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TMI Blog2003 (8) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board of Directors to increase the paid-up capital of company from Rs 5 lakhs to Rs 10 lakhs by the issue of 500 equity shares of Rs 1,000 each. Notice of this was given to the applicant who received it but did not apply to be allotted any of the additional shares. Mani and his wife, Kasturi, offered to purchase 279 shares each. The offer was accepted and additional shares issued in the name of Mani and his wife. According to Visakh, he had not been given notice of the offer of the additional shares. The trial court considered the various exhibits tendered in evidence by Mani and his group, including the local delivery book (Ex. R.-48), which was signed by Madhusoodhanan, the father and guardian of Visakh, to negative the submission of Visakh. We see no reason to interfere with this finding of fact. It is true that the Division Bench proceeded on an erroneous basis when it held that the learned Single Judge had dismissed the application on the ground of delay. Since we have upheld the factual finding of the court of the first instance, this misreading of the Trial Court’s judgment by the Division Bench is of no consequence. X X X X Extracts X X X X X X X X Extracts X X X X ..... al is 20 lakhs divided into 2,000 shares of Rs. 1,000 each. The total number of issued and paid up equity shares in Kerala Kaumudi was 1575. During the lifetime of K. Sukumaran each of the brothers along with their parents had shares in Kerala Kaumudi and the shareholding was as follows : Sr. No. 1. Mani 222 shares 2. Valsa Mani 84 shares (Mani's daughter) 3. Sukumaran Mani 84 shares (Mani's son) 4. Madhusoodhanan 390 shares 5. Srinivasan 390 shares 6. Ravi 390 shares 7. Madhavi 3 shares 8. Sukumaran 9 shares 9. Kaumudi Investments 3 shares (P.) Ltd. Total 1575 shares 5. Sukumaran died on 18th September, 1981. He was the Managing Director of Kerala Kaumudi from 1955 to 1973 and its Chairman from 1973 till his death. He was succeeded as Chairman by his widow Madhavi. Madhusoodhanan was appointed as Managing Director of Kerala Kaumudi in 1973 immediately after Sukumaran died. On 25th January, 1985, Madhusoodhanan was appointed as Managing Director and Editor of Kerala Kaumudi for life. He was also empowered to exercise the powers given to the Director under Article 79 of the Articles of Association. At the same time Srinivasan was appointed as Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. As a result, Mani and his children had no shares in Kerala Kaumudi, Madhusoodhanan had 612 shares, and Sreenivasan and Ravi had 222 shares each. Nine shares continued to stand in the name of the late K. Sukumaran and three shares in the name of Madhavi. In addition, the two children of Madhusoodhanan had 84 shares each, Sreenivasan's daughter, Anju had 168 shares, Ravi's son, Deepu, had 168 shares and KIPL continued to hold 3 shares. 9. On 23rd July, 1986, a Board Meeting of Kerala Kaumudi was held at which Madhavi assumed the powers of the Managing Director in purported ouster of Madhusoodhanan. The meeting is disputed by Madhusoodhanan. He says that no such meeting was in fact held and that the minutes were subsequently drawn up. A second Board meeting, which is also disputed by Madhusoodhanan, was held on 1st August, 1986 in which a decision was taken to increase the paid-up share capital of Kerala Kaumudi by issuing 425 additional shares of Rs. 1,000 each. At a Board meeting held on 8th August, 1986 these additional shares were issued to Ravi and Sreenivasan and one share was transferred by Ravi to Mani. This meeting as well as the allotment of the additional shares is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3261 of 1991) filed by Vaishak, the minor son of Madhusoodhanan, for rectification of the share register of Kerala Kaumudi. 13. The fourth set of proceedings originally consisted of two suits filed before the Munsif's Court, Trivandrum relating to the office premises of Kerala Exports and KIPL. The suit filed by Kerala Exports, (numbered on transfer as CS No. 2 of 1989) was for a mandatory injunction to restrain Kerala Kaumudi, Sreenivasan, Ravi and Madhavi from disturbing its functioning in Kaumudi Buildings. O.S. No. 1569 of 1988 (subsequently numbered as CS 4 of 1989) was a similar suit filed by KIPL before the Munsif's Court for restraining the defendants from preventing the peaceful functioning of KIPL's administrative office in Kaumudi Buildings. 14. All the original suits were transferred to the High Court under the provisions of section 446 of the Companies Act and were heard along with the several company petitions noted earlier. About 296 documents were tendered in evidence by the parties. Seven witnesses were examined. The four witnesses who deposed in support of Madhusoodhanan were P.K. Kurien, Advocate (PW 1), Mohan Raj, former Personal Assistant to Madhusoodhanan ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions were filed in this Court in the separate proceedings on which leave was granted on 27th August, 1991. 19. We propose to deal with issues which can be said to be common to the different sets of litigations before giving our conclusions on each appeal separately. 20. The underlying question in the first set of litigations viz. who has the controlling interest in Kerala Kaumudi has given rise in turn to the following topics : (A)The transfer of shares by Mani and his children to Madhusoodhanan; (B)The removal of Madhusoodhanan as Managing Director ; (C)The issue of additional shares to Ravi and Srinivasan; and (D)Specific performance of the agreement (Karar) dated 16-1-1986. (A) Transfer of shares by Mani and his children to Madhusoodhanan. 21.1 In C. P. 26/87, Mani and his group prayed for rectification oftheshare register of Kerala Kaumudi by deleting the name of Madhusoodhanan as a shareholder in respect of the shares which Mani and his group had transferred to him in 1985. The prayers proceed on the basis that there was in fact a transfer of shares in 1985 which was, after two years, sought to be set aside. The grounds on which this was asked for were : A.The con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer. The Kerala Kaumudi (P.) Ltd. undertakes to discharge the liabilities arising on account of personal guarantees given by Sri M.S. Mani for the company." [Emphasis supplied] The sixth resolution clearly envisages three distinct stages: an immediate and unconditional transfer of shares, then, the settlement of the Mani's income tax liabilities by Kerala Kaumudi and, after both these stages, the determination of the consideration for the transfer to be mutually agreed on. 21.5 The Division Bench, therefore, erred in holding that the agreement for transfer of shares was conditional on the determination of the price of the shares and in concluding that as there had been no such determination, no transfer could have taken place. The express intention was to effect an immediate transfer of the shares and to agree upon the consideration later. Section 9 of the Sale of Goods Act, 1930 permits this1. 21.6 Section 4 read with section 2(10) of the Sale of Goods Act, 1930 require that the contract of sale must provide for the payment of money as a consideration for the transfer of goods, or to put it differently, that a price must be paid. But section 9 of the 1930 Act allows the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Mani to Madhusoodhanan, 84 shares by Sukumaran Mani to M.S. Mani and 84 shares by Mani to Madhusoodhanan. The Board resolution goes on to record. "After discussion the share transfers were approved by the Board and the Managing Director and any other Director was authorised to sign the relative new share certificates to be issued in favour of Sri M.S. Madhusoodhanan and to affix the common seal of the company in the share certificates in the presence of the Company Secretary." 21.9 The minutes of the Board meeting held on 21st May 1985, were read and approved on 4th June, 1985. Both meetings were attended by Madhavi, Madhusoodhanan, Srinivasan and Ravi and the minutes signed by Madhavi as Chairman. The transfer of the shareholding of Mani and his children was also admittedly entered in the Company's Share Certificate Ledger (Ex. P-90). 21.10 It is evident from this that the share transfer forms which were placed before the Board had been executed and were otherwise duly completed, or else the question of the approval of such transfer would not arise. 21.11 Apart from these minutes, are the minutes of the meeting held on 26th August, 1986, when Madhusoodhanan, was already effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vasan and Ravi as Managing Director and Director of Kerala Kaumudi respec- tively together with a certificate by Ravi and Srinivasan under section 161(2) of the Companies Act, 1956. They certified that the return states the facts as they stood on the day of the annual general meeting correctly and completely and that since the date of the last annual return the transfer of all the shares and debentures and the issue of all further certificates of shares and debentures had been appropriately recorded in the books maintained for the purpose. 21.15 This was again done in the Annual Return of Kerala Kaumudi filed under the signature of Ravi and Srinivasan dated 28th July, 1987 [Ex. P.131(a)]. Madhusoodhanan is shown as holding 612 shares and Mani is shown as holding only one share. Under section 164 of the Companies Act, 1956, the annual returns, the certificates and statements therein, "shall be prima facie evidence of any matters directed or authorised to be inserted therein" under the Act. 21.16 The explanation given by Mani that he did not respond to the statutory declarations although they did not show his name or the names of his children as shareholders of Kerala Kaumudi beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Annual Return for 1986 and 1987 was sold by Ravi to Mani at a meeting held on 26 August 1986. As has been recorded in the minutes [Ex P-62(N)] and affirmed in the same affidavit of Madhavi in C.P. No. 14/86 on behalf of Ravi, Srinivasan, Mani and herself : "The meeting of the Board of Directors held on 26th August,1986 expressly considered the question whether the fifth respondent (Mani) is to be selected as one whom it is desirable in the interest of the company to admit to its membership. The Board resolved that the fifth respondent (Mani) is not only a desirable person, but his admission to the membership of the company will enhance its prestige and strengthen its administration. The Board felt that in the circumstances it was essential that the fifth respondent (Mani) was to be inducted as a member of the company." That he was "admitted" to membership and "inducted" as a member of the company by the transfer of one share on 26th August, 1986 has been acknowledged by Mani himself in his affidavit affirmed in the same proceedings on 28 November, 1986. 21.19 This admission to membership was in terms of Article 24(a) of the Articles of Association of Kerala Kaumudi, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nutes of the Board meeting held on 21 May,1985, an onus that he has singularly failed to discharge. Learned counsel for Mani submitted that the statutory presumption was not available as Madhusoodhanan had admitted that no formal meetings were held and that the minutes were prepared after informal discussions by the Company Secretary and shown to Srinivasan who signed the same after it was approved by Madhusoodhanan. The submission is unacceptable for three reasons. First: The Articles of Association of the Company (Art.81) allow Directors to regulate their meetings as they think fit. Also Art. 89 says that a resolution in writing circulated to all the Directors and assented to by a majority of them shall be as valid as a resolution passed at a meeting of the Board of Directors. Second, section 193(1) of Companies Act, 1956 provides : "Minutes of proceedings of general meetings and of Board and other meetings. - Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its board of directors or of every committee of the Board, to be kept by making within thirty days of the conclusion of every such meeting concerned, en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the statutory records submitted by Srinivasan after Madusoodhanan was removed as Managing Director of Kerala Kaumudi which continued to state that Mani and his children had transferred their shares in the company to Madhusoodhanan. 21.26 The fact that all the parties, including Ravi, Srinivasan and Mani himself, hardened businessmen all, not only proceeded on the basis that there was effective transfer of Mani and his childrens' shareholding to Madhusoodhanan but also certified the same to the Registrar of Companies, and additionally affirmed that such transfer had taken place on oath in their affidavits can only lead to the conclusion that the transfer had been legally effected on the basis of duly executed share transfer forms in compliance with the provisions of the Companies Act, 1956. 21.27 Nevertheless, the respondents argue, there were in fact no share transfer forms which were placed before the Board and the only transfer forms executed by Mani and his children were invalid because of non-compliance with section 108 of the Companies Act, 1956. 21.28 In his examination in chief, in response to the question whether he and his children had transferred their shareholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer forms. Mani and his group contend to the contrary. The issue would be of importance if one were to allow the respondents to resile from their admissions. We are not minded to do so. Nevertheless, since the reasoning of the Division Bench rests to a large extent on the question whether the transfer was in accordance with section 108 of the Companies Act, it would be appropriate to pronounce on this. 21.31 Section 108 of the Companies Act, 1956 insofar as it is relevant provides : "Transfer not to be registered except on production of instrument of transfer. - (1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transfer has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures;" 21.32 According to Mani, the share transfer forms were not duly stamped and could not be given effect to under section 108 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the respondents on oath and their conduct on the basis that the transfer had legally taken place. An additional fact is Exhibit R-18 which is a voucher for a cash payment of Rs. 2,370 issued to Kerala Kaumudi towards the "cost of share transfer stamps purchased". It is dated 16th May, 1985 and signed by Madhusoodhanan, Srinivasan, Madhusoodhanan's wife and Ravi's wife as well as the cashier, the clerk, the accountant, the manager and the Secretary of Kerala Kaumudi. The corresponding entries in the expense account of Kerala Kaumudi which form part of this exhibit, show that the accounts of Mani and Madhusoodhanan have been debited with the amounts of Rs. 420 and Rs. 1,950 respectively. It is improbable that stamps having been purchased for the share transfers which was recorded as effected four days later, they would not have been utilised. In this state of the evidence it cannot reasonably be held that Mani and his group have been able to establish that the transfer of the 390 shares by them to Madhusoodhanan was effected in violation of section 108 or any other provision of the Companies Act, 1956. 21.36 The Annual Returns signed by Srinivasan and Ravi [Exs. P-28, P-130 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the shares of Sukumaran Mani was "an absolute nullity in the eye of law" on the ground that the initial transfer by Sukumaran Mani was invalid because it was sought to be effected by Sukumaran Mani's mother who was not his legal guardian and who "figured as a guardian only as a ruse for getting over the statutory provision". The transfer of Sukumaran Mani's share through his mother to Mani has not been challenged. Therefore the issue of Sukumaran Mani's minority and his mother's competence to act as his legal guardian, were not issues which could be relevantly raised before, or decided by the appellate court. 21.39 Coming now to the question of consideration, the Division Bench on an interpretation of section 108 held that "the fixation of the price was a condition precedent, even in relation to an important and mandatory procedural formality like the payment of stamp duty to make the transfer lawful and proper". 21.40 We have already held that the relevant share transfer forms must be taken to have been duly executed. Although Mani and Madhusoodhanan had agreed to determine the actual consideration later, clearly some consideration was agreed to be shown on the share transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal payment made on this account to Rs. 10 lakhs. Mani contended that there was a total failure of consideration, a contention which was accepted by the Appellate Court. The truth appears to lie somewhere in between. 21.45 There is no dispute that the machines were in fact lifted by Mani, pursuant to Ex. P-134. Exhibit R-14 evidences payment by Kerala Kaumudi of Rs. 3 lakhs to Madhusoodhanan for, ostensibly purchasing property at Cochin for Kerala Kaumudi. The Division Bench holds that "It is this money that is utilised for payment to Mani as part consideration of the shares to be transferred by Mani and his group". However the Division Bench discounts this payment because "The very transaction itself may be open to serious challenge. The money of the company cannot be appropriated for a personal purpose of a person having a fiduciary capacity vis-a-vis the company". As a statement of law this is a doubtful proposition. Be that as it may, it is apparent that Mani received some consideration for the transfers although the consideration may have moved from Kerala Kaumudi to Mani. To sum up - the transfers by Mani and his children were effected validly to Madhusoodhanan. Their praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient running of the organisation. Resolved that an extraordinary general body meeting be convened at a date suitable for the Chairman to discuss and take decisions on matters arising out of the above decisions and that the Chairman be and is hereby authorised to issue notices to all concerned." The fact whether any notices were at all issued to Madhusoodhanan or to the other shareholders in his group including his children or to K.I.P.L. is seriously disputed by them. According to Mani and his group however, notices were duly issued of the meeting which was due to be held on 1st August, 1986. 22.4 The minutes of the meeting held on 1st August, 1986 [P-62 (L)] records that Madhavi, Srinivasan and Ravi attended the meeting. Out of the various resolutions which were taken regarding the administration of Kerala Kaumudi, what is important is the resolution taken by the Board members unanimously to the following effect : "Resolved that the issued share capital of the company be and is hereby increased to Rs. 20 lakhs by issuing additional shares worth Rs. 4.25 lakhs (for 25 shares of Rs. 1000 each) at par. The Chairman was authorised to issue notices to the existing shareholders to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 1986 at its registered office. The resolution to forthwith remove Madhusoodhanan as Director under section 284 of the Companies Act, 1956 was passed taking into consideration the additional shareholding of Ravi and Srinivasan. Madhusoodhanan and his group did not vote. 22.7 On 27th September, 1986 the Board of Directors of the Kerala Kaumudi held a meeting attended by Madhavi, Srinivasan and Ravi, at which Srinivasan was appointed as Managing Director of the company, Mani was appointed as additional Director, Madhusoodhanan was removed from the post of editor and Mani was appointed in his place and stead. Madhusoodhanan's final ouster from the control of Kerala Kaumudi was thus completed. 22.8 According to Madhusoodhanan, resolutions quoted above removing him as Managing Director of Kerala Kaumudi were illegal because in terms of Article 74 of the Articles of Association of Kerala Kaumudi, Madhusoodhanan was appointed the Managing Director and editor of the company for life. It is contended that in accordance with the Memorandum and Articles, 75 per cent of the votes was required to amend the Articles. Mani's group (including Madhavi) held only 50 per cent of the shares of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings at any General Meeting." 22.11 The corresponding section in the 1956 Act to section 81 of the Indian Companies Act, 1913, is section 189. The relevant extract of section 81 of the 1913 Act reads : "81. Extraordinary and special resolutions. - (1) A resolution shall be an extraordinary resolution when it has been passed by a majority of not less than three-fourths of such members entitled to vote as are present in person or by proxy (where proxies are allowed) at a general meeting of which notice specifying the intention to propose the resolution as an extraordinary resolution has been duly given. (2) A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not less than twenty-one days' notice specifying the intention to propose the resolution as a special resolution has been duly given : Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given. ****** (7) For the purpose of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Body, since it is felt that the effect of the said resolutions taken by the Board and being implemented may have the effect of curbing the powers of the Managing Director vested with him by the General body". 22.15 What has been deliberately and completely glossed over is that Madhusoodhanan's power was not sought to be merely curbed, but completely denuded. At the Extraordinary General meeting held on 16th August, 1986 [Ex. P-57 (a)], when the special resolution was taken up for consideration, Madhavi said that she would like to submit a report "in continuation of the Explanatory statement mentioned in the notice" and then proposed that "another special resolution also be passed deleting Article 74 of the Articles of Association of the company". 22.16 This acknowledges that there was no earlier extraordinary general meeting deleting Art.74 as Madhavi had claimed in the meeting dated 23-7-1986. Furthermore it shows that the special resolution which was proposed in the notice was not the resolution which was ultimately passed. In the garb of ratifying the resolution taken by the Board of Directors on 23-7-1986 , what was in fact "ratified" was not only the proposal to remove M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the respondents that under Article 49 of the Articles of Association of the Company even if no notice were given of the Extraordinary General Meeting, this would not vitiate the proceedings is misconceived. This was no ordinary general meeting, but a meeting where a special resolution was to be passed. This had to be done under section 81 of the 1913 Act, to which Article 49 is expressly subject, and the requirement for giving due notice under section 81 is mandatory. Furthermore, Article 49 speaks of an "accidental omission" to give notice not officiating the proceedings. In other words the omission must be bona fide, and not an omission which was wilful as it was in this case. 22.20 Furthermore, the third condition to be fulfilled before the Articles can be amended under section 81(1) of the 1913 Act, (Section 189 (2)(c) of the 1956 Act) is that at least 75 per cent of the members entitled to vote and voting must support the resolution. This mandatory need to have the special resolution passed by a statutory majority of 75 per cent was also sought to be circumvented by the respondents by the purported issue of additional shares to Ravi and Srinivasan. Both these aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16th August, 1986. 23.4 According to Madhusoodhanan and his group they neither knew of the meeting dated 1st August, 1986 nor did they receive any notice with regard to the allotment of additional shares nor of the meetings said to have been held on 8-8-1986 and 16-8-1986, in which the allotment of additional shares to Ravi and Srinivasan were made and later confirmed. 23.5 The Learned Single Judge held that no notice either of the Board meeting held on 1st August, 1986 or for the issue of additional shares had been served on Madhusoodhanan. He also referred to Articles 40, 41 and 18 of the Company to hold that the notice period of seven days to apply for allotment of additional shares was far too short. He upheld the contention of Madhusoodhanan that no meetings were in fact held on 8-8-1986 or 16-8-1986 and that there was as such no valid allotment of the additional shares to Ravi and Srinivasan. Madhusoodhanan's claim for rectification of the share register of Kerala Kaumudi was accepted and a fresh allotment of the additional shares was directed to be held. The Division Bench disagreed on all counts with the learned Single Judge, in our view, erroneously. Let us consider in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as P.49, besides also giving oral evidence to this effect. We find no reason to disbelieve Mohan Raj's oral testimony as to the circumstances under which he had affirmed the affidavit relied on by the respondents. 23.7 As far as the outward register is concerned, it has not been proved as to who dispatched the notice nor does the register show how the dispatch was effected. It is unclear on what material the Division Bench proceeded on the basis that it was sent by post under certificate of posting. In any event, if this were indeed so, where is the certificate? Its absence is significant. 23.8 Also significant is the absence of the actual notice alleged to be dated 25th July, 1986 of the Board meeting held on 1st August, 1986. Why was it not produced by the respondents? What did the notice say? Did it indicate the intention to issue additional shares for the purposes of increasing the share capital company as it should have? We do not know. But we can only observe that the absence of the notice raises a presumption against the respondents. And in so far as the outward dispatch register is concerned, the mode of dispatch has not been mentioned nor is there anything to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1986 to issue 425 equity shares of Rs. 1,000 each for subscription to the existing shareholders. The notice which appears to be addressed to Madhu-soodhanan, his two children, Srinivasan and his daughter, Ravi and his daughter and finally to KIPL finally states: "You are eligible to apply for additional shares within seven days". 23.13 Article 40 of the Articles of the company requires all new shares to be offered to all existing shareholders "in proportion, as nearly as the circumstances admit to the amount of the existing shares to which they are entitled". The offer is required to be made by notice "specifying the number of shares offered, and limiting the time within which the offer, if not accepted, will be deemed to be declined. . . ." The notice, exhibit R-26, is not in this form at all. 23.14 However, the respondents have sought to rely upon the following evidence in support of their contention that Madhusoodhanan was given an opportunity to apply for the additional shares by service of a notice dated 1-8-1986. : (a)An entry in the local delivery book of Kerala Kaumudi [Ex. R-8 (b)] which ostensibly records that on 1st August, 1986, Madhusoodhanan, Managing Director, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the indefensible conclusion that "evidence regarding dispatch of a communication under certificate of posting attracts the irrebuttable statutory presumption under section 53 (2)( b) that the notice had been duly served", that "it is not open now to project a plea of absence of service of notice and a substantiation thereof by evidence" and that even if it were proved that the notice did not reach the addressee, the evidence could not be " formally accepted and formally acted upon by the court" such contrary evidence "being necked (sic ) out at the threshold". 23.18 This Court in Mst. L.M.S. Ummu Saleema's case (supra) said that a certificate of posting might lead to a presumption if the letter was addressed and was posted, that it, and in due course, reached the addressee. "But, that is only a permissible and not an inevitable presumption. Neither section 16 nor section 114 of the Evidence Act, compels the Court to draw a presumption. The presumption may or may not be drawn. On the facts and circumstances of case, the Court may refuse to draw the presumption. On the other hand the presumption may be drawn initially but on a consideration of the evidence the Court may hold a pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod and not as laying down a rule of conclusive proof. In fact these presumptions are not peculiar to the Evidence Act. They are generally used wherever facts are to be ascertained by the judicial process." (p. 1105) It was accordingly held that the words "shall presume" contained in section 28B of the U.P Sales Tax Act only require the authorities concerned to raise a rebuttable presumption that the goods must have been sold in the State if the transit pass is not handed over at the check post at point of exit and that it was open to the transporter to still prove that the goods had been disposed of in a different way. (See also Syed Akbar v. State of Karnataka AIR 1979 SC 1848; State of Madras v. A. Vaidyanatha Iyer AIR 1958 SC 61). 23.22 Raising of a presumption, therefore, does not by itself amount to proof. The result of a mandatory requirement for raising a presumption cast on Court, as there is under section 53(2) of the Companies Act, is that the burden of proof is placed on the person against whom the presumption operates for disproving it. It is only if such person is unable to discharge the burden, that the court will act on the presumed fact. (See Dahyabhai Chhaganbha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the shares was too short or contrary to the Articles of Association of Kerala Kaumudi. 23.26 Once we have held that Madhusoodhanan and his group, all of whom held shares in Kerala Kaumudi, were not given notice to apply for allotment of the additional shares, it must be held that the subsequent allotment of the shares to Ravi and Srinivasan at the meeting held on 8-8-1986 and the affirmation of such allotment at the meeting allegedly held on 16-8-1986 were vitiated thereby and invalid. 23.27 Although there appears to be substance in the submission of Madhusoodhanan, as accepted by the learned Single Judge, that no meetings were in fact held on 8-8-1986 or on 16-8-1986, in view of our finding relating to the non-service of the notice dated 1-8-1986, we refrain from deciding the issue. 23.28 We, therefore, set aside the decision of the Division Bench in MFA 330/90, AS No. 164/90 and AS No. 165/90 and affirm the judgment and order of the learned Single Judge in CP 14/86 and the decree in CS No. 3/89 and CS No. 5/89 including the directions in connection with the allotment of the additional 425 shares. 23.29 KIPL's application CP 31/88 was dismissed by the Single Judge and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. M.S. Madhusoodhanan and the price of that share will be informed to the other parties in time". (B)"the value of the shares of Kerala Kaumudi which is to be sold by M.S. Mani to M.S. Madhusoodhanan will be informed to others at the appropriate time". (C)"the price paid by M.S. Madhusoodhanan on the sale of Kerala Kaumudi shares by M.S. Mani will be intimated to other parties as and when (it is done)". 24.4 Having regard to our finding on the question of transfer of Mani's 390 shares to Madhusoodhanan in May, 1985, perhaps the appropriate translation is the one put forward by the official translator which is set out above as (C). This difference of opinion, however, is really of no moment, because the subject-matter of Madhusoodhanan's claim for specific performance is limited to that part of the Karar which provides for the division of shares of the late Sukumaran and Madhavi in the percentage of 50: 25: 25 between Madhusoodhanan, Ravi and Srinivasan, on Madhavi's death. Before considering the merits of this claim, we may briefly refer to the remaining clauses of the Karar. Clauses 4 to 10 relate to the division of assets and shareholding in various family concerns so that ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons which persuaded the Division Bench to allow the appeal were first: no steps had been taken by Madhusoodhanan for determination of the price of 390 shares or the 'inherited shares' or for making the same known to the other parties or for carrying out the other provisions in the Karar - in particular closing down of Blue Travels, Kaumudi Hotels and Blue Transports. Second, there was no averment in the plaint regarding consideration and no relief sought for in relation to the fixation or payment of consideration. Third, in contravention of section 16 of the Specific Relief Act there was no averment in the plaint about the preparedness of Madhusoodhanan to pay the consideration; fourth, since there had been no transfer of the 390 shares, it was not possible to enforce the Karar in respect of the bulk of shares regarding which specific performance had been claimed. Fifth, Madhusoodhanan could not claim specific performance of only that part of the agreement which was in his favour without performing the obligations which were cast on him by the other clauses. These clauses were inseparable and part performance of the agreement was not possible. Sixth, there was an undue delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrators of the deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. It was the contention of the respondents that insofar as the Karar provided for the transfer of the shares of the late Sukumaran and Madhavi to Madhusoodhanan, it was contrary to Article 29 of the Articles of Association of the company and could not be enforced. This submission is made on the basis of the decision of this Court in V.B. Rangaraj v. B. Gopalakrishnan AIR 1992 SC 453. That decision must be understood and read after enunciating certain basic principles relating to the transfer of shares and in the background of earlier decisions on the subject. It is settled law that shares are movable properties and are transferable. As far as private companies like Kerala Kaumudi are concerned, the Articles of association restrict the shareholder's right to transfer shares and prohibit any invitations to the public to subscribe for any shares in, or debentures of, the company. This is how a "private company" is now defined in section 3 (1)(iii) of the Companies Act, 1956 and how it was defined in section 2 (13) of the 1913 Act. 24.10 Subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before such an agreement can be enforced, it is not necessary for the company to be a party in any agreement relating to the transfers of issued shares for such agreement to be specifically enforced between the parties to the transfer. 24.12 In S.P. Jain's case (supra), the company was a private limited company to begin with. An agreement was entered into between two shareholders and S.P. Jain, who was not a member, which internally provided that S.P. Jain would be allotted shares after the share capital of the company was increased equal to those held by the said two shareholders. The company was not a party to it nor were the other shareholders. In terms of the agreement there was an increase in the share capital and shares were allotted to S.P. Jain. Some years later, after the company had been converted into a public company, a decision was taken by the company to issue fresh shares. The shares were not allotted to S.P. Jain. Alleging oppression by the majority shareholders, S.P. Jain filed proceedings in which it was contended that the subsequent allotment of the new shares was in violation of the agreement between S.P. Jain and the two shareholders. In this context, this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed on 15-7-1985 several months prior to the Karar. The parties who had consciously entered into the agreement regarding the transfer of their parents shares are therefore obliged to act in terms of the Karar. The defence of Ravi and Srinivasan based on Ex.R-59 and R-60 should not, in the circumstances, have been accepted by the Division Bench. Having regard to the nature of the shareholding, on the basis of the law as enunciated by the Federal Court and Privy Council in the decisions noted above, it must be held that the Karar was specifically performable. 24.14 As far as the question of consideration is concerned, we have already held that parties can agree to subsequently determine the price at which the shares were sold and section 9 of the Sale of Goods Act, 1930 expressly provides that such contracts are perfectly legal. Besides, the Karar in terms does not call upon parties to determine the consideration. All it says is that once the consideration was determined by Madhusoodhanan and Mani, it would be made known to the others. Since there was no such determination, there was no question of informing anyone. The finding that there was no determination of the considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly laid down in sub-section (2). The Division Bench appears to have relied on clause (a) of section 20(2) to deny specific performance of the Karar by holding that Madhusoodhanan had obtained an unfair advantage over others under the Karar because he had been allotted the more 'substantial' companies. This logic flies in the face of clause (a) of sub-section (2) to section 20 and the explanation thereto - which say : "20. Discretion as to decreeing specific performance.-- ****** (2) The following are cases in which the court may properly exercise discretion not to decree specific performance-- (a)where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; ****** Explanation 1.--Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b)." This section is an inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the late Sukumaran and the 3 shares of Madhavi now stand. Whoever is recorded as the owner of the shares shall further transfer six of those shares to Madhusoodhanan. 24.20 For all these reasons, we have no hesitation in setting aside the decision of the Appellate Court and restoring the decree as passed by the Trial Court as modified below. "Madhusoodhanan will appoint one Arbitrator and Mani and his children, Sukumaran and Ravi will appoint one Arbitrator within one month to decide the following matters. Failing this any one of them may move this Court to appoint an Arbitrator to decide : (a)What was the fair value of one share of Kerala Kaumudi (P) Ltd. on 21-5-1985? (b)What amount was paid or adjusted by or on behalf of M.S. Madhusoodhanan to M.S. Mani towards the value of shares ? What is the balance amount due from Madhusoodhanan to Mani and his children in respect of the transfer of the 390 shares transferred to M.S. Madhusoodhanan. (c)What would be the value of one share on the date of Madhavi's death ? It will be open to the parties entitled to the consideration as determined by the Arbitrators to recover the sums due to them from Madhusoodhanan". Rectificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatever papers be brought by Mr Madhusoodhanan." 25.4 The learned Single Judge dismissed the application for rectification. He held that the 4 brothers had admitted their signatures in Exhibit P-190 which is a record of decisions taken at a meeting held on 29-11-1984 when one of the decisions taken was to entrust separate concerns to each of the brothers, depending upon who was taking an active interest in the company. The decision was implemented by the share transfers in the sister concerns of Kerala Kaumudi and it was not disputed that in respect of Laisa Publications, Srini Printers, Ravi Printers etc., the respective brothers who were in control of those concerns were given 52 per cent shares. As far as KIPL was concerned it was decided : "3(b). In Kaumudi Investments and Kaumudi Exports 52 per cent of shares will be held by Shri M.S. Madhusoodhanan and family and 16 per cent each of shares will be held by Shri M.S. Mani and family, Sri M.S. Srinivasan and family and Sri M.S. Ravi and family." This was effected as far as KIPL was concerned on 4th March,1985. It was held that the evidence showed clearly that all the necessary steps had been taken to effect the share transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en produced. Madhusoodhanan had filed an application for production of the original share transfer deeds. He said that he could not produce the share transfer deeds because they were in the administrative office of KIPL and that he had been prevented from entering that office. That the administrative office of KIPL is within the Kerala Kaumudi premises in a separate room was also the finding of the Division Bench. Madhusoodhanan and his group's grievance that they were being denied access to KIPL's office since April, 1986 was not rejected by the Division Bench as not genuine. But the Division Bench observed "A mere alibi of inability to enter the office, cannot be accepted as a sufficiently strong reason for their grievous omission". This conclusion is as startling as it is unreasonable. For the reasons given earlier in connection with transfer of shares in Kerala Kaumudi, we are of the view that here also, the minutes and the other records of the company, which prima facie raise a presumption of their veracity, have not been sufficiently disproved by the evidence tendered on behalf of the petitioners in the application for rectification. 25.9 Apart from the provisions of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the documents which were duly maintained by the company recording the transfers of the shares had been disproved, we cannot uphold a finding that the share transfer deeds must have been improperly stamped or executed in violation of the provisions of section 108 of Companies Act. 25.11 No further reason has been given by the Division Bench for upholding the prayer for rectification of the share register of KIPL. We have, therefore, no compunction in setting aside the decision of the Division Bench and restoring that of the learned Single Judge dismissing the application. Rectification of the Share Register of Kerala Kaumudi 26.1 The next matter is the application for rectification of the Share Register of Kerala Kaumudi filed by the minor son of Madhusoodhanan, Visakh (CP 11/87; MFA No. 285/90; CA 3261/91). This appeal need not detain us as both the courts below have concurrently held that the application had no merit. 26.2 In keeping with the Karar, Mani and his family have the controlling interest in the company. In June 1985, of the 500 issued shares, Mani and his family held 260, Madhusoodhanan and his children held 80 shares, Srinivasan and his children held 80 shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of KIPL was carried on from this office. It has been further averred in its plaint, that Geetha, Madhusoodhanan's wife, had been denied access to the administrative office when she went there along with a staff in August 1986. She was informed by the reception office that the keys to the room were with Srinivasan who refused to hand over the keys to Geetha. 27.3 Srinivasan filed a written statement on behalf of Kerala Kaumudi in which it was denied that KIPL had its administrative office in Kaumudi Buildings. According to Srinivasan, Geetha used to sit in Madhu-soodhanan's office when he was the Managing Director of Kerala Kaumudi. 27.4 On behalf of the plaintiffs, entries in the telephone directory (Ex.P-181), notices and letters issued by the income tax office addressed to KIPL at Kaumudi Buildings (Ex-P. 182, 184 and 185) as well as a letter from the Commissioner of Income Tax (Ex.P. 183) similarly so addressed were proved by Madhusoodhanan. Srinivasan has been unable to explain why the letters and notices to KIPL by the concerned authorities should be addressed to Kaumudi Buildings unless KIPL was functioning from that place. Additionally, Srinivasan also said, in his ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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