TaxTMI 
TaxTMI 
1988 (10) TMI 259
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....he holder of such shares in the place of the said Associated Printers (Madras) Ltd. The third respondent in the appeals was the third respondent before the learned judge in all the company petitions. He is none other than the brother of the petitioner before the learned single judge and the appellant before us. Since it was agreed between the parties that the pleadings in C.P. No. 31 of 1976, if referred to, would be enough to focus the controversy which is identical in all the cases, the learned judge noted that excepting in the matter of variance of the number of shares and the value thereof, the point of law being one and the same, it would be sufficient to confine the consideration only to the pleadings in C.P. No. 31 of 1976. The short facts are as follows : Mr. Anantharamakrishnan, a leading industrialist, died on April 18, 1964, leaving his widow, two sons and two daughters. The third respondent is the eldest son. On the death of the said Anantharamakrishnan, his estate became liable to pay estate duty in the sum of over Rs. 150 lakhs. There were other liabilities also. Principally, the estate of Anantharamakrishnan consisted of agricultural lands in Tirunelveli Dis....
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.... letter to this effect was written on August 26, 1974, by the third respondent to the appellant and it reads as follows : "Madam, Reference our letter of the 10th June, I am detailing the position below. The shares in Reichhold Chemicals India Ltd., Bimetal Bearings Ltd., Shardlow India Ltd., Tractors and Farm Equipment Ltd. and India Pistons Ltd. in the name of father were transferred to Associated Printers (Madras) Private Ltd. on 8th March, 1974, in partial liquidation of the amounts due to them by the estate. Details of the shares with the price realised are given below : Name of company No. of shares Value per share Rs. Price Rs. 1. Shardlow India Ltd. 100 10 1,010 2. Reichhold Chemicals India Ltd. 10 100 583 3. Tractors and Farm Equipment Ltd. 100 10 , 897 4. Bimetal Bearings Ltd. 400 10 9,644 5. India Pistons Ltd. 1 10 50 Total: 12,184 In this connection, I wish to advise that these shares were transferred at the values determined under the Wealth-tax Rules, 1957. As regards filing of wealth-tax returns for the assessme....
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....ld be known when a ruling on the basis of valuation of shares, in Amalgamations P. Ltd. is given by the Central Board of Direct Taxes with whom this matter is pending. A copy of the estate account for the period 1st July, 1973, to 30th June, 1974, with Amalgamations P. Ltd. is sent herewith." On October 21/25, 1974, the appellant's husband, as power of attorney-holder, replied to the third respondent that the appellant was very sorry and surprised to be informed that the shares held by their father in the various companies have been sold by the third respondent in alleged satisfaction of debts due to Associated Printers (Madras) P. Ltd. He also stated that she was surprised that she was never informed about the alleged debt and that she would have paid the amount if any amount was really due and kept the shares herself. According to her, the third respondent did not even choose to offer the shares to a co-owner who is entitled to a pre-emptive right to purchase the same. Therefore, the transfer of the shares was illegal and was not binding on her. By the said letter, she also offered to purchase the shares at the rates mentioned in the letter of the third respondent to the ex....
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....authority and control over the said companies, either prevented the name of the petitioner being properly entered in the books or otherwise transferred or disposed of the shares belonging to her late father in which she is entitled to 1/5th share, to companies controlled by the third respondent. In the counter-affidavit filed on behalf of the first respondent, the principal stand taken was that section 155 of the Companies Act provides only a summary remedy. It is intended only to adjudicate upon questions arising under the said Act between members. The petitioner does not claim to be a member of the respondent-company. She claims to be one of the heirs of a deceased member. The third respondent had explained that he administered the estate and signed the transfer document with the knowledge, connivance and acquiescence of the petitioner. In a petition of this nature, complicated questions of law and disputed questions of fact cannot be determined. The third respondent acted as de facto administrator and manager of the estate of the deceased Anantharamakrishnan with the consent of the other co-heirs. It is incorrect to say that the first respondent is under the control of the th....
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....acity as the administrator of the estate. The transfer was made only to a 100 per cent. subsidiary of Amalgamations P. Ltd. in which the petitioner has one-fifth shareholding. Therefore, the petitioner cannot be said to be prejudicially affected by such transfer of shares whose value is insignificant, namely, Rs. 12,184. This clearly shows that these petitions had been filed with ulterior motives. In the reply affidavit, the petitioner reiterated her stand. Ramaprasada Rao J. held that there was no evidence to show that the third respondent was controlling all the directors in the concerned companies ; nor did he have a sway over them so as to lead them to the goal which he desired. The learned judge further found that it was only on April 20, 1972, that the petitioner-appellant herein decided to cancel the power of attorney in favour of the third respondent and further decided to handle the matter directly. The question, therefore, would be whether the third respondent could continue to act. In determining this question, the learned judge took the view that the estate in the hands of the third respondent was impressed with the character of a constructive trust and unless ....
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....article remain unsatisfied in this case. Therefore, the transfer cannot stand in the eye of law. The learned single judge had completely missed this vital aspect of the matter. Equally, there is no scope for the application of section 108 of the Companies Act. That will arise only if the title of the appellant is in question. Here, it cannot be denied that, on the death of Anantharamakrishnan, the appellant became entitled to one-fifth share. On the death of a Hindu male dying intestate, the heirs succeed to the estate as, tenants-in-common under the provisions of section 19 of the Hindu Succession Act and not as joint tenants. As such, the appellant had every right to question the action of the third respondent, more so, when the authority of the third respondent had been cancelled on June 12, 1972. Under these circumstances, section 108 of the Companies Act cannot be a bar for the relief prayed for. A clear authority on this is K.P. Antony v. Thandiyode Plantations P. Ltd. [1987] 62 Comp Cas 553 (Ker.). A special remedy had been provided under section 155 of the Companies Act and it cannot be said that it involves any complicated questions of law or disputed questions of fact ....
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.... has no power to partition and divide the shares. This case arose, after the amendment. As held therein, an allotment can be done only in an action for partition. Again, in Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1965] 35 Comp Cas 651 (All.), it was held that where title to the share was disputed, section 155 of the Companies Act could not apply and the parties were referred to a suit, since section 155 proceedings were summary in nature. In Daddy S. Mazda v. K.R. Irani [1977] 47 Comp Cas 39 (Cal.), a serious charge of forgery in the company records arose and it was held that, without letting in evidence, section 155 cannot be invoked. This respondent would take it that his position is that of an intermeddler. Even then, whether his actions could be questioned is the point to be determined. Learned counsel referred to section 2(11) of the Code of Civil Procedure containing the definition of "legal representative" who would include a person who would intermeddle with the estate of the deceased. Again, the Estate Duty Act, under section 2(12)(ii), takes within it an "intermeddler". As to what is the position of the executor or administrator of the estate of a deceas....
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....ier, under the Hindu law, when a Hindu male dies intestate, the heirs take the estate as tenants-in-common. That is clear from section 19 of the Hindu Succession Act. As such tenant-in-common, the petitioner has every right to question the actions of the third respondent; more so when his authority had been revoked. To a wrong-doer, the court cannot extend its protection. Section 155 of the Companies Act is not summary in nature. It has been so laid down in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel of Baroda [1978] 48 Comp Cas 438 (Guj.). It states that all questions in relation to transfer, right to transfer and heirship should be decided by a court. With regard to transmission, Schedule I, Table A of the Companies Act deals with the same. Therefore, that alone will be applied. The company has a fiduciary duty to recognize only the legal representative. Otherwise, no title can pass. Shakuntala Rajpal v. Mckenzie Philip (India) P. Ltd. [1986] 60 Comp Cas 545, lays down so. Where there is a transfer by operation of law, one cannot bring in concepts like administrator de son tort, etc. That is clearly unwarranted. We will now proceed to deal with the respective submissi....
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....is based on the right found in section 19 read with section 22 of the Hindu Succession Act, 1956. Section 22 reads as follows : "(1)Where, after the commencement of this Act, an interest in any immovable property of an intestate, or in any business carried on by him or her, whether solely or in conjunction with others, devolves upon two or more heirs specified in class I of the Schedule, and any one of such heirs proposes to transfer his or her interest in the property or business, the other heirs shall have a preferential right to acquire the interest proposed to be transferred. (2)The consideration for which any interest in the property of the deceased may be transferred under this section shall, in the absence of any agreement between the parties, be determined by the court on application being made to it in this behalf, and if any person proposing to acquire the interest is not willing to acquire it for the consideration so determined, such person shall be liable to pay all costs of or incident to the application. (3)If there are two or more heirs specified in class I of the Schedule proposing to acquire any interest under this section, that heir who offers the highest....
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.... (b)if the order be passed by a single judge of a High Court consisting of three or more judges, to a Bench of that High Court. (5) The provisions of sub-sections (1) to (4) shall apply in relation to the rectification of the register of debenture holders as they apply in relation to the rectification of the register of members." Sub-section (1)(a) clearly talks of "without sufficient cause". In this case, it cannot be contended that there was no sufficient cause. It would equally follow that sub-section (3) cannot apply because the question of title cannot be decided in the absence of the other co-sharers. It is only a disgruntled co-sharer who has come forward to claim right in the shares. We do not know how she could be definite before a partition by metes and bounds takes place. But, we will ultimately deal with the question of allotment of shares. In this context, Hemlata Saha v. Stadmed P. Ltd. [1964] 34 Comp Cas 875 ; AIR 1965 Cal 436, is relied on. This case arose after the amendment of Section 155, wherein the headnotes (of AIR) read thus : "An allotment in severalty of the shares can only be done in an action for partition, unless the parties agree to amicable pa....
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....hat cannot be a matter to be agitated under section 155 of the Companies Act. In Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1965] 35 Comp Cas 651 (All.) at pages 653 and 654, it is stated thus : "It is well settled that section 155 confers a jurisdiction of a summary nature and that it contemplates a relief which is available at common law as well. The primary remedy is the remedy under the general law. The remedy under the Companies Act is a summary remedy. The object of this provision is not to supersede or oust the remedy at common law. As observed by Shah J. in Rao Saheb Manilal Gangaram Sindore v. Western India Theatres Ltd. [1963] 33 Comp Cas 826 , 828 (Bom.) : '....this procedure is resorted to by persons aggrieved by the refusal of the directors of a company to rectify the register and enter the name of the transferee in place of the name of the transferor of shares in the register of members, but it is recognised by a long line of judicial decisions that the court is not bound to give relief under that section in that proceeding if it finds that complicated questions of facts and law are involved. It has got the power to direct the party concerned to a ci....
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....pplication under section 155 of the Act, is it open to the court to proceed to adjudicate upon the disputes without taking into consideration oral and documentary evidence on the question of the disputes raised ? The decision of this appeal would depend upon the answer to this question." It was answered as follows (at page 53) : "In our view the intensity, the depth and the sweep of the allegations are such that it is not possible for the court to come to any conclusion about the truth of the allegations except upon evidence which can be tested by cross-examination of witnesses. There can be no doubt that the allegations relate to serious disputed questions of fact and such disputes can only be resolved by oral testimony tested by cross-examination and by no other means. To hold that disputes such as those raised in the application can and ought to be resolved on averments made in the affidavits would defeat the purpose and object of the summary procedure prescribed by section 155 of the Act. The principles to be followed by courts in such cases are well-settled and the trial court had taken notice of those principles. But, having taken notice of those principles, the trial c....
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.... was more often repeated to me to be a settled legal position." But, we are obliged to note the following observations (at page 456) : "A.H. Mehta, however, said that, apart from the authorities hereinbefore discussed By me, the point is no more res integra and is finally clinched by a decision of the Supreme Court in Public Passenger Services Ltd. v. M.A. Khader [1966] 36 Comp Cas 1 . The pertinent observation specifically relied upon reads as under (page 6) : 'Counsel for the appellant contended that the relief under section 155 is discretionary, and the court should have refused relief in the exercise of its discretion. Now, where by reason of its complexity or otherwise the matter can more conveniently be decided in a suit, the court may refuse relief under section 155 and relegate the parties to a suit. But the point as to the invalidity of the notice dated January 20, 1957, could well be decided summarily, and the courts below rightly decided to give relief in the exercise of the discretionary jurisdiction under section 155. Having found that the notice was defective and the forfeiture was invalid, the court could not arbitrarily refuse relief to the respondents.' ....
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.... revoked on June 12, 1972. The complaint of the appellant is that in spite of such revocation, without informing her, the transfer of shares had been made. It is important to note at this stage that in the petition filed before the learned single judge, it is not challenged any where that the transfer of shares was not in due course of administration of the estate, but what is challenged is the authority to transfer (emphasis supplied). Even in the grounds of appeal, grounds Nos. 2 and 3 read as follows : "2. The learned company judge has erred in holding that respondent No. 3 was authorised to borrow moneys or to administer the estate of the late Anantharamakrishnan forgetting that he was given a very limited authority to represent the petitioner before the Estate Duty Officer and render accounts by her letter dated December 15, 1964, and to do no other thing on her behalf. 3. The finding that the petitioner gave oral consent to the third respondent to enter upon the administration of the estate of the late S. Anantharamakrishnan and incurred debts and entered into arrangements for repayment of loans by transferring shares to the second respondent company is contrary to reco....
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....tained in the Administration of Estates Act, 1925." About 'executor de son tort intermeddling' Williams, Mortimer and Sunnucks on executors, Administrators and Probate, 16th edition, at page 92, state : "Executor de son tort- intermeddling.-A person not lawfully appointed executor or administrator and without title to a grant may by reason of his own intrusion upon the affairs of the deceased be treated for some purposes as having assumed the executorship. Such an intermeddler is called a tort executor or an executor de son tort ( i.e., on his own wrong). The same term is used whether the deceased died testate or intestate, for the law knows no such appellation as 'administrator de son tort'." We may now see the position under the Indian Succession Act. In Paruk's Indian Succession Act, seventh edition, defining "Executor de son tort" it is stated thus : "Definition of executor de son tort.-An executor de son tort is one who takes upon himself the office of an executor or intermeddles with the estate of the deceased without having been appointed an executor and without having obtained a grant from a competent court. He is not necessarily a wrong doer and his possession ....
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....the third respondent. That section reads : "In any case not coming within the scope of any of the preceding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property for the benefit of the persons having such interest, or the residue thereof (as the case my be), to the extent necessary to satisfy their just demands." Article 21 of the company, on which reliance is placed by Mr. Vedantam Srinivasan, talks of transmission of shares. The said article is to the following effect: "Any person becoming entitled to shares in consequence of the death or insolvency of any member upon producing such evidence that he sustained the character in respect of which he proposed to act under this clause or of his title, as the board think sufficient, may with the consent of the Board (which they shall not be under any obligation to give) be registered as a member in respect of such shares or may, subject to the regulations as to transfer herein contained, transfer such shares. This clause is hereinafter called the 'transmission clause'." In our considered view that has no application because thi....
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....ertificate upon evidence satisfactory to them of its loss or destruction. (d) All instruments of transfer which shall be registered shall be retained by the company, but any instrument of transfer which the board may decline to register shall (except in any case of fraud) be returned to the person depositing the same. (e)( i)On the death of a member, the survivor or survivors where the member was a joint holder, and his legal representatives where he was a sole holder shall be the only person recognised by the company as hav ing any title to his interest in the shares. (ii)Nothing in the above clause shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons." But, as we have seen above, this is not a case of transmission. We will now look at Shakuntala Rajpal v. Mckenzie Philip (India ) P. Ltd [1986] 60 Comp Cas 545 (Delhi) where the headnote reads : "The provisions of section 155 of the Companies Act, 1956, are meant to provide speedy and inexpensive remedy to heirs and transferees of shares where the companies choose to adopt a recalcitrant attitude. It is true that the co....
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....us of the petitioners as children of S had not been disputed, and in the circumstances, the respondents should not have insisted upon asking for succession certificate or estate duty clearance. It had been mutually agreed that S's widow would become the shareholder in his place. The respondents could not take advantage of the agreement to obstruct the rights of the petitioners when S's widow had died. The respondents had not taken the stand at any stage in the proceedings that S's mother had a share in the estate of S. The facts showed that S's mother had never claimed such share. It should, therefore, be taken that she had relinquished her rights in S's estate. The petitioners were, therefore, entitled to the registration of the 167 shares of S in their names ; (iii) that till 1980, the company had been a closely knit family concern. It was in the nature of a partnership, and any alteration in the share structure naturaly required the consent and/or approval of all. So also, the induction of new members. The petitioners were not allowed to have a say in all this as they were wrongfully kept excluded and were not treated as members. However, rights had risen in favour of the Agg....
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....ioner has title to the shares in question ..." On this basis it is argued that section 108 of the Companies Act is no bar. But, we would like to note the following passage in paragraph 50-14 of Palmer's Company Law, twenty-third edition : "It is a corollary from the principle that the register of members is to be the creditors' guarantee, showing them to whom and to what they have to trust, that the register should be properly kept and that the names appearing therein should be the names of the persons really for the time being liable to the creditors. But, if there is an error in the register this cannot be rectified by the company without applying to the court. Accordingly, section 116 of the 1948 Act provides a summary mode of rectifying the register from time to time by application to the court in two classes of cases : (1)Where the name of any person is without sufficient cause entered in or omitted from the register of members. (2)Where default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member. This jurisdiction is exercisable after as well as before winding-up, and is frequently exercised. ....