MAHALAKSHMI TEXTILE MILLS, LTD BY ITS MANAGING AGENTS, S S N LAKSHMANAN AND CO BY PARTNER S S N LAKSHMANAN CHETTIAR Vs. AKRMMKMEYYAPPA CHETTIAR (DIED)

JUDGEMENT

(1.) An interesting question of company law is raised for determination by this appeal. The material facts which are more or less beyond the pale of controversy may be briefly stated.

(2.) The plaintiff, a shareholder of the defendant, which is a limited company fell into arrears in respect of the third and fourth instalments of Rs. 1,250 each of the total share amount of Rs. 5,000 payable by him on his 50 shares of the face -value of Rs. 100 each, having duly paid the amounts of the first and second instalments of Rs. 1,250 each, payable along with the application for shares and at the time of the allotment, thereof respectively. There was a meeting of the Directors of the company held on 31 October, 1928, as shown by the entries, Exhibits D-4 and D-5, in the minutes book at which, firstly, it was resolved that the first call (i.e., the call in respect of the third instalment) made as proposed in the circular letters, Exhibit D-2 series, should be confirmed and, secondly, the Managing Directors were authorised to make the second call (i.e., the call in respect of the fourth instalment) before 5th December, 1928, requiring the amount of that call to be paid by 25 December, 1928. It is the case of the defendant company that thereafter, as shown by Exhibits D-3 and D-3(a), the blank printed form of the: call notice maintained by it and the counterfoil of the notice actually issued, notice-was duly sent to the plaintiff in respect of the first call on 30 March, 1928 and that, similarly, as shown by Exhibits D-6 and D-6(a), a similar printed form of the call notice and a similar counterfoil respectively, notice was duly sent to the plaintiff in respect of the second call on 4 December, 1928. The plaintiff did not comply with the notices and make the payments. There were further notices, Exhibit D-8 series, which also proved fruitless. The company thereupon resolved by Exhibit D-9 on 2nd December, 1938, to issue further notices to defaulting share- holders intimating to them its intention to forfeit their shares on default of payment within the further time to be given. Accordingly on 30 July, 1940, notice (Exhibit D- 10) was issued by the company to the plaintiff, demanding the payment of Rs. 2,500 for the first and second calls with interest at nine per cent per annum on 31 August, 1940 and intimating forfeiture on default. Although the plaintiff received this notice, he did not respond. On 18 January, 1941, the Directors resolved, as shown by Exhibit D-11(a) the entry in the minutes book, that final notice should be given to the defaulters that payment should be made by 30 April, 1941, or, else that the shares would stand forfeited. Exhibit D-12 is the notice issued to the plaintiff, giving him intimation of the resolution and demanding payment In response to this notice the plaintiff sent to the managing agents of the company a hundi, Exhibit D-14, on 23 April, 1941, for Rs. 2,500, and along with the hundi also paid a sum of.Rs. 500, leaving a balance of Rs. 2,000 still to be paid. The balance not having been paid till 11 May, 1943, there was a resolution of forfeiture passed by the company on that date (Exhibit D-17). Intimation of the forfeiture was given to the plaintiff by letter, dated 22nd May, 1943 (Exhibit D-18). The hundi, Exhibit D-14,and Rs. 500 were also returned to the plaintiff along with a covering letter, Exhibit D-19. Thereupon, notices passed between the parties, Exhibits D-20 and D-20 (a) and Exhibits D-21 and D-21 (a), the plaintiff challenging and the company maintaining the validity of the forfeiture. The suit out of which this appeal arises is the sequel to these notices. The plaintiff craves in his plaint a declaration of the invalidity of the forfeiture and an injunction in restraint of a sale or re-allotment of the shares or any other dealing with them by the company.

(3.) The Court below found (1) that Exhibit D-2 series, the circular letters and the resolution at the meeting Exhibit D-4, in respect of the first call, were defective, in that they did not fix the amount of the call or specify the person to whom or the place at which it was to be paid, as required by Art. 40 of the Articles of Association; (2) that the resolution Exhibit D-5 in respect of the second call, did not, while fixing the time for payment specify the amount to be paid and the person to whom or the place at which it was to be paid, and was therefore defective for want of conformity to the same article; (3) that the notices said to have been issued by the company to the plaintiff in respect of the two calls on 30 March, 1928 and 4th December, 1928, were not proved to have been served on the plaintiff or even posted, and that there was no proof, in fact, of how the notices were sent to the plaintiff; (4) that the further notices, Exhibit D-8 series, of 1931 and 1932 were defective, in that/while mentioning the total amount as being Rs. 2,500 they did not, as required by Art. 42 of the Articles of Association, contain particulars concerning the place at which or the person to whom the amount was to be paid; (5) that the resolutions Exhibits D-9 and D-11 (a) could not be regarded as resolutions for calls under Art. 40; and (6) that the notices, Exhibits D-10 and D-12 were defective in the particulars required to be mentioned by Art. 42 in notices for call amounts. On these findings the Court below held the forfeiture of shares made by the defendant by Exhibit D-17 to be illegal and invalid. It also held that there was no waiver on the part of the plaintiff of his right to com-plain of the irregularity of proceedings on the part of the defendant. The parties were at issue in the Court below also on one subsidiary matter which we may dismiss from consideration after just adverting to it, viz., whether the hundi, Exhibit D-14 and the Rs. 500 were accepted by the defendant as an unconditional payment as contended by the plaintiff or only as a conditional payment as contended by the defendant. The Court below upheld the defendant's case in this regard and found that it was open to the defendant to treat the plaintiff as a defaulter, even though the defendant did not send the hundi to the plaintiff's agent at Rangoon for encashment. On this last mentioned subsidiary matter no question arises on this appeal, as the respondent has accepted the finding recorded by the Court below.