9911796707
TMI Blog1995 (2) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. It was founded on March 28, 1930, by the late Kowtha Surya-narayana Rao as a company limited by shares. Subsequently, in the year 1957, licence was obtained from the Central Government under section 25 of the Act on the ground that it is a non-profit sharing firm for promoting religious and charitable activities. The late K. S. Rao founded the Sangha and also three other business companies, viz., (a)Indian Commerce and Industries Co. Pvt. Ltd. (b)Kowtha Business Syndicate Pvt. Ltd. (c)Beehive Engineering and Allied Engineering Industries Pvt. Ltd. The first petitioner in C. P. No. 12 of 1982 was the only son of the late K. S. Rao. The third petitioner in C. P. No. 12 of 1982 is the son of the first petitioner and the grandson of late K. S. Rao. The second respondent in C. P. No. 12 of 1982 is also the grandson of late K. S. Rao through the daughter Parameswari. The third respondent in C. P. No. 12 of 1982 is the daughter of the first petitioner and the grand-daughter of late K. S. Rao and sister of the third petitioner. She is the wife of the. second respondent B.V.S.S. Mani. The fourth respondent in C. P. No. 12 of 1982 is the daughter of K. S. Rao and sister of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time when the licence under section 25 of the Act was expected from the Government. Only after settling the properties in favour of his only son, Mohanram Sastri, and grandson, K. L. Manohar, and alter giving certain properties to his daughters, the late K. S. Rao made the first gift of immovable property to the Sanga on March 28, 1957. It is in evidence that section 25 of the Act licence was obtained on July 5, 1957. In August, 1960, K. S. Rao executed a will giving the balance of his properties to the Sanga. It is admitted that none of the parties ever questioned the action of K. S. Rao till his death on September 23, 1964, and all his directions were implicitly obeyed by one and all. It is seen that Mohanram Sastri and C. Srinivasan were also directors of the Sanga in 1956-57 for different periods and they were in the know of things. It is on record that C. A. Chettiar, father of C. Srinivasan, was also a director of the Sanga till his death on February 7, 1976. K. L. Manohar became a shareholder of the Sanga on August 13, 1957. In C. P. No. 13 of 1982, three resolutions dated January 15, 1956, August 13, 1957, and October 14, 1978, are attacked. First, I will take up C. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the compound wall at Gunatala during the period ending May 31, 1977. The complaint is, that it is an exaggerated figure and wasteful expenditure. On behalf of the respondents it is submitted that an obvious mistake had been made by the petitioners when a wrong reading of the balance-sheet was done by them, viz., exhibit R-33 series. The report of the auditor and the balance-sheet for the year ending May 31,1977, would mention only about the additions during the year regarding the fixed assets which come to Rs. 4,44,486.93. P.W.-1 in his chief examination has talked about this compound wall. On behalf of the respondents, R.W.-1 has spoken about the same. According to Mr. T. Raghavan, P.W.-1 has deposed that the said amount has been included in the balance-sheet under the heads "additions during the year" and "fixed assets". P.W.-1 has stated in his evidence about this. He queried about the construction of the compound wall by the second respondent. However, it is contended that the second respondent has cleverly manipulated under the guise of a donation given by one Suryanarayana and brought back the said amount siphoned by him in the next year. It is also stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details regarding the expenses incurred in the sum of Rs. 4,44,486.93 and these bills had been duly verified and countersigned by the auditors. No questions had been asked regarding the genuineness or the authenticity of these bills in the cross-examination while R.W.-1 was in the witness box. At no point of time, the second respondent ever contended that the expenses involved for the construction of the compound wall was Rs. 4,44,486.93. On the other hand, it was only Rs. 2,54,329.25. The engineer examined as P.W.-2 had valued the compound wall and there has not been much of a difference in value. In fact, P.W.-1 himself had said that he had not made any estimate and according to his engineer's valuation, the value of the compound wall was only Rs. 1.5 lakhs. But, he would admit that he had discussed with the auditor on this issue. It is submitted that the expenses involved for the construction of the compound wall were only Rs. 2,54,329 25, which had not only been accepted by the auditor after duly vouching the bills, but the board of the Sanga had also passed the resolution on November 29, 1976, as per exhibit R-2, to which the third petitioner himself was a party. Hence, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds by means of fixed deposits and it was these amounts that were transferred to the Sanga on July 4, 1978, as per the directions of B. Suryanarayana to the bank on July 2, 1977, itself. Therefore, the argument of Mr. T. Raghavan, learned counsel for the petitioners, that the said B. Suryanarayana had no means falls to the ground. It is also pointed out that the first ever misunderstanding commenced only on June 10, 1978, when the third petitioner addressed a letter to the second respondent and the second petitioner as per exhibit P-84 and long prior to it, on July 2, 1977, itself B. Suryanarayana, the donor, had funds in the form of fixed deposits with Bank of Baroda and has also given instructions to have the amounts transferred to the Sanga on maturity. Even P.W.-1 had conceded about the aforesaid fixed deposit amounts as donations to the Sanga. I am, therefore, of the opinion, that there is no merit in the argument of Mr. T. Raghavan on item No. 3 and, therefore, the same is rejected. Item No. 4 : Under this item, the petitioners question the annual general body meeting dated January 21, 1981, for the years ending 1979 and 1980. The petitioners have made allegations against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne or more administrators to take charge of the affairs of the Sanga. In view of the conduct of the second respondent, his wife and children, Mr. T. Raghavan would urge that it is essential to ensure a broad-based board and for this purpose, this court should direct amendments to the articles by providing for appointment of responsible persons on the board and to ensure representation to all the groups of shareholders on the basis of the proportional representation. In support of the above contentions, Mr. T. Raghavan invited my attention to the decisions in Balasundaram ( V. G.) v. New Theatres Carnatic Talkies P. Ltd. [1993] 77 Comp. Cas. 324 , wherein this court has followed the earlier decision of this court in Veeramachineni Seethiah v. Bode Venkatasubbiah [1949] 19 Comp. Cas. 107 (Mad) and Promode Kumar Mittal v. Southern Steel Ltd. [1980] 50 Comp. Cas. 555 (Cal). It is also not correct to state that the board of the Sanga only consists of P.W.-1 and R.W.-1, according to Mr. T. Raghavan. There were other directors on the board and they were respondents Nos. 2, 4 and 9. Therefore, it cannot be correct for the respondents to contend that for want of the third petitioner, the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titude and the negative approach of the third petitioner from Secunderabad. It is in evidence that the accounts relating to the printing press, Kalyan Mantap and Vidya Mandir from Secunderabad were to be sent only by the third petitioner to the Madras head office, without which the accounts could not be finalised. The accounting year of the Sanga is from June 1, to May 31, every year and the annual general body meeting of 1979 should have been held on or before November 30, 1979, and the annual general body meeting of 1980 on or before November 30, 1980. According to Mr. V. R. Gopalan. the evidence on record would clinchingly show that it was the third petitioner who was the real cause for the delay and it is unfortunate that the petitioners should still accuse the respondents for the delay. Exhibit R-48 dated November 3, 1979, is the letter written by the Sanga's auditor to the third petitioner pointing out the various lapses on his part regarding the audit for the year ending May 51, 1979, which was mainly responsible for the delay in holding the annual general body meeting for the year 1979. Exhibit R-49 dated November 5, 1979, is the notice for the board meeting, the agenda be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no quorum, the meeting was adjourned to January 31, 1980. Exhibit R-56 is yet another telex message received from the third petitioner pertaining to the annual general body meeting 1979, wherein he would urge the second respondent to hold the adjourned the annual general body meeting 1979 without him but with the second petitioner. It is the evidence of the second respondent as R.W.-1 that he did not want to proceed with the meeting without the third petitioner who had by now started giving trouble, and the second respondent was very particular that the third petitioner attends the annual general body meeting 1979. Hence, the annual general body meeting was not conducted on January 31, 1980. A note to that effect was made in exhibit R-56 itself. A fresh notice dated June 16, 1980 (exhibit P-3), was again sent giving notice for the conduct of the annual general body meeting 1979 on July 9,1980. On July 9,1980, again the third petitioner was absent and as there was no quorum, the meeting was adjourned to July 16, 1980. Only the second petitioner and the second respondent were present and again the meeting was adjourned to November 29,1980. Exhibit P-5 dated November 7, 1980, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for the accounts relating to the annual general body meeting 1980. Exhibit R-60 dated December 31, 1980, is yet another memo sent to the third petitioner. Exhibit R-61, dated November 8, 1980, is the reply from the third petitioner stating that the trial balance with available figures was getting ready. Exhibit R-62 is the telex message issued to the third petitioner by the second respondent on November 15, 1980, asking for accounts from Secunderabad, followed by another telex message, exhibit R-63, dated November 21,1980, complaining that the accounts were not forthcoming from Secunderabad. Exhibit R-64 dated November 21, 1980, is the reply telex message from Secunderabad requesting the Sanga's auditor to come on Monday to take up the audit work at Secunderabad. Exhibit R-65 is a telex message of the auditor to the third petitioner dated December 19, 1980. Exhibit R-66 is again a telex message received from the Secunderabad office asking for postponement of the auditor's meeting. Exhibit R-57 dated December 30, 1980, is a critical note of the Sanga's auditor addressed to the third petitioner pointing out the defects in his accounting towards the audit for the year ending May 31, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the meeting dated January 21, 1981, as such. But, evidence was adduced and arguments advanced on this issue also. Article 78 of the memorandum and articles of association deals with the election of the directors every year. Admittedly, the second petitioner was only a co-opted director on August 10, 1979, and unless and until he was re-elected in the next meeting, he ceases to be a director as per article 82. So far as the third petitioner is concerned, his term had expired and he did not stand for re-election. It is, therefore, submitted by learned counsel for the respondents, that both petitioners Nos. 2 and 3 are no longer directors of the Sanga. So far as the election of the third respondent is concerned as a director in the meeting held on January 21, 1981, it is argued by Mr. V. R. Gopalan, the same cannot be questioned. A technical objection has been taken as to the election of the second respondent as a director on January 21, 1981, and this objection is raised only at the time of arguments. The said objection, according to Mr. V. R, Gopalan is not taken in the pleadings nor when the meeting was held at 4 p.m., on January 21. 1981. Exhibit R-4(a) deals with that matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the meeting since there was no other alternative left. While replying to the rulings cited by Mr. T. Raghavan in Nagappa Chettiar (N. V. R.) v. Madras Race Club [1949] 19 Comp. Cas. 175 ; AIR 1951 Mad 831, Mr. V. R. Gopalan contended that the above decision has no application to the facts of the case and the said judgment was rendered on October 5, 1948, before the advent of the Indian Constitution. The facts and circumstances of the said case are entirely different and the said decision will not apply to the facts of this case because in the instant case, there are only about 14 members of the Sanga, out of which 12 are relations and family members, the remaining two being close associates and family friends. It is conceded that the respondents are in the majority having majority shareholdings whereas the petitioners are in minority. No decision was called upon to be taken by the chair excepting announcing the results of the poll. No quasi-judicial function was required to be performed by the chair in the instant case. In the above cited Supreme Court case, Nagappa Chettiar's case [1949] 19 Comp. Cas. 175 , there were 260 club members eligible to vote and the chairman in that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent as R.W.-1 has given answers to these allegations. The petitioners in paragraph 22 of the petition have set out in detail about the proposal initiated by the second respondent to form a. trust in or about 1970. Admittedly, the Sanga has accumulated its income from time to time. Sometime in February; 1970, the second respondent mooted out the proposal in exhibit P-69 dated November 16,1970, that the Sanga should promote a new trust for satisfying the income-tax requirements. This was followed by a draft deed given to the petitioners on December 3,1970, and on that day the second respondent persuaded the other directors that the Sanga will be associated in the management of the said trust. However, the trust deed, as finalised, does not make any such provision. According to learned counsel for the petitioners, the trust deed was executed by Visweswara Rao on November 9, 1970, and registered on December 16, 1970. The substantial amount of Rs. 15 lakhs was made over to the new trust by the Sanga on the initiative of the second respondent. According to learned counsel for the petitioners, the petitioners were induced to make this transfer on the representation that the Sanga wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent has sold 3½ acres of land belonging to the Sanga for Rs. 3.67 lakhs as per the evidence of RW-1. According to the petitioners, there is no necessity for the Sanga to borrow funds and spend and as on to-day, the Sanga is in debts. The financial position of the Sanga is not known to anyone except the second respondent, and that the second respondent has been treating the Sanga as a sole proprietary concern and has made the Sanga to borrow and spend from time to time beyond its capacity. The Sanga is a charitable trust and a non-profit organisation and there is no necessity to sell its immovable properties and spend the same for charitable purposes. As on March 31, 1990, the Sanga owes to Sri Ramalingeswaradu Trust Rs. 11.5 lakhs and none is aware of the financial position of the Sanga as on date. In answer to the above allegations, Mr. V. R. Gopalan invited my attention to the answers given by the second respondent as RW-1. He had given full explanations as to how the expenditures were on the increase. It is further said that the expenditures incurred during the years ending with May 31, 1977, May 31, 1978, May 31, 1979, May 31, 1980 and May 31, 1981, were all duly app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a totally different legal entity and grant any relief against it. It is no doubt true that a corpus donation of Rs. 15 lakhs was given by the Sanga to the tenth respondent Trust in 1970. A question is raised as to the competence of the Sanga to give such a donation and it is argued that it is ultra vires. It is submitted that clause III, sub-clauses 10 and 24 of the memorandum of association of the Sanga are very clear and specific. According to Mr. V. R. Gopalan, clauses 10 and 24 give ample powers to the Sanga to organise, promote, establish and maintain, aid in the promotion, establishment, maintenance of the Sanga or associations with objects similar to those of the Sanga in all parts of India and elsewhere and that the Sanga can subscribe or guarantee money for any national, charitable, benevolent, religious, public, general and useful objects. It is contended that the Sanga had all the legal competence to donate, aid or subscribe and the test is that the receiving institution should have objects of similar nature or should be national, charitable, benevolent, religious, public and useful objects. A comparative reading of the memorandum and articles of association of the San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust and regarding the details which were worked out, the same took place in October, 1970, during Navarathiri celebrations in Vijayawada when P. Visweswar Rao also took part. R.W.-1 speaks about the same. After the modalities were worked out, the trust was formed by P. Visweswara Rao on November 9, 1970, and Visweswara Rao wrote exhibit R-119 letter to the Sanga on November 10, 1970. Along with that letter, he enclosed a copy of the trust deed, which copy has been marked as exhibit R-159. Exhibit R-159 is a carbon copy of the original trust deed exhibit R-160. It will be seen that the original trust deed was registered on December 19, 1970 and in the Sanga's files, in exhibit R-159, an endorsement to that effect had been made on the top portion of the document. Exhibit R-159 has been on the files of the Sanga from November, 1970, onwards till this date. It is stated that the same was seen by everyone and it is an open secret. As already stated, exhibit R-119 was placed before the board of Sanga under the chairmanship of C. A. Chettiar and the other directors who participated were the third petitioner and respondents Nos. 2 and 9, and the resolution was, passed on November 14, 1970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and 3 are directors. Similarly, the other business company, Indian Commerce and Industries Co. Pvt. Ltd., also run by petitioners Nos, 2 and 3 herein, had availed of a loan of Rs. 12 lakhs from the tenth respondent earlier in September, 1977, vide exhibit R-162. The said amount was repaid by them subsequently and again borrowed by the very same petitioners for and on behalf of Beehive Engineering and Allied Industries Pvt. Ltd. It is submitted that both the above transactions took place in the year 1977 and that petitioners Nos. 2 and 3 were fully aware of the existence of an independent management for the tenth respondent, and at no point of time, they treated the tenth respondent as forming part of the Sanga. There is yet another resolution passed by the Sanga on December 29, 1971, vide exhibit R-2(i) which will show that certain shares and securities of the Sanga had been sold to the tenth respondent and the said meeting was attended by C. A. Chettiar and respondents Nos. 2, 3 and 4, and that the chairman of the said meeting was C. A. Chettiar. From a reading of the evidence of PW-1 and RW-1, it will be seen that a number of drafts were prepared for the formation of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made by the petitioners to implicate the tenth respondent and wanted the documents of the tenth respondent to be produced in court in this company proceeding but the said request was negatived by this court on August 28,1986, in Application No. 221 of 1983. The same was challenged before a Bench of this court in 0. S. A. No. 179 of 1983. The Bench by order dated September 11, 1983, dismissed the said appeal and confirmed the order of the company court. Having regard to the above, I am of the view, the present proceedings initiated implicating the tenth respondent is not legally maintainable. If really any fraud was practised by the second respondent in 1970 at the time of the formation of the tenth respondent trust, nothing prevented the petitioners from taking any action immediately. On the other hand, they recognised the independent functioning of the trust when they chose to borrow moneys from the trust. Only when the tenth respondent filed a suit for recovery of the said amount in 1981, the tenth respondent had been wilfully and wrongly implicated in this proceeding. The twelve years gap of inaction has not been explained at all by the petitioners. At any rate, no relief c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wash Service Ltd., In re [1966] 36 Comp. Cas. 566 (Ch. D.) it has been held that the matters complained of must affect the person alleged to be oppressed in his or their character as a member or members of the company ; harsh and unfair treatment to the petitioner cannot entitle him to any relief. A member or a director will have no personal interest in the case of a section 25 company since the object of the company is wholly charitable and no member or director can complain that he was ignored while doing the charity. Mr. V. R. Gopalan, learned counsel for the respondents, would submit that in the instant case, it is the petitioners/minority who are oppressing and even giving pressure on the respondents/majority and it is a reverse case. It is also not in dispute that most of the properties belonging to the Sanga are tenanted to the three business companies run by petitioners Nos. 2 and 3. It is also alleged that even though the third petitioner ceased to be a director of the Sanga from 1981, he had not handed over the assets and properties of the Sanga at Secunderabad in spite of the orders of court. Before winding up,, counsel for the respondents would also draw my attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners have been parties to all the transactions and they were fully aware of the same. There is absolutely no evidence to show that they were ignorant of the transactions. Sanga, a charitable institution in the nature of trust, is not commercial. It is argued that there is no question of any oppression of the petitioners' right as members of company especially in a section 25 company. According to Mr. V, R. Gopalan, the scope of section 397 of the Act is very limited in a case of this kind. On the ground of mismanagement, no specific instances have been spelt out, On the other hand, the six items of complaints levelled against the respondents have been well met and answered. The right of the petitioners under section 25 of the Act is only to ensure the performance of a charitable trust and certainly the personal benefits of the petitioners do not come into the picture. Hence, I am of the view, that in the case of a section 25 company, the scope of section 397 of the Act is curtailed. A Division Bench of the Kerala High Court had occasion to deal with section 397 of the Act in the case of Thomas Vettom ( V. J.) v. Kuttanad Rubber Co. Ltd, [1984] 56 Comp. Cas. 284 (Ker). The Bench h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the tenth respondent during the said period of nine years. Only in the year 1979, after a gap of nine years, the fifth respondent had been co-opted as a trustee by P. Visweswar Rao, and the fifth respondent has come into the scene as a co-trustee of the tenth respondent only in the year 1979. Simply because the fifth respondent is a shareholder or director of the Sanga also, whether the petitioners can file proceedings belatedly after the long lapse of time asking for the return of the amount, is the question. In my view, the same cannot be done either in law or on facts. The other case cited by Mr. T. Raghavan viz., Manvalal Khetav v. Kedar Nath Khetav [1977] 47 Comp. Cas. 185 (SC), relating to section 108 of the Act, also has no application to the facts of the present case. It is not the case of the respondents in this proceeding that there are no proper instruments of transfer of the shares. On the other hand, there is the positive evidence of RW-1 that all the share transfers questioned are covered by instruments of transfer duly complying with all the legal formalities and that they were all kept in the share transfer file, which had been stealthily removed by the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds that should be regularly flowing to the treasury of the Sanga have been deliberately blocked by the petitioners, who happened to be the lessees of most of the Sanga's properties. On a careful consideration of all the materials placed on record it is clearly seen that the petitioners have come to this court with an untrue case. There has been no oppression and mismanagement on the part of the respondents as alleged by the petitioners. It, therefore, follows that Company Petition No. 12 of 1982 is highly misconceived and has been filed without any basis or merit and above all, there is inordinate delay and laches in seeking remedies, which are discretionary in nature. As pointed out earlier, discretionary relief cannot be granted if there is inordinate delay and laches. Prayer (a) seeking for a declaration, therefore, cannot be granted, as, in my view, no case has been made out by the petitioners. Prayer (b) relating to investigation into the conduct of respondents Nos. 2 to 5 and 9 in relation to the affairs .of the Sanga and the alleged diversion of the funds and assets of the Sanga, cannot also be granted since no case has been made out for the grant of such a relief. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion made by the petitioners' counsel for appointment of an administrator, in my view, is unwarranted and quite unnecessary. Instead, the parties may consider the appointment of some eminent persons who are interested in public social and religious activities on the board. Now, I will take up Company Petition No. 13 of 1982. In this petition filed under section 155 of the Act, the petitioners pray for rectification of the share register, of the Sanga by deleting the names of respondents Nos. 2 and 3 in respect of the shares said to have been transferred by virtue of the resolution of the board dated January 15, 1955, August 11, 1957, and October 4, 1970. The first respondent is the Sanga, the second respondent is B.V.S.S. Mani and respondents Nos. 3 to 7 are the wife, sons and daughter of the second respondent. According to the petitioners, they are the shareholders of the Sanga. The second respondent was allotted only ten shares of Rs. 100 each. However, taking advantage of his stay with the late K.S. Rao he got entries made in the register of members without any instrument of transfer and without following the procedure laid down in section 108 of the Act. The petitioners hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanga and entries made in the name of the second respondent or his wife as holders of the said shares. In paragraph 13 of the petition, it is alleged that the second petitioner K. L. Manohar made an inspection of the Sanga's records in 1981 and the complaint is that the second respondent was effectively avoiding making the records of the Sanga available to the petitioners, When the inspection took place on August 5, 1981, of the Sanga records, the file containing the share transfer applications of the company from its inception was shown to K. L. Manohar and he noted serious infirmities in several of the applications which related to the transfer of shares to respondents Nos. 2 and 3. In the counter-statement filed on behalf of respondents Nos. 1 and 2, the following defences were taken: (a)This petition is clearly barred by limitation with reference to the transfer of shares made on January 15, 1956, August 13, 1957, and October 4, 1978. (b)K. L. Manohar had suppressed the fact of his holding 75 shares of Rs. 10 each, which shares he obtained by virtue of the board resolution dated August 13, 1957, only, and he was co-opted as director in the year 1959 only after he became eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with ulterior motive. Only the petitioners are responsible to make available the file containing the share transfer forms which is not available in the custody of the second respondent. In paragraph 16 of the counter, it is contended that all the transfers of shares were done in accordance with law but unfortunately the file containing the share transfer applications is obviously in the custody of the petitioners and now they want to take advantage of the same. At no point of time any specific demand was ever made by either of the petitioners for the production of the share transfer application file and no occasion arose to any one to look into the said file all these years. With reference to October 4, 1978, meeting, in paragraph 17 of the counter affidavit, the respondents would submit that all the share transfers were done in accordance with law. Even after October 4, 1978, there were the annual general body meetings in which the petitioners were present and no question about the invalidity or the impropriety of the transfer of shares was ever made by either of them. Mr. T. Raghavan, learned counsel for the petitioners, would contend that the second respondent, taking advantag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid ? Point: As already pointed out, the late K. S. Rao, the founder of the Sanga, was a self-made man and a man of independent thinking. He always took final decisions in the matter relating to the Sanga as well as his three business companies. K. S. Rao was acting as the managing director of the Sanga till his lifetime, which is not disputed. Articles 86 to 90 of the articles of association deal with the powers of the managing director. As already discussed, 1956 and 1957 were crucial periods for the Sanga, in that, K. S. Rao applied for a licence under section 25 of the Act from the Central Government, which he got eventually on July 5, 1957. He did not gift or donate any property to the Sanga before 1956-57. In fact, he did his duty to his only son, Mohanram Sastry, and his son's son, K. L. Manohar, by settling substantial properties in their favour on March 26, 1957. Only thereafter he made the first gift to the Sanga on March 28, 1957. None of the parties ever questioned the action of the late K. S. Rao till his death on September 23, 1964. With the above background, the resolutions dated January 15, 1956, and August 13, 1957, should be analysed. It is admitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Commerce and Industries Co. Pvt. Ltd., till his death in 1970. At the time when the two board meetings were held on January 15, 1956, and August 13, 1957, it is conceded that A. K. Balasubramaniam was maintaining the minutes in his own handwriting and certainly not B.V.S.S. Mani. Exhibit R-1 is the minutes book and exhibit R-1(a) is the pasted resolution dated January 15,1956. Exhibit R-1(a) is the underneath writing in the handwriting of A. K. Balasubramaniam dated January 15, 1956. Exhibit R-1(h) is the photo copy. Exhibit R-1(b) is the pasted resolution dated August 13,1957. Exhibit R-1(bb) is the underneath writing on August 13, 1957. Exhibit R-1(f) is the photo copy. The only witness examined on behalf of the petitioners is K. L. Manohar as P.W.-1. He would say that he was only 19 years of age when the aforesaid two resolutions came to be passed. No other witness had been examined to substantiate and prove the various charges and allegations made against B. V. S. S. Mani. Neither Mohanram Sastri, who died in 1988 only pending the proceeding, nor C. Srinivasan chose to give evidence in the case. B. V. S. S. Mani had examined himself as RW-1. The evidence of P.W.-1 was recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late K. S. Rao founded the organisation originally as a company limited by shares and even issued share certificates to about 50 persons, the value of the shares being Rs. 100 and Rs. 10 each respectively. Already it has been discussed as to how a stalemate was created in the year 1948 and how originally K. S. Rao wanted to have a broadbased board of directors and how those persons did not come up to the expectation of the late K. S. Rao and did not even pay the subscription amount with the result their names were struck off. The evidence would clearly disclose that in the years 1956 and 1957, there was thinking and re-thinking in the mind of the late K. S. Rao when he wanted to consolidate his position when he applied for the licence under section 25 of the Act. Naturally, he wanted to restrict the number of shareholders in whom he reposed confidence. Only with this background he took decisions 1956-57, and only after taking the said decision, the first ever disposition was made by him to the Sanga on March 28, 1957. It was at that time that the licence under section 25 of the Act was expected from the Central Government. K. S. Rao did his duty to his son and son's son by settling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the case of the petitioners that the writing underneath subsequently found out from the report of the Forensic Library was true and genuine. In fact, the petitioners had not said either in the pleadings or in the oral evidence, that only the writing underneath prevails and that it was true and genuine. Their objection was only to the effect that both the resolutions were pasted resolutions. Here again, they would attack only part of the resolutions. The evidence of P.W.-1 is most unimpressive, very vague and very meagre too. In fact, P.W.-1 has not come out with a clear case. But, he would say that he was fully aware of the fact that there was writing underneath the two pasted resolutions, He would even add that the pasting was done only at the top portion. If that were so, the writing underneath would have been easily visible. He made two official inspections before filing the company petitions, one on August 5, 1981, and another during December, 1981, in the City Civil Court, Madras. The present petition filed in February, 1982, is very silent and there is no whisper at all about the writing underneath. In fact, the petitioners had not spelt out their case regarding the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being no contra evidence on this the evidence of R.W. 1 is to be accepted. By no stretch of imagination it could be said that the writing underneath and the incomplete matter dated January 15, 1956, was ever acted upon by the parties and it is nobody's case either. If the incomplete writing underneath goes out of picture, what survives is the pasted resolution exhibit R-1(a), which is full, complete and meaningful. The writing underneath stopped abruptly with the word 'and'. Another special feature is that we do not find any change or difference or contradiction between the writing underneath and the pasted resolution dated January 15, 1956, excepting that the writing underneath makes a full sense only when we read the pasted resolution. RW-1 also had clearly stated that the transferors mentioned in the resolution dated January 15, 1956, were very much alive at that time. Exhibit R-l(b) is the pasted resolution dated August 13,1957, and exhibit R-l(bb) is the writing underneath. On a very careful analysis of both the writing underneath and the pasted resolution, the following features as pointed out by Mr. V. R. Gopalan, learned counsel for the respondents, are clearly seen : (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer 10 more shares of Rs. 10 each belonging to Kadiyalau Suryanarayana Rao, which is reflected in pencil writing as + 10 of 10. The pasted resolution exhibit R-1(b) reflects the said position. (f)So far as K. L. Manohar is concerned, in the writing underneath initially K. S. Rao was intending to transfer 125 shares of Rs. 10 each to him, which was also his thinking when the pasted resolution exhibit R-1(b) was typed. But, eventually when K. S. Rao put his signature in the final resolution, he restricted the share transfer retaining and not touching the 50 shares of Sella Lakshmana Sastry of Varanasi. The reason for retain ing Lakshmana Sastry's shares and not disturbing the same had been well explained by R.W.-1. (g)By restricting the share transfer only to 75 in favour of K. L. Manohar as against the original thinking of 125, neither B. V. S. S. Mani nor Mrs. Lalitha Rathnam got any advantage or benefit. On the other hand, the evidence would clearly show that the late K. S. Rao wanted to retain the services of Lakshmana Sastry of Varanasi and that was the reason why his 50 shares were not touched. (h)In the writing underneath, there was no mention about Hari-shankara Sastry but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er raised until the death of the late K. S. Rao or during the lifetime of C. A. Chettiar. The persons now complaining were directors of the Sanga. They ask B. V. S. S. Mani alone to explain the events that took place in 1956-57. In fact, both of them had recognised all the share transfers made by the late K. S. Rao without raising any protest till 1982. The share register of the Sanga had been filed as exhibit R-124. The shareholdings of each and every one had been clearly mentioned in that book in the handwriting of A. K. Balasubramaniam himself. Only the two pasted resolutions dated January 15, 1956, and August 13, 1957, figure in that book and not the writing underneath. The annual returns as on December 19, 1956, addressed to the Registrar of Companies have been marked as exhibit R-122. This has been signed by B. V. S. S. Mani and C. Srinivasan. Similarly, the annual returns as on October 31, 1957, marked as exhibit R-123 would contain the signatures of B. V. S. S. Mani and the late K. S. Rao himself. In those returns submitted to the competent authorities in the usual course of business of the Sanga, only the two pasted resolutions exhibits R-1(a) and R-1(b) dated January 15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file. The allegations levelled against B. V. S. S. Mani that he manoeuvred the shares transferred in his name as per the resolutions dated January 15, 1956, and August 13, 1957, with a view to get at the properties of the Sanga at a future date, have absolutely no legs to stand and those allegations have been made mischievously and wantonly for the first time in this company proceeding. On a careful analysis of both the oral and documentary evidence adduced, I am of the view that the request for rectification of the share register cannot be granted since it is highly belated and time barred. Only the two pasted resolutions have been acted upon fully and effectively by the members and directors of the Sanga right from 1956 and 1957 and at no point of time did anybody question the same. The petitioners are estopped from questioning the said position at this belated juncture. In fact, only those two pasted resolutions have been accepted and found in the records of the Registrar of Companies also. The two pasted resolutions are the real and genuine ones and there cannot be any doubt about it. It is the positive evidence of RW-1 that all the legal formalities pertaining to the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isweswar Rao and A. V. Jagannathan were alive at that time and the other two were dead. It is the positive evidence of RW-1 that due letters had been addressed to the shareholders Stephen and P. E. Ethirajulu Chetty to the addresses mentioned in the Sanga's records and only after complying with the legal formalities as laid down under articles 35(A) and (B), the transfers were effected. He would further state that the notices sent to dead persons were returned and they were all kept in the share transfer file, which is now missing. In respect of the other three shareholders, all the formalities had been observed by getting the transfer of shares and the transfer documents were also kept in the said missing file. It is contended by Mr. V. R. Gopalan, learned counsel for the respondents, that none of the persons whose shares were transferred or the legal representatives of the deceased persons ever questioned or made any claim to the Sanga till now on the transfers effected on October 4, 1978. It is seen that at that time, the board of directors of the Sanga were B. V. S. S. Mani, Lalitha Rathnam, K. Nagarajalakshmi (daughter of the founder K. S. Rao), K. L. Manohar and V. K. Dongre. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sanga's custody. R.W.-1 would assert that only after removing the file, all the allegations have been deliberately made by the petitioners knowing full well that he cannot produce the file and meet the queries. There is considerable force in the explanation given by B. V. S. S. Mani in this regard. The same is quite convincing and has to be accepted. Per contra, K. L. Manohar has given evidence as P.W.-1 regarding the meeting dated October 4, 1978. In the cross-examination he has given prevaricating answers, which will show that he has not come out with true and real version. His answers are very evasive and most unimpressive. Further, even in the counter statement the second respondent would clearly state that the petitioners had also taken part in the subsequent board meetings and the annual general body meetings but never questioned the minutes of the meeting dated October 4,1978. On a careful consideration of the oral and documentary evidence, it has to be held that the meeting dated October 4, 1978, was a genuine one and the share transfers effected in that meeting are legal and quite in order. The petitioners chose to attack only part of the resolutions pertaining to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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