1982 (10) TMI 189 - HC - Companies Law

Issues Involved:
1. Effect of the sale of ninety shares held by P.K. Mohammed in 1956.
2. Claim relating to thirty-three shares originally held by P.O. Kamaludin.
3. Validity of the sale of Kamaludin's shares in auction by the company.
4. Jurisdiction of the civil court to try the suit.
5. Plea of limitation.
6. Plea of misjoinder of cause of action.
7. Allegations of laches or acquiescence by the plaintiffs.

Detailed Analysis:

1. Effect of the Sale of Ninety Shares Held by P.K. Mohammed in 1956:
The plaintiffs contended that the transfer of ninety shares from P.K. Mohammed to the second defendant was a sham transaction, alleging that P.K. Mohammed continued to be the real owner and received dividends until his death. The trial court, however, held that the sale was not a sham and that the plaintiffs failed to establish the transfer as benami. The court found that the evidence, including Ext. B-2, B-13, B-14, B-18 series, and company resolutions, supported the legitimacy of the sale. The first plaintiff's claim to the shares based on Exts. A-1 and A-2 was rejected as the agreement did not transfer ownership of the shares but only a portion of the dividend.

2. Claim Relating to Thirty-Three Shares Originally Held by P.O. Kamaludin:
The plaintiffs claimed ownership of thirty-three shares held by Kamaludin, arguing that the sale in auction for Kamaludin's debts was invalid due to lack of notice. The trial court found that notices were issued to Kamaludin's mother and widow, and the sale was conducted properly. The court held that even if the sale was without proper notice, the plaintiffs' remedy would be limited to damages, not recovery of the shares.

3. Validity of the Sale of Kamaludin's Shares in Auction by the Company:
The trial court upheld the sale of Kamaludin's shares, noting that the company had issued notices and followed the procedures outlined in its memorandum and articles of association. The appellate court agreed, stating that the plaintiffs could not challenge the sale without offering to redeem the debt. The court emphasized that the sale was conducted in accordance with the company's right of lien and that any irregularity did not invalidate the sale.

4. Jurisdiction of the Civil Court to Try the Suit:
The trial court upheld its jurisdiction to try the suit, rejecting the defendants' contention that the civil court lacked jurisdiction. This finding was not challenged in the second appeal, so it was not addressed in detail in the judgment.

5. Plea of Limitation:
The trial court rejected the plea of limitation raised by the defendants, allowing the suit to proceed. This finding was also not challenged in the second appeal and thus was not discussed further.

6. Plea of Misjoinder of Cause of Action:
The trial court repelled the plea of misjoinder of cause of action, allowing the plaintiffs to pursue their claims together. This finding remained unchallenged in the second appeal.

7. Allegations of Laches or Acquiescence by the Plaintiffs:
The trial court found no laches or acquiescence on the part of the plaintiffs, allowing them to pursue their claims. This finding was not contested in the second appeal.

Conclusion:
The High Court dismissed the second appeal, upholding the trial court's findings that the sale of ninety shares was legitimate and not benami, and that the plaintiffs' remedy for any irregularity in the sale of Kamaludin's shares was limited to damages. The court emphasized the importance of proper notice and the plaintiffs' failure to tender the amount due on the pledge. The judgment reinforced the principles of company law regarding the sale of shares and the rights of shareholders.

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