NELLIE WAPSHARE Vs. PIERCE LESLIE AND CO LTD

JUDGEMENT

(1.) This is an appeal by the plaintiffs in the Court below representing the entire body of shareholders of a private limited company, the O. V. Estates Ltd. (16th defendant) which was liquidated, for possession, vesting or reconveyance of the suit properties (Schedules A to D) alleged to have been transferred through the exercise of fraud, misrepresentation and undue influence on the part of defendant 1 (Messrs. Pierce Leslie & Co. Ltd.), and defendants 2 to 14 through the 1st defendant, who stood to the plaintiffs in a fiduciary relationship of trust and confidence, in favour of the O. V. Estates (1939) Ltd., the 15th defendant (new company). The learned Subordinate Judge of Nilgiris dismissed this suit upon findings adverse to the plaintiffs upon all the main issues, including limitation.

(2.) In the presentation of this appeal before us learned counsel for the appellants has attempted to base their case upon certain principles of equity jurisprudence, which have received both statutory recognition and the affirmation of Courts in many precedents, within the ambit of the specific case of actual fraud, willful misrepresentation and the deliberate exercise of undue influence, which were not proved, and which have now been abandoned. But this is in no sense the superimposition of a new case; it is not any other frame of suit upon the facts and probabilities of the record. It is the consideration of those facts and probabilities in a somewhat different complexion, because the plaintiffs (appellants) claim to be entitled to succeed, in the light of certain principles of law repeatedly applied by courts, particularly courts exercising a jurisdiction in equity, conceding that they had failed in proof in certain areas of their claim. The tenability of this, in the wide sense is not disputed by learned counsel for the first defendant (Messrs. Pierce Leslie & Co. Ltd.) or the 15th defendant, which may be hereinafter termed "The new Company', as distinguished from the 'Old company' (the 16th defendant), who are the main contesting respondents in appeal.

(3.) The case of the appellants may be further clarified as follows: The plaintiffs, who were all members of a single British family, the Wapshares, conducting planting operations in an estate in the Nilgiris, formed the exclusive body of shareholders of a private limited company founded by the later J. H. Wapshare. The 1st defendant company were the secretaries, under the directors of this old company 4. In the context of increasing pressure from the Imperial Bank of India, who were the financiers and debenture trustees under a debenture trust deed (Ex. A. 18) which created an English mortgage in their favour over the properties, to sell the estates and liquidate the indebtedness under threat of foreclosure and actual entry upon the properties, the plaintiffs (appellants) entered into the impugned transactions, and consented to the liquidation of the old company. They were persuaded to this course by the 1st defendant company, which stood to them in a fiduciary relationship of trust and active confidence. In these transactions, they were in terrorem as far as the threats of the Bank to foreclose and to enter upon the properties were concerned, and further an actual date-line (the 15th November, 1937) had been fixed by Bank. They had no independent legal advice; in fact, they had no disinterested advice of any kind. Though the transactions were in form with the new company, the 15th defendant, it was really the 1st defendant and two or three of the directors of the old company (16th defendant) itself, who were the promoters of the vendee company, responsible for its flotation. Quite apart from any actual fraud, willful misrepresentation, or undue influence, the transactions are impeachable upon the principle of what is known as 'Constructive Fraud.' There is also a heavy burden on the 1st defendant company and the ex-directors of the old company, who associated themselves with the formation of the new company, to clear themselves in respect of these transactions; a burden which has received statutory recognition in this country in S. 111 of the Indian Evidence Act. That burden has not been discharged in this case. Further, the facts abundantly establish that, in the context of another offer for 14 lakhs for the entire estate including Naduvattam, the offer which appellants were induced to accept was less than a fair price to the extent of about 12 lakhs; there was certainly 'unjust enrichment' to this degree, of the 1st defendant company and certain ex- directors of the old company. This they must now disgorge; in this respect they must make restitution. Every difficulty of formal rigour, whether arising from the non-identity of the appellants with legal persona of the old company, or their incapacity to represent it after its liquidation, or the non-identity of the 1st defendant company with the new company (15th defendant) in the outer semblance of the transactions, must be resolved in favour of the appellants. For the Courts' power to "pierce the veil" of corporate personality in such cases, in order to administer equity and to render justice, is large and indisputable. The bar of limitation is accepted as an absolute bar, if it exists; for though there is authority for the view that the Statute of Limitation must be beneficently construed in favour of him who seeks to sue, nevertheless, the interpretation of it must be strict, for equitable grounds cannot be imported into that task. But it is submitted that the suit as framed for recovery of possession of the corpus of the estate was not barred, and that the suit is in time.