TaxTMI 
TaxTMI 
2003 (8) TMI 360
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....ll the litigations are Madhusoodhanan, Srinivasan, Ravi and Mani who are brothers, with Madhusoodhanan on one side and Srinivasan, Ravi and Mani on the other. The parents of the four were one K. Sukumaran and Madhavi both of whom are deceased. K. Sukumaran died before the litigations between the parties erupted and Madhavi died during the pendency of the litigation. While she was alive she supported Srinivasan, Ravi and Mani. The four brothers are married and have children. It is unnecessary at this stage to clutter the narration of facts with the names of the wives and children, who will be referred to by name when the particular litigation in which they are involved is considered. The dispute began with a struggle over the controlling interest in a company by the name of Kerala Kaumudi (P.) Ltd. (hereinafter referred to as Kerala Kaumudi). 3. Kerala Kaumudi is a private company incorporated under the Indian Companies Act, 1913 which was promoted in 1955 by the parents of the four brothers. Besides Kerala Kaumudi other "family" concerns were incorporated including Kaumudi Investments (P.) Ltd., Kerala Exports (P) Ltd., Kaumudi News (P.) Ltd., Laisa Publications (P.) Ltd., Shiv Pr....
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.... were effected between the brothers and their respective families. The disputes however did not abate. On 24th October,1985 an agreement was entered into between the parties in an attempt to resolve their differences. This agreement has been exhibited in the proceedings as Ext. P1. On 23rd December, 1985, a second agreement (Ext. P-2) was entered into by which it was, inter alia, agreed that all the various family- controlled companies and firms would be divided among the four brothers. 7. On 16th January, 1986 a third agreement was entered into, which has been marked as Ext. P.3. The parties to the third agreement were Madhavi, Mani, Madhusoodhanan, Srinivasan and Ravi. Briefly speaking, Ext. P3 is about the division of effective control of the "family" concerns amongst the four brothers. It relates to the transfer of Mani's shares in Kerala Kaumudi to Madhusoodhanan. In addition, the parties' agreement that Madhusoodhanan would have the major shareholding in Kaumudi Investments (P.) Ltd., Kerala Exports (P) Ltd. and Kaumudi News (P.) Ltd., Mani the majority shareholding of 52 per cent in Laisa Publications (P.) Ltd. [which has subsequently changed its name to Kala Kaumudi (P.) L....
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....ii)Company petition, C.P. No. 31 of 1988 filed by KIPL for similar reliefs. (iii)A suit filed by Madhusoodhanan in the Munsif's Court, Trivandrum being O.S. No. 1329 of 1986 (subsequently re-numbered as C.S. No. 3/89, when withdrawn to the High Court) for a decree declaring that he continued to be the Managing Director of Kerala Kaumudi and for a declaration that the Board meetings held on 23-7-1986, 1-8-1986 and the meetings subsequent thereto were illegal and ultra vires the Articles of Association of the company. (iv)A suit being O.S. No. 482/88 (subsequently re-numbered as C.S. No. 5/89, when withdrawn to the High Court) filed by KIPL against Kerala Kaumudi for similar reliefs. (v)A suit filed by Madhusoodhanan for specific performance of the third agreement, Ex.P.3.(O.S. No. 483/88, subsequently re-numbered as C.S. 6/89 when withdrawn to the High Court). (vi)C.P. No. 26 of 1987 filed in 1987 by Mani and his children for a declaration that the transfer of 390 shares by them to Madhusoodhanan pursuant to the Board's decision dated 21-5-1985 was illegal and void and for rectification of the share register by recording them as the owners of 222, 84 and 84 shares respectively. ....
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....liefs as in CP No. 14 of 1986 was dismissed by the learned Single Judge on the ground of delay. Madhusoodhanan's suit (C.S. No. 3 of 1989) and KIPL's suit (CS No.5 of 1989), were decreed by holding inter alia that the meetings held on 23-7-1986, 1-8-1986 and 17-8-1986 in so far as they affected Madhusoodhanan and by which Madhusoodhanan had been removed as Managing Director and Article 74 of the Articles of Association of the company was deleted, were illegal and invalid. Madhusoodhanan was declared to be the Managing Director of the Company. The suit filed by Madhusoodhanan for specific performance of Ext. P3 (CS No. 6 of 1989) was also decreed. Mani and his children's application for setting aside the transfer of 390 shares (CP No.26/87) was dismissed. An arbitrator was appointed for determining what amount was payable by Madhusoodhanan to Mani for the shares transferred by Mani to Madhusoodhanan. 16. The second set of proceedings initiated by Mani's wife and others viz. CP No. 15 of 1986, for rectification of the share register of KIPL and the third set filed by Madhusoodhanan's minor son, Vaishak for rectification of the share register of Kerala Kaumudi (CP No. 11 of 1987) wer....
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....s. To begin with the minutes of the meeting held on 19th March, 1985 [Ex. R-62(a)] which were signed by Mani, records: "Shares of Sri M.S. Mani. All the shares in Kerala Kaumudi owned by Sri M.S. Mani and family would be pledged by him to Sri M.S. Madhusoodhanan who shall extend financial facilities to Sri M.S. Mani. The loan will be paid with 22 per cent interest by Sri Mani when Sri M.S. Madhusoodhanan shall release the shares of Sri M.S. Mani. The modus operandi of the transaction shall be decided in consultation with barrister P.K. Kurien of Menon and Pai." 21.4 The intention of Mani and his group to transfer their shareholding to Madhusoodhanan is evident from this. Although the mode of transfer was subsequently changed, this intention was affirmed at the Board meeting of Kerala Kaumudi held on 23rd April, 1985. The fifth and sixth resolutions as appearing in the minutes of the meeting [Ex.P.-62(b)] which were also signed by Mani read as under : "Sri M.S. Mani Letter of resignation from the direct directorship of Kerala Kaumudi (P.) Ltd. effective from 23-4-1985 afternoon submitted by Sri M.S. Mani was approved by the Board. (6) Shares owned by Sri M.S. Mani and family in....
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....contract, on the grounds of uncertainty, unless and until they later reach agreement on a price. Moreover, an agreement to leave the price open to further negotiation will normally exclude any inference that the price should be a reasonable price in accordance with the provisions of section 8(2)." may be an exposition of the law as it is in England and cannot be seen as an authority on the interpretation of section 9(1) of the Sale of Goods Act. Besides, the same passage cited goes on to say : "But in accordance with the principle that the Courts will endeavour to uphold bargains which the parties believe themselves to have concluded, especially in the case of executed or partially executed contracts, it may sometimes be possible either to infer an intention that at any rate a reasonable price should be paid if no price is later settled, or to have regard to other circumstances, such as the course of dealing between the parties." In this case, there can be no doubt that the first stage of the agreement for the immediate transfer of shares was executed and the Division Bench erred when it held to the contrary. 21.7 The questions as to what would be the reasonable price for the s....
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....M.S. Mani, the former senior Director and glorious editor of the newspaper to be a shareholder of the company." 21.12 In the Annual Return of Kerala Kaumudi dated 27th June, 1985 filed under section 159 of the Companies Act, 1956 with the Registrar of Companies, in the list of past and present members and debenture holders, the names of all parties have been given including the names of Mani, and his children. However against their names it has been mentioned that they had effected transfer of their shareholding to Madhusoodhanan. Particulars of the transfer made by each as well as the date of registration of the transfers have been given as 21st May, 1985. (Ex. P-128). 21.13 On 1st March, 1986 in keeping with the statutory requirement relating to the ownership of newspapers, a statement was published in Form IV. In the list of shareholders the names of Madhusoodhanan, Ravi, Visakh Madhusoodhanan, Deepu Ravi, M.S. Srinivasan, Julie Madhusoodhanan and Anju Srinivasan are mentioned. There is no mention of Mani or either of his children as shareholders (Ex. P - 86). There was no protest by Mani or any of the other shareholders which would have naturally been made if the statements w....
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....rred to as the "fifth counter petitioner" and Madhusoodhanan as "the petitioner") She has affirmed : "(a)In fact the fifth counter petitioner left the company in the year 1985 and has transferred all the 390 shares belonging to him and his children (major daughter and minor son) to the petitioner, receiving only a miniscule part of a consideration and accepting the promise of the petitioner to pay him the balance without even insisting on formal documents to evidence the promise of the petitioner. (b)Once Article 74 was amended to the petitioner's liking, his attitude started changing slowly. Even then we did not take it seriously. That is why the fifth counter petitioner transferred his shares to the petitioner, giving him literally a strangle hold on the company. (c)He (Mani) and his minor son had held 306 shares in the company which he had transferred to the petitioner in 1985. (d)The petitioner holds 612 equity shares of Rs. 1,000 each of the company." Mani has also said in an affidavit affirmed on 28th November, 1986 in Application 305/86 (arising out of CP No.14/86) : "After the meeting was over the petitioner and respondents 2 to 5 that is, the mother and sons had info....
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....the company. The minutes of the meeting held on 26 August, 1986 which have been admitted by Srinivasan and the affidavits of Madhavi and Mani thus prove that Mani and his family held no shares in the company until the single share was transferred by Ravi to Mani under Article 24(a) on 26th August, 1986. 21.21 We have been unable to understand the logic of the Division Bench by which it sidestepped this inevitable conclusion, when it said "It is open to a party to take an extra precaution to ward off possible disconcerting experiences while planning for the future". Ignoring-or at least not giving sufficient weight-to the wealth of evidence in favour of the submissions of Madhusoodhanan, the learned judges of the Appellate Court sought to base their assessment of the evidence on the absence of documents, such as income-tax returns of Madhusoodhanan, which according to them would have shown the acquisition of the additional shares by Madhusoodhanan from Mani, an exercise which was entirely uncalled for in the face of the positive evidence already on record and the repeated admissions of Mani and his group before the Court. 21.22 Furthermore, under section 194 of the Companies Act, ....
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....d to and relied upon but there has been no consensus as to the correct interpretation of the clause. This controversy is addressed in detail in connection with Madhusoodhanan's suit for specific performance of the agreement. 21.24 Had this clause been the only basis on which this Court were called upon to decide whether there had been a transfer or sale of the shares of Mani's group to Madhusoodhanan, no doubt it would have been difficult to determine what had in fact happened. However, the clause is only one of a series of documents, the authenticity of which cannot be disputed, which clearly show that the transfer had taken place although the exact consideration may not have been agreed upon or paid. 21.25 Mani did not attend the Board meeting held on 21st May, 1985 or any other till he was admitted to membership of Kerala Kaumudi on 26th August, 1986. Apart from this telling circumstance supporting Madhusoodhanan's case, Srinivasan had attended and signed the minutes of the meeting on 21st May, 1985. His claim that no such meetings were in fact held and that whenever he signed the minutes of the meetings held during the managing directorship of Madhusoodhanan, he did so at the....
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.... to fix up the consideration. But he did not do so. I did not hand over the forms to the petitioner." The admitted case therefore is that Mani and his children had agreed to transfer their shareholding to Madhusoodhanan, but according to them, such transfer never took place. 21.29 Mani produced the share transfer deeds, presumably from the custody of his wife as Exhibits R 9-12. Exhibit R 9 is signed on 11-5-1985. It is an unstamped document and purports to record the transfer of 222 shares by Mani to Madhusoodhanan. Similarly R. 10 is a share transfer form signed by Valsa on 11-5-1985 transferring 84 shares to Madhusoodhanan. The document bears stamps of the value of 720 rupees on the reverse. R.11 is a share transfer form signed by Mani's wife as a transferee recording the transfer of 84 shares by Sukumaran Mani to MS Mani. It is dated 11th May, 1985. It also bears stamps of the value of Rs 720. R.12 is a share transfer form signed on 11th May, 1985 by Mani transferring 84 shares to Madhusoodhanan. The document is signed on 11th May, 1985. All the share transfer forms bear the stamp of what appears to be of the office of the Registrar of Companies dated 20-4-1985. All four exhi....
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....not produced. 21.34 The Division Bench held that exhibits R.9 to R.12 were the "real" share transfer forms because they were dated 23-5-1985 and the evidence of Madhusoodhanan was that he had signed only one set of transfer forms in 1985. The Division Bench also relied upon what appears to be an unsigned stamp of the office of the Registrar of Companies dated 20th April, 1985 although no one has pledged his or her oath to it. Having come to the conclusion that the share transfer forms produced by Mani, exhibits R.9 to R.12, were the "real" transfer forms, the Division Bench set about demolishing those documents as being invalid and not legally effective. 21.35 In our opinion, given the documentary evidence of completed transfers, it is more than probable that the "real" share transfer forms were never produced by Mani and his group and that exhibits R. 9 to R. 12 were prepared in 1984 as claimed by Madhusoodhanan. Mani has himself stated : "At that time it was proposed to start Calicut edition of the paper. But the high technology machinery required for what further increased the debts of Kerala Kaumudi. This caused considerable financial strain. I put in some suggestions for re....
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.... to operate as a transfer of shares". Nobody can reasonably contend that a transfer of shares can be effected by mere assertion in an affidavit. What the Division Bench ought to have held was that all this evidence indicated that there were in existence duly executed share transfer forms prepared in conformity with the provisions of section 108 of the Companies Act, 1956 which everyone had accepted and acted upon and which were deliberately not produced. 21.37 On the question of the invalidity of the transfers of Valsa and Sukumaran Mani to Madhusoodhanan, Valsa Mani was admittedly a major on 21st May, 1985. And yet the Division Bench held that Mani continued to stand in a fiduciary relationship with her and therefore "the transfer which purports to have been effected by Valsa Mani on her own will clearly indicate the stamp of illegality and invalidity". The reasoning is incomprehensible and unacceptable. Valsa was an adult and legally competent to enter into a contract of sale of her sharers to Madhusoodhanan which she duly did. 21.38 As far as the shares of Sukumaran Mani are concerned, in our opinion, the learned Single Judge was right when he said that Mani's group could not ....
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.... the sale value of shares you owe to me. Kindly let me know your decision so that I can arrange to lift the machines." Then we have the paragraphs from the affidavits of Madhavi and Mani quoted earlier which talk of the "balance consideration". 21.42 Finally is the lawyer's notice dated 20-3-1987 (Ex.P-83) sent on behalf of the Mani to Madhusoodhanan threatening legal action unless Madhusoodhanan paid "the balance sale consideration of Rs. 50 lakhs". "Since Mani had positively asserted that he must get a price between 50 and 75 lakhs, and that price negotiated was in between the said figures". 21.43 Madhusoodhanan's claim in this regard is inconsistent. At one stage he claimed that the consideration for the transfer was recorded in the transfer form. At another stage he said : "As far as transferring the shares is concerned, it is already transferred at the face value by fixing the proper stamps and the process have been completed. The excess amount I will pay on the shares will depend upon finally when he transfers the 3 shares to me; but I will not enter into a written agreement, I will continue to pay as and when the 5th respondent required money. The only agreement was tha....
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....11 years as on that date, in other words since 1973. The decision to so appoint Madhusoodhanan was secured by proposing an amendment to the Articles of Association of the Company in the following manner: "Mr. M.S. Madhusoodhanan, presently the Managing Director and Editor be and is hereby appointed the Managing Director and Editor of the Company for life or until he voluntarily retires on the existing remuneration, which remuneration may be revised by the Board from time to time with the consent of Mr. M.S. Madhusoodhanan. He shall also in exercise of his duties as Managing Director exercise the powers given to the directors under Article 79." 22.2 It is not a dispute that an Extraordinary General Meeting was held which approved this resolution and that the Articles of the company were duly amended by the introduction of Article 74. 22.3 The last meeting of Kerala Kaumudi attended by Madhusoodhanan was of 5th February, 1986. It does not appear from the minutes of the meeting [Exhibit P-2 (J)] that anything of import relevant to the issues to be decided in these appeals took place on that day. Then comes the first meeting, which, according to Madhusoodhanan ,was illegal . This wa....
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....gust, 1986. It was attended by Madhusoodhanan, albeit, according to the minutes [ Ex P - 62 (N) ], under protest. It was at this meeting that Mani was admitted as a shareholder of Kerala Kaumudi by Ravi's sale of one share to him despite Madhusoodhanan's objection. 22.6 However, the unkindest cut was yet to come. Madhavi, as Chairman, proposed "that an extraordinary general meeting of the company be convened to remove Sri M.S. Madhusoodhanan from the directorship of the company for his actions against the interest of the company and his misconduct". Madhusoodhanan objected and said that this could not be done without amending the Articles of Association. The minutes go on to record that Madhavi pointed out that Article 74 of the Articles of Association had already been deleted at an extraordinary general meeting of the company held for that purpose and also that the legal opinion was that the Board of the prescribed number of members could convene a general body meeting for removal of a Director in exercise of the powers under section 284 of Companies Act, even if a person be appointed a Director for life. A resolution was then taken to convene an extraordinary general meeting on ....
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....d by Madhu-soodhanan for a declaration that he is the Managing Director of Kerala Kaumudi, KIPL's CS No. 5/89 was filed for cancellation of the impugned annual general meetings and extraordinary general meetings of Kerala Kaumudi. A. Alteration of Article 74 of the Articles of Association of Kerala Kaumudi 22.10 Sub-section (1) of section 31 of the Companies Act, 1956, provides that the company may alter its articles only by special resolution subject to the provisions of the Act and the conditions contained in its memorandum. Our attention has not been drawn to any condition in the memorandum of Kerala Kaumudi which prescribes something different from the provisions of the Act for effecting an alteration of the articles. Article 49 of the Articles of Association of Kerala Kaumudi provides : "Subject to the provisions of sub-section (2) of section 81 of the Indian Companies Act, 1913, relating to special resolutions, fourteen days' notice at the least (exclusive of the day on which the notice is served, or deemed to be served but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting and, in case of special business, the general nat....
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....eting Article 74 were fulfilled. It may be recalled that at the Board meeting held on 23rd July, 1986 [Ex.P.62(K)] in connection with Madhusoodhanan's functioning as a Managing Director, only a limited resolution was taken, namely, that Madhavi "shall assume the executive powers of the Managing Director with immediate effect for effective running of the Organisation". The resolution that an extraordinary general body meeting be convened at a date suitable for the Chairman "to discuss and take decisions on matters arising out of the above decisions" was therefore confined to this limited resolution. Exhibit R -5 is the notice dated 25th July, 1986 purporting to call an extraordinary general meeting of the shareholders of Kerala Kaumudi on 16th August, 1986 at 11 AM to inter alia consider and if thought fit to pass as a special resolution the following : "Resolved that the consent of the Company be and is hereby accorded in order to satisfy the requirements of section 192 (c) and other applicable provisions, if any, of the Companies Act, 1956, to ratify the following resolutions adopted by the Board of Directors of the Company at its meeting dated 23-7-1986. 1. Resolved that Smt. C....
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....obtained by means of a notice which did not substantially put the shareholders in the position to know what they were voting about cannot be supported" - see Baillie v. Oriental Telephone & Electric Co Ltd. [1914-15] All E.R.Rep. 1420. 22.17 Since the further resolution to delete Art. 74 formed no part of the notice of the Extraordinary General Meeting, which in all fairness it should have, we have no doubt in our minds that the special resolution on the basis of such defective notice is insupportable in law and cannot be given effect to. This finding is sufficient to hold that the deletion of article 74 of the Articles of the company was invalid and that therefore Madhusoodhanan continued to be the managing director of Kerala Kaumudi as claimed by him in CS 3/89. 22.18 However we may also indicate briefly here our additional reasons for reaching this conclusion. The notice (Ex. R-35) was required to have been served on all the members of the company either by post or personally in terms of Article 108 or section 53 of the Act. The second imperative for a special resolution to be validly passed is that notice of the general meeting must be 'duly' given. The mode of service of not....
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....i and Srinivasan. The evidence on record amply bears this out. 23.2 As we have seen, Madhavi assumed charge as Managing Director of the company on 23-7-1986 with the object of ousting Madhusoodhanan from his control over the affairs of Kerala Kaumudi. This needed to be ratified by the general body of shareholders. The minimum period of notice for a general body meeting under Article 49 read with section 81 of the Act is "not less than 21 days", that is there should be a clear interval of 21 days and in computing the period the date of the meeting and the date of service of the notice is to be excluded. (See N.V.R. Nagappa Chettiar v. Madras Race Club AIR 1951 Mad 831] In re Hector Whaling Lt. [1936] 1 Ch. 208]. So the notice dated 25-7-1986 (Ex. R-35) was issued for holding the extraordinary general meeting on 16th August, 1986 with the requisite statutory majority of 75 per cent. 23.3 A decision was taken by the respondents at the meeting of the Board on 1st August, 1986 [Ex. P-62(l)], to increase the share capital of the company to Rs. 20 lakhs by issuing additional shares worth Rs. 4.25 lakhs. At the same meeting , the Chairman (Madhavi) was authorised by the two other directo....
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....ne letter Board meeting on 1-8-1986. Gl. Body meeting on 16-8-1986" was dispatched on 25-7-1986 to Madhusoodhanan with copies to Srinivasan, Ravi and Mani. (iii)an affidavit of Mohan Raj affirmed on 25th August, 1986 [in O.S. 1329 of 1986 (Ex. R-7)] in which he has affirmed "sealed envelopes from the Chairman, Kerala Kaumudi (P.) Ltd. was served on me on 25-7-1986 and 1-8-1986 and I have signed the local delivery book as a token of its acknowledgement and I have duly forwarded the letters to Sri M.S. Madhusoodhanan". Not one of these pieces of evidence at all establish that the notice dated 25th July, 1986 of the Board meeting to be held on 1st August 1986 was served on Madhusoodhanan. As far as item (i ) is concerned, it certainly does not amount to personal service on Madhusoodhanan as required under the Articles or section 53 of the Companies Act, 1956. Apart from this fatal legal flaw, the exhibit merely records that an unknown or at least an unnamed person handed over a sealed envelope to Mohan Raj who then handed it over to a peon, Raghunathan, who was to hand it over to Mrs. Madhusoodhanan. No one has come forward to say that the sealed envelope contained the notice dated ....
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....e 4th August, 1986. It cannot be construed as an admission that all mail prior to that date had been duly received. In fact, on the same date that exhibit P.35 had been written by Madhusoodhanan to Srinivasan, he also wrote to Madhavi (Ex.P.24) that on 3rd August, 1986 he came to know "while holding discussions with the Deputy Manager of Canara Bank, Trivandrum, that you purported to hold a Board meeting on 1-8-1986. I have had no notice of this meeting and consequently this was illegal. Any decision taken there is invalid and not binding on the company or me. You purported to pass a resolution regarding the operating of the bank accounts. My power to operate bank accounts of the company on my own as managing director is not depended (sic ) on any resolution of the board. The board cannot take away those powers or make it necessary that someone else who sign (sic) with me". The letter was admittedly received but not replied to. Apart from the categorical assertion of lack of notice of the meeting held on 1-8-1986, it is clear from the contents of the letter that Madhusoodhanan had no knowledge of what actually transpired there. 23.11 Since Madhusoodhanan did not know of the meetin....
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....usoodhanan, his children or on KIPL either in fact or in law. The learned Single Judge held it did not. The Division Bench disagreed. Considering the facts, we have no hesitation in holding the learned Single Judge was right. 23.16 We have already held that service on Mohan Raj did not amount to personal service within the meaning of Article 108 of the Articles of Association of the Company or section 53 of the Companies Act, 1956. Even on the factual score, for the reasons set out by us earlier in connection with service of the notice dated 25-7-1986, we are not satisfied that Madhusoodhanan was in fact served with a notice through Mohan Raj. Besides, the relevant entry does not refer to the notice. 23.17 As far as the certificate of posting is concerned, it is not explained why it does not record the dispatch of notices to any other shareholder. When the relationship between the parties was already so embittered, proof of service of notice by certificate of posting must be viewed with suspicion. Judicial notice has been taken that certificates of posting are notoriously "easily" available. What was seen as a possible but rare occurrence in 1981 (Mst. L.M.S. Ummu Saleema v. B.B.....
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....hmad Khan v. Union of India AIR 1962 SC 1052. They are rules of evidence which attempt to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts proved in relation to other facts presumed or inferred (ibid). Sometimes a discretion is left with the Court either to raise a presumption or not as in section 114 of the Evidence Act. On other occasions, no such discretion is given to the Court so that when a certain set of facts are proved, the Court is bound to raise the prescribed presumption. But that is all. The presumption may be rebutted. 23.21 While construing section 28B of the U.P. Sales Tax Act which inter alia provides that if a transit pass is not produced at the check post on entry and at the point of exit, "it shall be presumed that the goods carried thereby have been sold within the State", the contention that the phrase "it shall be presumed that" meant that "it shall be conclusively held" was negatived. After referring to section 4 of the Evidence Act it was held by this Court in Sodhi Transport Co. v. State of U.P. AIR 1986 SC 1099 : ". . . The words 'shall presume' require the Court to draw a presumption accordingly, unl....
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....d the basic facts namely the due posting of the document is proved, the onus being on the addressee to show that the document referred to in the certificate of posting was not received by him. 23.24 In the present case, the certificate of posting is suspect. Assuming that such suspicion is unfounded, it does not in any event amount to conclusive proof of service of the notice on Madhusoodhanan or on any of the other addressees mentioned in the certificate as held by the Division Bench. Except for producing the dispatch register and the certificate of posting, no one on behalf of the respondents came forward to vouch that they had personally sent the notice through the post to Madhusoodhanan and his group. Madhusoodhanan had written two letters contemporaneously dated 4-8-1986 and 8-8-1986 (Ex. P-24 and Ex. P-35) to Srinivasan, the General Manager of Kerala Kaumudi and to Madhavi complaining that he was not receiving any mail at all. These letters were admittedly received but not replied to by the respondents. It is also apparent from a perusal of those letters that Madhusoodhanan had no knowledge whatsoever of the notice for application for allotment of additional shares. Had ther....
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.... Madhavi is alleged to have executed two agreements and a will transferring the 9 shares of the late Sukumaran and her own 3 shares to Ravi and Srinivasan [Ex. R-59, Ex. R-59(a) and Ex. R-60]. 24.3 It is in this background that the agreement dated 16th January, 1986 must be read. The original of which is in Malayalam and which has been described by the parties as the Karar, has 11 clauses. It is admittedly written by Mani and is signed by Madhavi, Mani, Madhusoodhanan, Srinivasan and Ravi. It seeks to record the partition of assets by mutual consent. Clause 1 of the Karar provides that Madhavi would be the Chairman of Kerala Kaumudi during her lifetime. Clause 2 provides that there will be no change in the existing share structure during the lifetime of Madhavi and that after the death of Madhavi, the shares of Kerala Kaumudi should be so given that Madhusoodhanan gets 50 per cent of the total shares of the company including the shares owned by Mani, and Srinivasan and Ravi get 25 per cent each. It was also agreed that the shares of the late Sukumaran and Madhavi should be divided according to this percentage. The shares of KIPL in Kerala Kaumudi were also to be given to Madhusood....
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....lders refuse to purchase the share, the others would have to do so at the value fixed by the concerned company's auditors according to the Company's balance-sheet for the previous year. Clause 10 provides that the agreement would bind the four brothers and their heirs in the event of the death of any one of them before the agreement was completely implemented. The last clause in the Karar is clause 11. It provides that all pending litigation regarding the subject matter of the Karar, should be withdrawn and that all disputes should be mutually settled, and if this is not possible the matter should be referred to an acceptable third party whose decision would be binding. 24.5 On 2nd December, 1987 Madhavi died and on 10th October, 1988, Madhusoodhanan filed CS 6/89 for transfer of 50 per cent of the late Sukumaran and Madhavi's shares to him and the transfer of 50 per cent of KIPL's shareholding in Kerala Kaumudi to Ravi and Srinivasan in terms of the Karar. The defendants in the suit were Mani, Srinivasan, Ravi, Kerala Kaumudi and KIPL. They first filed a four page written statement in which they contended that the suit was not maintainable, that the suit was bad for mis-joinder a....
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.... had been given the majority shareholding of 52 per cent in the companies specified against their names in the Karar. Since the other three brothers had taken the full benefit of the Karar, they were bound to comply with all its terms. It was not open to them to accept that portion of the Karar which was in their favour and jettison the rest. And the Karar which is in the nature of a family settlement seeking to settle disputes between brothers, having been already acted upon at least to the extent that the four brothers were each given the majority shareholding in the different companies as mentioned in the Karar, should not be lightly interfered with. (See: K.K. Modi v. K.N. Modi [1998] 3 SCC 573). 24.8 The Division Bench has not adverted to this all. It is also on record that Madhusoodhanan had transferred the bulk of his shareholding in the companies which were to be under the majority control of the other three brothers. The learned Single Judge had held that Madhusoodhanan had given evidence that he had taken steps for closing down the companies not mentioned in the Karar. This finding has not been questioned. All the clauses except for the transfer of the 'inherited shares'....
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.... in the Explanation to section 10. One of the exceptions is where the property is "of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market". It has been held by a long line of authority that shares in a private limited company would come within the phrase "not easily obtainable in the market" (See: Jainarain Ram Lundia v. Surajmull Sagarmull AIR 1949 F.C. 211). The Privy Council in Bank of India Ltd. v. Jamsetji A.H. Chinoy AIR 1950 P.C. 90 said: "it is also the opinion of the Board that, having regard to the nature of the company and the limited market for its shares, damages would not be an adequate remedy" specific performance of a contract for transfers of shares in a private limited company could be granted. 24.11 In 1965, this Court while dealing with proceedings rising out of sections 397, 398, 402 and 403 of the Companies Act, 1956 in the case of S.P. Jain v. Kalinga Tubes AIR 1965 SC 1535, had occasion to consider the effect of an agreement relating to the issue of new shares in a company between two shareholders and an outsider. It may be noted at the outset that there is a distinction between the issue of new sha....
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.... 24.13 In V.B. Rangaraj's case (supra), relied upon by the respondents, an agreement was entered into between the members of the family who were the only shareholders of a private company. The agreement was that for all times to come each of the branches of the family would always continue to hold equal number of shares and that if any member in either of the branches wished to sell his share/shares, he would give the first option of purchase to the members of that branch and only if the offer so made was not accepted, the shares would be sold to others. This was a blanket restriction on all the shareholders, present and future. Contrary to the agreement, one of the shareholders of one branch sold his shares to members of the second branch. Such sale was challenged in a suit as being void and not binding on the other shareholders. This Court rejected the challenge holding that the agreement imposed a restriction on shareholders' rights to transfer shares which was contrary to the articles of association of the company. It was therefore held that such a restriction was not binding on the company or its shareholders. The decision is entirely distinguishable on facts. There is no suc....
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....- For the purpose of clause (c),- (i)where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the Court; (ii)the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction." 24.16 We called for the plaint filed by Madhusoodhanan in order to verify whether the Division Bench was correct in coming to the conclusion that section 16 of the Specific Relief Act had not been complied with. We found that paragraph 14 of the plaint reads : "the plaintiff was always ready and willing to perform his part of the agreement and is even now ready to perform his part of contract. The transfer of shares in respect of other companies have already taken place in accordance with the Karar dated 16-1-1986." In view of this clear averment, the finding of the Division Bench regarding the contravention of section 16 of the Specific Relief Act, was perverse. 24.17 On the question of delay the cause of action arose when Madhavi died in December, 1987. It cannot reasonably be said that filing of the suit ten months....
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....nder sub-section 9(2) of the Sale of Goods Act, 1930 read with Art. 25 of the Articles of Association of Kerala Kaumudi. Under the first if the price is not fixed in the manner agreed to in the contract of sale, the buyer shall pay the seller a reasonable price and what would be a reasonable price would be dependent on the circumstances of the case. Article 24 of the Articles of Association of the company speaks of the 'fixed price' and the 'fair price'. Both of these relate to the ostensible price shown on the transfer deeds. Nevertheless for the purposes of this case, Article 25 which lays down guidelines for the resolution of disputes between the transferor and transferee, may be relied on. It says : "Article 25 - The fair value of a share shall be fixed by the Company by a resolution passed by a majority of not less than three fourths of the holders of such shares declaring the fair value. Such resolution shall remain in force for two years from the date of its passing or until annulled whichever is earlier. If at the time a transfer notice is given no resolution fixing the fair value is in force: then any difference in regard thereto shall be referred to two arbitrators, one ....
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.... 1985 I ceased to be a director. I resigned my directorship in March, 1985". 25.2 According to Madhusoodhanan, at the Board meeting held on 4th March, 1985, which was attended by Geetha and Laisa, Laisa's resignation was accepted and he was appointed as additional director. At the same meeting, the Board approved the transfer of shares by Laisa, Shylaja, Madhavi and Kasturi to Madhusoodhanan, Ravi's minor sons-Deepu and Darsan, Valsa (Mani's daughter) and Srinivasan so that the shareholding in KIPL became as follows : Geetha 250shares Madhusoodhanan 270shares Srinivasan 160 shares Valsa 160 shares Deepu Ravi 80 shares Darsan Ravi 80 shares 25.3 According to the four applicants for rectification, they had effected no such transfer. Of the four, only Laisa came forward to give evidence in support of the case for rectification of the share register of KIPL [Ex. P-123 (F)] by restoring the position with regard to the shareholding as it existed prior to March 1985. In her deposition Laisa admitted that she had signed the attendance register of KIPL (Ex.P.-123) which showed that she had attended the Board Meeting on 4th March, 1985. She also admitted that sh....
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....t the Karar was a valid agreement, this reason of the Division Bench will not stand. Besides, as observed by the learned Single Judge, all the necessary documents had been duly executed to effect the transfers of the shareholding as approved in the meeting held in March 1985. In the annual return of KIPL in respect of the year ending on 30th September, 1985, this shareholding is reflected (Ex.P-212). Further this is in keeping not only with the Karar but also with Ex.P-190 according to both of which Madhusoodhanan and his group were to have 52 per cent shareholding in KIPL and the remaining three brothers - 16 per cent each. 25.7 The explanation given by Laisa that she used to sign whatever papers had been sent by Madhusoodhanan is unbelievable. The Division Bench by relying upon a narrative in a biography of Norman Birkett (The Life of Lord Birkett of Ulverston by H. Montgomery Hyde) chose to accept it. According to Laisa herself, she had been a director of the company, operated the banking accounts and otherwise done whatever was necessary in the discharge of her duties as a director since 1972. As we have noted earlier, differences between the 4 brothers had been simmering for ....
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.... recorded the transfer of shares resulting in the present shareholding, the appointment of Madhusoodhanan as additional director and the resignation of Laisa as a director of KIPL. 25.10 The next reason given by the Division Bench for permitting rectification of the share register of KIPL was that no price had been fixed for the shares and that there were not even negotiations with parties regarding such fixation of price. This is, for reasons already stated, an incorrect statement of the law. Moreover in this case there is the additional factor which has persuaded us to hold that the Division Bench was wrong, namely Article 16 of the Articles of Association of KIPL which says: "the Board of Directors shall fix price at which the shares for the time being forming part of the capital of the company may be purchased in pursuance of transfer notice and the price thus fixed shall be known as the 'fair value'. Until the 'fair value' has been fixed as herein provided, a sum equal to the capital paid up on any share shall be deemed to be the fair value of such share." The Division Bench's final conclusion that there had been a non-compliance with section 108 of Companies Act because th....
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....i and his group, including the local delivery book (Ex. R.-48), which was signed by Madhusoodhanan, the father and guardian of Visakh, to negative the submission of Visakh. We see no reason to interfere with this finding of fact. It is true that the Division Bench proceeded on an erroneous basis when it held that the learned Single Judge had dismissed the application on the ground of delay. Since we have upheld the factual finding of the court of the first instance, this misreading of the Trial Court's judgment by the Division Bench is of no consequence. 26.3 We accordingly dismiss the appeal being C.A. 3261/91 without any order as to costs. Civil Suit No. 4 of 1989 27.1 This brings us to the remaining appeal which arises from a decree passed in a suit filed by KIPL. The suit was originally numbered as OS 1569/88 when it was filed in the Munsiff's court in Trivandrum. After it was withdrawn on 16th February, 1989 by the order of the High Court, it was renumbered as C. S. 4/89. In the suit, KIPL had prayed for a decree of permanent injunction restraining Kerala Kaumudi or any of its Directors or staff or anyone claiming through or under them or any of their agents from disturbing....
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....t that KIPL had an office in Kaumudi Buildings to which members of its management and staff have the right of access. 27.5 A similar suit had been filed by Kaumudi Exports which was decreed by the learned Single Judge on substantially the same evidence. (C. S. No 2 of 1989). The appeal from the decree was dismissed by the Division Bench (A S. No. 205 of 1990). No further appeal has been preferred by the respondents. 27.6 Logically, the Division Bench should have also rejected the appeal preferred from the decree in CS No. 4/49. However the Division Bench rejected the appeal on the sole ground that although KIPL had been denied access in 1986, the suit had been filed only in 1988. According to the Division Bench "The inaction for a period of two years can be taken to have resulted in the extinction of the present possession. If the plaintiff does not have present possession, injunction could not be an available relief". This strange piece of reasoning appears to proceed on the basis that the period of limitation for extinction of a possessory right is two years which it is not. Besides the claim of KIPL was that it was being denied access. The denial was a continuous one. It was t....