DEVAKUMAR MISHRA Vs. RUPAK LTD

JUDGEMENT

(1.) This is an implication dated 14-7-1954 made by Sri Devakumar Mishra for rectification of the share register under Section 38 of the Companies Act. The case of the petitioner is that two thousand ordinary shares Nos. 1 to 2,000 of Rs. 10 each were standing in the share register in the name of his father Ramadhin Mishra, and after the death of the said Ramadhin Mishra on 1-12-1952, the title to the shares devolved on the petitioner who is his only son and heir. The petitioner further alleged that he applied to the company for entering his name as a snare-holder in respect of the 2000 shares, but the company refused to enter his name on arbitrary grounds. A counter affidavit is filed on behalf of the Rupak Limited. Tae contention pat forward on behalf of the company is that the title to the shares is the subject-matter of dispute between the parties in the court of the Subordinate Judge, Patna, and the question cannot be decided in a summary way by this Court acting under Section 38 of the Companies Act. Reference was made to the resolution of the company dated 26-2-1951, from which it appears that the company agreed that a sum of Rs. 1,00,000/- would be paid to Sri Devakumar Mishra, his lather Ramdahin Mishra and his wife Shrimati Ramsundari Devi in lieu of the shares which they held and on condition that they retired from the company. It appears that in pursuance of this agreement, a sum of Rs. 50,000/- was paid by the company to the petitioner. It also appears that on 8-5-1953, the petitioner presented a winding up petition to the High Court claiming that he was entitled to the balance of Rs. 50,000/- from the company in addition to Rs. 2,50,000/- which he had advanced as loan. The position taken by the company was that the resolution of the company dated 26-2-1951 was illegal and 'ultra vires', since the transaction was tantamount in law to a trafficking in shares. The petitioner claimed on the contrary that the resolution was 'intra vires' and that he was entitled to the balance of Rs. 50,000/- which was due from the company as consideration for the transfer of shares. The petition for winding up was heard by the Court and it was agreed by the parties in the course of the hearing that the petition should be stayed pending the determination of the title to the shares and also of the other disputed questions in a properly constituted civil suit.

(2.) The submission made by Mr. Chaudhury on behalf of the company is that there should be no rectification of the share register since there is a complicated question in dispute between the parties and since the matter is actually 'sub judice' in the court of the Subordinate Judge. Mr. Choudhury pointed out in the first place that on 7-7-1953 the company had brought a suit for accounts against Sri Devakumar Mishra, and in the written statement filed in that suit the petitioner asserted that the resolution dated 26th of February, 1951 was valid and enforceable. Counsel also pointed out that in the statutory notice to the company given before the winding up petition the petitioner had claimed that he was creditor of the company for a sum of Rs. 2,50,000/-in addition to the sum of Rs. 1,08,000/- which was the consideration for the transfer of the shares and also a sum of Rs. 8,000/- which was the consideration promised by the company for giving up his connection with the company. The company had also filed Title Suit No. 109 in the court of the Subordinate Judge and one of the reliefs claimed by the company was rectification of the share register relating to these very shares. As I have said, the position taken by the company was that the resolution of the company dated 26-2-1951 was 'ultra vires' and illegal, but in the written statement filed in that suit the petitioner re-affirmed his position as the creditor of the company and also asserted that the resolution dated 26-2-1951 was valid and intra vires. It is also admitted that the petitioner had filed Money Suit No. 34 of 1954 claiming a sum of Rs. 8,000/- on the basis of the agreement dated 26-2-1951. The amount was claimed by the petitioner on the ground that compensation was due to him for having severed his connection as a share-holder of the company. In reply to the claim of the petitioner, the company filed a written statement saying that the petitioner was not entitled to the payment unless the issue was determined whether the resolution of the company dated 26-2-1951 was ultra vires or not. All these circumstances go to show that there is a serious dispute between the parties regarding the validity of the resolution dated 26-2-1951, and the transfer of the shares in pursuance of that resolution. If that is the correct position, it appears to me that the application for rectifying the share register under Section 38 of the Companies Act presented on behalf of the petitioner cannot be allowed. The reason is that the questions at issue between the parties cannot be properly decided in these summary proceedings, and it must be left to the parties to agitate these questions in the suits which have already been instituted and to obtain a finding from the civil court whether the resolution of the company dated 26-2-1951 is valid and intra vires and whether there can be a valid transfer of shares in pursuance of that resolution. I do not propose at this stage to express any opinion on the merits of the questions in controversy between the parties, but it is clear that there are serious matters in dispute, and the proper course in such a case is for the petitioner to get the questions determined in the civil suit and not in summary way in these proceedings under Section 38 of the Companies Act, The principle applicable to a case of this description is Veil stated by Kekewich J. in -- 'Bellerby v. Rowland and Marwood's Steamship Co.', (1901) 2 Ch 265 (A):

(3.) For these reasons, I hold that the application filed by Sri Devakumar Mishra under Section 38 of the Companies Act should be dismissed; hearing fee Rs.100.00