TMI Blog1968 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant-company all the estates except Naduvattam for Rs. 10 1/2 lakhs and the appellant-company would convey Naduvattam to Mrs. Nellie Wapshare for Rs. 50,000 and would, at the same time, advance Rs. 50,000 on the hypothecation of Naduvattam crops. By January 10, 1938, the appellant-company pair the entire purchase price and took possession of the estates and the entire dues of the Imperial Bank of India were liquidated. On March 30, 1938, the old company passed a special resolution for its voluntary winding up and appointed Capt. F. Murcutt as its liquidator. The appellant-company promoted a new company known as Ouchterlony Valley Estates Ltd. for the purpose of acquiring the estates. The new company was incorporated on September 5, 1938. Fifty per cent, of its shares were held by the appellant-company. Formal conveyances of the Naduvattam estate in favour of Mrs. Nellie Wapshare and of the other estates in favour of the new company were executed by the old company between January and May, 1939. On the execution of the conveyances the new company entered into possession of the estates conveyed to them. As soon as the affairs of the old company were wound up the liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company; (2) the impugned agreements and conveyances were not induced by fraud, fraudulent concealment, undue influence or improper means and were valid and binding on the old company and the plaintiffs ; (3) the suit was barred by limitation ; (4) the old company was dissolved in accordance with law and was not in existence ; and (5) the plaintiffs had no locus standi to maintain the suit. The plaintiffs filed an appeal from the decree. The Madras High Court allowed the appeal in part and passed a decree asking the appellant to pay to the plaintiffs Rs. 1,50,000. The High Court held that, (1) there was a fiduciary relationship between the appellant and the old company; (2) the appellant, by availing itself of its fiduciary character, gained a pecuniary advantage of Rs. 1,50,000 and to the extent of this unjust enrichment was bound to reimburse the plaintiffs; (3) the suit was not barred by limitation ; and (4) in spite of the dissolution of the old company the plaintiffs were entitled to maintain the suit. Aggrieved by this decree the appellant-company filed C.A. No. 1174 of 1965 and the Wapshares have filed the cross-appeal, C.A. No. 1935 of 1966, on the strength of certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat was done". The appellant-company was the secretary of the old company, was in charge of its correspondence and accounts and was actively engaged in assisting it and its shareholders in selling the estates. In the course of its employment the appellant acquired intimate knowledge of the income, prospects and the market value of the properties. 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 appellant entered into an agreement with the old company for the purchase of the properties. It promoted the new company to which the properties were subsequently conveyed. Fifty per cent, of the shares of the new company were held by the appellant-company and the new company was managed and controlled by it. 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. Since 1931 the Wapshares were keen on selling the estates. From time to time there were of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration of their offer. On November 10, Dorothy sent a telegram to the appellant-company informing them that the family was agreeable to their new proposal. The draft agreement was sent by the appellant on November 11. In the beginning of November, Mrs. Wapshare was ill and was in a hospital in Bangalore. But on November 10, she was well enough to discuss the appellant's proposal. On November 12, she came to Ootacamund and on November 13, she went to her lawyer, Gonsalves, discussed the matter with him and gave her consent. Gonsalves was approached to put the bargain in a legal form. He took exception to the draft agreement, but found the formal agreements to be free from blemish. At a meeting held on November 18, 1937, the shareholders of the company unanimously accepted the proposal. Mrs. Wapshre, Dorothy, Robert and Edward were present at the meeting. The meeting was also attended by E.W. Simcock, chairman of the company, H.M. Small, the director, nominated by the Imperial Bank of India, and C. K. Pittock. All the Wapshares were sui juris. Dorothy was a shrewd young lady and the best business brain in the family. All the Wapshares knew the value of the properties int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Section 10 does not apply as the properties are not vested in the new company for the specific purpose of making them over to the old company or to the plaintiffs. Article 144 does not apply for several reasons. In the plaint there is no prayer for recovery of possession. The plaintiffs claim declaratory reliefs, a decree vesting or re-transferring the properties to the old company or to the plaintiffs and accounts. Such a suit is governed by article 120. 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. In Chhatra Kumari Devi v. Mohan Bikram Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tenant dying intestate without leaving any lawful heirs his estate came to an end and the lord was in by his own right and not by way of succession or inheritance from the tenant: see Attorney-General for Oniario v. Andrew F. Mercer [1883] 8 App. Cas. 767, 772. In most cases the land escheated to the Crown as the lord paramount, in view of the gradual elimination of intermediate or mejne lords since 1290. The Crown takes as bona vacantia goods in which no one else can claim a property. In Dyke v. Walfo"d [1846] "i Moore P.C. 434, 496 ; 13 E.R. 557, 580 it was said that "it is the right of the Crown to bona vacantia to property which has no other owner". The right of the Crown to take as bona vacantia extends to personal property of every kind : see In re Wells : Swinburne-Hanham v. Howard [1933] 1 Ch. 29, 49; [1933] 3 Comp. Cas. 124 . Escheat of real property of an intestate dying without heirs was abolished in 1925 and the Crown now takes all his properties as bona vacantia. On the dissolution of a company the Crown took its real property by escheat and its personal property as bona vacantia. Technical escheat of the property of a dissolved company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty for want of an heir or successor. In this country escheat is not based on artificial rules of common law and is not an incident of feudal tenure. It is an incident of sovereignty and rests on the principle of ultimate ownership by the State of all property within its jurisdiction. Private ownership not existing, the State must be owner as ultimate lord": see Collector of Masulipatam v. C. Vencata Narainapah [1860] 8 MIA 500, 525. The rules of English feudal law relating co mesne lords are not applicable, and consequently the Zamindar could not take by escheat the land of a tenant dying without heirs. The right of escheat belongs to the Government only : see Ranee Sonet Kowar v. Mirza Himtnut Bahadoor [1876] LR 3 I.A. 92, 101; ILR 1 Cal. 391. The Government has the right to take all property within its jurisdiction by escheat for want of an heir or successor and as bona vacantia for want of a rightful owner : see Bombay Dyeing and Manufacturing Co. v. State of Bombay [1958] S.C.R. 1122, 1146; Legal Remembrancer v. Corporation of Calcutta [1967] 2 SCR 170, 204 ; AIR 1967 SC 997. Consequently the property of an intestate dying without leaving lawful heirs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate and the escheat of the personal estate of corporations in such a case, and practically makes obsolete the doctrine as to the extinguishment of the debts owing by and to the corporation in such cases. Stated in another way, the rule is that after the dissolution of a corporation, its property passes to its stockholders subject to the payment of the corporate debts. The inherent jurisdiction of equity over trusts embraces the power to administer the assets of a dissolved corporation". The subject of dissolution of corporations is discussed in articles 1628 to 1996 of the book. The corporation is dissolved by a judgment of court (article 1645). For the purpose of complete winding-up of its affairs, statutes provide that even after dissolution the corporation shall continue to exist and may sue or be sued for a limited period : see articles 1662, 1668, 1669, 1671,1673. Statutes also provide for appointment of a trustee for the dissolved corporation and their effect is to convert its properties into a trust fund and to abrogate the common law rule of escheat: see articles ] 676, 1677. The .stockholders of the dissolved corporation can accordingly maintain an action against the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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