9911796707
TMI Blog1952 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... e order for rectification and, if necessary, also direct the mills to pay damages under that section. Principle to the present application under article 181. If article 181 applies then time began to run after the company came to know of its right to sue. It is not alleged that the company had any knowledge of the forfeiture between the 5th September, 1941, when the resolution of forfeiture was passed and the 9th September, 1941, when the company became defunct. After the last mentioned date and up to the 16th February, 1945, the company stood dissolved and no knowledge or notice can be imputed to the company during this period. Therefore, the company must be deemed to have come to know of its cause of action after it came to life again and the present application was certainly made well within three years after that event happened on the 16th February, 1945. If article 181 does not apply then the only article that can apply by analogy is article 120 and the application is also within time. In either view this application cannot be thrown out as barred by limitation. The result, therefore, is that this appeal must succeed. We set aside the judgment and decree of the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had not paid the allotment money and the call money within the date fixed and to intimate them that in default their shares would be forfeited. A notice was issued on the 16th September, 1940, and two copies thereof are said to have been sent to Sundara Ayyar and Govindaraju Chettiar. No payment having been made, the 5,000 shares held by the company were forfeited by a resolution of the board of directors of the mills. The auditor of the mills having pointed out that the purported forfeiture was irregular and illegal, this forfeiture was cancelled. By a resolution passed by circulation on the 25th February. 1941, the board of directors of the mills resolved that a notice be sent to the company informing it that it was in arrears with calls to the extent of Rs. 25,000, that the amount must be paid on or before the 31st March, 1941, and that, in default, its shares would be forfeited. A notice dated the 15th March, 1941, was accordingly addressed to the company and sent by registered post with acknowledgment due. It appears that the notice was actually posted on the 17th March, 1941, and was received by Govindaraju Chettiar on the 20th March, 1941. The company did not pay the arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Ayyar paid up the claim of the income-tax authorities. The two petitions for restoration of the company were accordingly dropped. On the 27th June, 1942, Sundara Ayyar filed a suit against the mills and others including Palaniappa Chettiar claiming a declaration that the forfeiture by the mills of the 5,000 shares was illegal and inoperative and directing the mills to pay to the plaintiff and the third defendant representing the estate of Govindaraju Chettiar the value of the forfeited shares with dividend or interest thereon and directing Palaniappa Chettiar to pay the plaintiff and the third defendant the sum of Rs. 25,000. This suit was dismissed on the 17th November, 1943, on the ground that Sundara Ayyar, who was only a number of the dissolved company, had no locus standi and could have no relief personally. Sundara Ayyar filed an appeal therefrom which was dismissed as against the mills but the case was remanded to the trial court for the trial of his claim as against the fourth defendant Palaniappa Chettiar. During the pendency of Sundara Ayyar's appeal he, on the 12th August, 1944, filed O.P. No. 199 of 1944 for the restoration of the company. On that application an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not apply either expressly or by way of analogy to the present application and that article 120, which prescribed a period of six years from the date when the right to sue accrued, would, by analogy, apply to the present proceedings and that so applied the present proceedings must be held to be within time. Having disposed of the controversy on the above points it remained to consider the form of the order which could properly be made on the application. It is quite clear that the specific shares having already been allotted to 14 different persons and those persons not being then before the court, the court could not then and there direct rectification of the register by restoring the name of the company to the share register of the mills in respect of those identical shares. There was nevertheless nothing to prevent the court even at that stage to give notice of the application to the persons to whom the shares had been re-allotted and/or those who were holding the shares at the time and after thus adding them as parties thereto to make the appropriate order of rectification and, if thought fit, to also award damages to the company. There were, however, 16,000 shares of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason of the delay stood on a different footing. Then after referring to certain conduct on the part of Gevindaraju Chettiar and Sundara Ayyar the learned Judges concluded that by reason of the long delay in reviving the company and in taking proceedings under section 38 of the Indian Companies Act the mills had been induced to put themselves in a situation in which it became impossible for them to restore the company to the register in respect of those 5,000 shares and that in view of this conduct, if the applicants were Govindaraju Chettiar and Sundara Ayyar, it would have been a case in which relief would have been refused in the light of the principles which the learned Judges deduced from the judicial decisions referred to by them. Then referring to the decision in Smith, Stone Knight v. Birmingham Corporation and certain text books the learned Judges took the view that it was too late in the day to adhere to the strict formalism laid down in Salomon's case and that as the tendency of modern decisions was to lift the veil of corporate personality and disregard the corporate form, the conduct of its only two members had disentitled the company from claiming the relief o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d referred to the decision in Prendergast's case as a case of abandonment of right, Lord Wensleydale read it as an instance of acquiescence and estoppel. Unilateral act or conduct of a person, that is to say, act or conduct of one person which is not relied upon by another person to his detriment is nothing more than mere waiver, acquiescence or laches while act or conduct of a person amounting to an abandonment of his right and inducing another person to change his position to his detriment certainly raises the bar of estoppel. Therefore, it is not intelligible how, having held that no plea of waiver, acquiescence or estoppel had been established in this case, the appeal court could, nevertheless, proceed to give relief to the mills on the plea of abandonment by the company of its rights, if the facts on record were not sufficient to sustain the plea of waiver, acquiescence or estoppel, as held by both the courts, we are unable to see how a plea of abandonment of right which is an aggravated form of waiver, acquiescence or laches and akin to estoppel could be sustained on the self-same facts. Further, whatever be the effect of mere waiver, acquiescence or laches on the part of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st even here. Assuming, but not conceding, that the principle of piercing the veil of corporate personality referred to in Smith, Stone Knight v. The Birmingham Corporation can at all be applied to the facts of the present case so as to enable the court to impute the acts or conduct of Govindaraju Chettiar and Sundara Ayyar to the company, we have yet to inquire whether those acts or conduct do establish such abandonment of right as would, according to the decisions, disentitle the plaintiff from questioning the validity of the purported declaration of forfeiture. There can be no question that the abandonment, if any, must be inferred from acts or conduct of the company as such or, on the above principles, of its two members subsequent to the date of the forfeiture, for it is the right to challenge the forfeiture that is said to have been abandoned. In order to give rise to an estoppel against the company, such acts or conduct amounting to abandonment must be anterior to the mills' changing its position to its detriment. The resolution for forfeiture was passed on the 5th September, 1941. The five thousand forfeited shares were allotted to 14 persons on the 16th November, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the company that the forfeiture was invalid and the claim for rectification of the share register of the mills by restoring the name of the company connot possibly have been affected by this decision. Sundara Ayyar's claim against Palaniappa Chettiar was based on the agreement of 1939 and it was formulated as an alternative personal claim. In view of the clear allegation in the plaint that the forfeiture was invalid and not binding on the company, the continuation of the suit by Sundara Ayyar to enforce his personal claim against Palaniappa Chettiar cannot be regarded as an abandonment by Sundara Ayyar of the right of the company. It must not be overlooked that the company stood dissolved on that date and Sundara Ayyar had no authority to do anything on behalf of the company. In our opinion there is no evidence of abandonment of the company's right to challenge the validity of the purported forfeiture. The second point on which the appeal court decided the appeal against the company was that the form of the order made by the trial court could not be supported as one validly made under section 38 of the Indian Companies Act. It will be recalled that having disposed of all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the applicant company as owner of 5,000 of the unissued shares the applicant company shall pay to the respondent company only Rs. 25,000 being the amount of calls in arrears." The appeal court, however, went behind this record of the proceedings that took place before the trial court and heard the learned senior advocate as to what had happened in court and after hearing the senior advocate for the mills found itself unable to agree with the contention that the learned advocate for the mills had agreed to the substitution of 5,000 unissued shares for the shares forfeited. No affidavit of the learned senior advocate was filed before the trial court for the rectification of what is now alleged to have been wrongly recorded by the trial Judge as suggested by the Privy Council in Madhu Sudan Chowdhn v. Musammat Chandrabati Chowdhrain and other cases referred to in Timmalapalli Virabhadra Rao v. Sokalchand Chunilal Others. While we do not consider it necessary or desirable to lay down any hard and fast rule, we certainly take the view that the course suggested by the Privy Council should ordinarily be taken. It appears that at the time when the application was made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er only if the mills failed in their appeal on the merits. In short, the consent covered only the form of the order and nothing else so that if the mills succeeded in their appeal the order would go, although advocate had agreed to its form but that if the mills failed in their contention as to the correctness of the findings of the trial court on the different questions on merits it would no longer be open to them to challenge the order only on the ground of the form of the order. In our judgment the mills cannot attack the form of the order to which their counsel consented. Learned advocate for the mills has raised the question of limitation. He referred us to articles 48 and 49 of the Limitation Act but did not strongly press his objection founded on those articles. We agree with the trial court and the court of appeal that those two articles have no application to this case. A claim for the rectification of the register simpliciter does not necessarily involve a claim for the return of the share scrips and in this case there was, in fact, no prayer for the return of shares or the scrips and, therefore, these two articles can have no application. Learned advocate, however, str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the third division which governs applications but they do not relate to applications under the Code but to one under the Arbitration Act, and, therefore, the old reasoning can no longer hold good. It is urged that it was precisely in view of this altered circumstance that in Asmatali Sharif v. Mujahar Ali Sardar a Special Bench of the Calcutta High Court expressed the opinion that an application for pre-emption by a non-notified co-sharer should be governed by article 181 of the Limitation Act. A perusal of that case, however, will show that the Special Bench did not finally decide that question in that case. In Hurdutrai Jagdish Prasad v. Official Assignee of Calcutta a Division Bench of the Calcutta High Court consisting of Chief Justice Harries and Mr. Justice Mukherjea who had delivered the judgment of the Special Bench clearly expressed the view that article 181 of the Limitation Act applied only to applications under the Civil Procedure Code and did not apply to an application under section 56 of the Presidency Towns Insolvency Act. Mukherjea J. who also delivered the judgment of the Division Bench explained the observations made by him in the Special Bench case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uo is also prescribed in article 120 of the Limitation Act. In O.RM.O.M. SP. ( Firm ) v. Nagappa Chettiar, which was a suit to recover trust property from a person who had taken it with notice of the trust, by a transaction which was a breach of trust, the Privy Council approved and applied the principles of the earlier Indian decisions referred to therein to the case before them and held that time began to run under article 120 after the plaintiff came to know of the transaction which gave him the right to sue. On the same reasoning we are prepared to extend that principle to the present application under article 181. If article 181 applies then time began to run after the company came to know of its right to sue. It is not alleged that the company had any knowledge of the forfeiture between the 5th September, 1941, when the resolution of forfeiture was passed and the 9th September, 1941, when the company became defunct. After the last mentioned date and up to the 16th February, 1945, the company stood dissolved and no knowledge or notice can be imputed to the company during this period. Therefore, the company must be deemed to have come to know of its cause of action afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample, the value of unpaid calls exceeds the market value of the shares. Such a position was envisaged in Garden Gully United Quartz Mining Co. v. Hugh McLister. So also with waiver. A long catena of illustrative cases will be found collected in B. B. Mitra's Indian Limitation Act, Thirteenth Edition, pages 447 and 448. This fundamental concept brings about another repercussion. Unless other circumstances intervene, there is a locus poenitentiae in which a unilateral abandonment or waiver can be recalled. It would be otherwise if the unilateral act of abandonment in itself, and without the supervention of other matters, effected a change in legal status. In point of fact, it is otherwise when, as in the statutory example I have quoted, the law intervenes and determines the tenancy. It is therefore, in my opinion, fundamental that abandonment and waiver do not in themselves unilaterally bring about a change in legal status. Something else must intervene, either a statutory mandate or an act of acceptance, express or implied, by another person, or, as Lord Chelmsford put it in Clarke Chapman v. Hart, acts which are equivalent to an agreement or a licence, or an estoppel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , lose that title by mere laches, or mere standing by or even by saying that he has abandoned his right, unless there is something more, namely, inducing another party by his words or conduct to believe the truth of that statement and to act upon it to his detriment, that is to say, unless there is an estoppel, pure and simple. It is only in such a case that the right can be lost by what is loosely called abandonment or waiver, but even then it is not the abandonment or waiver as such which deprives him of his title but the estoppel which prevents him from asserting that his interest in the shares has not been legally extinguished, that is to say, which prevents him from asserting that the legal forms which in law bring about the extinguishment of his interest and pass the title which resides in him to another, were not duly observed. Fazl Ali J. and I endeavoured to explain this in Dhiyan Singh v. Jugal Kiskore. What happens is this. The person estopped is not allowed to deny the existence of facts, namely the actings of the parties and so forth which would in law bring about the change in legal status, namely the extinguishment of his own title and the transfer of it ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
