IRON TRADERS PRIVATE Vs. HIRALAL MITTAL

JUDGEMENT

(1.) THE questions which survive for determination in this appeal are whether the transfer of 133 shares of the Iron Traders Private Limited in the name of Hira Lal mithal, respondent No. 1, was validly cancelled by the company, and secondly, if the suit brought by respondent No. 1 could be entertained without impleading the transferor of these shares.

(2.) THE Iron Traders Private Limited was incorporated in 1932 and has a subscribed capital of Rs. 3,00,000/- divided into 300 shares of Rs. 1,000/- each. On 29th of October 1954, Chhote Lal Sanwal Das wrote to the company that they had transferred 44 shares to Hira Lal Mithal (hereinafter referred to as the first respondent ). On 20th of May 1955, these shares were transferred in the name of the first respondent by the company and he was duly informed about this transfer on 27th of May 1955. Thereafter the first respondent purchased from the same party another lot of 89 shares which were similarly transferred and registered by the company on 6th and 11th of October 1956. After the acquisition of 44 shares, the first respondent was appointed a Director on 27th of February 1956. At that time, the company had two other Directors Hanuman Pershad and Bisakha Singh who are appellants Nos. 2 and 3. The first respondent did not feel quite content with the management of the company and filed a suit for restraining it from appointing a Managing Director and also gave notice of a meeting for discussion of a non-confidence motion against Hanuman Pershad and Bisakha Singh. The company, on its part, asked the first respondent to resign from the directorate under clause 94 (4) of the Articles of Association requiring a Director to vacate his office "on his being requested by his co-Directors to do so". These internecine disputes were settled by addition of two more Directors, one of these being the son of the first respondent and the withdrawal of the proceedings initiated at the instance of the first respondent against his colleagues. The harmony between the Directorate, however was short-lived and another notice was given for a meeting by the first respondent on 29th of November 1956. This meeting was called for 19th of January 1957. Before that date, however, the directors received the letter dated 8th of January 1957, Exhibit D. W. 1/1, from chhote Lal Sanwal Das, wherein it was pointed out that the transfer of shares in favour of the first respondent had been made in contravention of the Article of association, being in favour of an outsider without the other members having received a notice of the sale of shares. The company then sent a notice marked 'z' on the 12th of January 1957 for an emergent meeting of the Board of Directors to be held on "tuesday the 15th day of January 1957" for consideration inter alia of the "letter dated 8th of January 1957 of Messrs. Chhote Lal Sanwal Das, Delhi, and the legal adviser's opinion thereon. " The first respondent, who had deposited proxies for the general meeting which had been convened in pursuance of his requisition for 19th of January 1957, found that no meeting of Directors was held on 15th of January 1957. It appears that a meeting was held instead on the 16th of January 1957 and the only business transacted was to strike the name of the first respondent and his son from the register of membership and the vacation of their offices as Directors (Exhibit D. W. 1/11 ).

(3.) THE first respondent on his removal from the Directorate filed the present suit for rectification of the company's register and his reinstatement as a Director of the company. There were many pleas raised in defence but the only two issues for purposes of this appeal relate to the cancellation of the first respondent's name from the register and the necessity of Chhote Lal Sanwal Das being impleaded as party. Issue No. 2 to the effect "whether Chhote Lal Sanwal Das are necessary parties to the suit" was decided as a preliminary issue and was decided in favour of the first respondent by the Subordinate Judge on 17th of July 1957. On the other relevant issue in this appeal it was held that the Directors had no warrant to cancel the name of the first respondent from the membership register. The suit was decree by the trail Judge and the appeal preferred by the company and the other Directors and dismissed by the learned Additional Feeling aggrieved, the company and its Directors have again preferred an appeal to this Court.