1968 (11) TMI 101 - HC - Indian Laws

Issues Involved:

1. Agreement between the plaintiff and defendant No. 1.
2. Liquidation of advances by the plaintiff.
3. Existence of enforceable debt or liability at the time of sale.
4. Lien on the 25,000 shares.
5. Enforcement of lien and sale value.
6. Validity of the exercise of lien.
7. Plaintiff's acquiescence in the sale.
8. Estoppel against the plaintiff.
9. Bona fide purchase for valuable consideration.
10. Validity of the sale to purchasers.
11. Mala fide nature of the sale and adequacy of the price.
12. Binding nature of the sale on the plaintiff.
13. Reliefs to which the plaintiff is entitled.

Issue-wise Detailed Analysis:

1. Agreement between the plaintiff and defendant No. 1:

The court examined whether there was an agreement between the plaintiff and defendant No. 1 as alleged by the defendant. It was concluded that a sum of Rs. 1,10,000 remained due and payable by the plaintiff company to the defendant company with interest. However, the rate of interest and the time for which interest was payable were not clearly established.

2. Liquidation of advances by the plaintiff:

The plaintiff claimed that all advances made by the defendant company had been liquidated. The court found this claim to be untrue, concluding that the plaintiff did not liquidate the advance made by the defendant company.

3. Existence of enforceable debt or liability at the time of sale:

The court held that there was a debt or liability of Rs. 1,10,000 with interest by the plaintiff company to the defendant company at the time of the alleged sale. However, this debt or liability had become time-barred and could not be enforced by a suit in a court of law.

4. Lien on the 25,000 shares:

The court examined Article 35 of the Articles of Association, which provided the company with a first and paramount lien on all shares registered in the name of each member for their debts, liabilities, and engagements. The court concluded that the defendant company had a first and paramount lien on the 25,000 shares of the plaintiff company.

5. Enforcement of lien and sale value:

The court considered whether the defendant company duly enforced its right of lien on the 25,000 shares and whether the shares were sold at the proper value. It was held that the lien remained enforceable even though the debt was time-barred. The court found that the notice served on the plaintiff was valid and that the shares were sold at the proper value.

6. Validity of the exercise of lien:

The court held that the exercise of the right of lien by the defendant company was valid and binding on the plaintiff company and was not void or inoperative.

7. Plaintiff's acquiescence in the sale:

The court did not find it necessary to discuss this issue in detail, as the plaintiff was not entitled to any relief based on the findings on other issues.

8. Estoppel against the plaintiff:

Similarly, the court did not consider it necessary to discuss the issue of estoppel in detail.

9. Bona fide purchase for valuable consideration:

The court found that the purchasers were bona fide purchasers for valuable consideration. It was established that the purchasers had paid the entire amount of consideration money of Rs. 1,25,000 and acted bona fide in the transaction.

10. Validity of the sale to purchasers:

The court held that the sale of the shares was valid. It was concluded that Section 108 of the Companies Act, which deals with the registration of transfer of shares, did not apply to the sale of shares by the company in enforcement of its lien. The sale was effected in accordance with the provisions of the Articles of Association.

11. Mala fide nature of the sale and adequacy of the price:

The court held that the sale was not mala fide and that the price of Rs. 5 per share was not grossly inadequate or below the market price.

12. Binding nature of the sale on the plaintiff:

The court held that the sale of the 25,000 shares in favour of the purchasers was binding on the plaintiff company.

13. Reliefs to which the plaintiff is entitled:

The court concluded that the plaintiff was not entitled to any relief in this suit. The suit was dismissed, and the plaintiff was directed to pay half of the taxed costs of the suit to the defendant company and the full taxed costs to the purchaser-defendants.

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