9911796707
TMI Blog1988 (10) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Associated Printers (Madras) Ltd. The third respondent in the appeals was the third respondent before the learned judge in all the company petitions. He is none other than the brother of the petitioner before the learned single judge and the appellant before us. Since it was agreed between the parties that the pleadings in C.P. No. 31 of 1976, if referred to, would be enough to focus the controversy which is identical in all the cases, the learned judge noted that excepting in the matter of variance of the number of shares and the value thereof, the point of law being one and the same, it would be sufficient to confine the consideration only to the pleadings in C.P. No. 31 of 1976. The short facts are as follows : Mr. Anantharamakrishnan, a leading industrialist, died on April 18, 1964, leaving his widow, two sons and two daughters. The third respondent is the eldest son. On the death of the said Anantharamakrishnan, his estate became liable to pay estate duty in the sum of over Rs. 150 lakhs. There were other liabilities also. Principally, the estate of Anantharamakrishnan consisted of agricultural lands in Tirunelveli District and shares in various companies including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, Reference our letter of the 10th June, I am detailing the position below. The shares in Reichhold Chemicals India Ltd., Bimetal Bearings Ltd., Shardlow India Ltd., Tractors and Farm Equipment Ltd. and India Pistons Ltd. in the name of father were transferred to Associated Printers (Madras) Private Ltd. on 8th March, 1974, in partial liquidation of the amounts due to them by the estate. Details of the shares with the price realised are given below : Name of company No. of shares Value per share Rs. Price Rs. 1. Shardlow India Ltd. 100 10 1,010 2. Reichhold Chemicals India Ltd. 10 100 583 3. Tractors and Farm Equipment Ltd. 100 10 , 897 4. Bimetal Bearings Ltd. 400 10 9,644 5. India Pistons Ltd. 1 10 50 Total: 12,184 In this connection, I wish to advise that these shares were transferred at the values determined under the Wealth-tax Rules, 1957. As regards filing of wealth-tax returns for the assessment year 1974-75 (valuation date 31st March, 1974), the assets detailed in the attached sheet will form part of the estate. The following liabilities are to be borne equally by the legal heirs and should thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. is sent herewith." On October 21/25, 1974, the appellant's husband, as power of attorney-holder, replied to the third respondent that the appellant was very sorry and surprised to be informed that the shares held by their father in the various companies have been sold by the third respondent in alleged satisfaction of debts due to Associated Printers (Madras) P. Ltd. He also stated that she was surprised that she was never informed about the alleged debt and that she would have paid the amount if any amount was really due and kept the shares herself. According to her, the third respondent did not even choose to offer the shares to a co-owner who is entitled to a pre-emptive right to purchase the same. Therefore, the transfer of the shares was illegal and was not binding on her. By the said letter, she also offered to purchase the shares at the rates mentioned in the letter of the third respondent to the extent that was due to her. The third respondent was called upon to arrange to have them retransferred to her name within a week failing which necessary steps would be taken in that regard. A similar letter was issued to the second respondent-Associated Printers (Madras) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. In the counter-affidavit filed on behalf of the first respondent, the principal stand taken was that section 155 of the Companies Act provides only a summary remedy. It is intended only to adjudicate upon questions arising under the said Act between members. The petitioner does not claim to be a member of the respondent-company. She claims to be one of the heirs of a deceased member. The third respondent had explained that he administered the estate and signed the transfer document with the knowledge, connivance and acquiescence of the petitioner. In a petition of this nature, complicated questions of law and disputed questions of fact cannot be determined. The third respondent acted as de facto administrator and manager of the estate of the deceased Anantharamakrishnan with the consent of the other co-heirs. It is incorrect to say that the first respondent is under the control of the third respondent. The articles of association give absolute power to the first respondent to refuse to register a transfer. As the petitioner has not lodged a transfer in her favour for registration, the question of refusal has not arisen. The registration of shares in favour of the second res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely, Rs. 12,184. This clearly shows that these petitions had been filed with ulterior motives. In the reply affidavit, the petitioner reiterated her stand. Ramaprasada Rao J. held that there was no evidence to show that the third respondent was controlling all the directors in the concerned companies ; nor did he have a sway over them so as to lead them to the goal which he desired. The learned judge further found that it was only on April 20, 1972, that the petitioner-appellant herein decided to cancel the power of attorney in favour of the third respondent and further decided to handle the matter directly. The question, therefore, would be whether the third respondent could continue to act. In determining this question, the learned judge took the view that the estate in the hands of the third respondent was impressed with the character of a constructive trust and unless the dealings of the possessor of the estate are illegal and void abinitio and not to the benefit of the co-owners of the estate, there could not be no rightful challenge. In so far as it was not decided that the transfers in question were effected to pay off the preexisting debts of the deceased, Ananthara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question. Here, it cannot be denied that, on the death of Anantharamakrishnan, the appellant became entitled to one-fifth share. On the death of a Hindu male dying intestate, the heirs succeed to the estate as, tenants-in-common under the provisions of section 19 of the Hindu Succession Act and not as joint tenants. As such, the appellant had every right to question the action of the third respondent, more so, when the authority of the third respondent had been cancelled on June 12, 1972. Under these circumstances, section 108 of the Companies Act cannot be a bar for the relief prayed for. A clear authority on this is K.P. Antony v. Thandiyode Plantations P. Ltd. [1987] 62 Comp Cas 553 (Ker.). A special remedy had been provided under section 155 of the Companies Act and it cannot be said that it involves any complicated questions of law or disputed questions of fact when the title is not disputed. It is perfectly open to the appellant to invoke section 155 of the Companies Act. In support of this submission, reliance is placed on Shakuntala Rajpal v. Mckenzie Philip (India) P. Ltd. [1986] 60 Comp Cas 545 (Delhi). In so far as section 22 of the Hindu Succession Act gives a right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act could not apply and the parties were referred to a suit, since section 155 proceedings were summary in nature. In Daddy S. Mazda v. K.R. Irani [1977] 47 Comp Cas 39 (Cal.), a serious charge of forgery in the company records arose and it was held that, without letting in evidence, section 155 cannot be invoked. This respondent would take it that his position is that of an intermeddler. Even then, whether his actions could be questioned is the point to be determined. Learned counsel referred to section 2(11) of the Code of Civil Procedure containing the definition of "legal representative" who would include a person who would intermeddle with the estate of the deceased. Again, the Estate Duty Act, under section 2(12)(ii), takes within it an "intermeddler". As to what is the position of the executor or administrator of the estate of a deceased and whether he could be considered as a legal representative is dealt with in Mulla's Hindu Law, fifteenth edition, page 489. His power to dispose of the property has been clearly set out in para 376A. That is exactly the position here. Even assuming that this respondent is an executor de sen tort as pointed out in Halsbury ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot extend its protection. Section 155 of the Companies Act is not summary in nature. It has been so laid down in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel of Baroda [1978] 48 Comp Cas 438 (Guj.). It states that all questions in relation to transfer, right to transfer and heirship should be decided by a court. With regard to transmission, Schedule I, Table A of the Companies Act deals with the same. Therefore, that alone will be applied. The company has a fiduciary duty to recognize only the legal representative. Otherwise, no title can pass. Shakuntala Rajpal v. Mckenzie Philip (India) P. Ltd. [1986] 60 Comp Cas 545, lays down so. Where there is a transfer by operation of law, one cannot bring in concepts like administrator de son tort, etc. That is clearly unwarranted. We will now proceed to deal with the respective submissions raised on either side. We have already set out the facts in detail to show as to how the transfer of shares came to be effected by the third respondent in favour of the second respondent and how it was protested. One thing is clear that, during his lifetime, Anantharamakrishnan had incurred debts as follows : Rs. Higginbothams Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass I of the Schedule, and any one of such heirs proposes to transfer his or her interest in the property or business, the other heirs shall have a preferential right to acquire the interest proposed to be transferred. (2)The consideration for which any interest in the property of the deceased may be transferred under this section shall, in the absence of any agreement between the parties, be determined by the court on application being made to it in this behalf, and if any person proposing to acquire the interest is not willing to acquire it for the consideration so determined, such person shall be liable to pay all costs of or incident to the application. (3)If there are two or more heirs specified in class I of the Schedule proposing to acquire any interest under this section, that heir who offers the highest consideration for the transfer shall be preferred. Explanation. -In this section, 'court' means the court within the limits of whose jurisdiction the immovable property is situate or the business is carried on, and includes any other court which the State Government may, by notification in the Official Gazette, specify in this behalf." But, this is a case of administrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it cannot be contended that there was no sufficient cause. It would equally follow that sub-section (3) cannot apply because the question of title cannot be decided in the absence of the other co-sharers. It is only a disgruntled co-sharer who has come forward to claim right in the shares. We do not know how she could be definite before a partition by metes and bounds takes place. But, we will ultimately deal with the question of allotment of shares. In this context, Hemlata Saha v. Stadmed P. Ltd. [1964] 34 Comp Cas 875 ; AIR 1965 Cal 436, is relied on. This case arose after the amendment of Section 155, wherein the headnotes (of AIR) read thus : "An allotment in severalty of the shares can only be done in an action for partition, unless the parties agree to amicable partition. The company cannot take upon itself the obligation to divide and allot the shares among the several joint holders and indeed, under the Companies Act, 1956, it has no power to do so. To hold that the company can, at the request of one joint holder of shares, insert his or her name as the separate holder of a particular lot of those shares, would be to introduce entirely unwholesome principles which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he remedy under the Companies Act is a summary remedy. The object of this provision is not to supersede or oust the remedy at common law. As observed by Shah J. in Rao Saheb Manilal Gangaram Sindore v. Western India Theatres Ltd. [1963] 33 Comp Cas 826 , 828 (Bom.) : '....this procedure is resorted to by persons aggrieved by the refusal of the directors of a company to rectify the register and enter the name of the transferee in place of the name of the transferor of shares in the register of members, but it is recognised by a long line of judicial decisions that the court is not bound to give relief under that section in that proceeding if it finds that complicated questions of facts and law are involved. It has got the power to direct the party concerned to a civil court and to file a proper action for the purpose of securing the relief which he seeks in the summary proceeding.' Primarily, the civil court has jurisdiction to decide such matters and it is only by way of summary remedy that section 155 comes in. If the petitioner's title is not seriously questioned and the matter is such as could be decided on affidavits, there will be no objection to a person applying for the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court to come to any conclusion about the truth of the allegations except upon evidence which can be tested by cross-examination of witnesses. There can be no doubt that the allegations relate to serious disputed questions of fact and such disputes can only be resolved by oral testimony tested by cross-examination and by no other means. To hold that disputes such as those raised in the application can and ought to be resolved on averments made in the affidavits would defeat the purpose and object of the summary procedure prescribed by section 155 of the Act. The principles to be followed by courts in such cases are well-settled and the trial court had taken notice of those principles. But, having taken notice of those principles, the trial court ought not to have directed rectification of the share register having regard to the serious disputes raised by the parties with regard to the title to the shares. Counsel for the appellants is right in his contention that the discretion of the court should not have been exercised in favour of the respondent directing rectification of the share register of the company in a summary proceeding under section 155 of the Act, having regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (page 6) : 'Counsel for the appellant contended that the relief under section 155 is discretionary, and the court should have refused relief in the exercise of its discretion. Now, where by reason of its complexity or otherwise the matter can more conveniently be decided in a suit, the court may refuse relief under section 155 and relegate the parties to a suit. But the point as to the invalidity of the notice dated January 20, 1957, could well be decided summarily, and the courts below rightly decided to give relief in the exercise of the discretionary jurisdiction under section 155. Having found that the notice was defective and the forfeiture was invalid, the court could not arbitrarily refuse relief to the respondents.' Now, with great respect, it is not possible to agree with Mr. Mehta that the question that the remedy under section 155 is of summary nature and that as soon as complex or complicated questions are raised, the party ought to be relegated to a suit is concluded by this decision. In the initial part of the question there is submission of counsel. While disposing of the contention the court observed that where a matter can be more conveniently decided in a suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2 and 3 read as follows : "2. The learned company judge has erred in holding that respondent No. 3 was authorised to borrow moneys or to administer the estate of the late Anantharamakrishnan forgetting that he was given a very limited authority to represent the petitioner before the Estate Duty Officer and render accounts by her letter dated December 15, 1964, and to do no other thing on her behalf. 3. The finding that the petitioner gave oral consent to the third respondent to enter upon the administration of the estate of the late S. Anantharamakrishnan and incurred debts and entered into arrangements for repayment of loans by transferring shares to the second respondent company is contrary to record and is unsupportable in the teeth of the revocation of the limited authority given to respondent No. 3 in and by the letters of the appellant-petitioner dated April 20, 1972, and October 25, 1974, expressly prohibiting respondent No. 3 from acting for her on and from April 20, 1972." Where, therefore, as executor de son tort, if shares had been transferred, what is the position in law ? It is in this view that we refer to section 2(11) of the Code of Civil Procedure : "'legal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or an executor de son tort ( i.e., on his own wrong). The same term is used whether the deceased died testate or intestate, for the law knows no such appellation as 'administrator de son tort'." We may now see the position under the Indian Succession Act. In Paruk's Indian Succession Act, seventh edition, defining "Executor de son tort" it is stated thus : "Definition of executor de son tort.-An executor de son tort is one who takes upon himself the office of an executor or intermeddles with the estate of the deceased without having been appointed an executor and without having obtained a grant from a competent court. He is not necessarily a wrong doer and his possession cannot always be regarded as wrongful at its inception. Shivaprasad Singh v. Prayag kumari Debee, AIR 1935 Cal 39 ; ILR 61 Cal. 711 dissented from in Masireddi Suryanarayana v. Akula Anasuyamma, AIR 1963 AP 298. The mere taking away of a portion of the property of the deceased when there is a legal representative present does not make that person an executor de son tort: Satya Ranjan Roy Choudhry v. Sarat Chandra Biswas, AIR 1926 Cal 825. But a very slight circumstance of intermeddling will make him an executor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares. The said article is to the following effect: "Any person becoming entitled to shares in consequence of the death or insolvency of any member upon producing such evidence that he sustained the character in respect of which he proposed to act under this clause or of his title, as the board think sufficient, may with the consent of the Board (which they shall not be under any obligation to give) be registered as a member in respect of such shares or may, subject to the regulations as to transfer herein contained, transfer such shares. This clause is hereinafter called the 'transmission clause'." In our considered view that has no application because this is a case of transfer by an administrator de son tort. In this connection we may note the transfer form : Share Transfer Form Transfer from Transferor (s) (Name (s) in full) Mr. S. Anantharamakrishnan (preferably typewritten or in block capitals) But, this alone cannot be pressed into service without resort to what is obtainable below: Signatures of transferor (s) (Sd.) K. Sivasailam (For the estate of the late Sri S. Anan-tharamakrishnan for Associated Prin-ters (Madras) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii)Nothing in the above clause shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons." But, as we have seen above, this is not a case of transmission. We will now look at Shakuntala Rajpal v. Mckenzie Philip (India ) P. Ltd [1986] 60 Comp Cas 545 (Delhi) where the headnote reads : "The provisions of section 155 of the Companies Act, 1956, are meant to provide speedy and inexpensive remedy to heirs and transferees of shares where the companies choose to adopt a recalcitrant attitude. It is true that the court has discretion to refuse to consider a matter if it raises complicated questions of fact but that does not mean that there is an automatic bar to the relief being given under section 155 simply because one of the parties chooses to raise a defence and call it a complicated one, while the judge finds that the matter is such that he could decide on the material on record without any difficulty. It cannot be said that the judge would be committing any irregularity or illegality if he decides a disputed question of fact on the basis of documentary evidence on record, finding that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be taken that she had relinquished her rights in S's estate. The petitioners were, therefore, entitled to the registration of the 167 shares of S in their names ; (iii) that till 1980, the company had been a closely knit family concern. It was in the nature of a partnership, and any alteration in the share structure naturaly required the consent and/or approval of all. So also, the induction of new members. The petitioners were not allowed to have a say in all this as they were wrongfully kept excluded and were not treated as members. However, rights had risen in favour of the Aggarwal group as a result of the issue of fresh shares. In order to set matters right, the petitioners should be given the choice to subscribe to the shares in proportion to their shareholding at all stages when additional shares were allotted." But, this is not a case of transmission of shares, as we have pointed out above. Palmer's Company Law, twenty-third edition, in paragraph 39-43, says as follows : "Where a member of a company dies, his shares vest in his executors or administrators and the estate is liable for calls if the shares are not fully paid. The executors or administrators, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectified by the company without applying to the court. Accordingly, section 116 of the 1948 Act provides a summary mode of rectifying the register from time to time by application to the court in two classes of cases : (1)Where the name of any person is without sufficient cause entered in or omitted from the register of members. (2)Where default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member. This jurisdiction is exercisable after as well as before winding-up, and is frequently exercised. It may be invoked by the company, or by the person aggrieved (whether a member or not). or by any member. The following are a few illustrative cases in which orders have been made : where the applicant was induced to take shares by misrepresentation, where the company improperly neglected to register a transfer where shares had been issued to the applicant as paid up without filing a contract in compliance with what is now section 52 of the Act of 1948. Where shares were improperly forfeited ; where the company, acting on a forged transfer, had removed the name of the applicant, the real owner ; where there was a disput ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
