1958 (3) TMI 80 - HC - Indian Laws

Summary

Issues Involved:

1. Bar by Order II, Rule 2(3) and/or Order 33, Rule 1(3) of the Code of Civil Procedure.
2. Validity of Annual General Meetings and elections of Directors.
3. Existence and validity of Directors and Extra-ordinary General Meetings.
4. Plaintiff's debt to the company and lien on shares.
5. Legality of the sale of shares.
6. Conspiracy and collusion in the sale of shares.
7. Entitlement to rectification of the Share Register.
8. Ownership of shares post-sale.
9. Vacation of office by Dr. S.L. Mukherjee and Dr. Neogy.
10. Non-joinder of necessary parties.
11. Reliefs entitled to the plaintiff.

Detailed Analysis:

1. Bar by Order II, Rule 2(3) and/or Order 33, Rule 1(3) of the Code of Civil Procedure:
The defendants argued that the suit was barred due to the withdrawal of previous suits without permission to institute a fresh suit. The court held that the previous suit (No. 3112 of 1954) did not relate to the old shares of the plaintiff and was primarily about the plaintiff's right to act as Managing Director and the issue of new shares. The court concluded that the current suit was not barred by Order 23 Rule 1(3) or Order 2 Rule 2 as the cause of action and reliefs claimed were different.

2. Validity of Annual General Meetings and elections of Directors:
The plaintiff argued that no valid Annual General Meetings were held from December 7, 1950, to April 6, 1953, making the elections of directors invalid. The court found that the meetings held were not in compliance with the Companies Act and Articles of Association, rendering the appointments of directors invalid. However, the court considered the possibility of treating these appointments as defective, which could be validated under Section 86 of the Companies Act, but concluded that the invalidity was shown to the directors, thus not protecting their acts.

3. Existence and validity of Directors and Extra-ordinary General Meetings:
The court examined whether the company had validly appointed directors and found that from July 1954 onwards, there were no directors entitled to act. The resolutions passed by Dr. Mukherjee and Dr. Neogy were invalid as they were not directors at the time.

4. Plaintiff's debt to the company and lien on shares:
The court scrutinized the plaintiff's alleged debt of Rs. 4,00,887/14/8 and found that most of the claims were unfounded and cooked up by Dr. Mukherjee and Dr. Neogy. The court held that the plaintiff was not indebted to the extent claimed and that the exact liability was not ascertained at the time of the sale of shares.

5. Legality of the sale of shares:
The court held that the sale of shares was illegal as the conditions laid down in Article 17 of the Articles of Association were not met. The directors had no authority to sell the shares as the debt was not ascertained and the notice of demand was not properly served.

6. Conspiracy and collusion in the sale of shares:
The plaintiff alleged that the sale was a result of a conspiracy between Dr. Mukherjee, Dr. Neogy, and the defendant Ramapada Gupta. The court found that the defendant Ramapada Gupta did not act bona fide and had knowledge of the wrongful nature of the transaction, thus not protecting his title under Section 86 of the Companies Act or Article 19 of the Articles.

7. Entitlement to rectification of the Share Register:
The court found that the registration of the transfer of shares to Ramapada Gupta was not lawful as there was no proper instrument of transfer executed and delivered to the company. The court ordered rectification of the Share Register to restore the plaintiff's name as the holder of the shares.

8. Ownership of shares post-sale:
The court held that the plaintiff continued to be the owner of the shares as the sale was illegal and void.

9. Vacation of office by Dr. S.L. Mukherjee and Dr. Neogy:
The court concluded that Dr. Mukherjee and Dr. Neogy had vacated their office as directors by July 1954 and had no authority to act as directors thereafter.

10. Non-joinder of necessary parties:
The court found that the suit was not bad for non-joinder of Dr. Mukherjee and Dr. Neogy as necessary parties.

11. Reliefs entitled to the plaintiff:
The court granted the plaintiff reliefs including the declaration of ownership of the shares, injunction against the defendant Ramapada Gupta, rectification of the Share Register, and costs.

Conclusion:
The court ruled in favor of the plaintiff, declaring the sale of shares to Ramapada Gupta illegal and void, and ordered the rectification of the Share Register to restore the plaintiff's name as the holder of the shares. The plaintiff was also awarded costs.