ivil Appeal No 5 19521 of 1975
From the Judgment and Order dated 951974 of the Punjab and Haryana High Court in IT Reference Nos 30 to 32 of 1973
GC Sharma Ms A Subhashini and KC Dua for the Appellant
Dr YS Chitale RK Jain Rakesh Khanna and Ms Abha Jain for the Respondent
The Judgment of the Court was delivered by PATHAK CJ
These appeals by special leave are directed against a judgment of the High Court of Punjab and Haryana disposing of an Income tax Reference in favour of the re spondent assessee
The assessee manufactures strawboard
For the assessment years 1965 66 1966 67 and 1967 68 the relevant previous years being the respective calendar years 1964 1965 and 1966 the assessee claimed concessional rates of income tax development rebate at higher rate and deduction under section 80 E of the Income Tax Act 1961 on the 774 ground that the manufacture of strawboard was a priority industry
For the assessment year 1965 66 the total income assessed was Rs 1771334 and against the basic rate of 80 per cent the assessee claimed rebate at the rate of 35 per cent up to Rs 1000000 and on the balance at 26 per cent
The Income Tax Officer allowed the rebate at 30 per cent up to Rs 1000000 and at 20 per cent on the balance
For the assessment year 1966 67 the assessee claimed development rebate under section 33 of the Income Tax Act at the rate of 25 per cent on the value of the machinery installed after 1 April 1965 worth Rs34287 but rebate was allowed at 20 per cent only
The assessee also claimed benefit under section 80 E inserted by the Finance Act 1966 with effect from 1 April 1966 to the extent of the income determined by the Income Tax Officer at Rs8 17485 received from the manu facture of strawboard
This industry is mentioned at item No 16 in the Fifth Schedule to the Income Tax Act as sub stituted by the Finance Act 1965
The claim of the assessee was
rejected by the Income Tax Officer
For the assessment year 1967 68 the total income of the assessee was determined at Rs 1100885
The assessee claimed relief under section 80 E to the extent of Rs750316 received as income from the manufacture of strawboard
This claim was similarly rejected by the Income Tax Officer on the ground that the assessee could not be described as a priority industry
The Income Tax Officer took the view that the manufacture of Strawboard was not covered by the words paper and pulp  in the rele vant Schedules pertaining to the assessment 1966 67 and 1967 68
The assessee appeared to the Appellate Assistant Commis sioner of Income Tax in respect of the three assessments but the appeals were dismissed
In second appeals filed in all the three cases the assessee s plea that the manufac ture of strawboard was a priority industry was accepted and the Appellate Tribunal held that the assessee was entitled to the statutory rebates claimed by it
At the instance of the Revenue the Tribunal referred the following questions to the High Court for its opinion Assessment year 1965 66 Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that strawboard  is covered by the term paper and pulp  appearing in paragraph F of Part I read with Part III of the First Schedule to the Finance Act 1965 Act No X of 1965 775 Assessment years 1966 67 and 1967 68 Whether on the facts and in the circumstances of the case the Appellate Tribunal was fight in law in holding that strawboard  is covered by the term paper and pulp  appearing at item 16 of the Fifth Schedule to the Income Tax Act 1961 and in allowing the assessee s claim under section 80 E of the Act The High Court has held that the strawboard industry is covered within the expression paper and pulp  appearing in the relevant Schedules of the Income Tax Act and has there fore answered the questions referred to it in the affirma tive in favour of the assessee and against the Revenue
The sole question before us is whether strawboard can be said to fall within the expression paper and pulp  men tioned in the Schedules relevant to the respective assess ment years
To resolve the question it is necessary first to examine the significance and scope of the Schedules
The provision for rebate has been made for the purpose of en couraging the setting up of new industries and the indus tries are those described in the relevant Schedules
It seems to us clear that when the Schedules refer to paper and pulp  they in fact intend to refer to the paper and pulp industry
That being so the next question is whether the strawboard industry can be described as forming part of the paper and pulp industry
We have no doubt in our mind that it does
The expression has been used comprehensively
It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity a liberal construction should be put upon the language of the statute
From the material before us which we have carefully consid ered that is the only reasonable conclusion to be reached in
these case
The High Court has referred to the licence dated 31 May 1954 issued to the assessee that the undertak ing of the assessee was registered in terms of section 10 of the Industries Development and Regulation Act 195 1 and the details given in the licence declare that it relates to a Schedule industry which includes newsprint paperboard and strawboard
The High Court has also referred to the circum stances that the process of manufacturing strawboard is identical with that of manufacturing paper
The expression paper and pulp  in the Industries Development and Regula tion Act includes paperboard and strawboard
Our attention has been drawn to the Entry relevant to the assessment year 1964 65 which speaks of paper and pulp including 776 paper products  and it is said strawboard is evidently not within the natural meaning of the word paper 
We do not think that the submission merits serious consideration
Newsprint paperboard and strawboard have been specifically mentioned in the entry in order to make it clear that they are included within the meaning of the word paper 
In our judgment the High Court is fight in taking the view which it has and therefore the appeals must be dis missed
The appeals are dismissed with costs
NPV Appeals dismissed


Summary:
The respondent lodged certain fully paid up shares with the appellant company for transfer in his name
The Board of Directors of the Appellant company disapproved the registra tion of the shares
The respondent filed an application under section 155 of the for rectifica tion of the share register ie for inserting his name in the share register as a registered share holder which was allowed by a single judge of the High Court
The Company preferred an appeal which was dismissed by the Division Bench of the High Court
In appeal to this Court it was contended on behalf of the company that i the Company had residuary inherent power to refuse the registration of the transfer of shares ii the words or otherwise in Article 42 of the Articles of Association and section I 112 of the recognise the existence of an inherent power to refuse registration of the transfer of shares iii the applica tion under section 155 was not maintainable as the transfer or had not been made parties therein and iv the company was entitled to examine the correctness of transfer consi 83 deration shown in the transfer deeds and refuse registration of the transfer of shares if the transfer deeds were not duly stamped
Dismissing the appeal this Court HELD 1
Unless there is any impediment in the transfer of a share of a public limited company a shareholder has the right to transfer his share
Correspondingly in the absence of any impediment in this behalf the transferee of a share is entitled to have a rectification of the share register of the company by inserting his name therein as a registered shareholder of the share transferred to him
To have such rectification carried out is the right of the transferee and can be defeated by the company or its Direc tors only in pursuance of some power vested in them in this behalf
Such power has to be specified and provided for
It may even be residuary but in that case too it should be provided for and traceable either in the Act or the Articles of Association
Even if the power of refusal is so specified and provided for the registration of a transferred share cannot be refused arbitrarily or for any collateral purpose and can be refused only for a bona fide reason in the inter est of the company and the general interest of the share holders
If neither a specific nor residuary power of refus al has been so provided such power cannot be exercised on the basis of the so called undeclared inherent power to refuse registration on the ground that the company or its Directors take the view that in the interest of the Company and the general interest of the shareholders registration of the transfer of shares should be refused
Indeed making a provision in the Act or the Articles of Association etc
conferring power of refusal would become futile if existence of an inherent power is assumed for the simple reason that the amplitude of the so called undeclared inherent power would itself take care of every refusal to register the transfer of share
Assumption of such a power would result in leaving the matter of transfer of share and its registra tion at the mercy and sweet will of the company or its Directors as the case may be
86E H 87A B 2
The objects or purposes for which a company is creat ed should be distinguished from the powers which it can exercise
So far as refusal to register the transfer of a share is concerned the power has to be specified and within the framework of the said specification
There is no inher ent power in this behalf
90B In re Smith Knight  Co IV Chancery Appeal Cases 20 In re National Provincial Marine Insurance Company V Chan cery Appeal Cases 559 Moffatt vs Parqunar VII Chancery Division 591 In re 84 Cawley  Co XLH Chancery Division 209 In re Discoverers Finance Corporation Ltd 1910 1 Chancery Division 312 and Sadashiv vs Gandhi Sewa Samaj AIR 1958 Bom
247 followed
Palmer s Company Law 24th Edn
p 121 referred to
The Conservators of the River Tone vs Ash 109 English Reports 479 Attorney General vs The Lord Mayor etc
of the City of Leeds 1929 2 Chancery Division 291 EM Muthappa Chettiar vs Salem Rajendra Mills Ltd XXV Company Cases 283 Life Insurance Corporation of India vs Escorts Ltd  Ors 1985 Suppl3 SCR 909 and Bajaj Auto Ltd vs NK Firodia and Anr 41 Comp
Cases 1 distinguished
In the context in which the words or otherwise have been used in sub section 2 of section 111 they only purport to cast a duty or impose an obligation of giving notice of refusal to register the transfer of a share irre spective of the fact whether such refusal is under the Articles of Association of the Company or de hors the Arti cles which would include even a case where such refusal has been made arbitrarily or for any collateral purpose
A fortiorari this would be the interpretation of even Article 42 of the Articles of Association of the Company inasmuch as on its plain language which except for the provision for punishment is in pari materia with sub section 2 of Section 111 of the Act
The purpose of this Article is the same as of the said sub section 2
To introduce a concept of either conferment or recognition of a right to refuse registration of the transfer of a share in sub section 2 militates against and runs counter to the very texture and purpose of this subsection
88A C 87E 4
The transferor is not a necessary party to an appli cation under section 155 of the Act unless the transfer was disputed by him
92B C 5
In the instant case it has been found as a fact by the High Court that it had not been proved that the respond ent had paid higher prices for the shares than those stated in the transfer deeds
Therefore there is no justification for interfering with the said finding of fact
On this finding the transfer deeds could not be termed as unduly stamped and power to refuse the registration of the transfer of shares contemplated by section 108 of the Act could not be invoked
92D E