H EZEKIEL Vs. CAREW AND CO LTD

JUDGEMENT

(1.) The plaintiff in this case is the son of one David Ezekiel, who on. 2 September, 1936, was the registered holder of 16,800 ordinary shares in the defendant company. The defendant company's registered office is at Calcutta and their business is that of sugar manufacturers and distillers. On 18 April 1929, David Ezekiel had executed a power of attorney in favour of his nephew, Solomon Ezekiel, the terms of which must be considered at a later stage. At that time David was the proprietor of two businesses, one known as Davidson & Co. and carried on in Calcutta, and the other known as S. Ezekiel & Co. and carried on in Chittagong. Both the businesses traded in general stores and wines and spirits. In 1931, the business of Davidson & Co. was incorporated as a private limited company under the style of Davidsons Ltd. It is not challenged that shortly after the execution of the power, David left India for England, or that he. visited India and spent some months in Calcutta every succeeding cold season up to and including that of 1934-1935. According to the plaintiff, David left India for the last time in March 1935 and has never returned. The defendants however do not admit this.

(2.) Admittedly David has a strong motive for not returning. In March 1936, proceedings were instituted against him and various other persons in the Criminal Courts at Alipore, wherein he was charged with offence punishable under the Indian Penal Code and Excise Act. In the course of the criminal proceedings, David has been proclaimed an absconder under Section 87, Criminal P.C. and under Section 88 his property, including the 16,800 shares in the defendant company, has been attached. The Official Receiver of this Court is now in possession of the share certificates, as receiver appointed by the Criminal Court under Section 88 (3) (b) by an order dated 17 June 1936. When the share certificates were seized they were in the custody of Messrs. Lyall Marshall & Co. the Managing Agents of the defendants, in the following circumstances. Solomon had purported to transfer the shares under the power of attorney, the transferee being the plaintiff. As to 6800 shares the consideration is said to have been shares in Davidsons Ltd., belonging to the plaintiff, and as to the balance, a sum of Rs. 2,10,000 borrowed on over-draft account from the Eastern Bank Ltd. The plaintiff had arranged with the Bank that all the 16,800 shares should be held by them as security against his overdraft, and that the transfers should be made out in the names of two of the Bank's officers. Solomon as attorney executed the transfers in that form and handed the certificates to the Bank. The Bank forwarded them to the Managing Agents for registration, but this had not been effected when the scrip was seized under the order of the Criminal Court. In my opinion these facts are not relevant to this suit, although the defendants sought to make them the basis of an issue which I ruled did not arise on the pleadings.

(3.) To resume the main story. About this time the defendants thought it desirable to increase their capital. Their powers to do so are limited and prescribed by Articles 37 to 40 of the Articles of Association. These Articles are as follows: 37. The company may, from time to time, by extraordinary resolution, increase the capital by the creation of new shares of such amount as may be deemed expedient. 38. The new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as shall be directed in such Resolution, or in default of such direction as the Directors may determine, and in particular such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the company, and with a special or restricted or without any right of voting. 39. Subject in all respects to any direction to the contrary that may be given by the company in general meeting at which the resolution for the issue of any new shares is passed, such shares shall be offered in the first instance either at par or at a premium as the Directors may decide to all the then members in proportion to the amount of the capital held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting the time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time or as to the shares of any particular member on the receipt of an intimation from such member that he declines to accept the shares offered, the Directors may dispose of the same in such manner as they think proper but in default of any such determination or so far as the same shall not extend the new shares may be dealt with as if they formed part of the shares in the original ordinary capital. 40. Except so far as otherwise provided by the conditions of issue or by these presents any capital raised by the creation of new shares shall be considered part of the original ordinary capital and shall be subject to the provisions herein contained with reference to the payment of the calls and instalments, transfer and transmission, forfeiture, lien, surrender and otherwise.