TaxTMI 
TaxTMI 
2003 (8) TMI 360
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....pondents'. 2. The main protagonists in all 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.....
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....r concern. Kerala Kaumudi's control was to be with Madhusoodhanan. In implementation, Transfer of shares in these com-panies 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 majori....
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....ation of the allotment of 425 shares to Ravi and Sreenivasan and for removal of the name of Mani from the company's share register. (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....
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....r of one share in favour of Mani was, however, disallowed. However, the petition filed by KIPL (CP No. 31 of 1986) which had virtually asked for the same reliefs 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 reg....
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....ainable for the reasons stated in the following paragraphs. 21.3 The documentary evidence relating to the transfer, shows without a shred of doubt that there was a valid transfer of shares. 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 resignat....
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....ed, is unacceptable. The passage from Benjamin's Sale of Goods (1974 Edn.) relied on which says : "If the price is left to be agreed upon subsequently between the parties, there will ordinarily be no binding 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 ....
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....n of late Sri Sukumaran, the founder of the company. She also pointed out that Sri M.S. Mani is eligible for 1/5 of the shares held in the name of his father. She further pointed out that it is prestigious for the company that Sri 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 an....
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....e were any doubt on the issue, the fact which settles the matter conclusively are the admissions in the counter affidavit filed by Madhavi in CP No. 14 of 1986 on behalf of herself and on behalf of Ravi, Srinivasan and Mani (wherein Mani is referred 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. ....
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...." and provided that such person is willing to purchase the share. 21.20 If the transfer by Mani and his children of their entire shareholding in Kerala Kaumudi to Madhusoodhanan had not been effected, there was no question of "admitting" Mani to the membership of 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 addit....
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....t the support of the statutory presumption under section 195 of the 1956 Act. 21.23 Exhibit P-3, the third agreement which was referred to at the outset has a clause which relates to the sale of Mani's shares in Kerala Kaumudi to Madhusoodhanan which both sides have referred 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 Ma....
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...., in order to assure him that I will transfer the shares, I signed the forms and handed it over to my wife for keeping them in safe custody. I knew that if the matters were not finalised within 60 days the forms cannot be made use of thereafter. So I requested the petitioner several times 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....
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....he affairs of Kerala Kaumudi. The papers, books and other records of the company were in the custody and control of those who controlled Kerala Kaumudi namely Srinivasan and Ravi. It is not improbable that the share transfer certificates which had been placed before the Board meeting were deliberately 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 i....
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....aside by the Division Bench on the very weak explanation given by Mani as to why these repeated admissions had been made even after the filing of the litigation between the parties. The Division Bench erred in ignoring the affidavits of Madhavi and Mani by saying that it "would not be sufficient or strong enough 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 ....
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...., Mani wrote a letter to Madhusoodhanan which has been exhibited as P-134. The letter states : "This is in continuation of discussion I had with you, regarding the sale of Flow line machine, Sheet-fed offset and the Cutting machine to me. My offer is Rs 3 lakhs for all the three machines. This amount may be deducted from 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 ....
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....the Board meeting dated 25th January, 1985 [Ex. P-62(H] records the presence of Madhavi, Mani, Madhusoodhanan, Srinivasan and Ravi and the unanimous resolution to appoint Madhusoodhanan as Managing Director and Editor of the company for life. It also records that Madhusoodhanan had been working as the Managing Director of Kerala Kaumudi for 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.....
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.....m. at Madhavi's residence and attended only by Madhavi Srinivasan and Ravi, 425 shares were allotted to Srinivasan and Ravi on applications dated 4th August, 1986 received from them - 212 shares being allotted to Srinivasan and 213 shares to Ravi. 22.5 The next meeting which is the subject-matter of challenge by Madhusoodhanan is the meeting held on 26th August, 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 com....
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....es. It is also the submission of Madhusoodhanan and KIPL that in fact no meeting was held on 8th August, 1986, at which the further shares were allotted to Ravi and Srinivasan. 22.9 Madhusoodhanan and KIPL's application Nos. CP 14/86 and CP 31/88 were therefore filed for rectification of the share register of Kerala Kaumudi as noted earlier and suit CS No. 3/89 was filed 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 t....
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....ordinary resolution must be given; (ii)The resolution must be passed by 75 per cent of the members present ; and (iii)Not less than 21 days notice of the meeting must be duly given. The requirements are cumulative and mandatory. 22.13 Coming now to the facts of this case, it is apparent that none of the three preconditions for effecting an alteration in the Articles of Kerala Kaumudi by deleting 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 consid....
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....ed in the general meeting. The notice must be frank, open, clear and satisfactory. If it is not, the notice is bad and the special resolution vitiated and cannot be acted upon. "If any attempt is made by the directors to get the sanction of the shareholders, it must be made on a fair and reasonably full statement of the facts upon which the directors are asking the shareholders to vote...and special resolutions 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. 22.1....
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....r cent of the paid-up share capital of the company was reduced to 25 per cent. This was sought to be achieved by the respondents in two stages. First, by taking a decision to increase the paid up share capital of the Company by issuing an additional 425 shares. Second, by not giving Madhusoodhanan or any of his group to any chance participate in the fresh allotment of shares and ensuring that the shares were allotted to Ravi 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 issu....
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.... "one letter regarding Board and General Body Meetings" was acknowledged as having been received on behalf of Madhusoodhanan by one Mohanraj, the then personal assistant of Madhusoodhanan (PW.2) who has written that he "handed same over to Mrs. Madhusoodhanan through Mr. Raghunathan, peon". There is no remark under the column "By whom delivered". (ii)an entry in the outward register of Kerala Kaumudi [Ex. P-93 (p)] which shows that "one 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 am....
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.... had not been receiving his personal mail or letters addressed to him as Managing Director since 4th August, 1986 and that the usual method of handing over such mail to his personal assistant was not been followed, to contend that the notice dated 25th July, 1986 had been duly served on Madhusoodhanan and received by him. 23.10 The letter is a complaint regarding the complete blocking of all mail both personal and official by the respondents since 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 (si....
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....(a) is an entry in the outward register of Kerala Kaumudi indicating the dispatch of the notice; (c)A Certificate of Posting dated 1-8-1986 (Ex. R.25) which purports to relate to service of the notice on Madhusoodhanan, his children and KIPL. 23.15 Both the learned Single Judge and the Division Bench accepted that the signature of the person acknowledging receipt of the notice was Mohan Raj. Where they have differed is whether this amounted to service upon Madhusoodhanan, 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 ....
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....at if a document is sent by post in the manner specified, "service thereof shall be deemed to be effected". The word "deemed" literally means "thought of" or, in legal parlance "presumed". 23.20 There is a distinction between "presumption" and "proof". A presumption has been defined as "an inference, affirmative or disaffirmative of the truth or falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted" Izhar Ahmad 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 p....
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.... is couched in different language, normally indicating that proof of one set of facts shall be "conclusive proof" of a second set. An example of this is Rule 3 of the Rules framed in 1956 under section 18 of the Citizenship Act, 1955 which was the subject-matter of challenge in Izhar Ahmad Khan's case (supra). Section 53(2) contains no such language. 23.23 Consequently, the words "shall presume" in section 53 sub-section (2) means a rebuttable presumption which the Court must raise provided 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 ....
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.... (D) Specific Performance of the Karar 16th January, 1986 24.1 The last proceeding relating to Kerala Kaumaudi was CS 6/89 which was a suit filed by Madhusoodhanan for specific performance of the Karar dated 16th January, 1986. 24.2 We have already held that by May, 1985, Mani and his group had transferred their shareholding in Kerala Kaumudi to Madhusoodhanan, and that as a result of such transfer Madhusoodhanan and his group held more than 50 per cent of the shares in the company. On 15th July, 1985, 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 th....
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....ice (P.) Ltd. Ravi Ravi Printers and Publishers (P.) Ltd.; Kaumudi Films Outdoor Unit; Electronics and Equipment Corporation; Ravi Transport Srinivasan Srinivasan Printers and Publishers Private Ltd. All other establishments were required to be closed down and Madhusoodhanan was appointed for that purpose. Clause 9 provides that if any shareholder in any of the concerns wishes to sell his shares, they must be offered to the "52 per cent shareholders" at a price to be fixed by the others. If the 52 per cent shareholders 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 par....
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....tted to Mani) and Ravi Printers (allotted to Ravi) was insignificant, the last fact justifying the court's refusal to grant specific performance of the Karar under section 20 of the Specific Relief Act. The appeal was, therefore, allowed and the suit dismissed. 24.7 We have already said that except for clauses 1, 2, 3 and 11, all the other clauses of the Karar related to the division of the several concerns among the four brothers. In deciding whether the agreement should be implemented, the Appellate Court overlooked the basic fact that each of brothers 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 ....
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.... 10 of the Specific Relief Act, 1963, which corresponds to section 12 of the Specific Relief Act, 1877. The section provides that specific performance of such contracts may be enforced when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. In the case of a contract to transfer movable property, normally specific performance is not granted except in circumstances specified 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 sha....
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....nt and was not bound by its terms; there was no provision in the agreement as to what would happen if and when the share capital was actually increased beyond the increase at the time of the agreement. Therefore it was held that as far as the company was concerned, it was free to dispose of shares as its directors or shareholders in a general meeting considered proper without regard to the agreement. The decision does not in any way hold that the transfer of shares agreedto between shareholders inter se does not bind them or cannot be enforced like any other agreement 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, pre....
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....ce formed no part of the Karar. 24.15 Coming to the reasoning of the Division Bench with regard to non-compliance with section 16 of the Specific Relief Act, 1963. The section provides : "16. Personal bars to relief.-Specific performance of a contract cannot be enforced in favour of a person- ****** (c)who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms of the performance of which has been prevented or waived by the defendant. Explanation.- 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....
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....foray into the question of the value of the assets allotted under the Karar. It has, despite Explanation 1 to section 20(2) refused specific performance of the Karar on one of the excluded grounds viz., inade-quacy of consideration. 24.19 The parties are at loggerheads and it is unlikely that they will mutually agree to a price to be paid for the 390 transferred shares or the 'inherited shares' as envisaged at the meeting held on 23rd April, 1985 [Ex. P.62(b)] or to a mutually acceptable third party in terms of clause 11 of the Karar dated 16th January, 1986 (Ex.P-3). The solution to this impasse is available under 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, Ar....
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....r section 155 of the Companies Act was filed by Mani's wife and daughter - Kastoori and Valsa respectively, Srinivasan's wife - Laisa, and Ravi's wife - Shylaja. Of the 1000 shares issued of KIPL, Madhavi had 10, Kastoori had 240, Valsa had 10, Madhusoodhanan's wife, Geetha, had 250, Laisa had 250 and Shylaja had 240 shares in 1985. On 4th March, 1985, Laisa who, along with Geetha, was a director of the company till then, resigned. She has admitted her resignation in her evidence when she said "I became the director of the company in 1972. I became a shareholder of the company in 1972. I'm not a director of the company now. In March, 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 Madhus....
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....re not parties to exhibit P-190 because the share transfer deeds had been signed and the signatories were bound by that, particularly when they had not established that they had signed the share transfer documents under any misrepresentation, fraud or undue influence or mistake. 25.5 The Division Bench reversed the decision of the learned Single Judge in MFA No. 312 of 1990. It was held that since exhibit P-3, or the Karar, had not been accepted as a valid document, "the projected basis of the transfer disappears" and "the further recording in the minutes of the company would not be sufficient to give legal efficacy to the transfer of shares". 25.6 Since we have held that 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 Madhusoodh....
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....sociation of KIPL (Ex. P-180) also provides : "Where minutes of the proceedings of any general meeting of the company or of any meeting of the Board of Directors has been made and signed in accordance with provisions contained in the preceding article 10 unless the contrary is proved, the meeting shall be deemed to have been duly called and held and all proceedings thereat to have duly taken place, and in particular, all appointment of directors made at the meeting shall be deemed to be valid". The only evidence or "proof" to the contrary in this case is Laisa's unacceptable oral evidence. Therefore the minutes of the meeting held on 4th March, 1985 must be taken to have correctly 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. Mor....
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....eld 80 shares after effecting share transfers by the brothers and their respective groups inter se. A decision was taken by the Board of Directors to increase the paid-up capital of company from Rs 5 lakhs to Rs 10 lakhs by the issue of 500 equity shares of Rs 1,000 each. Notice of this was given to the applicant who received it but did not apply to be allotted any of the additional shares. Mani and his wife, Kasturi, offered to purchase 279 shares each. The offer was accepted and additional shares issued in the name of Mani and his wife. According to Visakh, he had not been given notice of the offer of the additional shares. The trial court considered the various exhibits tendered in evidence by Mani 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 t....
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....he sister concerns of Kerala Kaumudi had post box No. 99 and post office was instructed to put the correspondence addressed to the sister concerns in that post box No.". The post box number in question was Kerala Kaumudi's. He also said, "At the time when application for telephone was given, applications were given in the name of all sister concerns as well as Kerala Kaumudi, in order to get telephone easily. These telephones were allotted. All the telephones are installed in Kerala Kaumudi Buildings" and that for all the sister concerns the telex No. is the same. In view of all this evidence, including the admission by Srinivasan, amply justifies the conclusion reached by the Trial Court while decreeing the suit 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 r....