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1968 (12) TMI 52 - SC - Companies LawWas there a fiduciary relationship between the appellant and the old company, and if so, did the appellant-company, by availing themselves of this fiduciary character, gain a pecuniary advantage of ₹ 1,50,000 ? Is the suit barred by limitation ? and Are the plaintiffs as shareholders of the old company entitled to maintain the suit ? Held that:- We agree with the High Court that the appellant stood in a fiduciary relationship towards the old company and was bound to protect its interests. The onus is upon the appellant-company to establish affirmatively that the transaction was righteous and that it did not gain any pecuniary advantage by availing itself of its fiduciary character. We are inclined to think that the appellant-company has discharged this difficult burden of proof. The transaction was just and fair and that the appellant did not gain any pecuniary advantage by availing themselves of their fiduciary character or under circumstances in which their interests were in conflict with those of the old company. In saying so we must not be understood to say that we encourage transactions of this type. Having regard to their fiduciary character the appellant-company might well have avoided entering into the transaction. The High Court passed a decree for money and net for recovery of immovable properties. A suit for such a relief would be governed by article 120. Even if the suit is treated as one for recovery of possession of the properties, it would be governed by article 120 and not by article 144. The old company could not ask for recovery of the properties until they obtained a reconveyance from the new company. The cause of action for this relief arose in 1939 when the properties were conveyed to the new company. A suit for this relief was barred under article 120 on the expiry of six years. After the expiry of this period the old company could not file a suit for recovery of possession. It follows that the suit is barred by limitation. The law in our country is very different. Here the winding-up precedes the dissolution. There is no statutory provision vesting the properties of a disnlved company in a trustee or having the effect of abrogating the law of escheat. The shareholders or creditors of a dissolved company cannot be regarded as its heirs and successors. On dissolution of a company, its properties, if any, vest Li the Government. It follows that the plaintiffs are not entitled to maintain this suit.
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