Bajaj Auto Ltd v NK Firodia

Facts

• NK Firodia acquired shares in Bajaj Auto Ltd through purchase and sought registration of the transfer
• The Board of Directors refused to register the transfer of shares
• The transferee challenged the refusal, alleging it was motivated by personal reasons of the controlling group rather than company interest

Issue

1. Whether the Board's power to refuse registration of transfer of shares is absolute, or subject to judicial review on grounds of bona fides and reasonableness.

Held

• The Supreme Court held that the Board's discretion to refuse transfer is not absolute. It must be exercised bona fide, for the benefit of the company, and within a reasonable time. The refusal must be supported by cogent reasons germane to the company's interest. The Court can examine whether the power was exercised properly and set aside any mala fide or arbitrary refusal.

Ratio Decidendi

The power of the Board to refuse registration of transfer of shares is a fiduciary power that must be exercised bona fide and in the interest of the company. Such refusal must be communicated within the prescribed time with reasons. The court retains jurisdiction to review the exercise of this discretion, and will intervene where the refusal is motivated by extraneous considerations, personal animosity, or an attempt to consolidate control rather than protect company interest.