913)

Section: 2(13)

Law: Civil Procedure Code (V of 1908)

Section: 60, O. XXI, rr. 46, 76, 79, 80

(a) Companies Act (VII of 1913), S. 2(13)-Company ---Essential features-Public company and private company ---Difference in corporate character. Section 28 of the Companies Act, 1913 describes the shares of a limited company to be movable property and transferrable in manner provided by the articles of the company. Read in isolation this provision does no doubt indicate that the shares of a company are movable property and saleable in the wider context of the term `transferable' used in the section. It would also appear that the words `in a manner provided by the articles of the company' have reference to the procedure governing the sale and are not intended to detract from the basic transferability of the share themselves. However for reason it does not seem that the above principle as visualised by section 28 is of universal application. There seems to be a clear exception made in respect of private companies limited by shares by subsection (13) of section 2 of the Companies Act, 1913. The definition of a private company as given in section 2(13) of the Companies Act, 1913 shows that a restriction on the right to transfer the shares is one of the essential features of the company, and to the extent that such restriction is adopted in the articles, it knocks out their free transferability. The corporate character of a private limited company is vastly different from a public company. The former, as the very word "private' signifies, is frequently an enterprise of a family or of persons intimately known to each other and commanding mutual con fidence. It is more in the nature of a partnership venture and lh1is alt the exclusive features of a firm. It is not entirely the soundness of the enterprise which brings persons together in a private company. More often it is the personal equation and mutual confidence which is known to impel the formation of such companies and the continuance of such confidence is essential to any profitable pursuit of the venture. Ladli Prasad Jalswal v. Karnal Distillery Co. Ltd. P L D 1965 S C 221 rel. (b) Civil Procedure Code (V of 1908), S. 60 and O. XXI, rr. 46, 76, 79 & 80 read with Companies Act (VII of…