1965 (5) TMI 27 - HC - Companies Law

Issues Involved:
1. Liability of Respondent No. 1 for payment of calls made during his tenure as a registered holder of shares.
2. Whether Respondent No. 1 surrendered the shares and if the forfeiture and re-allotment were bona fide and not collusive.
3. Validity and effect of payments of subsequent calls as shown in the company's books.
4. Bona fide status of Respondent No. 9 and its effect.
5. Relief.
6. Whether the petition is within time.

Issue-wise Detailed Analysis:

1. Liability of Respondent No. 1 for Payment of Calls:
The court examined whether Respondent No. 1 was liable for the payment of calls made during the period he was the registered holder of the shares. Respondent No. 1 denied liability, claiming the shares were held benami for Sardul Singh Caveeshar. The court did not express a final opinion on this issue but noted that the non-payment of calls led to the forfeiture of shares.

2. Surrender of Shares and Forfeiture/Re-allotment:
Respondent No. 1 claimed that he had surrendered the shares to Sardul Singh Caveeshar and severed his connection with the company in March 1946. The liquidator alleged that the forfeiture and re-allotment were fraudulent and collusive to evade the payment of Rs. 60,900 in call money. The court found strong suspicion of fraud but concluded that the standard of proof required to establish fraud was not met.

3. Validity of Payments of Subsequent Calls:
The liquidator argued that the payments of subsequent calls, as shown in the company's books, were invalid, fraudulent, and ultra vires. The court did not provide a definitive ruling on this issue, focusing instead on the question of fraud and the statute of limitations.

4. Bona Fide Status of Respondent No. 9:
The court was to determine if Respondent No. 9 was a bona fide transferee and the effect of such a status. This issue was not conclusively decided as the primary focus was on the limitation and fraud aspects.

5. Relief:
The liquidator sought rectification of the register by restoring 3045 shares to the name of Respondent No. 1 and removing the names of Respondents Nos. 2 to 9. The court's decision on relief was intertwined with the findings on fraud and limitation.

6. Whether the Petition is Within Time:
The learned company judge ruled that the petition was barred by limitation under Article 181 of the Limitation Act, which provides a three-year period for seeking annulment of forfeiture. The court noted that the application was made twelve years later and could only overcome the limitation bar with proof of fraud, which was not definitively established.

Conclusion:
The court primarily decided the case based on the finding that the petition was barred by limitation, as no firm decision was given on the other issues. The court referred to the Supreme Court's decision in Sha Mulchand and Co. v. Jawahar Mills Ltd., which indicated that Article 181 might not apply to applications under the Companies Act. The court also discussed the applicability of Article 120 and concluded that even if it applied, the cause of action would arise from the date of the winding-up order.

Order:
The appeal was allowed, and the order of the learned single judge was set aside. The case was remanded for a fresh decision after re-casting the issues and allowing the parties to lead fresh evidence. The costs of the appeal were to abide by the event.

Separate Judgment:
Dulat J. concurred with the decision.

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