TaxTMI 
TaxTMI 
1970 (11) TMI 108
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is essentially a suit by Deokinandan Jalan. Originally there were four Plaintiffs in the suit, the first Plaintiff being Asiatic Oxygen and Acetylene Company Ltd. The other Plaintiffs were Surajmull Nagarmull, Howrah Trading Company Pvt. Ltd. and Deokinandan Jalan. On behalf of Asiatic Oxygen and Acetylene Company Ltd., which was originally the Plaintiff No. 1, the plaint was signed by Deokinandan Jalan as partner of Surajmull Nagarmull, the Managing Agents of Asiatic Oxygen and Acetylene Company Ltd. Subsequently by an order made, the name of Asiatic Oxygen and Acetylene Company Ltd. was deleted from the category of the Plaintiffs and the said company was transposed to the category of the Defendants. The firm of Surajmull Nagarmull, which was originally the Plaintiff No. 2, has now become the first Plaintiff in the suit. Howrah Trading Company Pvt. Ltd. is now the second Plaintiff and Deokinandan Jalan, who happens to be the real Plaintiff, is the third and the last of the Plaintiffs. On behalf of Surajmull Nagarmull, now the first Plaintiff in the suit, the plaint has been signed by Deokinandan Jalan as partner of the said firm. On behalf of Howrah Trading Co. Pvt. Ltd. the plai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n that such Directors shall be ex -officio Directors within the meaning of the said Articles of Association and that one of them as shall be named by the said Plaintiff Surajmull Nagarmull would be the Chairman of the Board of Directors of the said Defendant No. 13. ( 7. ) It is stated in para 4 of the plaint that at all material times one Baijnath Jalan, father of the Plaintiff No. 3 Deokinandan Jalan, since deceased was the registered share -holder of the Defendant No. 13 to the extent of 350 equity shares of Rs. 10 each and was a partner of Surajmull Nagarmull, and the said Baijnath Jalan died intestate in the year 1954 leaving him surviving the Plaintiff Deokinandan Jalan as his only son. It is stated that since long prior to the death of the said Baijnath Jalan the Plaintiff Deokinandan Jalan was a partner of Surajmull Nagarmull, and after the death of the said Baijnath Jalan the Plaintiff's firm Surajmull Nagarmull was reconstituted and the Plaintiff Deokinandan Jalan in his individual capacity became a partner to the extent of 2 as. 9 pies share in the Plaintiff firm. ( 8. ) It is averred in para 5 of the plaint that prior to the alleged and impugned transfer of sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ution. ( 11. ) Paragraph 8 of the plaint states that Article III of the Articles of Association of the Defendant No. 13 at all material times provided that minimum number of Directors of the Defendant No. 13 would be three and the maximum number of Directors would be eight. ( 12. ) It is alleged in para 9 of the plaint that qualification shares required to be held by a Director of the Defendant No. 13 under the Articles of Association thereof at all material times were 500 equity shares. ( 13. ) It is alleged in para 10 that at all material times and in any event since long prior to the year 1959 the Defendant No. 1 Shew Bhagwan Jalan was and still is a partner and associate of the Plaintiff No. 1 Surajmull Nagarmull and in para 11 it is averred that the Defendant No. 2 Shyamsundar Jalan is the son of Babulal Jalan, the Defendant No. 5 who is also a partner and associate of the Plaintiff No. 1 Surajmull Nagarmull and, as such, the Defendant No. 2 at all material times was and still is an associate of the Plaintiff No. 1. ( 14. ) In para 12 of the plaint reference is made to the employment of Gopalkrishna Jalan under the Defendant No. 13 at a monthly remuneration of more....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Rs. 10,065 -68 to the said Gopalkrishna Jalan, an assistant of the Plaintiff No. 1. The alleged notices of the said alleged general meeting of the company are alleged to have been despatched on September 6, 1962. " (e) No consent of the Defendant No. 13 appears to have been accorded either by, a special resolution or otherwise with regard to the appointment of the said Gopalkrishna Jalan as an assistant of and or holding an office of profit under the Defendant No. 13 upon payment of remuneration of over Rs. 500 per month. . (f) Sometime in June 1962 the Defendant No. 4 appears to have allotted 6,650 equity shares, 1,900 equity shares and 1,900 equity shares in the Defendant No. 4 in favour of the Defendants Nos. 1, 2 and 3 respectively in exchange of all the equity shares held by the said Defendants Nos. 1, 2 and 3 in the' Defendant No. 13 at the rate of 38 equity shares in Defendant No. 4 for 10 equity shares in the Defendant No. 13. In the circumstances it further appears that the said Defendants Nos. 1, 2 and 3 cease to hold any equity shares in the Defendant No. 13. ( 16. ) It is alleged in para 14 of the plaint that each of the said alleged notices....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Defendant No. 13 at any rate since prior to the middle of the year 1961. ( 18. ) The Plaintiffs state in para 16 of the plaint that thus the only Director of the Defendant No. 13 between the middle of 1961 and middle of 1962 was the Defendant No. 3 who alone could not validly act as Director nor transact any business of the Defendant No. 13 and, furthermore, the Defendants Nos. 1, 2 and 3 having in the circumstances hereinbefore stated ceased to hold the qualification shares, they and each of them ceased to be the Directors of the Defendant No. 13 with effect from, their ceasing to hold of such qualification shares. ( 19. ) The Plaintiffs allege in para 17 of the plaint that the Defendants Nos. 1, 2 and 3 are wrongfully alleging" that at all material times they were and still are the Directors of the Defendant No. 13 and the said Defendants are also wrongfully and illegally continuing to act and hold themselves out as Directors of the Defendant No. 13 although they have no right to do so. ( 20. ) It is averred in para 18 of the plaint that at all material limes the Plaintiff Surajmull Nagarmull was and still is the holder and/or owner of practically all the shares ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....only false/ wrongful and illegal but is intended to defraud the share -holders of the Defendant No. 13 including the Plaintiffs Nos. 1, 2 and 3. ( 25. ) In para 23 the Plaintiffs refer to the announcement in the prospectus of the proposal to appoint the Plaintiff No. 1 as the Managing Agent of the Defendant No. 4 for a period of ten years and to the obtaining of the necessary approval of the Government sometime in January. 1962 and that upon such appointment the Plaintiff No. 1 would resign from the Managing Agency of the Defendant No. 13. ( 26. ) In para, 24 the Plaintiffs state that the Plaintiff No. 3 Deokinandan Jalan in his capacity as a partner of the Plaintiff No. l Surajmull Nagarmull had expressly prohibited all other partners of the, said firm and the Defendants Nos. 1, 2, 3, 5 and 7, the original Defendant No. 8. and the Defendants Nos. '9, 10, 11 and 12 from transferring any share of the Defendant No. 13 standing in the name of the Plaintiff No. 1 and/or in the name of the said Defendants; and the Plaintiff No. 3 in his capacity as a Director of the Plaintiff No. 2 had also expressly prohibited the "Defendant No. 1 who at all material limes was and still is th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plaint that the issued capital of the Defendant No. 4 is Rs. 1,60,00,000 divided into 16,00,000 equity shares of Rs. 10 each. According to the alleged exchange of shares of the Defendant No. 13 the share -holders of the Defendant No. 13 are alleged to have been allotted 2,66,000 equity shares of Rs. 10 each in Defendant No. -4,. and in this way all the share -holders of the Defendant No. 13 would be having a voting power only to the extent of 16 -62 % in the Defendant No. 4 and the Defendant No. 13 will be reduced to the position of a subsidiary company of the Defendant No. 4 and the share -holders of the Defendant No. 13 will be reduced to a hopeless minority in the Defendant No. 4 and would practically have no controlling power in the Defendant No. 4. ( 29. ) In para 26(b) it is alleged that in the premises the said alleged arrangement for transfer and/or transfer of shares in the Defendant No. 13 in favour of the Defendant No. 4 was and is in fraud of the Defendant No. 13 and its share -holders and in any event in fraud of the Defendant No. 4. ( 30. ) The Plaintiffs state in para '27 that the reasonable and the market value of the shares, of the Defendant No. 13 at all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ging and/or creating the said mortgage was not sanctioned by any Board of Directors of the Defendant No. 13 and as such was and is invalid, void, illegal and of no effect and it should be declared as such... ( 33. ) In para 30 the Plaintiffs allege that the Defendant No. 13 had in order to extend their business acquired and obtained from the Government of India the licence No. L/9/N -3.8/59 for manufacture, of 9,000 units of regulators, 7,500 units of torches and 150 units of oxy -cutting machines per annum ; and the Defendants Nos. 1, 2 and 3 purporting to act as the Directors Of the Defendant No. 13 and the Defendants Nos. 4 and 5 in collusion and conspiracy with each other having also wrongfully and illegally purported to transfer and /or agreed to transfer the said most valuable licence to the Defendant No. 4 without any advantage or benefit to the Plaintiff's and to the Defendant No. 13 resulting in the prevention of further expansion of business activities and consequential profits to the Plaintiffs and to the Defendant No. 13. ( 34. ) The Plaintiffs state in para 31 that the Defendant No. 13 had also procured an import licence from the Government of India for impor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to defraud the Plaintiffs and the Defendant No. 13 and other share -holders of the Defendant No. 13, the Plaintiff No. 1 and/or its partners and in any event the Plaintiff No. 3. ( 38. ) In Para 35 the Plaintiffs state that, assuming but not admitting in any way the factum or validity of the alleged transfer of shares, the Plaintiffs allege that such, alleged transfer of shares, if any, must have been made on the basis of the statements contained in the prospectus issued by the Defendant No. 4 which as hereinbefore stated were false and were appeared to have never been intended to be implemented nor have the same been implemented and, in the premises, the said alleged transfer of shares, if any, is void and/or voidable and the Plaintiff for self and on behalf of the Defendant No. 3 and the Defendant No. 13 have avoided the same and the Plaintiffs hereby avoid the same. ( 39. ) In para 35,(a) the Plaintiffs refer to the death, of the original Defendant No. 8 Nandkisore Jalan and to his heirs and legal representatives who have been brought on record. ( 40. ) In Paras 38, 39, 40, 41 and 42 of the plaint, introduced by way of. further amendments, the Plaintiffs refer to earlie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e sale and/or agreement for sale of the cylinders mentioned in para 31 is illegal, void and of no effect. (10) Permanent injunction restraining the Defendant No. 4, its agents and servants from using or in any way utilising the manufacturing licence mentioned in para 30. (11) Permanent injunction restraining the Defendants Nos. 1, 2 and 3, their servants and agents from charging and/or creating any mortgage in respect of any of the assets or properties of the Defendant No. 13. either in favour of the Industrial Finance Corporation of India or otherwise. (12) A decree in favour of the Defendant No. 13 directing the Defendants Nos, 1, 2 and 3 to refund or restore all monies or advantages received by them as Directors of the Defendant No. 13. (13) A decree for Rs. 1,00,00,000 or alternatively an enquiry into damages. (14) A decree in favour of the Defendant No. 13 against the Defendants Nos. 1, 2, 3 and 4 directing refund of all promotional expenses mentioned in paras. 13 and 14. (15) Receiver. (16) Injunction. (17) Costs. (18) Leave under Order 2, Rule 2 of the Code of Civil Procedure. (19) Furt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....legations made in para 4 of the plaint this. Defendant states that Baijnath Jalan was a registered holder of 350 equity shares of this Defendant and that Baijnath Jalan died in the year 1954 leaving the Plaintiff No. 3 as his only son. This Defendant further states that no application has been made to this company for transmission of the said shares which stood in the name of the said Baijnath Jalan nor has this company been informed of the issue of any succession certificate or any other representation in respect of other properties or the said shares left by the said deceased. In para 4 this Defendant, dealing with the allegations made in para 5 of the plaint, denies that the Plaintiff No. 3 ever Was or still is a share holder of this Defendant and this Defendant craves reference to its register of members. ( 46. ) In para 5 this Defendant denies each and every allegation made in para 6 of the plaint. In para 6 of the written statement this Defendant denies that on and from July 18, 1962, the qualification shares required to be held by a Director of this Defendant under its Articles were and are 500 equity shares as alleged or at all. ( 47. ) In para 7 this Defendant, deali....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Defendant No. 4 being expenses incurred by this Defendant in the usual course of business. ( 52. ) In para 11 this Defendant denies each and every allegation made in para 13(e) of the plaint. ( 53. ) In para 12 this Defendant, dealing with the allegations made in para 13(f) of the plaint, denies that the Defendant No. 1 acquired 6,650 or any equity shares in the share capital of the Defendant No. 4 in exchange of any equity shares held by the Defendant No. 1 in the share capital of this Defendant;. and this Defendant states that the Defendants Nos. 2 and 3 acquired, at all material times, held and still holds one equity share in this Defendant and the Defendant No. 1 at all material times, held and still holds 1,751 equity shares in this Defendant. This Defendant denies that the Defendant No. 1 or 2 or 3 ceased, at any material time, to be holder of any equity shares in this Defendant. ( 54. ) IN para 13 of the written statement this Defendant denies each and every allegation made in para 14 of the plaint. ( 55. ) In para 14 of the written statement this Defendant deals with the various sub -paragraphs of para 14 of the plaint and this Defendant states as follows....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Defendants Nos. 1 and 2 are no longer Directors of this company since prior to the middle of the year 1961 and this Defendant states that, the Defendants Nos. 1, 2 and 3 have, at all material times, duly retired by rotation from the Board of Directors of this Defendant and have been duly re -elected as Directors of this Defendant and the said Defendants Nos. 1, 2 and 3 have , at all material times, been and still are the Directors of this Defendant. ( 59. ) In paras. 17 and 18 of the written statement this Defendant denies and disputes each and every allegation made in paras. 16 and 17 of the plaint and, in particular, this Defendant denies that the Defendant No. 1 or 2 or 3 ceased to hold the requisite qualification shares for the directorship so long as such qualification was necessary or that the said Defendants have ceased to be Directors of this Defendant, at any material times, as alleged or at all and this Defendant states that the Defendants Nos. 1, 2 and 3 have, at all material times, been and still are the Directors of this Defendant. ( 60. ) In dealing with the allegations contained in para 18 of the plaint this Defendant states that save that the Plaintiff No. 1 h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 is denied and disputed and such prohibition had and has no legal consequence and was and is not binding on the Plaintiff No. 1 or its other partners or the other Defendants. This Defendant denies other allegations contained therein and denies the allegation of any collusion and conspiracy and this Defendant states that, in any event, this Defendant has no notice of the allegations made in para 24 of the plaint, and the Plaintiff No. 3 never gave any notice of the same at any material time to this Defendant, and this Defendant was bound by law to register the transfers referred to in the said paragraph. This Defendant denies that the Plaintiff can challenge the validity or legality of the transfer or allotment or exchange of shares or are entitled to maintain the suit in connection with the same. ( 65. ) In para 26 this Defendant denies each and every allegation made in para 25 of the plaint. ( 66. ) In para 27 of the written statement this Defendant deals with the allegations made in para 26(a) of the plaint and this Defendant states that save what would appear from the books of the Defendant this Defendant does not admit any of the allegations contained in para 26(a) of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... each and every allegation, contention and submission contained in para 29 of the plaint; and this Defendant states that in any event the Plaintiffs are not entitled to or competent to. challenge or dispute the legality or validity of the said acts and agreements for creating charge or mortgage of the fixed assets of this Defendant, and, in any event, the said agreement was made and the said charge or mortgage was created upon notice to the share -holders of this company at the general meeting, of the share -holders of this company, and the same had been duly approved or ratified by the members of this company and the Plaintiffs are estopped from challenging the legality and validity thereof. ( 70. ) This Defendant in para 32 of the written statement in answer to the allegations made in para 30 of the plaint denies that the Defendant No. 1 or 2 or 3 or any of them acted in collusion or conspiracy with each other or have wrongfully or illegally proposed the transfer and/or transferred in favour of the Defendant No. 4, the licence referred to in the said paragraph or that the said transfer was without any advantage or benefit to this Defendant or that the Defendant has thereby bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rectors of this Defendant to sell at cost price the cylinders to the Defendant No. 4, and the above fact were duly brought to the notice of the members of this Defendant at the annual general, meeting of this company, and the same were duly approved and ratified by the members of this Defendant and the Plaintiffs are estopped from challenging the legality and validity of the same. ( 72. ) In paras. 34, 35 and 36 of the written statement this Defendant deals with the allegations made in paras. 32, 33 and 34 of the plaint and denies the allegations contained therein. ( 73. ) In answer to the allegation made in para 35 of the plaint this Defendant in para 37 denies that the statements contained in the prospectus issued by the Defendant No. 4 were or are false or were not intended to be implemented or that the transfer of shares was made on the basis as alleged in the said paragraph or that the same is void or voidable or that the same has been avoided or that the Plaintiffs are entitled to challenge the said transfer or to claim any alleged relief in respect thereof. ( 74. ) In para 38 of the written statement this Defendant dealing with the allegation made in para 35(b) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any cause of action and/or claim against this Defendant and cannot claim any relief and that the suit should be dismissed with costs. ( 77. ) An additional written statement has also been filed on behalf of this Defendant to answer the allegations introduced in the plaint by way of amendment for raising the question as to the contention. of the Defendants as to the maintainability of the suit of the Plaintiffs being barred by res judicata or principles analogous thereto. In the additional written statement filed, this Defendant craves reference to the said earlier proceedings and orders made and denies and disputes the claim and contention of the Plaintiffs as to the question of res judicata. In the written statement filed on behalf of the Defendants Nos. 1 to 10, including the original Defendant No. 8, the claim and contention of the Plaintiffs in the suit are denied and disputed. Similarly, in the written statement filed on behalf of the Defendant No. 11 the case of the Plaintiffs as made in the plaint and the claim of the Plaintiffs have been denied and disputed. The averments in the written statement filed on behalf of these Defendants are more or less on the same lines ado....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lleged in para 24 of the plaint ? (b) If so, was such prohibition valid or legal or binding on the Plaintiff No. 1 or its partners or any of the Defendants ? (c) Were the transfers, allotments and exchange of shares invalid or illegal or made in collusion and conspiracy or without the knowledge or consent or approval of the partners of the Plaintiff No. 1 as alleged in paras. 24 and 25 of the plaint ? (d) Are the Plaintiffs entitled to dispute the validity and legality of such transfers, allotments and exchanges of shares? 10. (a) Was the agreement between the Defendant No. 13 and the Industrial Finance Corporation of India to secure loans to the Defendant No. 4 invalid or void or illegal or ineffective or without sanction of the Board of Directors of the Defendant No. 13 as alleged in para.29 of the plaint? (b) Has the agreement been approved and ratified by the members of the Defendant No. 13 as alleged in para 31 of the written statement of the Defendant No. 13 ? (c) Are the Plaintiffs estopped from challenging the legality and validity of: the said agreement as alleged in the written statement of the Defendant No. 13 ? ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve the said arrangement and transfer of shares caused pecuniary loss and disadvantage to the Defendant No. 13 or its shareholders and the Plaintiff No. 1 or the Plaintiff No. 3 ? (iv) (a) Were the statements contained in the prospectus of the Defendant No. 4 false as alleged in para 28 of the plaint? (b) Was any statement made in the said prospectus with intentions as alleged in para 28 of the plaint ? ( 80. ) The Learned Counsel appearing on behalf of the other Defendants had also suggested certain issues. ( 81. ) As , in my opinion, the aforesaid issues sought to be raised on behalf of the Defendant No. 13 and the other issues which are suggested on behalf of the other Defendants were not very material for adjudication of the real disputes in suit and the issues relevant and material for proper and effective determination of the real disputes in suit have been raised and settled, I did not consider it necessary to raise specifically any of the said other issues suggested. I, however, made it clear to the parties that, although no specific issues had been raised as suggested, the parties would be entitled and at liberty to lead such evidence as they might c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ajmull Nagarmull was the real owner of all the shares held in the Defendant No. 13, Asiatic Oxygen and Acetylene Company Ltd., by the Defendants and the Defendants were the benamdars of Surajmull Nagarmull; (ii) Deokinandan jalan had prohibited the other partners of Surajmull Nagarmull from transferring the shares held by the said partners standing in the names of individual persons or of the companies in the Defendant No. 13 ; (iii) Deokinandan Jalan as Director of Howrah Trading Company Pvt. Ltd. prohibited S.B. Jalan, who happens to be the other Director of Howrah Trading Company Ltd., from transferring the shares registered in the name of Howrah Trading Company Pvt. Ltd. in the Defendant No. 13, Asiatic Oxygen and Acetylene Company Ltd.; (iv) The books of accounts, records and documents of Surajmull Nagarmull are in the possession of other partner than D.N. Jalan ; and (v) That the ratio of exchange of 10 shares of Asiatic Oxygen and Acetylene for 38 shares of Asiatic Oxygen Company Ltd., the Defendant No. 4 herein, is improper. In course of his examination in chief this witness has stated that he goes very frequently to 61 Mahatma Gandhi Road where Deokinandan Jalan resides an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness told them: I have been asked by Mr. Deokinandan Jalan to tell them that the shares of Asiatic Oxygen and Acetylene Company Ltd. standing in the name of Surajmull Nagarmull and their partners and other persons belong to the firm of Surajmull Nagarmull and they should not be transferred with the shares of Asiatic Oxygen Ltd. and if they do so it will amount to a breach of trust. Thereafter, I also told Mr. S.B. Jalan that Mr. D.N. Jalan had asked me to tell him that the shares of Asiatic Oxygen and Acetylene Company Ltd. standing in the name of Howrah Trading Company Pvt. Ltd should not be transferred with the shares of Asiatic Oxygen Ltd. without the approval of the Board of Directors. (See Qs. 39 and 40). A copy of the letter addressed by Deokinandan Jalan along with four receipts has been tendered and is marked as Ex. B. This witness states that the exchange ratio of Asiatic Oxygen and -Acetylene Company Ltd. shares should have been approximately 256 shares of Asiatic Oxygen Ltd. for 10 shares of Asiatic Oxygen and Acetylene Co. Ltd. This witness has sought to prove photostat copies of documents lying at the office of the Registrar of Companies, West Bengal,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ylene Company Ltd. have been exchanged for shares in Asiatic Oxygen Ltd., has been questioned and his evidence has been seriously challenged. ( 87. ) The oral testimony of this witness, to my mind, is of no material consequence. It is established that this witness has nothing to do with the firm of Surajmull Nagarmull, the Plaintiff No. 1, and with Howrah Trading Co. Pvt. Ltd., the Plaintiff No. 2. This witness has never been an employee of the firm of Surajmull Nagarmull or of Howrah Trading Company Pvt. Ltd. This witness is also not in the personal employ of Deokinandan Jalan. He was in the employment of McLeod & Co: Ltd. of which Mr. D.N. Jalan was the Dy. Chairman, and he calls himself a senior executive of the three Tea companies of which Deokinandan Jalan is the Chairman. Though this witness is not in the personal employment of Deokinandan Jalan, this witness states that he is looking after the legal affairs of D.N. Jalan and also this litigation on his behalf. Why this witness who is not in the personal employment of Deokinandan and is in the pay of the three Tea companies of which Deokinandan Jalan is the Chairman should look after the personal litigation of Deokinandan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Pvt. Ltd., in the Defendant No. 13, being the property of Surajmull Nagarmull. For the same reason, namely, that this witness does not and cannot have any knowledge, the evidence of this witness that the books of account, records and documents of Surajmull Nagarmull are in possession of the other partners except D.N. Jalan, is absolutely worthless. The testimony of this witness that the ratio of exchange of 10 shares of Asiatic Oxygen and Acetylene Company Ltd. for 38 shares of Asiatic Oxygen Ltd: is wholly incompetent, unreliable and without any substance. ( 88. ) The evidence of this witness that he personally carried the letter addressed by Deokinandan to Shew Bhagwan, Babulal, Kisorilal and Nandkisore dated May 25, 1962, (Ex. B) and handed over the said letter personally to the said Jalans and he further orally conveyed to the said Jalans the instructions of Deokinandan Jalan, seems to be incredible. That Deokinandan Jalan had addressed the letter dated May 25, 1962, to the said Jalans and the said letter was received at the receiving Sec. of Surajmull Nagarmull is not disputed and is, in any event, established by the four receipts granted by the receiving Sec. of Surajmul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave already observed, this part of the evidence has been introduced in an attempt to improve the case and cover up the lacuna in the letter (Ex. 13). I have no hesitation in rejecting the testimony of this witness. ( 89. ) I shall now deal with the documentary evidence tendered on behalf of the Plaintiffs through this witness. The first document which has been exhibited is an announcement in lieu of prospectus, of Asiatic Oxygen Ltd., the Defendant No. 4 herein, in the Hindusthan Standard of May 22,. 1962 (Ex. 4). The second document tendered is the letter dated May 22, 1962, by Deokinandan Jalan to Babulal Jalan, Shew Bhagwan Jalan, Nandkisore Jalan and Kisoriial Jalan and the receipts granted in respect thereof. This letter along with the four receipts have been marked as Ex. B. Prospectus of the Defendant No. 4, Asiatic Oxygen Ltd., was also tendered through this witness (Ex. C). This witness has exhibited photostat copies of Form No. 23 filed by Asiatic Oxygen and Acetylene Company Ltd., the Defendant No. 13 herein, with the Registrar of Companies containing resolutions passed by the said Defendant No. 13 and the said photostat copies have been certified by the Asst. Registr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th a majority of the share -holders of the Asiatic Oxygen and Acetylene Company Ltd., whereby their share -holdings in that company are being transferred to the company in exchange for equity shares in the company of equivalent nominal value by a rate stated hereinafter. The announcement thereafter proceeds to state further under the caption 'acquisition of the ordinary shares of the Asiatic Oxygen and Acetylene Company Ltd.' - The Asiatic Oxygen and Acetylene Company Limited has been carrying on business of the manufacture of industrial gases since 1942. It has a factory at Calcutta for the manufacture of oxygen and dissolved acetylene gases to which has recently been added a new single unit with a capacity of 7,000 eft. per hour of oxygen and corresponding acetylene gases. It has another factory at Bhilai for the manufacture of dissolved acetylene gases to which it has proposed to add an oxygen unit. It is now also engaged in certain engineering and construction work. It undertook the sub -contract for the Indian portion of the work relating to the Dugda Coal Washery in Bihar for Hindusthan Steel Ltd., the erection of which has since been completed. It h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h taken by all the partners of the firm of Messrs. Surajmull Nagarmull in the temple of God Ramchandraji before His image, regarding the disputes of the firm and that you are full responsible for breaking the oath. ; I further point out that the action in regard to Asiatic Oxygen Limited has been taken in spite of my protest and even after explaining by me to you that such action on your part will render you liable for breaking the oath. I met Messrs. B.L. Jalan, and S.B. Jalan on the 16th instant when they contended that since 51% shares in the new company, viz. Asiatic Oxygen Limited, will be held by S.N. or their nominees, the new company for all purposes will belong to the firm of S.N. as is the present Asiatic Oxygen and Acetylene Company Limited and, as such, there is no breach, of oath. I, however, did not agree to this contention of theirs and said that since according to promises status quo should be maintained during the period of oath and as transfer of sale of shares has been a matter of serious differences, any sale or transfer of shares during the period of oath would be change of status quo and, as such, your action in transferring the shares of one company ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bition by D.N. Jalan on the other partners. ( 94. ) Exhibit D is a photostat copy certified to be a true copy by the Asst. Registrar of Companies. Exhibit D mentions that the following special resolutions were passed at a general meeting of the members of Asiatic Oxygen and Acetylene Company Ltd. held in Calcutta on December 21, 1959 - - That pursuant to the provisions of Sec. 261 and, other applicable provisions (if any) of the Companies Act, 1956, the appointment of Sri S.S. Jalan, a Director of the company who is also a relative of the partners of Messrs. Surajmull Nagarmull, the Managing Agents of the company, be and is hereby made or approved as required by the' provisions of the said section. Resolved that the company hereby approves and consents to the tenancy arrangement with Messrs. Surajmull Nagarmull, the Managing Agents of the company, for Occupying premises 57/1 Ballygunge Circular Road, Calcutta, lower flat by the company belonging to the said Managing Agents on a rent of Rs. 750 per month with effect from 1st April, 1959. The said document also mentions that the date of despatch of notice as November 30, 1959, the date of passing the resoluti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent for acquiring qualification shares by Directors and for the purpose to delete the relative Articles of Association of the company. In view of the above, your consent is necessary for the purpose of amending the Articles of Association of the company by deleting the said Article No. 114 as also Articles 115, 118(a) which are closely related to the said Article. This document mentions the date of despatch of notices as June 25, 1962, and the date of passing of the resolutions as July 18, 1962, and this document is also signed by Surajmull Nagarmull, the Managing Agents of the Asiatic Oxygen and Acetylene Company Ltd. ( 97. ) Exhibit G is also a photostat copy of another form No. 23 filed by Asiatic Oxygen and Acetylene Company Ltd. with the Registrar of Companies. This document records - - At the general meeting of the company duly convened and held in the town of Calcutta on the 27th of September, 1962, the following special resolutions were passed. Resolved that: '(i) that the advance of a sum of Rs. 2,95,883 -40 to meet the promotional expenses q GBP Asiatic Oxygen Limited during the year ended on 31st March, 1962, be and is hereby confirmed': &....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prove the truth of the allegations made in the said letters. It may also be noted that the alleged revocation of authority is only in respect of shares standing in the name of the firm. From the nature and manner of adducing evidence on behalf of the Plaintiffs I could not help forming an impression that the Plaintiffs were not serious about proving its case and did not make any proper attempt to prove the case made in the plaint. ( 101. ) I now propose to indicate generally and, in brief, the nature of evidence adduced on behalf of the Defendants. Although the Plaintiffs have not made any serious attempt to prove the case made in the plaint, as many as fifteen witnesses have been called and a huge mass of documents have been exhibited on behalf of the Defendants. On behalf of the Defendants, evidence has been led mainly through the Defendant No. 13, Asiatic Oxygen and Acetylene Company Ltd., with which the other contesting Defendants have made common cause. The Defendant No -13 has in fact called all the witnesses and the witnesses examined on behalf of the Defendant No -13 may be conveniently divided into four classes: (i) Persons in the employment of the Defendant c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to act only on his oral testimony and I am unable to place any reliance on his oral testimony unless the same is otherwise corroborated by acceptable documentary evidence or other facts and circumstances. ( 103. ) Rajmal Patni, a senior executive of Asiatic Oxygen and Acetylene Company Ltd., was called to explain the background of the formation of Asiatic Oxygen Ltd., the Defendant No. 4. herein, to disprove the allegation of mala fides in the matter of floating the said company. He has also deposed to explain the purpose of transferring the licence and the sale of cylinders by the Defendant No. 13 to the Defendant No. 4. This witness had been working with Surajmull Nagarmull since 1944 and has been in the employment of Asiatic Oxygen and Acetylene Company Ltd. since 1956. This witness refers to the scheme of expansion of Asiatic Oxygen and Acetylene Company Ltd., the collaboration arrangement, in the first instance, with a French company which failed and the ultimate collaboration with Air Products of U.S.A. and the formation of the company Asiatic Oxygen Ltd. on the basis of agreement with Air Products of U.S.A. This witness had himself visited France and America and had par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itnesses, Chamaria on behalf of the Plaintiffs and Boid on behalf of the Defendants, and I am not inclined to come to any conclusion on this question merely on the oral testimony of these two witnesses. This witness Boid has, however, proved to my satisfaction the dividend warrants, balance -sheets and the safe custody receipt of the shares of Coochbehar Trading Co. Pvt. Ltd. ( 107. ) Basant Vinayak Bapat is a partner of S.B. Dandekar & Company which happens to be the Auditors of Howrah Trading Company Pvt. Ltd, and also of one of the Auditors of Asiatic Oxygen and Acetylene Company Ltd. S.B. Dandekar & Company has been acting as the Auditors of Howrah Trading Company Pvt. Ltd. since its inception. This witness has testified to the books of Howrah Trading Company Pvt. Ltd., the balance -sheet prepared by the Auditors and the physical existence of the shares mentioned in the balance -sheet of the company. Ram krishna Venkatarama Iyer is the Auditor of Coochbehar Trading Company Pvt. Ltd., Orient Trading Company Ltd. and Raigarh Trading Co. Ltd. He has been Auditor of these companies for years," practically from the very beginning. He has proved the balance -sheets of these compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the statement of accounts of Howrah Trading Company Pvt. Ltd. with the said Bank. These witnesses have satisfactorily proved the documents tendered through them. ( 112. ) I have merely indicated my general impression of the testimony of the witnesses called on behalf of the Defendant No. 13. I have already noted that no other Defendants have called any witness. I shall refer to the testimony of these witnesses and the documentary evidence adduced as far as the same may be considered necessary and relevant while discussing the issues. ( 113. ) I shall now take up the issues for consideration. The first issue is - -Is the Plaintiff No. 3 a share -holder of the Defendant No. 13 as alleged in para 5 of the plaint ? ( 114. ) It is not disputed that the Plaintiff No. 3 D.N. Jalan does not hold any share in Defendant No. 13 (which is also referred to as the company) in his. own name and the name of D.N. Jalan is not registered as the share -holder or member of the company and his name does not appear in the share register of the company. The said Plaintiff No. 3 claims to be a share -holder of the Defendant No. 13 on the basis that Surajmull Nagarmull is a share -holder of the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s held by Surajmull Nagarmull as partner thereof, however, does not make him personally a member or share -holder of the company in his individual capacity. ( 117. ) Sec . 41 of the Companies Act contains the definition of member and provides - - Definition of member - -(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members. (2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall be a member of the company. ( 118. ) Under the provisions of the Companies Act a share -holder or a member of a company, entitled to the rights and privileges of a member, is the person whose name appears in the share register of the company and the person whose name appears in the share register is the only person to be recognised by the company as its member, for all purposes. So far as the company is concerned, Surajmull Nagarmull, therefore, must be considered to be the share -holder of the company. It is true that Surajmull Nagarmull is not an individual and is only a f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the provisions contained in the Act. and in the Articles of the company. The Company Law does not recognise any benami or any other kind of beneficial interest in any share of any person whose name does not appear in the share register of the company. The Company Act only recognises the person or persons whose name or names appear on the share -register of the company. Even in the case of joint share -holders, the company law recognises only these persons whose names appear on the share register of the company as such joint share -holders. With regard to such joint share -holders suitable provisions are made in the Articles governing their relationship with the company and the rights and privileges of such joint share -holders and also of the company are regulated accordingly. ( 120. ) The firm of Surajmull Nagarmull became a member of the company by virtue of provisions contained in Article 16 which provides - - Shares may be registered in the name of Managing Agents' firm (but not other) or of any limited company or other body corporate or individual. Not more than four persons shall be registered as joint share -holders of any share. ( 121. ) A firm is not u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered to be individual share -holders of the company in respect of the shares registered in the name of Surajmull Nagarmull. If each individual partner is to be considered as a member of the company, it will create a situation contrary to sense and all provisions of law and will lead to absurd results. If individual partners of the firm are to be considered to be members of a company in their individual right, separate notices to all such persons will have to be given. All such individual share -holders will then also have the right to attend and participate and they will also have the right to cast votes separately in respect of the same holding. The number "of votes which a firm may have in respect of this holding in any company will necessarily get multiplied by the number of persons constituting the firm; and the individual persons, if they are treated as individual members of the company, will each be entitled to claim the amount of dividend to be paid on the shares held by the firm, and the company in respect of the same shares registered in the name of a firm will be liable to pay the dividend as many times over as there are partners of the firm. ( 125. ) In the instant ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision is of no assistance in the present case. The said decision does not deal with any case of any share registered in the name of a firm and is no authority for the proposition that the partners of a firm are to be considered to be the joint share -holders of any share registered in the name of the firm in any company. The other decision in the case of Sendji Kapurchand and Ors. v/s. Pannaji Devichand (Supra), referred to by Mr. Gupta, deals with the question of construction of Sec. 4 of the Companies Act of 1913 and lays down that where persons exceeding 20 in number calling themselves as partners of unregistered firms, entered into a partnership to carry on business, and each person is individually entitled to the benefit of the contract, the partnership was illegal under Sec. 4(2), although the persons represented themselves to be partners of unregistered firms, for the word 'person' in Sec. 4 denotes individuals and does not include bodies of individuals whether corporate or not. The said decision of the Privy Council is of no assistance in the instant case and has no bearing on the question of the status of an individual partner of a firm vis -a -vis the company in r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... standing in the names of the original Defendants ?' The answer given by him was - -'Surajmull Nagarmull'. This is the entire evidence adduced on behalf of the Plaintiffs to prove the case of benami and real ownership of Surajmull Nagarmull. Chamaria does not say how Surajmull Nagarmull happens to be or can be the owners of shares standing in the names of the original Defendants. Chamaria does not even choose to say that the original Defendants are the benamdars or nominees of Surajniuli Nagarmull. Chamaria does not mention any fact on the basis of which he makes the aforesaid statement and Chamaria also does riot say a word as to how and under what circumstances Surajmull Nagarmull comes to be the owner of the shares standing in the names of the original Defendants. It is also interesting to note that Chamaria in his evidence does not even mention that Surajmull Nagarmull is the owner of the shares standing in the name of the Plaintiff No. % Howrah Trading Company Pvt. Ltd. Chamaria also does not state any facts on the basis of which he gave the said answer and he does not choose to say as to how he happens to know that Surajmull Nagarmull is the owner. In the facts of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id testimony of Chamaria, I would have had no hesitation in rejecting the said testimony. Even if the suit had been undefended, I would have refused to pass a decree in favour of the Plaintiffs declaring Surajmull Nagarmull to be the owners of the said shares and the parties in whose names the shares stand to be the benamdars of Surajmull Nagarmull on the basis (of the said statement only. To establish a case of benami, as is well -known, certain basic elementary facts as to consideration, possession, enjoyment, treatment of the property must of necessity be established. A mere statement by anybody even if he be a competent witness in an action for a declaration of benami, that A happens to the real owner and B is only his benamdar in the absence of any other evidence, is not evidence at all of the benami transaction and is really in the nature of opinion and, in any event, is not sufficient evidence on which the Court can rely and act even in an undefended suit. The necessary and relevant facts as to the payment of consideration, custody and possession of the property, nature of, the transaction and the nature of the relationship and the conduct of the parties will have to be sati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lf of the Defendant No. 13 have really admitted that Asiatic Oxygen and Acetylene Company Ltd. was under the control of Surajmull Nagarmull and was a company of Surajmull Nagarmull, and it is the contention of Mr. Gupta that in view thereof and as no positive evidence has been adduced on behalf of the Defendants to prove the consideration, the "Court should hold that Surajmull Nagarmull is the real owner of the said shares and the persons in whose names the shares stood were only the benamdars of Surajmull Nagarmull. This contention of Mr. Gupta is clearly unsound. Surajmull Nagarmull was undoubtedly the Managing Agent of the company for years and was certainly controlling and managing the affairs of the company. Surajmull Nagarmull also held a large number of shares in the company in its own name. Others including some partners of Surajmull Nagarmull also held various shares in their names. Various other companies in which Surajmull Nagarmull were interested and of which Surajmull Nagarmull were in -charge are considered and described loosely in common parlance as Surajmull Nagarmull concerns. The fact that a particular company is a Surajmull Nagarmull concern or is under the cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ord, therefore, clearly shows that the shares registered in the name of the companies belong to these companies which asserted all rights of ownership over the same and were the real owners thereof. It is not for the other parties to show that they had paid the consideration money and it is essentially for the Plaintiffs to establish the case of benami made in the plaint. The question of onus may be immaterial, but the burden of proof still rests with the Plaintiffs. On the evidence on record I have no hesitation in coming to the conclusion that the Plaintiffs have not only failed to discharge the burden but the totality of the evidence on record establish that Surajmull Nagarmull was not the owner of the shares referred to in paras. 6 and 19 of the plaint and the persons in whose names the shares stood registered were not the benamdars and nominees of Surajmull Nagarmull. I also fail to understand how a limited company can act as a benamdar for somebody else in respect of any shares registered in its name. I do not think that the memorandum of association and the articles of association of any company will ever permit any company to act as such benamdar. I have only to observe tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice upon Howrah Trading Company Pvt. Ltd., the Plaintiff No. 2, and (v) No notice of intention to propose as special resolution and want of explanatory statement. On identical grounds the notices in respect of the other meetings held on May 31, 1961, July 18, 1962, and September 27, 1962, and the validity of the proceedings of the said meetings have also been challenged in the plaint in paras. 13 and 14 thereof. It may be noted that the special resolution appointing S.B. Jalan as Director at the annual general meeting on May 31, 1961, has been specifically challenged on the same grounds and the special resolution alleged to have been adopted at the meeting of the company on July 18, 1962, which was an extra -ordinary general meeting amending the articles of association of the Defendant No. 13 and deleting from the articles of association the provisions with regard to share qualification of Director has also been specifically challenged. Two special resolutions alleged to have been passed at the annual general meeting of the Defendant No. 13 on September 27, 1962, one relating to promotional expenses of Asiatic Oxygen Ltd., the Defendant No. 4 herein, and the othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ving realised the difficulties of establishing the case made by the Plaintiffs in the plaint, strenuous and unsparing attempts have been made by and in course of cross -examination, to discredit the evidence adduced on behalf of the Defendant No. 13 and to seek to establish the Plaintiffs' case by means thereof. ( 135. ) I propose to take up the notice and the proceedings of the annual general meeting held on December 21, 1959, and to consider the nature of evidence adduced and submissions made in respect thereof. The only evidence adduced on behalf of the Plaintiffs is Ex. D, which is a photostat copy, certified to be a true copy by the Assistant Registrar of Companies. This Ex. D mentions the date of despatch of the notice, mentions due holding of the meeting and the passing of the special resolution appointing S.S. Jalan as a Director of the Defendant No. 13. Apart from this photostat copy there is not an iota of evidence from the Plaintiffs' side on the question of the notice, the meeting held on December 21, 1959, and the proceedings thereof. ( 136. ) Called on behalf of the Defendant No. 13 Mr. Kar has given evidence. He has sought to prove due service of notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pasted although the first minute in the same minute book is hand -written: see Kar, Qs. 3198 to 3216. ( 137. ) Relying on the unsatisfactory nature of evidence adduced on behalf of the Defendant No. 13 Mr. Gupta has contended that no notice had in fact been issued and served on any of the share -holders, -no meeting had in fact been held and no resolutions had at all been passed and the documents have all been fabricated and manufactured for the purpose of this suit. It is the contention of Mr. Gupta that in fact and in reality no meeting of the company would, ever be held and necessarily no notice would ever be issued and served and as there would be no meeting there would be no question of any resolution being passed at any such meeting. He argues that for the purpose of giving an appearance of purported compliance with the provisions of the Companies Act, necessary documents would be prepared and would be submitted with the Registrar of Joint Stock Companies as required under the law, but, in reality, the transactions which would be referred to in such documents would not at all take place. It is his argument that annual returns and returns in Form No. 23 would be filed with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and explanatory statement for passing any special resolution would be settled in the Board meeting: see Kar Qs. 1014 -5, 5155 -6, 5246, 5265. Referring to the proceeding of the meeting on December 21, 1959 (Ex. 001 A) Mr. Gupta, comments that Coochbehar Trading Company Pvt. Ltd. has been shown as present at the meeting through K.L. Jalan, but K.L. Jalan has not been shown as present for. himself. He argues that K.L. Jalan was, therefore, not present and K.L. Jalan's authority to represent Coochbehar has also not been exhibited and there would, therefore, be no quorum as required under Sec. 174(1) of the Companies Act, as the number of members present, ignoring K.L. Jalan and Goochbehar's presence will be les s than five; He contends that if there was no quorum present, then there was in the eye of law no meeting and the proceedings of the purported meeting must be held to be invalid. In support of this contention Mr. Gupta has referred to the decision in the case of Romford Canal Company, (1883) 24 Ch.D. 85. Mr. Gupta has commented that the notice of the meeting, on the Defendants' own showing, was dispatched on November 30, 1959, and the meeting was held on December ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice had, in fact, been issued or served on any of the share -holders. Mr. Mitter argues that the printed notice (Ex. 003), which has been properly proved, establishes clearly that there was the notice. Mr. Mitter comments that no evidence has. been adduced on behalf of the Plaintiffs that the said notice was not served on Howrah Trading and on Baijnath Jalan. Mr. Mitter argues, that documentary evidence on record clearly establishes service of the notice on Howrah Trading and Baijnath Jalan and, in the absence of any evidence from the side of the Plaintiff, there is no 'reason why the Court should not accept the evidence adduced on behalf of the Defendants proving due service of the notice. Mr. Mitter has argued that service of notice on Deokinandan Jalan is not necessary as Deokinandan Jalan is not a share -holder of the company and is not entitled to any notice. Mr. Mitter has submitted that if the requirement of Sec. 171 of the Companies Act is that 21 clear days' notice should be given, then the notice in question is short by a day, but if the requirement is not 21 clear days, then the notice will not be a short notice. He has, however,, frankly stated that he cannot ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he dividend declared at the said meeting and had enjoyed the benefits, and Mr. Mitter contends that with the dividend moneys still in their pockets the share -holders cannot be allowed to impeach the validity of the notice or of the meeting. Mr. Mitter points out that Surajmull Nagarmull who, as Managing Agent of the company, was responsible for the notice and its proper service, had issued' the notice in question and as such Managing Agent had submitted to the office of the Registrar of Companies the annual return and the necessary return in Form No. 23. Mr. Mitter has submitted that the return in Form No. 23 submitted by Surajmull Nagarmull as Managing Agent has been relied on by the Plaintiffs and a photostat copy of the same has been tendered by the Plaintiffs in the suit, and Mr. Mitter contends that the said evidence produced and relied on by the Plaintiffs, falsifies the entire case of the Plaintiffs apart from the case of short notice. ( 140. ) It is to be noted that the position is more or less the same with regard to all the meetings and similar submissions on the genuineness of the documents and transactions of the other meetings have been made. ( 141. ) Mr . G....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... general meeting held on September 27, 1962, but in his place another Director Dr. H.L. Dey was made to retire and he was re -elected. S.S. Jalan who was again due to retire at the annual general meeting held on September 30, 1963, was re -elected at the said meeting (Exs. 001(b), A3), which meeting, however, had to be adjourned as the accounts were not ready. Although S.S. Jalan had already, been re -elected on September 30, 1963, the notice of the adjourned meeting (Ex. 0030) and the report of the Directors included the question of re -appointment of S.S. Jalan as Director at the adjourned meeting held on January 10, 1964. The Chairman, however, at the adjourned meeting (Exs. A6, 001(k)) pointed out that S.S. Jalan had already been re -elected. Although S.S. Jalan had been appointed on September 30, 1963, notice (Ex. 0033) of the annual general meeting held on September 30, 1966, mentions that S.S. Jalan was appointed Director on January 10, 1964, the date on which the adjourned meeting had taken place and at which S.S. Jalan was not elected at all, having been earlier elected on the first date of the meeting held on September 30, 1963. There appears to be two Board meetings and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eting which was held on May 31, 1961, and the validity of this meeting has been challenged in this suit. The printed book (Ex. 0029) containing the notice along with the explanatory note, the Director's report, the Auditor's report and the balance -sheet of the company for the year ending on March 31, 1962, was received at the Registrar's office on December 28, 1962. This notice was in respect of the annual general meeting held on September, 27, 1962, and the validity of this meeting is impeached in this suit. The printed books containing the notices, the Director's reports, the Auditor' reports and balance -sheets of the, company for all the years commencing from the year ending on March 31, 1959, till the year ended on March 31, 1968, have been produced from the Registrar's custody and have been exhibited in this suit. I have already referred to Exs. 003, 006 and 0029, mentioning the dates' on which the said documents had been filed with the Registrar' of Companies, as the validity of the annual general, meetings covered by the notices contained in the said three exhibits is under challenge in this suit. I do not consider it necessary to make any s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndered in evidence in support of the Plaintiffs' case. The said documents exhibited by the Plaintiffs Clearly establish that the said meetings had been held and the resolutions had been passed. It is indeed strange that in this' situation any suggestion could be made on behalf of the Plaintiffs, which include Surajmull Nagarmull, that the documents which had been prepared by Surajmull Nagarmull were fabricated documents. These facts are sufficient to show that the documents are genuine documents and the suggestion that they had been manufactured and fabricated for this suit is unwarranted and untenable. There are, however, still more compelling reasons for holding that the documents are genuine. The resolutions which had been passed at the said meetings held pursuant to the said notices, genuineness of which and of the meetings in pursuance thereof is sought to be questioned, had all been acted upon by all concerned. Dividends declared at the said meetings had been paid to the" share -holders including Surajmull Nagarmull and Howrah Trading Company Pvt. Ltd. and they had received the same and enjoyed the benefits thereof. The Directors and Auditors appointed at such meeting....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rajmull Nagarmull, the Managing Agent. I fail to understand why the company after having issued the notices to the share -holders for the meetings would not choose to hold the same and would merely write out the minutes of the meetings and would submit necessary returns to the Registrar without holding in fact any such meeting and without passing any of the resolutions, when there was no possible impediment to the holding of the meeting and to the passing of any and every resolution. I can see or imagine no possible reason for such a peculiar, if not absurd, course being adopted. The only explanation that Mr. Gupta, the Learned Counsel for the Plaintiffs, could offer was that if the documents had not been sham and fabricated and if the meetings and the transactions at the meetings had all been genuine, there would not have been so many cases of mistakes, discrepancies, corrections, scoring out and rubbing out in the minute books and the documents produced. When asked how could Surajmull Nagarmull suggest that documents prepared by itself in the normal course of its business and duties as Managing Agent of the company were fabricated and not genuine, the only explanation that the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....agarmull had fabricated and manufactured documents and had itself been a party to. transactions and documents which are false, fabricated and fictitious. It appears that the Learned Counsel for the Plaintiffs having appreciated the effect of the very weak nature of the evidence adduced on behalf of the Plaintiffs could hardly find any way out, when confronted with the overwhelming documentary evidence produced against the Plaintiffs in the case, and he must have been instructed to impeach the genuineness of the documents which, if unchallenged, would completely demolish and falsify "the case of the Plaintiffs, sufficiently bad and weak, as it is otherwise. The unsatisfactory manner of keeping the books and the very unsatisfactory nature of Mr. Kar's testimony gave the Learned Counsel the opportunity of seeking to build up some kind of a case and the Learned Counsel naturally tried to make the best of a bad job. In this connection, it is of interest to note that the books of account of Howrah Trading produced by Hansraj Kothari, an employee of Howrah Trading who calls himself to be" the principal officer of Howrah Trading, was also challenged by the Plaintiffs which include Howr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....documents must, therefore, have been manufactured. Mr. Gupta in course of his arguments has sought to refer to a postal guide. Mr. Ralipada Mukherjee, an officer under the Post' and Telegraph department, now employed as the Assistant Postal Superintendent in R.M.S. department, has proved the genuineness of the postal seals on the said documents and has clearly explained the position. I see no reason to disbelieve his evidence. The guide on which Mr. Gupta sought to rely in course of his arguments was not shown to this witness who might have clarified the position. Mr. Mitter, in course of his reply to the argument of Mr. Gupta, had placed reliance on another guide and to the Telephone Directory to show the existence of 'R.M.S. Calcutta'. The way Mr. Gupta sought to develop his case on this aspect, starting with mail service at running trains to service at Railway platforms, also indicates that the Plaintiffs have no clear idea on the subject and can give no correct instruction in the matter. It was not necessary for the company to manufacture any of these documents for the purpose of this suit and it was within the absolute power and easy competence, of the company to d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or foundation. The evidence on record clearly establishes that notice had in fact been issued and served. The nature of allegation made in the plaint and the way the issue No. 4(a) has been settled indicate further that the factum of the issue of the notice was not really in dispute, although the said fact also came to be questioned in course of the cross -examination of Mr. Kar. ( 144. ) I only wish to add that I have come to the above finding on the basis of the evidence on record and in view of my aforesaid findings on the basis of the evidence on record. I do not think it necessary to consider the question of any presumption under Ss. 164 and 195 of the Companies Act. ( 145. ) The evidence on record establishes that the notices in respect of the annual general meetings held on December 21, 1959, on May 31, 1961, and on September 27, 1962, complained of in the plaint, fall short of 21 clear days and must be considered to be short,, if the requirement of the statute is that 21 clear days' notice should be given. The notice in respect of the extra -ordinary general meeting held on July 18, 1962, cannot, however, be considered to be short as it is more than 21 clear days....
X X X X Extracts X X X X
X X X X Extracts X X X X
....#39; minimum notice and on the authority of the decision of the Supreme Court, I hold that 21 clear days' notice is required under Sec. 171(1) of the Act. This period of 21 days' clear notice may, however, be shortened in accordance with the provisions contained in Sec. 171(2) of the Act. In case of any annual general meeting of the company, this period of 21 days' clear notice may be shortened by all the members entitled to vote thereat; There is no evidence in the instant case that any such consent was accorded by all the members entitled to vote at the annual meetings held on short notices on December 21, 1959, on May 31, 1961, and' on September 27, 1962. I must, therefore, hold that the charge of the Plaintiffs in the plaint that the notices in respect of the said three annual general meetings held on December 21, 1959, May 21, 1961, and September 27, 1962, were short, is established and the said charge of short notice in respect of the extra -ordinary general meeting held on July 18, 1962, fails. I only wish to add that this charge of short notice in respect of the aforesaid three annual general meetings levelled, by the Plaintiffs could not be seriously disput....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 21 clear days' notice, is in the nature of a statutory directive given - to a company in the larger interests of the members of the company. The statutory provision imposes a duty and obligation on the company to give ordinarily to the members of the company 21 days' clear notice and confers the right or privilege on the share -holders of the company to be given 21 days' clear notice. This statutory right or privilege is conferred on the share -holders of the company essentially in the interest of the share -holders. It is well -settled that any statutory right or privilege created for the benefit of any particular person or class of persons may ordinarily be waived by the person or persons for whose benefit the said right or privilege is created by any statute. Reference may be made to the following passage in Halsbury's Lotus of England (3rd ed., vol. 14, Article 1175, p. 637): Waiver is the abandonment of a right and is either express or implied from contract. A person who is entitled to the benefit of a stipulation in a contract or of a statutory provision may waive it and allow the contract or transaction to proceed as though the stipulation or provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... again, a company with 50 members cause the annual general meeting on a shorter notice without the necessary consent of the members and all the 50 members are present at the meeting and two members, with an insignificant number of votes, protest against the short notice and under protest choose to participate at the meeting. Suppose, at the meeting a resolution is passed after due deliberation against the wishes of these two members by an overwhelming majority by other 48 members on proper voting. Can these two members challenge the validity of the resolution on the ground that the meeting was a nullity, as the same was not called on a proper notice as required by the statute ? In my view, such a contention cannot be entertained and the resolution must be held to be valid. Now suppose, at any such meeting called on short notice without the necessary consent of the members of the company having 50 members, 26 members choose to protest against the shortness of the notice and leave the meeting, protesting that the meeting -has not been lawfully called and the remaining members present proceed with the meeting and pass certain resolutions. It will, undoubtedly, be open to the members w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the members for whose benefit the said period is prescribed. To my mind, it will be unreasonable to construe Sec. 171(2) to mean that prior consent of the members must necessarily be obtained for calling a meeting at a shorter notice. The object of Sec. 171(2) is, in my opinion, to enable the company to meet cases of urgency when the usual notice of 21 clear days may prove inconvenient and cause prejudice to the interests of the company. If before the issuing of any short notice calling a meeting of the company, consent of the share -holders has to be obtained in terms of the provisions contained in Sec. 171(2), the very purpose will necessarily be frustrated and the time that will be taken in securing necessary consent, apart from the possibility of not hearing from all the members and not obtaining the necessary consent, will defeat the very object. If such construction of prior consent of the members, before the issuing of the notice calling the meeting, is to be given, Sec. 171(2) will be rendered completely nugatory and the company will not be in a position to get any benefit intended to be conferred by the said Sec. and, it may mean sheer waste of valuable time for the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." their capacity of Directors, passed the resolution to issue debentures without any notice having been given for the calling of a general meeting of the share -holders, as required by Sec. 67 of the Companies (Consolidation) Act, 1908. The company was afterwards wound up, and it was contended by the Liquidator that as the requirement of the statute had not been complied with, the resolution to issue the debentures was invalid. The Court of Appeal held, affirming Astbury J. that the requirements of the statute were intended for the protection of the share -holders, and that if the resolution was in a matter inter vires the members of the company, and there was no fraud, the share -holders were able to waive all formalities as regards notice and that the resolution that had been passed was just as valid as there had been the requisite notice. Warrington L.J. said,, (1920) 1. Ch. 470: It happened that these 5 Directors were the only share -holders of the company, and it is admitted that the 5, acting together as share -holders, could have issued these debentures. As Directors they could not but as share -holders acting together they Could have made the agreement in question. It was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mandatory in the sense that any breach thereof will necessarily and invariably have the effect of invalidating the meeting and the proceedings of the meeting, called and held in breach of any of the said provisions. These provisions must be considered to be directory even though any breach thereof may entail penalty being imposed. A statutory provision does not necessarily become mandatory because any breach thereof may attract penal consequences. ( 156. ) In the case of Banarsi Das v/s. Cane Commissioner, Uttar Pradesh and Anr. : AIR 1963 S.C. 1417 (1424) the Supreme Court observed: The learned Attorney -General, however, contends that the prescription of Sec. 18(2) being mandatory they had to be followed to the letter. He urges that inasmuch as the Act and the Rules prescribe a penalty for breach the Sec. cannot but be regarded as mandatory in all its particles. He assumes that the Appellant may be guilty and punished but, says he, the mandatory provision not having been followed according to the letter there can be no resulting valid contract. A large number of ruling on how to distinguish between mandatory and directory provisions of law were cited before us in supp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....set out the consequence of non -compliance the question whether the prescription of law shall be treated as mandatory or directory could only pe solved by regarding the object, purpose and scope of the law. If the statute is found to be directory, a penalty may be incurred for non -compliance, but the act or thing done is regarded as good. It is unnecessary to multiply these cases which are based upon the statement in Maxwell which is quoted over and over again. ( 157. ) The Supreme Court in the case of Hari Vishnu Kamath v/s. Ahmad Ishaque and Ors. : AIR 1955 S.C. 233 (245) held: It is well -established that in an enactment in form mandatory might in substance be directory, and that the use of the word 'shall' does not conclude the matter. This question was examined at length in Julias v/s. Bishop of Oxford, (1880) 5 A.C. 214, and various rules were laid down for determining when a statute might be construed as mandatory and when as directory. They are well -known and there is no need to repeat them. But they are, all of them, only aids for ascertaining the true intention of the Legislature which is the determining factor, and that must ultimately depend on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he usual course of its business and working, creating an uncertainty and instability in the affairs of the company and resulting in chaos and confusion. These statutory provisions enacted for promoting and protecting the interest of the share -holders, in general, of companies, are indeed salutary and it is the duty of the companies to comply with them. Non -compliance of these provisions is not to be normally expected and, if made, may even be visited with penal -consequences. These provisions, however, are not so imperative that the requirements thereof cannot be waived at all and are not mandatory in the sense that any breach thereof will necessarily and invariably invalidate the meeting and the proceedings thereof. These provisions, relating to notice, contained in Ss. 171, 172 and 173 of the Act, are, in my opinion, in the nature of statutory directions or instructions to the company, enacted in the interest of the shareholders to enable them to participate effectively at the meetings of the company. Any breach of these provisions or requirements does not necessarily have the effect of invariably invalidating the meeting and nullifying the proceedings thereof. The effect of an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vt. Ltd. is a concern under the control of Surajmull Nagarmull. D.N. Jalan is a partner of Surajmull Nagarmull. He is, however, not a member of the company and is not entitled to any notice. It appears that short notices have been given by the company as the company did not have a clear idea that 21 days' clear notice was necessary under the law and had not considered it necessary to ascertain the correct position, as in view of the composition of the shareholders of the company, the notice had been considered to be a mere formality of law. The company does not appear to have been seriously worried and exercised over the requirements, as the company had never expected any trouble from any of the share -holders who were all under the control of Surajmull Nagarmull and accepted and were all expected to accept and abide by whatever were done by Surajmull Nagarmull and its partner S.B. Jalan who had been managing the affairs of the company. In view of this and in this, background the company had functioned with a degree of informality in the matter of these statutory requirements and no objection had been taken by any of the share -holders of the company. Indeed, but for the intern....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Ors. (Supra (839 -40)), referred to by Mr. Gupta, the question of validity of a meeting called on a short notice had come up for consideration before a Division Bench of the Madras High Court. Dealing with this question the Court observed: The next branch of argument on behalf of the Respondents in this part of the case was that as none of the members including the Plaintiffs who, though absent appointed proxies on their behalf, objected at the time of the meeting, it must therefore be deemed that the members present either in person or by proxy had waived the objection. This plea was not specifically raised in the written: statement nor in the issues. All that was said in para 3 of the written statement was that the Plaintiffs had received notices of the meeting in due time and raised no objection to the validity of the notice at any time at or about the meeting though they were present by proxy at the meeting. Issue 2 raises in a general form the question whether the Plaintiffs were entitled to question the validity of the notices of the meeting or the proceedings of the meetings at the general body of 7. 11.1947 as stated in para 3 of the written statement. As the fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roviso in Sec. 81(2). Under this proviso it would be seen that the requirement as to 21 days' notice may be dispensed with by an agreement of all the members 'entitled to attend and vote' and not merely of all the members 'entitled to vote and present in person or proxy at the meeting'. It requires therefore an agreement of all the members of the club in order to dispense with the requirement of 21 days' notice. The proviso in other words indicates the intention on the part of the Legislature that the provision in Sub -section (2) is mandatory and that it can be dispensed with only by the agreement of all the members. It is not enough that the members present at the meeting indicated either expressly or impliedly they consented to or acquiesced in shortening the period of notice. An express consent of all the members to waive the notice has not been established in this case. Even if the members present agreed to waive the defect in the notice the meeting would not be a valid meeting. The Plaintiffs therefore are not precluded from raising the contention that the notice contravened the provision of Sub -section (2) of Sec. 81. ( 161. ) These observations, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itiative of the general body that a special committee was appointed to consider the amendments, if any, to the Articles of Association. The notice clearly stated that a print of the proposed amended Articles of Association will follow shortly. From 22nd October to 7th November the members had ample time to consider the proposed amended Articles. We do not think that the notice was insufficient and therefore bad on this ground. No useful purpose would be served by referring to the decisions to which our attention was drawn, as the decision of that question would invariably rest on the facts of each case. In Palmer's Company Precedents, part I, at page 1002, it is pointed out that - -'Where a large number of alterations have to be made, it is generally more convenient to adopt a new set of Articles altogether. Where this course is adopted, a copy of the new regulations should lie for inspection at the office and the notice convening the meetings should state the fact; and in some cases it may be deemed expedient to send printed copies of the proposed new Articles with the notices. According to the decision of Kekewich J. in Normandy v/s. Ind. Coope & Company, (1908) I Ch 84, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n is in the main governed. by considerations of Convenience and justice:, and when that result. would involve general inconvenience or injustice to innocent persons, or advantage to those guilty of the neglect without promoting the real aim and object of the enactment, such an intention is not to be attributed to the Legislature. The whole scope and purpose of the statute under consideration must be regarded. Lord Campbell in Liverpool Borough Bank v/s. Turner, (1860) 30 L.J.Ch. 379 observed: No universal rule can be laid down as to whether 'mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed. It is, therefore, clear that regard must be had to the whole scope and purpose of the statute for the purpose of determining whether the statute is mandatory or directory. Judged by that test, the conclusion is irresistible that Sec. 173 enacts a provision which is mandatory and not directory. The object of enacting Sec. 173 is to secur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....284) lays down the principle that of a share -holder is aware of the facts, it is not for him or for her to complain of the insufficiency of notice of meeting. Lord Blanesburgh observed: No possible complaint of the notice or circular on the ground of insufficiency is therefore open to him. ( 164. ) P .B. Mukharji J., as his Lordship then was, referred to this decision of the Judicial Committee in the case of Maharani Lalila Rajya Lakshmi M.P. v/s. Indian Motor Company (Ilazaribagh) Ltd. and Ors. : AIR 1962 Cal. 127 (130, 131) and held after referring to the aforesaid observations of Lord Blanesburgh: There his Lordship is emphasising the aspect that a share -holder who by his conduct shows that he knew the real effect of the work to be transacted at a meeting cannot complain of a notice on the ground of insufficiency. The further observation of his Lordship was to the effect - - Although it imposes by Sec. 173(2) an obligation that there shall be annexed to the notice of meeting a statement of the type and nature which I have discussed above, the question is, does failure to comply with the details of Sec. 173(2) of the Companies Act make it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uted Board meeting. It was, however, contended on. behalf of the Directors that the payments had been made with the full knowledge and consent of all the shareholders of voting shares in the company at the relevant times and it was contended that in those circumstances the absence of a formal resolution by the company in duly convened meeting of the company was irrelevant, and in support of the contention reference was made to the case of Re Express Engineering Works Ltd., (1920) 1 Ch. 466 (471) and to the case of Parker and Cooper Limited v/s. Reading, (1926) Ch. 975. Buckley J. quoted the following observations of Lord Sterndale M.R. In the present case five persons were all the Corporators of the company and they did all meet, and did all agree that these debentures should be issued. Therefore, it seems that comes Within the meaning what was stated by Lord Davey in Solomon v/s. Solomon and Company Ltd.,, (1897) A.C. 22 at p. 757, and he quotes from Lord Davey. Lord Sterndale M.R. went on - - It is true that a different question was there under discussion, but I am of opinion that this case falls within that Lord Dayey said. It was said there that the meeting wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en carried in the Express Engineering Works' case (Supra), for Astbury J. expressed the view that it was immaterial that the assent of the Corporators was obtained at different times, and that it was not necessary that there should be a meeting of them all at which they gave their consent to the particular transaction sought to be upheld. The learned Judge holds ( Supra (168)): It seems to me that if it had occurred to Mr. Elvins and Mr. East, at the time when they were considering the accounts, to take the formal step of constituting themselves a general meeting of the company and passing a formal resolution approving the payment of Directors' salaries, that would have made the position of the Directors - -that is to say, Mr. Elvins and Mr. Hanley, - - who received the remuneration, - -secure, and nobody could thereafter have disputed their right to retain their remuneration. The fact that they did not take that formal step but that they nevertheless did apply their minds to the question of whether the drawings by Mr. Elvins and Mr. Hanley should be approved, as being on account of remuneration payable to them as Directors, seems to me to lead to the conclusion th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot necessary, so far as I understand it, that any resolution by the Board should have been expressed by a minute although it ought to be so. However, I do not want to be understood as 'finding, and I do not find, that the Board of this company has ever met or passed any resolution that the company intend to occupy these premises for their own purposes. I do not propose to find that at any effective time the Board of this company has passed a resolution of the intention to occupy these premises, but the business of the company has been so conducted and the position of the company is as such that matters of this sort, which are business matters, are dealt with by agents of the company, the people who manage the business. Their intention is quite clearly to occupy these premises as soon as they can. There is another point to which I ought to refer. Instructions had been given to architects to prepare certain plans with regard to alterations to the premises and this had been agreed from time to time. Plans had been framed and submitted to the managers, the business managers of this company, and I think it would be difficult for the Board of this company, after all that had been goi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar case there is evidence to go to a jury that the criminal act of an agent, including his state of mind, intention, knowledge, or belief is the act of the company...must depend on the nature of the charge, the relative position of the officer or agent and the other relevant facts and circumstances of the case. So here the intention of the landlord company can be derived from the intention of their officers and agents. Whether their intention is the company's intention depends on the nature of the matter under consideration, the relative position of the officer or agent and the other facts and circumstances of the case. Approaching the matter in that way, although there was no Board meeting, nevertheless having regard to the standing of these Directors in control of business of the company, having regard to the other facts and circumstances which we know, whereby plans had been prepared and much work done, it seems to me that the Judge was entitled to infer that the intention of the landlord company was to occupy the holding for their own purposes. I am of opinion, therefore, that the Judge's decision, on this point was right. ( 173. ) The English Courts appear ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owrah Trading were both present at the meeting held on August 20, 1956, and the necessary resolution had been passed unanimously. The necessary return in Form No. 23 (Ex. 0041) signed by Surajmull Nagarmull had also been duly filed with the Registrar of Companies, It is to be noted that in the plaint the factum of the consent, on the part of the Defendant No. 13 to Gopalkrishna Jalan holding an office of profit has been challenged and the issue that has been raised is also an issue of fact. The factum of consent is clearly established by the special resolution unanimously adopted by the company at the meeting of the members held on August 20, 1956 (Ex. 001 (j)). Surajmull Nagarmull and Howrah Trading were both present at the meeting and the special resolution according to the consent of the company was passed unanimously. Similar arguments to the effect that no meeting had in fact been held, the minutes are fabricated and the transactions recorded are not genuine and are sham transactions, were advanced by Mr. Gupta, relying on the same grounds, namely, nature of evidence of Mr. Kar, unsatisfactory manner of maintaining the books and discrepancies in the evidence of Mr. Kar in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t it is also not open to them, and any cause of action for challenging the validity of the special resolution which was passed on August 20, 1956, is also barred by limitation. The submission of Mr. Gupta that it is a case also of continuing wrong is untenable and of no avail. ( 175. ) I have, however, to note that certain other grounds, not taken in the pleadings, have been urged on behalf of the Plaintiffs to impeach the validity of the meetings and the proceedings thereof, including the validity of the special resolution according sanction to Gopalkrishna Jalan holding an office of profit. It has been argued' by Mr. Gupta that in view of the provision contained in Sec. 314 of the Companies Act, 1956, which came into effect on and from April 1, 195(5, S.B. Jalan and S.S. Jalan must be deemed to have vacated their office of Directors on and from that date. The relevant portion of the said Sec. 314 of the Companies Act in force on April 1, 1950, reads ; 314. (i) Except with the previous consent of the company, accorded by a special resolution, no Director of a company, no partner or relative of such Director, no firm in which such a Director or a relative is a partn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1956, are without any authority, illegal and of no consequence. ( 177. ) In my view, the contention of Mr. Gupta is not tenable. To put any such construction on Sec. 314 would result in utter chaos and confusion in the administration of the affairs of the company. When G, K. Jalan was appointed, there was no impediment to the appointment. S.B. Jalan and S.S. Jalan were Directors of the company long before appointment of G.K. Jalan and restriction sought to be imposed by Sec. 314 was not there when these three persons, namely, S.B. Jalan, S.S. Jalan and G..K. Jalan were holding their respective offices. It is not disputed that all these gentlemen were holding their offices lawfully and properly before the Act of 1956 came into force on April 1, 1956. The question is whether the imposition of the restrictions by Sec. 314 affects the position then existing and makes the holding of office as Directors unlawful. It is quite clear that in the facts of the instant case it was not possible for the company to comply with the requirements of obtaining previous consent. Mr. Gupta's submission that steps should have been taken in anticipation to obtain necessary consent of the company a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttle reason to believe that it represents legislative intent. We are unable to persuade ourselves to believe that the Legislature intended to ignore the rights of persons having legal title to possession and wanted to make a gift of any building to a trespasser howsoever recent the trespass might have been if only he happened to be in physical possession of the building on the date of vesting. ( 179. ) The Supreme Court held that the expression 'held' used in Sec. 9 must be considered to mean 'lawfully held'. ( 180. ) To my mind, it is impossible to attribute to the Legislature the intention that the persons lawfully holding any office of profit or of Directors will cease to hold such office lawfully when the Legislature in its wisdom did not choose to put a complete ban on such appointment without giving any opportunity of complying with the requirements to be complied with for the holding of such office. To attribute such intention to the Legislature and to put such construction on Sec. 314 will not only operate harshly but will bring about a ridiculous situation of utter chaos and confusion in the administration of the affairs of the company. The L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shed unless the relevant facts are properly pleaded. It is well -established that in the absence of any pleading or issue such a contention cannot be entertained on the basis of some stray evidence on record. In the case of Ram Prasad v/s. The State of Madhya Pradesh and Anr. : AIR 1970 S.C. 1818 (1821) the Supreme Court observed: The question whether an Agent can enforce his lien in a particular case is a mixed question of law and fact. Therefore, in the absence of any specific plea, that question cannot be gone into. ( 183. ) It has next been contended on behalf of the Plaintiffs that S.S. Jalan, who was longest in office, must have retired by rotation under Sec. 256(2) of the Companies AcL at the annual general meeting held on September 27 1962, and as he was not re -elected and H.L. Dey had been elected at the said meeting, S.S. Jalan must have ceased to be a Director after September 27, 1962, and had no authority to act as such after that date. It is the contention of the Plaintiffs that all acts purported to have been done by S.S. Jalan as Director thereafter are illegal and void and Sec. 290 of the Companies Act affords no protection to such unlawful acts. Relian....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in dispute and it cannot be disputed that if S.S. Jalan had in fact retired he would, undoubtedly, have been re -elected as the company was completely under the control of S.B. Jalan. Through inadvertence and foolish mistake, the fact that S.S. Jalan should have retired by rotation and not H. L. Dey, escaped the attention of the company. It is indeed very unfortunate that this kind of mistake should at all occur and it only goes to show that the affairs of the company were not being managed with that much of care and caution as should be expected of any company. There can, however, be no doubt that the whole thing was through mistake and lack of due care and there can be no question of any motives or mala fides and no motives or mala fides were even suggested or could be suggested, as S.S. Jalan could easily have been re -elected in the event of his retiring. I may only add that S. S - Jalan had in fact been subsequently re -elected on occasions after his retirement by rotation. ( 186. ) Even if I had held that it was open to the Plaintiffs to raise this contention that S.S. Jalan had retired by rotation, I would certainly have held in the facts of the instant case, that al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation comes within the purview of this section. The case of a Director retiring by rotation is not a case of no appointment at all as a Director. A Director, who is to retire by rotation, must have been validly appointed as Director and by virtue of the provisions contained in the Act or in the Articles, he is to retire by rotation in his turn and his appointment as Director is terminated by virtue of the provisions contained in the Act or in the Articles of the company. Ss. 255 and 256 of the Companies Act make provisions for retirement of Directors by rotation and Articles 123 and 124 of the company in the instant case also provide for retirement of Director by rotation. The question of any Director retiring by rotation is essentially a question of fact and, although normally and usually the company should know and the Director concerned may also know the time for such retirement, it cannot be contended that as a matter of law such knowledge must necessarily be presumed in every case to take the case of a retiring Director out of the purview of the protection afforded by Sec. 290 on the footing that such termination had been shown to the company which must be presumed to have suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s argument is, in my opinion, fallacious, and it may be noted that even in Sec. 280 the word 'vacate' has been used. In the Act, the Legislature has used various expressions, namely, 'vacating',, 'termination', 'retirement', 'cease' etc. in relation to determination of office of a Director. The effect, to my mind, of whatever expression may have been used in this connection, is the same and the effect is that the office of the Director stands determined or terminated. The word 'terminate', according to the Shorter Oxford English Dictionary (3rd. ed.) means, amongst other things - - "To determine; to bring to an end, put an end to, cause to cease ; to end (an action, condition, etc.)." The said expression is wide enough to cover a case of retirement by rotation which has the effect of terminating the office of the Director. In my opinion, the Legislature never intended to narrow down the scope of Sec. 290 to cases of termination under Ss. 280, 281 and 282 as contended by Mr. Gupta; and if the Legislature had so intended the Legislature could have easily said so. As I have already observed, the Legislature, in my opinion, intended the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oviso and were, therefore, not protected. The learned Judge does not appear to have considered the question of the validity of acts of persons done as Directors after the termination of appointment, as such, by retirement by rotation under Sec. 256 of the Act and does not appear to have construed the said provision in the section. The observation of the learned Judge that this is not a case where there was a defective appointment but one where there was no appointment of them as Directors at all appears to be based on the decision of the English Court in the case of Morris v/s. Kanssen and Ors., (1946) A.C. 459 and not on any interpretation of the provisions contained in Sec. 290 of the present Act as to validity of acts of persons as Directors after termination of the appointment. The conclusion of the learned Judge that the Directors were fully aware of their position and there is ample evidence on record for that also and Sec. 290 is not applicable to the facts and circumstances of this case suggests that Sec. 290 could otherwise apply, had the facts been different, and does not lay down that Sec. 290 has no application to the case of a Director retiring by rotation. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that may afterwards be discovered in his appointment or qualification. Lord Simonds dealing with the Sec. observed (Supra (471)): There is, as it appears to me, a vital distinction between (a) an appointment in which there is a defect or, in other words, a defective appointment, and (b) no appointment at all. ( 193. ) This case was not concerned with any acts done by a person as a Director who has retired by rotation and is of no assistance in the instant case. To my mind, in view of the fact that the English Act contains no provision protecting the acts of persons as Directors after termination of the appointment as Director as provided in Sec. 290 of the present Indian Act, the English decisions are not really of any assistance in construing this particular provision in Sec. 290 of the present Indian Act. I do not, therefore, consider it necessary to discuss the case reported in, (1914) 1 Ch. 883, referred to in the judgment of Law J., as the said case has no bearing on the question. The other case reported in, (1959) Comp Cases 273, referred to in the judgment of Law J., does not deal with Sec. 290 of the Companies Act and is not concerned with the question of. acts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial point of time. There is no evidence to show that the fact had been shown to the company at any material time or that the fact was present in the mind of the company at any relevant time. If the fact had been present in the mind of the company at the relevant time and had not escaped the attention of the company, the company instead of retiring H.L. Dey by rotation would have retired ' S.S. Jalan by rotation and would have him re -elected on such retirement. It is important to note that S.S. Jalan had in fact on subsequent occasions retired by rotation and had been re -elected. In the facts of the instant case, I am, therefore, of the opinion that all acts done, by S.S. Jalan after September 27, 1962, till his re -election, if' they could be challenged by the Plaintiffs, are valid and protected under Sec. 290 of the Companies Act. ( 195. ) I have to observe that the further argument of Mr. Mitter that S.S. Jalan must be considered to have been statutorily re -elected under the provision of Sec. 256(4) in the event of his statutory retirement under Sec. 256(1) & (2), does not appeal to me. The said Sec. 256(4) which provides for such statutory re -election reads: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh the result of such deliberation and volition is not any positive act of doing something and is aa act in the negative of not doing anything in the matter of filling up the vacancy caused by such retirement. To my mind, for attracting the provisions of Sec. 256(4) the company and the members thereof must know that the Director X is retiring by rotation and a vacancy is being caused in consequence thereof and with the knowledge of that fact the members must proceed to act at the meeting; and if with the knowledge of the fact that the members choose not to fill up the vacancy and further choose not to resolve expressly not to fill up the vacancy, the vacancy will be deemed to be filled up by the automatic re election of the retiring Director, provided the other conditions laid down in the Sec. are satisfied. If the company and its members do not happen to know that the Director X is retiring by rotation and a vacancy is being caused thereby, there cannot be any question of filling up such vacancy far less to speak of expressly resolving not to fill the vacancy. The question of filling up the vacancy and of further resolving expressly as to whether the vacancy is to be filled up or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ooting that he had retired by rotation. The members, therefore, resolved in fact to fill up the vacancy by re -electing H. L.Dey. There was, "therefore, no question of not filling up the vacancy or of any express resolution not to fill up the vacancy and naturally there could be no question of any compliance with the other requirements of the Sec. arising in consequence thereof. ( 199. ) Even if there had been a force in the contentions of Mr. Gupta and even if he had been in a position to urge them in the absence of any pleading or issue, the contentions cannot be entertained and are bound to fail for a very fundamental reason. Before I deal with this aspect, it will be convenient to dispose of another contention of Mr. Gupta. He has contended that the appointment of Mr. H.L. Dey as Director is' illegal and invalid as H.L. Dcy happens to be an employee of Surajmull Nagarmull. It is the contention of Mr. Gupta that at all material times H.L. Dey was an employee of Surajmull Nagarmull which was the Managing Agent of the company and, in the absence of compliance of the necessary requirements and formalities, the appointment of H.L. Dey is invalid and illegal and H.L. Dey was n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n behalf of the general body of share -holders, maintain an action against those Directors. ( 202. ) The facts of this case may be briefly noted. The accounts of the African Tug Company Ltd. at the commencement of its financial year, in 1900, showed a considerable debit balance on the previous year's trading, but the Directors illegally, though honestly, applied a profit made in the earlier part of 1900 in payment of an interim dividend instead of in reduction of the debit balance, thus in effect paying a dividend out of capital. The balance -sheet for 1900 showing the debit balance and also the payment of the dividend was submitted to and approved by the share -holders in the general meeting. Subsequently, the Directors, recognising their mistake, proposed to apply any future profits in wiping out the debit balance, and this was almost entirely accomplished out of profits in 1901 and 1902, as appeared from the balance -sheets for those years submitted to and approved by the share -holders in the general meeting. In 1903, two of the share -holders who had themselves received their portions of the dividend and concurred in passing the balance -sheets, commenced an action on b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imself and all other share -holders against the company as Defendants. I will not pause to consider under what particular circumstances such an action maybe maintained, but I assume that this is one of those cases in which such an action may be maintained. - -I mean in point of form. But I think it is equally clear that the action cannot be maintained by a common informer. The Plaintiff in an action in this form must be a person who is really interested. ( 205. ) In the case of In Re: James Burton and Son Ltd., (1927) 2 Ch. 132 it was held that a share -holder of the company, whose name appeared on the register in respect of the shares allotted to him and who acted as a share -holder of the company and received a bonus on his shares, was estopped from denying that he was a share -holder of the company and that the allotment of the shares to him was illegal and void. In January 1920, Kenworthy applied, on a form supplied to him by Young, for 100 shares in a company about to be formed. On April 14, 1920, Young purported to transfer to Kenworthy 100 shares, but the transfer did not specify denoting number of the shares comprised therein. At a meeting of the Directors held on April ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement had been come to. It is true that Kenworthy may not be estopped from alleging that the allotment to Young was illegal and void. I will assume that; but that is no reason why he should not be estopped from denying that a valid agreement was come to between him and the company for the allotment to him of these 100 shares. He was placed on the register in respect of these shares, and he received a certificate. He did not get a certificate from Young as a matter of fact, but he received the certificate from the company. He acted as a share -holder of the company and he received bonus on his shares. In these circumstances, I should have thought that he was clearly estopped from denying that an agreement was come to between him and the company under which he agreed to take those shares at a time when the company was in the position legally to enter into such an agreement. ( 206. ) In the case of British Sugar Refining Company, 26 L.J. Ch. 369 it has been observed that it may not be open to a share -holder who attends and participates at a meeting, without any protest or objection, to complain later on that the meeting was not duly convened and was invalid for any non -compliance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow be heard to say that he was interested in the allotment and could not vote. Like the Director in York Tramways Company v/s. Willows, (1882) 8 Q.B.D. 685, he is now estopped from contending that the allotment is invalid. ( 208. ) Some other decisions on this aspect have been cited by Mr. Mitter. I, however, do not consider it necessary to refer to the same as the question whether any particular party is debarred and estopped from denying or disputing any particular act or transaction or raising any objection must necessarily depend on the facts and circumstances of each particular case. Mr. Gupta has referred to the decisions in the case of Neal v/s. Quin, (1916) W.N. 223 and also to the decision in the case of North Eastern Insurance Company case, (1919) 1 Ch. 198. These decisions are of no material assistance in the facts of the instant case and I, therefore, do not consider it necessary to deal with these cases. ( 209. ) In the instant case, Surajmull Nagarmull and Howrah Trading received, with full knowledge of all facts, the dividends declared at the annual general meetings which they seek to challenge now in this suit, and they were present and had participated at the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Defendant No. 13 and had each acquired on the same day one share which they still hold, and S.B. Jalan never ceased to hold his shares in the company. ( 212. ) In view of my finding on issue No. 1 that D.N. Jalan is not a member of the company, issue No. 6 which reads - -"Has the Plaintiff No. 3 no right or authority or locus standi to dispute the validity of the notices and resolutions referred to in paras. 13 and 14 of the plaint for reasons stated in para 15 of the written statement of the Defendant No. 13 - must be answered in the affirmative and it must be held that D.N. Jalan has no such right. ( 213. ) Issue No. 7 is - -"Did the Defendant Nos. 1, 2 and 3 cease to be the Directors of the Defendant No. 13 as alleged in paras. 15 and 16 of the plaint - So far as this issue is concerned, in view of my findings on issues Nos. 3 and 4, this issue has to be answered against the Plaintiffs and it must, in any event, be held that the Plaintiffs are not entitled to challenge the validity of the appointment of the said Directors. ' ( 214. ) I now take up issue No. 8 which is - -"Was the arrangement as to exchange of shares invalid or illegal or fraudulent, as alleged in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exchange of shares by the other members. The other members raised no dispute as to the genuineness of the letters of offer and acceptance which passed between them and the company and they accepted the exchange of their shares. In these circumstances, I do not see any reason as to why these letters of offer and acceptance should be fabricated. Surajmull Nagarmull was the Managing Agent of the company. Surajmull Nagarmull and Howrah Trading must have been aware of the announcement of the arrangement in the newspaper and also in the prospectus. There was no protest from any of them. Surajmull Nagarmull and Howrah Trading acted on the arrangement and still hold the shares obtained by way of exchange. It can never be suggested that the announcement of the arrangement in the prospectus (Ex. C) and in the newspaper (Ex. A) could be fabricated and these documents could be manufactured documents. The said documents, which have been exhibited by the Plaintiffs, record the fact of the arrangement and no objection is taken by any of the members. The subsequent conduct of the members in acting on and in implementing the arrangement clearly falsifies the case sought to be made on behalf of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....validity of the said arrangement while they continue to retain the benefits of the said arrangement by holding the shares obtained on the basis of the said arrangement. This issue No. 8 is, therefore, answered against the Plaintiffs in the negative. ( 216. ) Issue No. 9 is as follows ; 9. (a) Did the Plaintiff No. 3 prohibit the transfer of shares in the share capital of the Defendant No. 13 as alleged in para 24 of the plaint ? (b) If so, was such prohibition valid or legal or binding on the Plaintiff No. 1 or its partners or any of the Defendants? (c) Were the transfers, allotments and exchange of shares invalid or illegal or made in collusion and conspiracy or without the knowledge or consent or approval of the partners of the Plaintiff No. 1, as alleged in paras. 24 and 25 of the plaint?, (d) Are the Plaintiffs entitled to dispute the validity or legality of such transfers, allotments and exchange of shares ? ( 217. ) I first take up issue No. 9(a). The only evidence in support of this issue consists of the oral testimony of Chamaria, the letter, dated May 25, 1962, written by D.N. Jalan to B. L. Jalan, S.B. Jalan, N.K. Jalan and K.L. Jalan (Ex. B), and the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No partner has any authority to prohibit any other partner from doing on behalf of the firm anything which such partner as partner is lawfully authorised to do, as no partner can arrogate to himself alone the entire authority of the firm to the exclusion of other partners. I need not consider as to what will be the position in a case, if there be any specific provisions in this regard in the partnership agreement, as it is nobody's case that the agreement of partnership gave any such authority or power to D.N. Jalan or any other partner. Sec. 18 of the Indian Partnership Act provides: Subject to the provisions of this Act a partner is the agent of the firm for the purpose of the business of the firm. Section 4 of the said Act provides: 'Partnership' is the relation between partners who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually 'partners' and collectively 'firm', and the name under which their business is carried on is called the 'firm name'. No individual partner constitutes ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....speaks of implied authority of a partner of a firm. In the absence of any evidence before me as to what were the terms of the partnership agreement, it does not appear to my mind to be necessary to invoke the said provision as to implied authority of a partner in the instant case. The fact that the partners did enjoy necessary, authority is clearly established by the letter of D.N. Jalan. Unless the partners of the firm enjoyed necessary authority to the knowledge of D.N. Jalan, D.N. Jalan would not consider it necessary to revoke the authority of the partners, as no question of such revocation would then arise. In any event, the facts of the case clearly suggest, to my mind, that the partners did enjoy such authority, whether express or implied,. It is clearly in evidence that one of the important items of business of Surajmull Nagarmull was to invest in shares in diverse joint stock companies and the power and authority to buy and sell shares or to change the nature of investments must necessarily be there with the partners of the firm. In the view that I take, I do not consider it necessary to refer to the decisions cited by Mr. Mitter on the question of partner's authority.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....So far as the third and the last ground taken in the plaint on the basis of collusion and conspiracy, I am of the opinion that there is no proper pleading of collusion and conspiracy. In any event, there is no evidence or material to justify this allegation. This ground No. 3 cannot, therefore, be entertained. ( 223. ) Issue No. 9(c) must, therefore, be answered against the Plaintiffs in the negative and the transfers, allotments and exchange must be held to be valid. ( 224. ) I have to observe that Mr. Gupta has further argued that the transfers should be held to be bad as the registration of the transfers by the company is illegal being in violation of the statutory provisions contained in Sec. 108 of the Companies Act of 1956. It is the argument of Mr. Gupta that the instruments of transfers are not duly stamped and, as the instruments are not properly stamped, the said transfers could not be registered under the law, and the registration is, therefore, illegal and consequently the transfers must by held to be bad. ( 225. ) In the absence of any such, case being made in the plaint, I am of the opinion that this objection sought to be raised at the, hearing cannot be ent....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... obtained on such exchange. They cannot, therefore, be heard to make any complaint about any irregularity or non -compliance of any formality in the matter of the transfer, allotment and exchange. D.N. Jalan, who is not even a member of the company, has no locus standi. As, in my opinion, it is not open to the Plaintiffs to raise this question of invalidity on the ground of sufficiency of stamp in the absence of necessary pleading and as I am further of the opinion that the Plaintiffs Nos. 1 and 2 are estopped from challenging the legality and validity of the transactions in question and the Plaintiff No. 3 has no right to raise any objection with regard to the said transactions, I have not considered it necessary to adjudicate upon the question whether the instruments of transfer had been duly stamped or not. It, however, appears that the company did proceed to act in a manner of care free laxity, not at all desirable in the administration of the affairs in a limited company. I have earlier observed with regard and have expressed my dissatisfaction as to lack of proper care and due diligence exhibited in the various affairs of the company. It may be true that there was this degree....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n has no say in the matter. ( 231. ) I have, therefore, no hesitation in holding that the Plaintiffs are not entitled to dispute the validity and legality of the transfers, allotments and exchange of shares. ( 232. ) I now take up the issue No. 10(a) which reads: Was the agreement between the Defendant No. 13 and the Industrial Finance Corporation of India to secure loans to the Defendant No. 4 invalid or void or illegal or ineffective or without the sanction of the Board of Directors of the Defendant No. 13, as alleged in para 29 of the plaint ? ( 233. ) That in fact there was a Board resolution is not seriously disputed. In any event, the Board resolution dated July 13, 1963, (Ex. 0016(b)) approving the agreement and according the necessary sanction has been proved. What has been contended on behalf of the Plaintiffs is that the purported Board resolution is in law no resolution of the Board of Directors of the company, as there were no validly elected Directors of the company and there was, therefore, no valid Board of Directors of the company. The contention is that the persons acting as Directors of the company were not the valid Directors of the company and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ient to take up the issues Nos. 11 and 12 together. Issue No. 11 relates to the question of transfer of the manufacturing licence by the company to the Defendant No. 4 and the issue No. 12 which comprises of three several issues, is in relation to the question of sale of cylinders by the company to the Defendant No. 4. ( 238. ) ISSUE No. 11 is - - Was the manufacturing licence transferred to the Defendant No. 4 wrongfully or illegally or in collusion and conspiracy or without any knowledge or benefit to the Plaintiffs or" the Defendant No. 13 ? ( 239. ) There is really no evidence on the side of the Plaintiffs on this aspect. To my mind, there is not even proper pleading of collusion and conspiracy. In any event, there is no proper material before the Court on the basis of which any such conclusion is permissible. On the other hand, the evidence of Rajmal Patni clearly explains the position and the circumstances under which the licence came to be transferred. The evidence of Patni, which I am inclined to accept, establishes, to my mind, that the transaction was a perfectly bona fide and proper one. It is to be noted that the said transfer had been duly sanctioned by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing? has to be answered in the affirmative, as the members of the company must be held to have ratified the transaction at the annual general meeting held on January 10, 19C4. Issue No. 12(c) is - - Are the Plaintiffs estopped from challenging the legality or validity of the sale and/or the agreement for sale as alleged in the written statement of the Defendant No. 13 ? ( 243. ) Surajmull Nagarmull having signed the balance -sheet (Ex. 0030) as Managing Agent of the company and being a party to the resolution adopting the said balance -sheet at the annual general meeting held on January 10, 1964, is not entitled to challenge the legality or validity of the sale or the agreement for sale. Howrah Trading and D.N.Jalan not being members of the company at the time are also not competent to challenge the said transaction. Issue No. 12(c) is, therefore, answered in the affirmative. - ( 244. ) In the facts of the instant case, I am further of the opinion that the transfer of the licence and the sale of cylinders by the company do not furnish for the Plaintiffs any cause of action on the basis of which they can maintain an action. It is to be noted that there is no ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ary objection had been raised as to the maintainability of the action. Danckwerts J. upheld the preliminary objection and dismissed the action. The learned Judge referred to various decisions and held that the action was not maintainable by the Plaintiff, because the sale of the mine being within the powers of the company and no acts of a fraudulent character being alleged by the Plaintiff, the sale could be approved or confirmed by the majority of the share -holders. The learned Judge observed (35): On the facts of the present case, the sale of the company's mine was not beyond the powers of the company, and it is not alleged to be ultra vires. There is no allegation of fraud on the part of the Directors or appropriation of assets of the company by the majority of the share -holders in fraud of the minority. It was open to the company, on the resolution of a majority of the share -holders, to sell the mine at a price decided by the company in that manner, and it was open to the company by a vote of the majority to decide that, if the Directors by their negligence or error of judgment had sold the company's mine at an under value, proceeding should not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he question of damage and no attempt had in fact been made to prove any loss or damage. On the authority of the decisions in the case of Pavlides v/s. Jenson (Supra) and in the case of Hevting v/s. Dupont, (1964) 2 All E.R. 273 (281), I further hold that in the fact of the instant case the Plaintiffs are not entitled to make any claim for any alleged loss or 'damage to the company and are not entitled to maintain an action in respect thereof. ( 250. ) I propose to take up the issues Nos. 14 and 15 together. Issue No. 14 is - - Is the suit not maintainable on the ground stated in Para 40 of the written statement of the Defendant No. 13 ? and the issue No. 15 is - - Is the question of the suit being not maintainable barred by res judicata for reasons stated in paras 38 to 42 of the plaint ? Relying on the rule in Foss v/s. Harbottle, (1843) 2 Hare 461 Mr. Mitter appearing on behalf of the Defendant No. 13 has argued that this suit by minority share -holders is not maintainable and should not be entertained. Mr. Mitter has argued that D.N. Jalan is the real Plaintiff in the suit and he is not a share -holder of the company. He has submitted that at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Gupta contends that in any event the rule laid down in Foss v/s. Harbottle, (1843) 2 Hare 461 is not of universal application, and exception to this rule has been made in many cases in the interest of justice. It is the contention of Mr. Gupta that exception to the rule laid down in Foss v/s. Harbottle in the interest of justice is well recognised and Mr. Gupta has also referred to a large number of authorities in support of his contention. Mr. Gupta has drawn my attention to the relevant passages appearing in Buckley (13th ch., pp. 169 -71), to Palmer (21st ed., pp. 498 -509) and also to the following decisions: Rameswar Prasad Bajoria and Ors. v/s. Satya Charan Law and Ors. : 52 C.W.N. 188, Dr. Satya Charan Law and Ors. v/s. Rameswar Prasad Bajoria and Ors. (Supra ), Edwards and Anr. v/s. Halliwell and Ors., (1950) 2 All E.R. 1064, Baillie v/s. Oriental Telephone and Electric Company Ltd., (1915) L.R. Ch.D. 503, Ramkrishandas Dhanuka and Ors. v/s. Satya Charan Law and Ors., AIR 1950 F.C. 81 and N.V.R. Nagappa Chettiar and Anr. v/s. The Madras Race Club by its Secretary H.L. Raja Urs and Ors. (Supra). ( 253. ) Mr . Gupta has argued that the contention of Mr. Tibrewal is barred....