TMI Blog1968 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... m operating the bank accounts of the company and also restraining them from terminating or suspending or transferring the services of the employees of the company. The further reliefs asked for ware that a spatial officer be appointed forthwith to take charge of and conduct and run the business and that a receiver be appointed to take charge of the books of account. Kshetra Mohan Saha, Satchidananda Sikdar and Mohit Kumar Pal started a business of medicine research institute in co-partnership in the year 1942 for manufacture of medicine. Gour Goppl Saha was an employee there at a salary of Rs. 250 per month. On October 31, 1946, Standard Medical Research Institute Ltd. was formed to take over the business of partnership. Kshetra Mohan Saha was appointed the scientific director for life and Gour Gopal Saha became one of the managing directors. In the year 1948 Sridhar Sikdar purchased ten ordinary shares in Standard Medical Research Institute Ltd. paying the full value of Rs. 1,000. On 2nd May, 1951, Sridhar Sikdar purchased five hundred ordinary shares and paid the value of Rs. 50,000 to the company. Thereafter, Sridhar Sikdar sold the five hundred shares to Gour Gopal Saha. On 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he members of a company shall have a right to apply provided that the applicant or applicants have paid all calls and other sums due on their shares. Kshetra Mohan Saha is admittedly a member and it is also an admitted feature of the case that shares in respect of which he is the owner are not fully paid up. On 16th May, 1966, there was a resolution of the board of directors of the company calling up Rs. 25 per share. The resolution of the company was that payment was to be made by 29th June, 1966, failing which interest would be charged at twelve per cent. On 23rd May, 1966, letter of call was issued by the company. On 25th May, 1966, the letter was received by Kshetra Mohan Saha. The petition forming the subject-matter of the appeal was filed on 26th May, 1936. Admittedly on the date of the presentation of the petition, the call was not paid but was paid later on. It is, therefore, said that Kshetra Mohan Saha did not pay call due on his shares and, therefore, he is not a person entitled to apply under section 397 of the Companies Act. On the other hand, it is contended on behalf of Kshetra Mohan Saha that though the company made a call on shares on 16th May, 1966, the call would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors authorising such call is passed. The effect of such a deeming clause is that the date of call is of importance as the call is deemed to have been made at the time when the resolution is passed. In the present case it is an admitted feature that the resolution of the meeting of the board of directors authorising call was passed on 26th May, 1966. Therefore, call is deemed to be made on that date, 26th May, 1966. A call is a determination that an application is to be made to a shareholder for a portion of the amount of his shares. It must be stated that the making of the call and the notice of its having been made are two distinct things: See Halsbury's Laws of England, third edition, volume 6, paragraph 43, page 30; See also R. v. Londonderry and Coleraine Rly. Co [1849] 13 QB 998 . A shareholder who transfers his shares after a call has been made thereon continues liable to pay the call as between himself and the company although at the time of the transfer he may not have received the notice. The right of the company against a transferor does not, however, affect the right of the transferor against the transferee in respect of a contract of transfer. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares in the society and held a policy upon his own life. The petitioner in that case stated that as a director he had objected to several acts and proceedings recommended by the manager of the society and in particular to the appropriation of 70,000 by way of bonus to the share and policyholders. The petitioner there alleged that the moneys available at the head office for the payment of the current claims against the company did not exceed 10,000 and there were sums due from the agents of the company, but these sums together with those available at the head office were insufficient to meet the amounts becoming due on policies. It was alleged that the company was insolvent and unable to pay its debts. Sir W.M. James V.C. said that the contract with the policyholder was that the assets of the company at the time when the claim matured would be the fund out of which the claim would be satisfied and the taking of all the premiums accruing due after that in payment of past liabilities would be an improper application of the assets. It was said that the petitioner did not make out a case in any sense of inability to pay debts of the company and that inability to pay debts was said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Syud Tuffuzzool Hossein Khan v. Rughoonath Pershad [1871] 14 MIA 40 , were Lord Justice James described a debt which was payable at a future day as an existing debt capable of attachment whilst a salary, wages or money claim accruing due was not liable to attachment. Reference was also made to the observation of Blackburn J. in Tapp v. Jones [1875] LR 10 QB 591, where it was said that the term "debt" included both present debt and future debt and an actually existing debt payable by installments not yet due, was treated as an accruing debt. Having referred to those decisions, Mookerjee J. referred to the decision of the Supreme Court of California in People v. Arguello [1969] 37 Calif. 524 where the Supreme Court of California referred to the word "debt" as applicable to a sum of money promised to be paid at a future day and considered the question as to whether it was a sum then due and payable. The Supreme Court of California said that, if it were to be distinguished, money which had been promised at a future date would be a debt owing and a money which would be due immediately would be debt due. It was also said by the Supreme Court of California that a sum of mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made it was a debt due in every respect. Reference was made to the decision in the North American Colonial Association of Ireland v. Bentley [1850] 15 Jur. 187 and it was contended that Dawes' shares were forfeited three days before the call could be compulsorily enforced. Lord Romilly M. R. said that Dawes was bound to pay without any words in the articles and the words in the articles made it clear that the call was owing at the moment it was made. In the present case the articles also indicate that the call has the effect of making it a debt at the time it is made and there is an immediate liability in respect of that debt though there is time to pay it. In the Bench decision in the case of Indian Co-operative Navigation and Trading Co. Ltd. v. Padamsey Premji AIR 1934 Bom. 97 , Beaumont C.J. considered the case where the company sued the defendant for the sum of Rs. 4,500 being the amount alleged to be due from him in respect of calls payable on shares. The defendant there applied for 600 shares of Rs. 10 each and paid a sum of Rs. 1,500, that is, Rs. 2-8-0 per share. The application was made on 23rd August, 1919. Under the articles of association of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en no money can be recovered by any legal process". The provisions in the Companies Act in section 399 are that a member should have paid calls due on shares. The making of a call results in the call becoming due. The company made a demand. It is true that the person concerned, namely, the member on whom a call had been made for the shares, was given time till 20th June, 1966, to pay. He was given notice to pay because of the debt. He was required to pay because of his liability to pay. Therefore, the member had to satisfy the debt due. The distinction between a debt and payment has to be kept in view because payment is required for a debt which is due. The Companies Tribunal also held that even if Kshetra Mohan Saha did not pay calls which were due from him on or before the date fixed by the notice of demand he would not be disqualified within the meaning of section 399(1)( a ) of the Companies Act. The decision of the Companies Tribunal is wrong and in error. It is an error of law. The call is a debt due. A member can apply provided a member satisfies the requirement contemplated in section 399(1)( a ) of the Companies Act. A member is to pay the dues. Counsel for the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikdar was entered in the register of members on the date of the petition he could not apply. In the Punjab case a petition was filed under sections 397 and 398 of the Companies Act. The locus standi of the petitioners was challenged. It was found that the petitioners were not members on the date of the presentation of the petition. It was contended that the act of directors in rectifying the register and striking out of the names of the petitioners was illegal. The petitioners in that case alleged that their names had been wrongfully struck out and they asked for the relief of rectification of the share register. It was noticed in the Punjab case, Ved Prakash v. Iron Traders (P.) Ltd. [1961] 31 Comp. Cas. 122 ; AIR 1960 Punj. 427, that the petitioners made an application for rectification of the register which was dismissed and that the petitioners in that case did not file a suit to establish their rights and yet they were seeking the relief. The Rajahmundry case ( supra ) has no application because there 13 members withdrew consent later on. The facts in the present case are entirely different. It is indisputable that the right of Sridhar Sikdar is recognized by the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o act. Pulbrook then brought a case against the company. Pulbrook took out a notice of motion to restrain the directors by injunction from interfering with Pulbrook's rights. One of the questions in that suit was whether Pulbrook was holding shares as a registered member in his own right. Jessel M.R. considered the meaning of the words "in his own right". It was held that the company could not look behind the register as to the beneficial interest but must take the register as conclusive, and could not inquire, either for that purpose, or indeed for any other into the trusts affecting the shares. Jessel M.R. next considered the effect of the order of Field J. as also the order of the divisional court and said : "So there are two decisions of two courts on the same point in the same matter. The result is that, rightly or wrongly, but I am bound for this purpose to assume rightly, the name of Mr. Cuthbert has been struck out of the register and the register rectified. The effect of that is exactly the same as if it had never been put in. That is the meaning of 'rectified' You strike it out by way of rectification, and the court has therefore declared that it ought never to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of the petitioner to be entered as holder. It was, therefore, said that the order was that he vas to continue to be a registered shareholder in respect of the shares which stood in his own name. Counsel for the appellant contended that the decision in the Pepsu case ( supra ) related to the meaning of persons who were either creditors or contributories with the right to apply for winding tip and therefore it was not a decision on the meaning of registered members. The decision of Jessel M. R. in Pulbrook v. Richmond Consolidated Mining Co. [1878] 9 Ch. D. 610 to which reference has already been made is an authority of antiquity and it has not been disturbed in England as will appear from the Statement of Law in Palmer's Company Precedents, Vol. 1, 17th edition, at page 1087, footnote 37, where it is stated that the effect of an order for rectification, by striking out a name, is the same as if the name had never been put on. It will also appear at page 374 in Palmer's book that the decision in Pulbrook s case ( supra ) has been acted on for many years and when in Bainbridge v. Smith [1889] 41 Ch. D. 462 it was called in question, it was held to be too late to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the company allotted 275 share- on 28th April, 1966, and 23rd May, 1966, in favour of 22 persons, the validity of that allotment was challenged by the petitioners and by the order of the Companies Tribunal dated 27th January, 1967, the preliminary issue had to be decided without taking into consideration the issue of those 275 shares amongst other new shares. The result was that the Companies Tribunal did not take into consideration the allotment of 275 shares to 22 persons by the order dated 27th January, 1967. That order is not impeached. Parties proceeded before the Companies Tribunal on the rival contentions as to whether on the date of the presentation of the petition the number of members would be 11 or 10. On behalf of the company it was contended that the total number of members of the company would be 11 and not 10 as stated in paragraph 11 of the petition. On behalf of the company it was pointed out that Chinmoyee Saha who was shown as one of the joint-holders of some shares as one of the heirs of Gour Gopal Saha was also alleged to be a shareholder in her individual capacity. The Companies Tribunal said that, in the absence of fuller evidence, it would not be proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 397 and 398 of the Companies Act. Counsel for the appellant relied on the decision in Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas. 351 ; AIR 1965 SC 1535 , in support of the proposition that there must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. Further, it was said by counsel for the appellant that in the present case the allegations related to past affairs and were not continuing affairs. The Companies Tribunal noticed the allegations in the petition which concerned the affairs of the company for several years prior to the date of the petition and the contentions advanced on behalf of the company that the affairs related to the malpractices and misappropriations during the time Kshetra Mohan Saha was in the management of the company. It was also contended on behalf of the company that other allegations were of a minor character. The contention on behalf of the petitioners before the Companies Tribunal was that the allegations in the petition would be within reasonable proximity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g would continue. I am unable to accept either of the contentions on behalf of the respondent. Misappropriation of money in the past is not a continuing wrong. There is no evidence of mismanagement. The Companies Tribunal has not made any finding of mismanagement. The view expressed by the Companies Tribunal that if charges of misappropriation and mismanagement are made, it would be in public interest to have proper investigation is to be substantiated with reference to facts. Counsel for the appellant, in my opinion, rightly contended that the Companies Tribunal failed to apply the principles of law laid down by the Supreme Court in Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas. 351; AIR 1965 SC 1535 and on the observation appearing at page 353 that theie must be continuous acts on the part of the majority shareholders continuing up to the date of the petition showing that the affairs were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to vacate his office if at any time he held less than the nominal amount of capital required in his qualification for election. The plaintiff who held the requisite qualification shares was elected a director. Prior to his election he had executed a deed of transfer to Cuthbert by way of mortgage as a security for a loan on the understanding that the transfer would not be registered. After the plaintiff's election as a director, Cuthbert had his name as the holder of those shares transferred to him by the plaintiff. On having received notice of the transfer, the directors refused to permit the plaintiff to take his seat at the board. The plaintiff took out a summons for rectification of the register and, by an order of court, the name of Cuthbert was directed to be struck out as the transferee of those shares and the name of the plaintiff inserted as the holder of the same. The order was affirmed on appeal. A few days later, the plantiff took his seat at the board and produced the order but the other directors refused to permit him to act, whereupon he brought an action against the company and the other directors and sought a motion to restrain the directors by injunction fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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