Shree Shakti Mills Ltd v CIT
Rule established
Transfer of shares is complete only upon registration: entry of transferee's name in the register of members; mere execution of transfer deed is insufficient
Facts
- The question arose as to when a transfer of shares becomes legally complete: upon execution of the transfer instrument, upon delivery to the company, or upon the company actually registering the transfer in the register of members.
Issue
- Whether transfer of shares is complete upon execution of transfer deed or upon registration by the company.
Held
- The Supreme Court held that a share transfer is complete only when the company registers the transferee's name in the register of members. Mere execution of the transfer instrument does not pass legal title. Until registration, the transferor remains the legal member (with all rights and liabilities). Registration is constitutive: it creates the legal relationship between transferee and company.
Ratio Decidendi
Transfer of shares is incomplete without registration. Registration means entry of transferee's name in register of members. Until registered, the transferor is the legal member (dividend, voting, liability). Registration is constitutive, not merely administrative. The company recognises only registered holders.
How to use it in an exam
Definitively settles that share transfer requires registration, not merely contract or delivery of documents. Practically crucial: transferees must follow up with the company to ensure registration; holding only a transfer deed without registration gives no legal membership rights.
Source
Source: AIR 1983 Supreme Court 1039
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.