UNITY COMPANY PRIVATE LTD Vs. DIAMOND SUGAR MILLS

JUDGEMENT

(1.) Unity Company Private Ltd., the plaintiff herein (hereinafter referred to as the plaintiff or the plaintiff company) was the owner and registered holder of 25,000 shares of Diamond Sugar Mills Ltd., the defendant No. 1 (hereinafter referred to as the defendant company). The said shares are fully paid up and, the shares are of the face value of Rs. 10/- per share. The defendant company claimed a lien over the said shares owned by the plaintiff company in respect of a debt of the plaintiff company to the defendant company and in exercise of the said lien the defendant company had sold the shares to other parties who happen to be and/or are represented by the other defendants in this suit. In this suit the plaintiff company challenges the validity of the sale of the plaintiff's said shares by the defendant company. The plaintiff had originally instituted this suit against the defendant company. By subsequent amendment of the plaint the other defendants who are the purchasers of the said 25,000 shares and the present registered holders thereof have been impleaded and brought on record in this suit. One of the original defendants Pannalal Beriwal who was the purchaser of 10,000 shares out of the said 25,000 shares died during the pendency of the suit and the defendant Nos. 2 to 10 are the heirs and legal representatives of the said Pannalal Beriwal. The defendant No. 3 Gopi Kissen Agarwal who is an heir and legal representative of Pannalal Beriwal is also himself a purchaser and the present registered holder of 5,000 shares out of the said 25,000 shares. The defendant No. 4 Sanwalram Agarwal, another heir and legal representative of Pannalal Beriwal is the purchaser and the present registered holder of another lot of 5,000 shares out of the said 25,000 shares and the defendant No. 5 Amarnath Agarwal who is also an heir and legal representative of Pannalal Beriwal is the purchaser and registered holder of another lot of 5,000 shares out of the said 25,000 shares which form the subject-matter of dispute in the present suit.

(2.) The case of the plaintiff as made in the plaint may be stated. In paragraph 1 of the plaint, the plaintiff states that the plaintiff is and at all material time was the holder of 25,000 shares in the defendant company and the particulars of the said shares are given. In paragraph 2 of the plaint, the plaintiff alleges that the defendant company demanded payment from the plaintiff a sum of Rs. 1,10,000/- alleged to be due to the defendant company by the plaintiff company on account of money lent and advanced by the defendant company to the plaintiff company in 1948 and in the said letter the defendant company claimed to exercise an alleged lien on the said shares belonging to the plaintiff if the said amount was not paid by the plaintiff to the defendant company. In paragraph 3 of the plaint, the plaintiff avers that no amount whatsoever was due by the plaintiff to the defendant company in June 27, 1956, all advances made by the defendant company to the plaintiff having been liquidated several years prior thereto and the plaintiff further states that in any event the alleged advances were barred by the law of limitation. In paragraph 4 of the plaint, it is stated that by letter dated 8th October, 1937 the defendant company informed the plaintiff that in exercise of the alleged power and lien as contained in the Articles of Association of the defendant company the said 25,000 shares standing in the plaintiff's name had been sold by the defendant company @ Rs. 5/- per share and a sum of Rupees 1,25,000/- had been realised by virtue of such alleged sale and it was further aliened in the said letter that after giving credit for the said amount to the plaintiff a sum of Rs. 42,940-1-0 still remained due and payable by the plaintiff to the defendant company, In paragraph 5 of the plaint the plaintiff makes the case that the plaintiff was and is not indebted to the defendant company in any sum whatsoever and the alleged sale of the said shares in exercise of the alleged lien contained in the Articles of Association of the defendant company is void, inoperative and not binding on the plaintiff. In paragraph 6, it is stated that no sale of the said shares in fact took place as alleged or at all and the purported sale of the said shares by the defendant company is mala fide and the sum of Rs. 5/- per share alleged to have been realised by the defendant company in respect thereof is grossly inadequate and is far below the market rate of the said shares. It is stated in paragraph 7, that the plaintiff is still the owner of the said shares. It is claimed in paragraphs 7 (a), 7 (b), 7 (c), 7 (d) and 7 (e) which were introduced by amendment of the plaint, that the purported forfeiture of the said shares by the defendant company by its resolution dated 25th May, 1957 and allotment of the said shares to the alleged purchasers of the said shares and entering their names on the share-register of the defendant company and issuing fresh certificates in their favour and expunging the name of the plaintiff company from the share register of the defendant company are wrongful and illegal and not binding on the plaintiff company and that the share register of the defendant company should be rectified by deleting the names of the alleged purchasers therefrom and recording the name of the plaintiff as the lawful owner of the said shares. In para 8 the plaintiff alleges that the defendant are denying the plaintiffs title to the said 25,000 shares. In para 9 of the plaint, the plaintiff in the alternative claims damages from the defendant company in respect of the said shares for Rupees 12,50,000/- @ Rs. 50/- per share, being the value thereof on 18th October, 1957. On the basis of the aforesaid material averments the plaintiff has asked for the following principal reliefs:

(3.) The case of the defendants may now be noted. The defendant company in the written statement admits that prior to 21st May, 1957, the plaintiff company was the holder of 25,000 ordinary shares which form the subject-matter of the suit and makes the case that between January and July, 1948 the defendant company lent and advanced to the plaintiff company a sum of Rs. 1,40,000/-in 4 instalments for the purpose of the business of the plaintiff company and at its request, and in December 1949, the plaintiff company repaid a sum of Rs. 30,000/- in part payment of the said sum of Rupees 1,40,000/- leaving a balance of Rupees 1,10,000/-. The defendant company further makes the case that as the plaintiff company was unable to repay the said sum of Rs. 1,10,000/- immediately or in the near future, the plaintiff company through Babu Champalal Jathia appealed to the defendant company for sufficient time to repay the said balance sum of Rs. 1,10,000/- and also for facilities to repay the same in easy monthly instalments and it was agreed by and between the plaintiff company and the defendant company as follows:--