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TMI Blog1976 (5) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... s void as being in violation of article 42 of the articles of association of the company. In paragraph No. 9, it is claimed that no notice in compliance with article 43 of the articles was given. In paragraph No. 10, it is claimed that the notice required by article 45 concerning the factum of forfeiture was also not given. In reply, the company filed a detailed affidavit taking several preliminary objections and also claiming on the merits that the petitioner knew about the forfeiture at least in January, 1966, and the sale of the forfeited shares was advertised in Hindustan Times on 20th May, 1968. In answer to paragraph No. 8, it was stated that the petitioner had misrepresented about there being no calls due and in fact she was liable for filing a false affidavit and for perjury. It was further stated that a notice of forfeiture was issued to the petitioner and has been got exhibited in Suit No. 234/67, which is pending before a subordinate judge. As regards the notices of calls, forfeiture, etc., it was claimed that the same were issued when the petitioner's father was the managing director and the mother was also a director of the respondent-company. In reply to paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture is bad. The learned counsel for the respondent-company urges that this does not discharge the onus of proof and does not show that the forfeiture is bad. On the other hand, the method by which the forfeiture has been brought about is known only to the company as the notices have to be issued by the company and other formalities have also to be fulfilled by the company. A shareholder necessarily has to make an allegation and all the facts are in the knowledge of the company, who has to show what was the procedure that was followed in bringing about the forfeiture of the shares in question. It is also to be noticed that the shares had a face value of Rs. 1,73,800, being 1,738 preference shares of Rs. 100 each. The calls up to the time of forfeiture were about 7 per cent. according to the account filed by the company ; the calls were in arrears to the extent of Rs. 12,000. Thus, at least, Rs. 1,00,000 had been paid up on these shares and it follows that the forfeiture would result in the loss of Rs. 1,00,000 to the petitioner without any compensation. The question of forfeiture and lien on shares has been dealt with in articles 42 to 56 of the articles of association of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remaining articles, only article 56 is important because it states that, upon any sale after forfeiture, etc., the directors may cause the purchaser's name to be entered in the register and the purchaser will not be bound to see to the regularity of the proceedings or the application of the purchase money. After his name has been entered on the register, the validity of the sale shall not be impeached by any person and the remedy by any person aggrieved by the sale shall be in damages only and against the company exclusively. These articles have been referred by me for the purpose of analysing the facts of the present case, which I will now deal with. In the original reply to the petition and the affidavit filed therewith, there was not any reference to the forfeiture notices and other notices required to be given by the articles to the petitioner. However, it was claimed that all the notices had been filed in Suit No. 234/67, which was pending in the court of the Commercial Subordinate Judge, Delhi. I had given time for filing a further affidavit which is before me. The new affidavit is by Shri H.L. Seth, one of the directors of the company. He states that he is the managing d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggarwal, Commercial Subordinate Judge, in the aforementioned suit. Thus, the case of the respondent-company is that the notice required by article 42 was sent to the petitioner but came back unserved. The question for consideration is whether a notice which has come back unserved can be deemed to be a service of a notice, as required by article 42. Further, if it is to be held that this is no service at all, it has to be ascertained whether the forfeiture is to be held to be bad and further whether the subsequent re-allocation of the shares to someone else defeats the claim. The first question for decision is whether the service is good when the notices have been returned unserved. It is provided in the articles that a notice is deemed to be served if sent by registered post acknowledgement due at the registered address of the shareholder. I do not think that the deeming provision has any application if the notice comes back unserved. I think the company is bound to enquire, especially in the case of a shareholder whose shares are to be forfeited as to whether the shareholder's address has not changed. When the shareholder happens to be the daughter of the managing director, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The forfeiture is, therefore, clearly void. Now, the main difficulty which arises at this stage is, what is the result of the further sale of these shares to someone else. It has been stated in article 56 "that the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the company exclusively". I think the meaning of this is that the sale of the shares cannot be impeached as far as the third parties are concerned but, nevertheless, if the forfeiture is bad, the petitioner has to be made a shareholder of the company to the extent of the forfeited shares. If the shares were never forfeited, they could not also be transferred. In my view, this article merely bars the impeaching of the sale of the shares. It does not bar the impeaching of the forfeiture. If the forfeiture was bad it would mean that the petitioner's name could not be struck off the register. If the petitioner's name could not be struck off the register she must be shown on the register to the extent of 1,738 shares. It is still open to the company to make calls in respect of those shares. If the company has sold some shares t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to the petitioner. It is not the case of the respondent-company that the shares belong to Shri K.C. Aggarwal, and hence the contention of Shri K.C. Aggarwal on this question seems to be quite irrelevant. There is a claim that the petition has not been signed by the petitioner but as her affidavit accompanies the petition and she resides in America, I must accept the fact that the petitioner has filed the petition. A point was raised that the petitioner's name is Miss Promila Aggarwal in the books of the company and she has filed the petition under her married name, Mrs. Promila Bansal. In order to avoid any controversy, the company may enter the petitioner's name under her original name of Miss Promila Aggarwal. As regards the contention that the petition is mala fide , I do not see why the petition can be considered to be mala fide only because Shri K.C. Aggarwal appeared once in this court during these proceedings. The petition has to be judged on its own merits and the question of mala fides does not enter into the controversy and clearly the petitioner has been deprived of an investment of Rs. 1,00,000. I accordingly reject all the preliminary objections and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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