9911796707
TMI Blog1987 (7) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... n was a person from Bombay. P.W.2, K.L. Menon, was a director. The petitioner is an employee of the company. The petition is under section 155 of the Companies Act, 1956, for rectification of the share register of the company by inclusion of the name of the petitioner also as a shareholder The prayer was strongly opposed by the respondent company. Due to mismanagement by the board of directors, the company was taken over by the Kerala State Industrial Development Corporation by purchasing shares and it got impleaded as additional second respondent. The second respondent also disputed the claim. There were 41 employees in the company including the petitioner. From all of them, the vice-chairman, P.G.K. Pillai received huge amounts as if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced and proved by either side. What is seen from the evidence is that the Vice-Chairman, P.G.K. Pillai, and his son, the managing director, Padmakumar, received various amounts from the 41 employees alleged to be by way of loans under the agreement that it will be repaid and, if not, converted into shares. The claim of the petitioner alone seems to remain. All others are said to have settled their claims with P.G.K. Pillai on receipt of 70 per cent of their amount. In exhibit P-2 letter sent to the chairman, what the employees said was that Rs. 3,000 to Rs. 40,000 were received from each of them, by P.G.K. Pillai for the requirements of the company under the agreement that it will be treated as loan or share. But their request was on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount was received by P.G.K. Pillai from the petitioner on the agreement that it will be either repaid or converted into shares. PW-2 admitted that collections were made by Padmakumar and P.G.K. Pillai without any resolution of the board of directors or authority to collect and there is no resolution of the board to allot shares for the amount. The undertaking made by Padmakumar in exhibit P-1 letter dated April 4, 1984, addressed to PW-2 that the amounts collected from workers will be converted into shares is also of no legal consequence since the conversion could only be by a resolution of the board of directors. Under section 193 of the Companies Act, the company is bound to keep minutes of the proceedings of all the meetings. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or's claim against the company. According to the rule evolved in Royal British Bank v. Turquand [1856] 6 E B 327, popularly known as "Turquand's rule", while persons dealing with a company are assumed to have read the public documents of the company and to have satisfied themselves that the transaction entered into is not inconsistent therewith, they are not expected or required to do anything more. These aspects may become relevant only when the petitioner attempts to assert his claim against the company for amounts alleged to be due to him. Those aspects are irrelevant while considering the claim involved in this case where we are dealing with the question whether the amounts have been converted into shares or could be so converted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the matters referred to in sub-section (1). It cannot be said that the petitioner has become a member or shareholder. Only when a person becomes a member or shareholder, the question of default or delay in entering the fact of having become a member or shareholder will arise under section 155(1)( b ) The petitioner has no case that he became a shareholder. In order to become a shareholder, there must be an agreement by him in writing under section 41(2). The words "in writing" indicate, by necessary implication, that an application for allotment of shares should be made in writing. There is no case for the petitioner that he has made such an application. On the other hand he has admitted that no application was made. The claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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