SURJEET MALHAN Vs. JOHN TINSON

JUDGEMENT

(1.) WE propose to dispose of both these appeals by a common judgment. R. F, A. No. 231 of 1985, has arisen out of judgment and decree dated March 4, 1985, passed by a learned single judge of this court in Civil Suit No. 1 of 1973, and R. F. A. No. 230 of 1985 has arisen out of the same judgment passed by the learned single judge in Civil Suit No. 2 of 1973. Both these suits were filed by the plaintiffs for declaration, permanent and mandatory injunction. In Civil Suit No. 1 of 1973, filed by Smt. Surjeet Malhan and in Civil Suit No. 2 of 1973 filed by her husband, Shri B. K. Malhan, defendants Nos. 1 to 3 were common. However, in Civil Suit No. 1 of 1973, defendant No, 4 is Shri B. K. Malhan, who is the plaintiff in Civil Suit No. 2 of 1973. Both the suits were taken together and by a common judgment were dismissed. The parties in both the appeals are being referred to as "the plaintiff" and "the defendants". Defendant No. 1 is the company, defendant No. 2, R.D. Bhagat and defendant No. 3 is Mrs. Salochana Bhagat, wife of defendant No. 2, R.D. Bhagat, and in Civil Suit No. 1 of 1973, Shri B. K. Malhan is defendant No. 4.

(2.) BOTH the suits were filed by the plaintiffs claiming declaration, permanent injunction as well as mandatory injunction. The prayer made in both the suits is identical in terms except the number of shares is different, because the plaintiff, Mrs. Surjeet Malhan, was holding 1,500 ordinary shares and 10 preference shares, whereas Mr. B. K. Malhan was holding 2,330 ordinary shares and 64 preference shares. Both the plaintiffs who are husband and wife along with their relatives, family members and friends had acquired the entire shareholdings of defendant No. 1 company and Shri B.K. Malhan plaintiff became the managing director of the said defendant company and continued to work till January 15, 1971, when he resigned from the managing directorship of the company. In the year 1970, the defendant company had some setback in its business, as such, in order to salvage itself, it was in need of some additional finance for working capital. With a view to generate funds, Shri B.K. Malhan intended to let out some area, approximately 3,000 square feet in premises bearing No. 54 Janpath, New Delhi (this property belongs to defendant No. 1 company). Since defendant No. 2, Shri R.D. Bhagat was interested in opening an office in Delhi and wanted to shift from Calcutta, as such, he had given advertisement in the newspapers at Delhi. In these circumstances, defendant No. 2 met Shri B.K. Malhan, the plaintiff and offered to make financial investment in the company and after several meetings between both of them, an agreement was arrived at on September 11, 1970, wherein, Shri R.D. Bhagat was to have an effective representation on the board of directors of defendant No. 1 company. In these circumstances, it was desired by defendant No. 2, Shri R.D. Bhagat, that the total shares belonging to the plaintiffs in both the suits be handed over to him and the price and the terms and other conditions of the sale were to be fixed on September 12, 1970. It was in these circumstances, that the shares held by Mrs. Surjeet Malhan were delivered by her to her husband defendant No. 4, Shri B.K. Malhan. According to the plaintiff, her husband assured her that he would be procuring a good price for her shares in case those were sold to Shri R.D. Bhagat so as to enable him to have controlling interest in the company. Accordingly, the plaintiff handed over the share scrips along with blank transfer forms to her husband who informed the plaintiff that he has handed over all those documents to Shri R.D. Bhagat on September 11, 1970, and terms and conditions were to be settled on September 12, 1970. According to the plaintiff, instead of finalising the other terms and conditions for transfer of her shares, Shri R.D. Bhagat kept on postponing the matter for some time and the case of this plaintiff further was that there was no valid transfer/sale of her shares in favour of Shri R.D. Bhagat. The alternative case set up by the plaintiff was that the sale is void being without consideration. The plaintiff's case further was that after taking possession of the share certificates and blank transfer forms, defendant No. 2 never settled the terms and conditions, not only this but she further pleaded that her husband Shri B.K. Malhan had no authority either in fact or in law on her behalf to transfer the shares held by her to Shri R.D. Bhagat without settlement of terms and other conditions of the sale as was mutually agreed to on September 11, 1970. The plaintiff further alleged that after obtaining control over the company, Shri R.D. Bhagat and Mrs. Salochana Bhagat became members of its board of directors and they were trying to manoeuvre the transfer of immovable assets of defendant No. 1 company. In addition to this defendants Nos. 2 and 3 had leased out from valuable area in building bearing No. 54, Janpath, New Delhi, i.e., the asset of the company. Since defendants Nos. 1 to 3 have wrongfully refused to recognise her as a shareholder of the company, it was in these circumstances that declaration was sought that she continues to be owner of 1,500 ordinary and 10 preference shares. In this context, it may be worthwhile to mention that 900 shares were held by Mrs. Surjit Malhan in her own right, whereas 600 shares were held by her along with her relatives and friends jointly and her name being the first in the share certificates. In these circumstances, the plaintiff has also prayed for mandatory injunction against defendants Nos. 2 and 3 directing them to hand over the share certificates taken over by them from defendant No. 4, Shri B.K. Malhan, her husband, and to return those to her. The further prayer made in the plaint was that defendant No. 1 be also directed to amend the register of shareholders. In addition to this relief, a decree for permanent injunction was also sought for against defendants Nos. 1 to 3 restraining them from disposing of by sale, lease, mortgage or in any other manner immovable property owned by the, defendant company.

(3.) DEFENDANTS Nos. 1 to 3 filed similar written statements in both the cases and a number of preliminary objections were raised, which related to the maintainability of the suit as also the suit being for rectification of the register of members could only be filed under the Companies Act, 1956. Estoppel was also pleaded against the plaintiff in both the cases, the suit being bad for non joinder of the brothers and sisters of the plaintiff, Mrs. Surjeet Malhan, who were jointholders of shares with her, The suit for permanent injunction was pleaded not to be maintainable as also the court lacked jurisdiction to try the same. It was further pleaded by defendants Nos. 1 to 3 that there is a valid and lawful transfer of the shares held by both the plaintiffs which is the subject matter of the respective suits. According to defendants Nos. 1 to 3 since the financial health of the company was going from bad to worse, besides suffering losses, according to the defendants both husband and wife, Mr. and Mrs. Malhan, were keen to sell their shares in the company to Mr. Bhagat which proposal of theirs was agreed to by defendant No. 2, Mr. Bhagat. According to the defendants, no written agreement was to be executed on September 12, 1970, and they further pleaded that the transaction of sale of shares held by both the plaintiffs and detailed in their suits was complete with the signing of the blank transfer deeds coupled with delivery of share scrips. According to the defendants, looking to the financial health of the company, the plaintiffs were keen to finish the dispute. It was also the case of the defendants that mere inadequacy of the consideration was no ground to allow their prayer. The allegations of defendants Nos. 2 and 3 to dispose of the building 54, Janpath, New Delhi, were denied. The jurisdiction of the court was disputed since the plaintiff had ceased to be a member of the company. In the replication filed, all the averments made in the plaint were re asserted and those of the written statement were denied,