 Sec.

2(5)
 Articles means - AOA of a Co. as
 Originally framed /
 As altered from time to time /
 Applied in pursuance of any previous Co. law
/ of this Act;
 Articles of Association – Sec. 5 (CA, 2013)
 (1) AOA - Shall contain - Regulations for management
of the Co.

(2) AOA - Shall also contain such matters, as may be

prescribed:

P… - Nothing prescribed in T/s/s - Shall be deemed to

prevent a Co.
From including such additional matters in its AOA as
may be considered necessary for its management.
 Sec. 5 ….
(3) AOA may contain - Provisions for entrenchment to
the effect that specified provisions of AOA may be
altered only if conditions / procedures as that are more
restrictive than those applicable in the case of a Spl.
Res. - are met / complied with. (Super-majority /
Referendum)

(4) Provisions for entrenchment referred to in

S/S (3) shall only be made either
On formation of a Co. /
By an amendment in AOA agreed –
 A Pvt. Co. - By all the members &
 A PLC - By a Spl. Res.
 (5) Where AOA contain provisions for entrenchment…
Co. shall give notice to ROC of such provisions…
Companies (Registration offices & fees) Rules, 2014
Rule 10 
 Where AOA contain the provisions for entrenchment –
Co. shall give notice to ROC of such provisions
in *Form No. INC. 2 / Form No. lNC - 7 / Form No.
INC - 32 (SPlCe) as the case may be, along with the
fee - at the time of incorporation of Co. /
 In case of existing Co’s, -
Shall be filed in Form No. MGT 14 within 30 days
from the date of entrenchment of AOA, as the case
may be, along with the fee.
 Sec. 5 (CA, 2013)
 (7) Co. may adopt all / any of the regulations contained
in the model AOA applicable to such Co.
(8) In case of any Co. registered after the
commencement O/T/A - in so far as - Reg. of AOA of
such Co. do not exclude / modify the Reg’s contained in
the model AOA applicable to such Co.,
Those Reg’s shall, so far as applicable, be the Reg’s of
that Co. in the same manner & to the extent as if they
were contained in the duly Reg. AOA

(9) Nothing in T/S shall apply to AOA – Registered under

any previous Co. Law unless amended U/T/A.
 AOA of a Co. Ltd By Share
Interpretation Adjournment of meeting
Share capital & variation of rights Voting Rights
Lien Proxy
Calls on shares BOD
Transfer of shares Proceedings of BOD
Transmission of shares CEO, Manager, Co. Sec. / CFO
Forfeiture of shares The Seal
Alteration of capital Dividends & Reserve
Capitalization of profits Accounts
Buy - back of shares Winding up
General Meetings Indemnity
Proceedings at GM’s
 Alteration of AOA - Sec. 14
 (1) Subject to T/P/O/T/A & the conditions contained in
its MOA if any, a Co. may, by a Spl. Res. –
 Alter its AOA including alterations having the effect of
conversion of -
(a) a Private Co. into a Public Co.; /
(b) a Public Co. into a Private Co.:
 Alteration of AOA - Sec. 14
 P… where a Co. being a Pvt. Co. alters its
AOA…
They no longer include the restrictions & limitations
which are required to be included in AOA of a Pvt.
Co. U/T/A –
Co. shall - As from the date of such alteration,
cease to be a Pvt. Co.:
 P… any alteration having the effect of
conversion of a PLC into a Pvt. Co. shall not
take effect
Except with the approval of NCLT which
shall make such order as it may deem fit.
 Sec. 14
 (2) Every alteration of AOA U/T/A & a copy of
the order of NCLT approving the alteration as
per Ss.(1) shall be
Filed with – ROC, together with a printed
copy of the altered AOA -
Within - 15 days in such manner…, who shall
register the same.
 (3) Any alteration of AOA registered U/Ss (2)
shall, subject to T/P/O/T/A - Be valid as if it
were originally in AOA
 Act to override - MOA, AOA, etc. – Sec. 6
 Conversion of Co’s already registered - Sec. 18
(3) Registration of a Co. U/T/S shall not
affect
Any debts, liabilities, obligations /
contracts
Incurred / entered into, by / on behalf of
the Co. before conversion &
Such debts, liabilities, obligations &
contracts
May be enforced in the manner as if such
registration had not been done.
Binding Nature
of
MOA & AOA
Binding Nature
 Effect of MOA & AOA - Sec. 10
(1) Subject to T/P/O/T/A - MOA & AOA
shall –
When registered -
Bind the Co. & the members thereof to the
same extent as if they respectively had
been signed by Co. & by each member, &
Contained covenants on its & his part to
observe all the provisions of MOA & AOA
(2) All monies payable by any member to
the Co. U/T MOA & AOA shall be a debt
due from him to the Co.
 V.B. Rangaraj v V.B. Gopalakrishnan & Others,
AIR 1992 SC 453 – JJ. P.B. Sawant & B.P. Jeevan Reddy
 Whether SH’s can among themselves enter into an
agreement which is contrary to / inconsistent with
AOA. (Private Agreement)
 Art. 13 –
 No new member shall be admitted except with the
consent of the majority of the members –
 On the death of any member of his heir / heirs /
nominee, shall be admitted as member.
 If such heir, heirs / nominee is / are unwilling to become
a member - such share capital shall be
Distributed at Par among the members equally /
Transferred to any new member with the consent of
the majority of the members.
Civil Appeal -
1946 / 1980

Pvt. Ltd. Co. (50 Shares)

Def.’s disputed – Pvt. Agreement between brothers
 V.B. Rangaraj v V.B. Gopalakrishnan
 1951 - Oral agreement between Baluswamy
Naidu & Guruviah Naidu (brothers)
Each branches of the family would always
continue to hold equal No. of shares (25
shares) &
 If any member in either of the branches wished
to sell his share / shares
He would give the 1st option of purchase to the
members of that branch &
 Only if the offer so made was not accepted, the
shares would be sold to others.
 V.B. Rangaraj v V.B. Gopalakrishnan
 Defendants - Disputed – there was any such
agreement between the two brothers
 All the courts below – held against the defendants
 Not in dispute that - AOA were not amended to
bring them in conformity with agreement.
 Contrary to the said agreement –
 Baluswamy’s sons filed the present suit for
 Declaration - Sale was void - Not binding on
Plaintiffs & 2nd Def. (Son of Baluswamy - joined
as a pro-forma Def.) &
 An order directing Def’s 1 & 4 - 6 to transfer the
said shares to the plaintiffs & 2nd Def. &
 Permanent injunction restraining Def.’s 4 – 6
from
Applying for registering - said shares in their
names &
Acting adversely to the interests of plaintiffs
& 2nd Def. on the basis of the transfer of the
said shares.
 High Court
(i) Sale of the shares by Def. 1 in
favour of Def’s 4 to 6 was invalid &
Plaintiffs & 2nd Def. became entitled
to purchase the said shares
(ii) Agreement was binding on the Co.,
(iii) Co. was bound in law to register
the said shares in the plaintiffs names.
 No limitation on the transfer of shares by a living
member either to - Existing member / to a new
member?
 AOA - are the Reg’s of the Co. - Binding on the Co. &
its SH’s ?
 Shares are a movable property?
 Transfer is regulated by AOA?
 Restriction which is not specified in AOA is
Not binding either on the Co. / on SH’s?
Vendee / Transferee - Cannot be denied the
registration of the shares purchased on a ground
other than that stated in AOA?
 S.P. Jain v Kalinga Tubes Ltd., 965 SCR (2) 720
 In Re, Mafatlal Industries Ltd., [1995] 84 Comp Cas 230
 Gore-Browne on Co’s
While dealing with transfer of shares - It is
stated that subject to certain limited
restrictions imposed by law –
A SH has prima facie the right to
transfer his shares when & to whom he
pleases.
Freedom to transfer may, however, be
significantly curtailed by provisions in
AOA.
 Gore-Browne on Co’s
Strict construction is adopted - In
determining the extent of any
restriction on transfer contained in
AOA.
Restriction must be set out expressly /
must arise by necessary implication &
any ambiguous provision is construed
in favour of the SH wishing to
transfer.
 Palmer’s Company law
 Transfer of shares –
 Well-settled that unless AOA otherwise provide
- SH has a free right to transfer to whom he will.
 Necessary to seek in AOA for a power to
transfer?
No - The Act - itself gives such a power.
 Only necessary to look to AOA to ascertain the
restrictions, if any, upon it.
 A Member has a right to transfer his share /
shares to another person unless this right is
clearly taken away by AOA.
 Penington’s Co. Law
When a restriction is capable of two
meanings –
Less restrictive interpretation will be
adopted by the court.
It is also made clear that these
restrictions have to be embodied in
AOA
No limitation on the transfer of his shares
by a living member either to the existing
member / to a new member.
Only condition is that
When the transfer is made to a new
member - It will have to be approved by
the majority.
Transfer may be to any existing member
whether he belongs to one / the other
branch of the family & in such case there is
no need of a consent of the majority.
AOA - envisages the distribution of SH’ing
of the deceased member (& not of the
living member) equally among the
members of both branches of the family &
not of any one of the branches only.
Even the shares of the deceased member
can be transferred to any new member
when his heirs / nominees are not willing to
become members.
However, this can be done only with the
consent of the majority of the members.
 Private agreement imposes
 1. A restriction on a living member to transfer the
shares only to the existing members &
 2. Transfer has to be only to a member belonging to the
same branch of family.
 Agreement obviously - Imposes additional restrictions
on the member’s right to transfer his shares which are
contrary to the provisions of AOA (Art. 13) & not
binding either on SH /on the Co.
 Hence - Sale by 1st Def. of his shares to Def 4 - 6 is
invalid (In breach of Pvt. agreement) - is erroneous in
law.
Only restriction on the transfer of the
shares of a Co. is as laid down in its AOA, if
any.
Restriction which is not specified in AOA is,
therefore, not binding either on the Co. / on
SH’s.
Vendee of the shares cannot be denied
registration of the shares purchased by him
on a ground other than that stated in AOA.
 Cases Referred & Cited
 Refered - S. P. Jain v Kalinga Tubes Limited, 1965 Indlaw SC 86,
AIR 1965 SC 1535
 Cited in – Vodafone International Holdings B.V. v UOI & Anr.,
(2012) 6 SCC 613
 Reliance Natural Resources Limited v RIL, (2010) 7 SCC 1
 Canbank Financial Services Ltd. v The Custodian & Others,
(2004) 8 SCC 355
 Modipon Limited v SEBI & Others, 2001 Indlaw SAT 29
 Narendera Kumar Agrawal v Saroj Maloo & Ors., (1995) 6
SCC 114
 Krushan Chandra Sahu & Others v State of Orissa & Others,
(1995) 6 SCC 1
 Gujarat Bottling Co. Ltd & others v Coca Cola Co. & others,
(1995) 5 SCC 545
 Mukri Gopalan v Cheppilat Puthanpurayil Aboobacker 1995
Indlaw SC 1785, (1995) 5 SCC 5
 Messer Holdings Limited v Shyam Madanmohan Ruia and others,
AIR 2016 SC 1948 – Art. 6.1 Right of First Refusal:
 With effect from the date this Agreement becomes
effective, neither party shall sell any shares in the Co.
held / acquired by it without first, offering the Shares to
the other party.
 Offer shall be in writing & shall set out in the price &
other terms & conditions.
 If the offeree does not agree to purchase the Shares so
offered the offerer shall be free to sell the Shares to any
person (other than a competitor of the offeree), but at the
same price & on the same terms as offered to the offeree.
 This right of first refusal does not apply to any sale of
shares by the purchaser to a Co. of the Hoechst Group.
 In a Co. directly / indirectly controlled by / under direct /
indirect common control with the Hoechst Group.
Ramakrishna Industries (P.) Ltd. v P.R. Ramakrishnan and Ors, 1988
64 Comp Cas 425 Mad

Art. 38 –
In the event of disagreement between the
directors at any time prejudicially affecting
the emoluments / the interests of any
member of BOD –
 Then the aggrieved party may either
Sell his shares to the other members at a fair
value /
Purchase the share of the other members at a
fair price,
Thus settling the matter between them.
 Ramakrishna Industries (P.) Ltd.
 In case any member fails to agree to the method above
said to end the deadlock, then the Co. shall be WU
forthwith, & for the purpose of realisation of assets -
Assets may either be sold for monetary
consideration / may be distributed among the
members in specie provided all the debts &
liabilities due by the Co. shall entirely be
discharged.
F/T/P/O/T Spl. Res., every member shall
vote in favour of the resolution for WU
when such contingencies arise.”
 Contention was Art. 38 - is void in so far as they
enabled the Co. to be WU on a ground which is
not specified U/S 433, CA, 1956
 AOA will have a contractual force between
Co. & its members
Between members, inter se - In relation to
their rights as such members.
 Parties are bound by such contractual
obligations ? 
 Valid & binding on the Co. & its members ?
 We cannot agree that Art. 38 - Adds any ground
for WU other than those specified in S. 433.
 S. 433(a) contemplates the Co. resolving by a
Spl. Res. that it may be WU by the court.
 It is this resolution for voluntary liquidation
that is provided U/ R\Art. 38
 Therefore, it could not be contended that it adds
any new ground to s. 433.
 Not contrary to & does not in any way affect the
power of the court to order a Co. to be WU
when it is of opinion that it is just & equitable.
 Hickman v Kent Or Romney Marsh Sheep-Breeders’ Association
[1915] 1 Ch 88  - Astbury J
 Hickman - Member of the Assn. –
 Assn. proposed to expel him.
 Action for an injunction to prevent the expulsion .
 “Any dispute between the Assn. & its members should
be referred to arbitration.”
 Hickman attempted to bring court proceedings against
the Assn. over its refusal to register his sheep
 Assn. argued – dispute ought to be referred to
arbitration.
 Did it mean that a Co’s constitution created a contract -
the parties to which were the Co. & its members? Or
 Alternatively (as Hickman argued) did it only create a
contract between the members themselves? 
 Held - Combined effect of Co’s Act & Co’s
MOA / AOA was to create a contract between
the Co. & the members & also between the
members themselves, both individually &
collectively (or “the members inter se”), breach
of which was enforceable by & actionable
against the members as well as the Co., so long
as the member was acting in his capacity as
member (“qua member”) at all material times.
 Hickman’s claim was stayed & referred to
arbitration.
 Hickman ‘Filter’
 Who is trying to enforce the contract ?
Only a member can do so
 What kind of a right are they trying to enforce?
Only an insider right may be enforced
 Solicitor (Eley v Positive Govt. Security Life Ass. Co.
1876,1 Ex. D. 88)
 Promoter (Re English & Colonial Produce Co. [1906] 2
Ch. 435)
 Director (Browne v La Trinidad (1888) 37 Ch.D. 1;
Melhado v Porto Alegre Railway Co. (1874) L.R. 9 C P
503)
 Of a Co. to whom a right has been given by AOA has
not been able to enforce such right upon the basis that
there is a contractual relationship between himself &
the Co. Unless it could be shown that the relevant AOA
formed part of a contract independently of AOA &
MOA.
 Quin and Axtens Ltd v Salmon
[1909] A.C. 442
 Constituent documents of the Co. operate with
contractual force between the Co. & its
members?**
Quin and Axtens Ltd v Salmon
[1909] A.C. 442
 Alteration of AOA in breach of the contract -
 Hari Chandana Devi v Hindustan Co-op Insurance Society,
AIR 1925 Cal 690
 Chidambaram Chettiar v Krishna Aiyangar, ILR (1910) 33
(Mad)
 Southern Foundries Ltd v Shirwal, 1940 AC 701
 British Mural Syndicate v Alperton Rubber Co, (1915) 2 Ch 186
 Any alteration must be made in good faith for the benefit of the
Co. as a whole -
 Sidebottom v Kershaw, Leese & Co [1920] 1 Ch 154, CA.
 AOA which provided that disputes between the Co. & its
members must be referred to arbitration would not avail a
person whose dispute was between the Co. & himself in his
capacity as a director, even though he was also a member
 Beattie v E. & F. Beattie Ltd, [1938] 1 Ch. 708