KHADIJA Vs. P.K. MOHAMMED P. LTD.

JUDGEMENT

(1.) Plaintiffs in O.S. No. 71 of 1971 before the Sub Court, Cochin are the appellants in the second appeal. Defendants 1 and 3 and the legal representatives of deceased 2nd defendant who had been impleaded as additional respondents 4 to 9 in the court below, are the respondents. The 1st defendant is the company known by the name and style of 'P. K. Mohammed, Private Ltd.'. Defendant No. 3 is a Director of the company Till his death the 2nd defendant too was its Director. Though the contentions between the parties originally ranged a larger area, the arguments in second appeal mainly relate to two questions: (i) the effect of the sale on 13th September, 1955 of the ninety shares then held by P. K. Mohammed, in auction in favour of the 2nd defendant and the impact of Exts. A-1 and A-2 on those shares and (ii) the claim relating to thirty three shares originally held by P. O. Kamaludin, husband of the 1st plaintiff and father of the 2nd plaintiff, on the demise of Kamaludin on 16th February, 1957; and the impact of the sale of the shares in auction for the debts of Kamaludin.

(2.) The facts relevant for the two questions pressed before this court in second appeal may briefly be stated as follows: The 1st defendant is a private limited company incorporated in the year 1953. Its share capital as in 1957 consisted of 183 fully paid up shares of Rs. 100 each, 33 shares held by Kamaludin, 90 shares by P. K. Mohammed and 60 shares by A. S. Sankunny. The shares of P. K. Mohammed were sold in auction on 13th September, 1956. They were purchased by the 2nd defendant and duly transferred in his name. That the 2nd defendant is his nephew is an admitted fact. That he was a dependent of P. K. Mohammed and without any means of his own is the allegation of the plaintiffs. The transfer of shares, according to them, was, therefore, a sham transaction. P. K. Mohammed was the real owner of the shares and continued to receive dividends and other benefits till his death on 24th August 1970, according to the plaintiffs. The 1st plaintiff is the adopted daughter of P. K. Mohammed. On 15th May, 1963 P. K. Mohammed wrote a letter Ext. A-1 wherein he expressed his view that the 1st plaintiff is to utilise in her individual capacity the dividend at the rate of 9 annas 4 pies in a rupee, on all the shares in P. K. Mohammed Private Ltd., kept by him in the name of the 2nd defendant P. C. Mohammed. The letter was to be retained by Khadija Umma, the 1st plaintiff, till the death of P. K. Mohammed and was to be shown to the 2nd defendant - P. C. Mohammed, if felt necessary. After the death of P. K. Mohammed, the letter was shown to the 2nd defendant and Ext. A-2 agreement was executed on 2nd October, 1970 where under the directions of Ext. A-1 are claimed to have been incorporated. Kamaludin had married the 1st plaintiff and to them was born the 2nd plaintiff. Till his death on 16th February 1957, Kamaludin was living with P. K. Mohammed along with the plaintiffs. It was averred that neither P. K. Mohammed nor Kamaludin had any necessity to borrow any amount from the company. In the wake of the death of Kamaludin, and the later demise of Kamaludin's mother the plaintiffs claimed to have become the full owners of the shares held by Kamaludin. The demand made by the plaintiffs after the death of P. K. Mohammed for rectification of the share register of the company by showing the 1st plaintiff as the shareholder in respect of 52 1/5 shares out of the 90 shares dealt with under Exts. A-1 and A-2 and of the 33 shares held by Kamaludin, was declined by the company pointing out the sale in auction of those shares. The plaintiffs alleged that the 2nd plaintiff was not given notice in relation to the sale proceeds of Kamaludin's 33 shares. Ultimately the plaintiffs sought a declaration that the 1st plaintiff is the owner of 52 1/5 shares and the two plaintiffs together to 33 shares, the former claim grounded on Exts. A-1 and A-2 and the latter on the contention about the invalidity of the sale in auction by the company on 13th September, 1958 in purported enforcement of the lien of the company on the shares, for the debts due to the company from Kamaludin.

(3.) The suit was resisted by the defendants. The contentions are more or less similar. It was stated that P. K. Mohammed owed a liability amounting to Rs. 4100-12-4 to the company, for which his 90 shares had been hypothecated. The company by resolution dated 23rd July, 1956 desired to recover the amount by the sale of the shares. Notice was issued to P. K. Mohammed on 13th July, 1956 demanding the amount. The demand not having been complied with, despite issue of even subsequent notices on 22nd August, 1956 and 10th September, 1956, the shares were sold in auction and were consequently transferred in the name of the auction purchaser, the 2nd defendant. Similarly, an amount of Rs. 3559.28 was due from Kamaludin when he died on 16th February, 1957. This amount was resolved to be realised from the legal heirs. Registered notice was issued to the 1st plaintiff, she being the widow of the late Kamaludin and the guardian of the 2nd plaintiff. Notice was also issued to another heir Ummacha, the mother of Kamaludin. Despite the clear intimation about the proposal to auction the shares in default of payment of the dues, in respect of which the company had a paramount lien, the amount was defaulted. The shares were accordingly sold in auction. In the light of these events, of which, it is contended by the defendants, the plaintiffs had adequate and due notice, the plaintiffs had no cause of action in relation to the two sets of shares.