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TMI Blog2005 (9) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... The shares which were allotted to the Sanwalkas, were originally held by M/s. Gupta Brothers (a concern of Gupta) who did not respond to the unpaid calls and thereby the shares were forfeited. Those forfeited shares were allotted to the Sanwalkas. At the time of issuance of such shares the company, however, accepted the partly paid up value of the shares. The shares were Rs. 100 each whereas the paid up value was Rs. 35 per share. The letters of allotment of shares are appearing at pages 127-134 of the paper book. According to the Sanwalkas no call was ever made to them by the Guptas who were in control of the company. Hence, the Sanwalkas could not pay the balance value of the shares. According to the Guptas, by letters appearing at pages 135-143 calls were made on 5-1-1991. However, the Sanwalkas did not respond to the said call. Hence, their shares stood forfeited. According to the Sanwalkas, none of those letters were received by them. The Guptas also could not prove receipt thereof. The contents of the letters allotting the shares and the contents of the letters making a call are quoted below: "Thank you for your letter dated 16-5-1986 and the two drafts enclosed therewith f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board. According to them, since the Sanwalkas did not respond to the call their shares stood forfeited and they did not have locus standi at all to question the affairs of the company to which they had no interest on the date of filing of petition. 5. The Sanwalkas also filed a suit before the Delhi High Court, inter alia, praying for a declaration that 3065 preference shares which had ceased to exist in 1967 could not be substituted by fresh issues as also for a further declaration that after the due date of redemption of 3065 preference shares the right of the holders of the shares was only to recover the value of the share money from the company which stood time-barred and an order of injunction restraining the respondent from holding an extraordinary general meeting for issuance of such shares to the defendants. 6. The matter was heard by the Company Law Board. In the course of hearing with the intervention of the Company Law Board the disputes were resolved between the parties. 7. The terms of settlement was duly signed by both the parties and was filed before the Company Law Board resolving the disputes between the parties. 8. In terms of the settlement th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition should have been dismissed. According to the petitioners, the Company Law Board should have set aside and cancelled the lease granted in favour of respondent Nos. 11 and 12 after holding the same one sided and detrimental to the interest of the company. The Company Law Board should also have directed payment of the balance unpaid value of the shares so that the petitioners would not have to depend on such calls to be made by the company at a later stage. The Company Law Board also should have intervened on the issue of redemption of preference shares instead of leaving the said issue to be decided by the Delhi High Court or by the shareholders in the general meeting. 14. The appeals were heard by me on the abovementioned dates. The hearing was concluded on 12-8-2005. Both the parties also prayed for liberty to file written notes of argument which were filed on the abovementioned dates. 15. On behalf of the company as well as the Guptas Mr. Sudipto Sarkar, learned counsel contended as follows : ( i )The shares held by the petitioners were subject to unpaid calls as the unpaid calls outstanding on account of Gupta Brothers were attached to the shares. Hence, until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted ( supra ) it would appear that there was no whisper about such outstanding call. On a query made by me Mr. Sanjib Banerjee, learned counsel also appearing for the appellant could not give any convincing answer as to why the petitioners were not asked to pay the entire value of the shares at the time of allotment if there was no outstanding unpaid call as on the date of allotment. I have no hesitation to agree with the finding of the Company Law Board that the terms of allotment would be the guiding factor on this issue. On this score Mr. Sarkar tried to make a distinction between the decision of the House of Lords in the case of New Balkis [1904] Appeal Cases 165 and the decision in Randt Gold Mining Co. Ltd. v. Wainwright [1901] 1 Ch 184. Such distinction, in my view, would not help me to resolve the present controversy. In the case of Randt Gold Mining Co. Ltd. v. Wainwright [1901] 1 Ch 184, the article provided that a member would not be entitled to vote if there was any unpaid call on the shares due from the former holder of the said shares. When the forfeited shares were issued, as in the present case without any such stipulation the petitioners were entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the key factor to decide on the issue. Since the original allotment did not speak about the unpaid call on account of Gupta Brothers the petitioner were only obliged to answer to the fresh call to be issued by the company upon due notice to the shareholders. ( iii )Article 18 of the company clearly stipulated that the liability for unpaid calls was that of persons whose shares were forfeited and it did not make any provision for attaching such liability with the shares even after reallotment. ( iv )On the cross appeal Mr. Mukherjee contended that the issue of cancellation of lease should have been taken up by the Company Law Board. The Company Law Board should have also taken up the issue of 3065 preference shares instead of leaving the said issue to be decided in the annual general meeting to be held by the company in terms of the direction of the Company Law Board. ( v )In support of his contention Mr. Mukherjee relied on the following decisions : ( a ) Amali English Medium High School v. Government of Andhra Pradesh AIR 1993 AP 338 (FB). ( b ) Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd. AIR 1966 Cal. 512 ( c ) Firm Sriniwas Ram Kumar v. Mahabir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1991. Hence, I hold that there was neither any attempt on the part of the company to ask the petitioners to make good the call unpaid on account of Gupta Brothers nor on account of the petitioners in terms of the letters of allotment issued in 1986. Hence, subsequent action on the part of the company either for forfeiting the shares or for further issue of shares (either bonus or original shares) or attempt to deal with the preferences shares was wrong. 22. On each issue parties cited decisions recorded above. On the issue of forfeiture several passengers from Bucklay were relied on. The decision of the House of Lords in the case of New Balkis Eersteling Ltd. ( supra ) and the decision in the case of Randt Gold Mining Co. Ltd. ( supra ) on the issue of unpaid share were cited by the parties. Those issues were dealt with by the Company Law Board in detail referring to the decisions referred to above. On a cumulative reading of the decisions my understanding of the law on subject is that issue of unpaid calls would be governed by the terms of allotment and the relevant provisions of the articles of association. In the instant case, article 18 of the articles of association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Sanwalkas I am of the view that once the Sanwalkas approached the Delhi High Court on the issue of dealing with preference shares as well as the holding of the extraordinary general meeting for the said purpose the Company Law Board rightly refused to entertain the identical issue as the issue was subjudice before the Delhi High Court. The petitioners decided their course of action. They approached the Company Law Board for a particular purpose. They approached the Delhi High Court for a different purpose. Hence, the Company Law Board was right in not interfering with the issue pending before the High Court and I do not find any scope for interference on that score. 26. On the issue of allotment of lease although the Company Law Board was within its power to cancel the same, in my view, for the said purpose appropriate action should be brought as against the lessee by the company inter alia for cancellation of the said lease. The Company Law Board was right in not interfering on that score. 27. In the result, both the appeals fail and are hereby dismissed. 28. There would be no order as to costs. 29. There would be however stay of operation of this j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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