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TMI Blog1950 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... y a letter of 23rd June, 1947, Exhibit P. 4, that he was sending Rs. 575-4-0 by means of a draft to cover the transfer charges. According to the allegations made by the petitioner in the application as well as in his statement recorded in court, he did not hear from the company regarding the registration of shares in his name on the basis of transfer for some time and on 20th August, 1947, he, in the capacity of the manager of the Traders Bank, New Delhi, invited the immediate attention of the company to return the share scrips that had been sent for transfer. This elicited no reply and another reminder was sent on 7th February, 1949, complaining as to why the share scrips were being withheld. This time he was, however, informed that the scrips could not be sent to him as they pertained to shares which had been forfeited on account of the fact that the call money was not paid. Accordingly another communication, Exhibit P. 8, was sent under registered cover asking the company to return the scrips immediately as the company could not withhold the scrips in spite of the forfeiture of the shares. But the respondent company reiterated in their letter dated 25th February, 1949, Exhibit P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the press and the final notice was given on 12th April, 1948, that if the payment of the call money was not made by the 4th May, 1948, the shares would be forfeited. It was claimed that in view of these circumstances the petition was misconceived and the move of the petitioner was mala fide and was made in order to harass the company. On one of the hearings arguments were heard on the preliminary objection with regard to the maintainability of the application under section 38 but in view of the fact that reference was made to the merits of the case in the course of arguments opportunity was given to both sides to adduce evidence in the form of affidavit or otherwise and the decision on the preliminary objection was also held over to be given along with the final disposal of the case. Both sides now have filed their affidavits as well as produced certain documents which have been duly exhibited on the record. Furthermore, the petitioner, Panna Lal, has come into the witness-box as his own witness while Mr. C.K. Khanna, secretary of the company, was examined on behalf of the respondent. Some other witnesses were summoned by the petitioner but they were given up and full dressed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase there is no dispute with regard to the title of the applicant and transfer of shares has admittedly been made in his favour. The sole question is as to whether any notice was served upon him in regard to the forfeiture or even if it was served whether such notice was a valid notice inasmuch as the petitioner's name was registered as a transferee of these shares on 1st May, 1948, and the shares were forfeited on 5th May, 1958, admittedly without giving any fresh notice. In the Bombay case, reported in 33 Bom. L.R. 184, also the application was made under section 38 of the Companies Act for the rectification of the register of members and the principle governing the court's discretion under section 38 was discussed but it was held that section 38 of the Companies Act was widely worded and it was a matter of discretion for the court whether in any particular case it would hear the petition or leave the parties to a separate suit. This dictum rather furnishes an answer to the contention of the respondent's counsel and it appears that the scope of section 38 is not so limited as urged by the learned counsel for the respondent company. The other authority relied upon is one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his name omitted from the register of shareholders and generally to decide any question necessary or expedient to be decided for the rectification of the register. On the examination of these authorities, it seems clear to me that the application is maintainable under section 38 of the Companies Act but it is only to be considered as to whether any complicated question of law is involved as to warrant the institution of a regular suit or the rectification can be made by summary proceedings as applied for under section 38 by the petitioner. In the light of the principle laid down in the above mentioned cases I am of the considered opinion that the respondent's counsel has failed to establish that there is any question of title involved between the parties or that the court is confronted with any intricate question which should not be taken seisin of under section 38 of the Companies Act. It appears that the respondent's counsel has tried to evade the issue and sought to take out the case from the ambit of section 38 in order to drive away the petitioner to protracted litigation. Mr. Radhe Mohan Lal also drew my attention to an observation at p. 146 of the Madras case Jawahar Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24th February, 1948, at a late stage is not above suspicion. In support of the argument the counsel furthermore drew my attention to the list of documents produced by the respondent on the first hearing and another list of the documents relied upon by the respondent comprising of more than a dozen documents and maintained that no reference was made to any notice given to the petitioner with regard to the call money. On the other hand the respondent's counsel controverted the argument and averred that the copy of the notice dated 25th February, 1948, is forthcoming from the record of the company and was further supported by the sworn testimony of the secretary as well as by the postal certificate receipt which by no stretch of imagination can be taken as a fictitious one. It was urged that even if this notice was not shown in the list of documents there was no reason to doubt the genuineness of the document. Be that as it may, the matter does not improve for the simple reason that this copy of notice is dated 24th February, 1948, which shows that notice was given to the petitioner at a much later stage inasmuch as initial notices for the call money were issued in August, 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this respect raised by the learned counsel for the petitioner is that call could not be made in the eye of law upon Mr. Panna Lal, the petitioner, before he had become a shareholder in the register of the company under section 30 (2) of the Companies Act. In this respect it was urged that section 30(2) of the Companies Act contemplates not only agreement to become a member of a company but also the registration of his name. Reliance was placed on Karachi Oil Products Ltd. v. Shree Narendra Singhji, wherein it was held that forfeiture is treated very strictly by the courts and directors seeking to enforce it must pursue exactly the course of procedure marked out by the articles. A slight irregularity is as fatal as the greatest. Hence if the call, in respect of which the forfeiture is made, is not validity made or e.g., if the notice on which the forfeiture is founded is inaccurate in requiring payment of interest from a wrong date, the forfeiture is liable to be held invalid. The counsel maintained that in this case the call as alleged by the respondent was made upon the petitioner before his name was registered and as such the call even if the notice was given was invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me forward to reclaim his shares and that his move is a mala fide one. It was also pointed out that the petitioner filed a suit at Delhi and then moved this court for winding up the company and failed, which conduct shows that he was out to harass the company. The position taken up by the petitioner's counsel was that it was Mr. L.P. Jaiswal, managing director, who had sold the shares in favour of petitioner and the call if made at all on the petitioner was only to benefit Mr. Jaiswal as observed above and that the forfeiture of shares was made without any notice and as such was invalid and liable to be set aside. It was further argued that the conduct of the petitioner in filing a suit for injunction at Delhi or applying in this court for winding up of the company was no bar in his way to safeguard his right because it was the conduct of the respondent company which roused him to move both ways; otherwise the petitioner's interest in the company was already there to the extent of Rs. 80,000 and there is no reason why he should have avoided the payment of Rs. 15,500 which could again be claimed against him under the company law and under the articles of association and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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