1950 (4) TMI 17 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application under section 38 of the Companies Act.
2. Validity of the call money notice and its service.
3. Legitimacy of the forfeiture of shares.
4. Allegations of mala fide intentions and harassment by the petitioner.
5. Whether the petitioner should pay the call money.

Issue-Wise Detailed Analysis:

1. Maintainability of the Application under Section 38 of the Companies Act:
The respondent argued that the application under section 38 was not maintainable as the case involved forfeiture of shares and not fraudulent entry or omission from the register. They contended that such matters should be addressed through a regular suit, citing several cases including Jawahar Mills Ltd., Salem v. Shah Mulchand & Co., Ltd., and Union Indian Sugar Mills Co., Ltd., v. Jaideo. The court, however, concluded that the application was maintainable under section 38, noting that no complicated question of title was involved and the issue could be addressed through summary proceedings. The court emphasized that the scope of section 38 is not as limited as urged by the respondent.

2. Validity of the Call Money Notice and Its Service:
The petitioner claimed that no notice regarding the call money was served upon him, which was supported by his affidavit. The respondent countered by producing a postal certificate receipt and a copy of the notice dated 24th February, 1948. The court found that while some notice might have been issued, there was no clear evidence of its service or its contents. The court also noted that the notice was given to the petitioner at a much later stage, and the initial call money notices were issued to Mr. L.P. Jaiswal, the transferor, not the petitioner.

3. Legitimacy of the Forfeiture of Shares:
The petitioner argued that the forfeiture of shares was invalid as the call was made before he was registered as a shareholder. The court agreed, noting that the call money notice was issued to the petitioner after the shares were registered in his name, which was not in compliance with the provisions of section 30(2) of the Companies Act. The court also found that the company's actions appeared to benefit Mr. L.P. Jaiswal, the managing director, and the forfeiture was done without proper notice, making it invalid.

4. Allegations of Mala Fide Intentions and Harassment by the Petitioner:
The respondent alleged that the petitioner's actions were mala fide and intended to harass the company. They pointed to the petitioner's previous legal actions, including filing a suit at Delhi and applying for winding up the company. The court, however, found that the petitioner's actions were justified as he had a significant financial interest in the company and was seeking to safeguard his rights. The court also noted that the company's conduct in forfeiting shares appeared suspicious and aimed at benefiting the managing director.

5. Whether the Petitioner Should Pay the Call Money:
The court ordered that the petitioner must deposit the call money of Rs. 15,500 within 14 days at the registered office of the company or with its bankers, Imperial Bank of India. Failure to do so would result in legal consequences. The court did not address the issue of interest on the call money as no arguments were presented on this aspect.

Conclusion:
The court allowed the application for rectification of the company's register, declaring the forfeiture of shares invalid and ordering the petitioner's name to be entered in the company's register as the holder of the specified shares. The petitioner was directed to deposit the call money within 14 days, and the necessary intimation was to be sent to the Registrar of Joint Stock Companies. The petitioner was also awarded costs, with counsel's fee set at Rs. 250.