BANK OF HINDUSTAN Vs. KOWTHA SURYANARAYANA RAO

JUDGEMENT

(1.) THIS is an appeal by the Bank of Hindustan Ltd (now in liquidation) by its Joint official Liquidators, the Official Receiver of this court and Messrs. Brahmayya and co. , the first defendant in C. S. No. 525 of 1948 and application No. 1229 of 1051 on the file of this court, against the judgment and decree of Ramaswami Gounder j. declaring that the plaintiffs, Kowtha Suryanarayana Rao and the Indian commerce and Industries Co, Ltd, represented by him as governing director, were entitled to have their names, which stood registered in the books of the appellant company, as holders and owners, cancelled and omitted in respect of 1608 partly paid up shares of Rs. 90 each (only Rs. 40 out of each share having been paid up)standing registered in the name of the first plaintiff and of 60 other similar shares standing registered in the name of the second plaintiff in the hooks of the company, and directing the name of the second defendant, Saraf, to be registered as the holder and owner of the above 1668 shares in the Looks of the bank, and restraining the appellant bank and its liquidators by an injunction from making any call or taking any Other proceedings against the plaintiffs in respect of the said 1668 shares.

(2.) THE facts are briefly as follows: the Bank of Hindustan Ltd, the appellant bank, was a banking company incorporated under the Indian Companies Act with its registered office at No. 119 Armenian Street, Madras. the first plaintiff is a landlord and merchant, carrying on business at No. 95 Broadway, Madras. Till the beginning of May 1945, he, admittedly, held 2508 party paid up shares of Rs. 100 each (reduced to Rs. 90) in to is bank; and the second plaintiff, of which the first plaintiff is the governing director held another 610 shares of Rs. 90 each. These shares admittedly, stood registered in the books of the appellant bank in the names of the first and second plaintiffs respectively till May 1947. The first plaintiff was then not only a director of the appellant bank, but the managing director thereof, having been an ordinary director from 1942 to 1944.

(3.) ON 4th May 1945 under an unstamped agreement, Ex. P. 1, the second defendant, Saraf, a merchant of Sir Phirozshah Mehta Road, Bombay, then considered to be a man of substance (now said to be a man of no substance), agreed to purchase all the 3118 shares (noted in Ex. P. 1 as about 3200 shares)from the plaintiffs at Rs. 41-4-0 ret 'per share (as against the Rs. 40 paid up share ). Ex. P, 1 added that the purchase money calculated at that rate would be paid by Bhagat, the fourth defendant, a partner of Sarafally Co. Sembudoss street, Madras, and that he had agreed to pay the money and to receive 3118 shares from the plaintiffs, the fourth defendant being said to have agreed to advance the amounts to second defendant who was asked by the 1st plaintiff to pay up at once and had no ready cash then but hoped to get in a few days from bombay. Ex. P. 1 went on to say that, as the first plaintiff had sold away all his shares and had no more interest as a shareholder in the Bank of Hindusthan Ltd. , he should tender his registration as the managing director, Chairman, and director as agreed to by him. This agreement was to enable the second defendant to step into his shoes, and defendants 2 to 4, who were the other directors, to run the bank them, selves, without the first plaintiff's interference. Ex. P. 1 added that the plaintiffs had agreed to give blank transfer deeds for each scrip separately, from the persons concerned, that is, the persons in whose names the relative share scrips, stood. Ex. P. 1 did not say to whom the scrips would have to be eventually sold or transferred by the second defendant, who purchased them or by the fourth defendant who took delivery of them after making payment on behalf of the second defendant, or fix a date for deleting the names of the plaintiffs from the books of the company and substituting the names of the purchasers in respect of these shares.