TaxTMI 
TaxTMI 
1968 (12) TMI 74
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....certificate. The short facts leading up to Civil Appeal No. 1412 of 1968 may be stated. The respondent-company was incorporated in or about August 25, 1945, under the Indian Companies Act, 191.3. The registered office of the company is at Victory Colliery, in West Bengal. The authorised capital of the company is Rs. 20,00,000 divided into 2,00,000 ordinary shares of Rs. 10 each, of which Rs. 15,10,000 is stated to have been fully paid and subscribed. The company owned four collieries, compendiously known as Victory Collieries. About September 2, 1945, Kishorilal was appointed managing agent but from about December 26, 1950, the company ceased to appoint managing agents. Thereafter, Kishorilal was appointed the managing director of the company. On or about March 1, 1952, Jagan Mohan Goenka, brother of Kishorilal, ceased to be a director and also a shareholder as he had transferred his shares. When Jagan Mohan Goenka ceased to be a director, his wife, Bhagwati Debi, became a director. In or about 1952 the management of the collieries was divided between two groups, which, for the sake of convenience, may be called the G. L. group and the M. J. group. Since about October, 1953, the J....
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....to be a director of the company and was professing to act as such since August 31, 1964. The plaintiff further averred that the defendant was neither appointed as a director in any meeting of the company, nor co-opted as a director of the company and the claim of the defendant came to be known by the plaintiff only in or about August-September, 1966. It was further stated by the plaintiff that article 104 of the articles of association of the company deals with the qualifications of a director. It is the plaintiff's case that the defendant did not hold, on August 31, 1964, any shares in the company, nor has the defendant obtained any shares till the date of the suit. Therefore, it was averred that even if the defendant had been appointed as a director on August 31, 1931, as claimed by him, inasmuch as he had not acquired the qualification shares within two months, the defendant should be treated as having vacated the office of a director. The plaintiff further alleged that the defendant had been wrongfully and without any authority purporting to act as the director of the company and had been wrongfully dealing with the funds and interfering with the management of the plaintiff by ....
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....gwati Debi, were to be transferred in the name of the defendant. Accordingly, 1,000 fully paid up shares of Rs. 10 each, bearing numbers 48001 to 49000, covered by Certificate No. 5, were transferred by Bhagwati Debi to the defendant on October 30, 1963. At the board meeting held on August 31, 1964, Bhagwati Debi transferred the said shares in the name of the defendant by a deed of transfer dated October 30, 1963. Certificate No. 5, together with the deed of transfer duly executed in favour of the defendant by Bhagwati Debi and signed by him were lodged by the defendant with the plaintiff company for necessary transfer being effected in his name. Kishorilal Goenka, the managing director, informed the defendant that the transfer of the shares in his name had been effected in the books of the company and that the share certificate would be forwarded in due course ; but the defendant had not received from the company the said certificate in spite of the promise mad^. by the managing director. The defendant has been and continues to be a shareholder of the company, holding 1,000 fully paid up shares since October 30, 1963. Prior to August 31, 1964, one Sunil Kumar Ganguli was a directo....
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.... the defendant it is clear that he (i ) claims to have 1,000 shares transferred by Bhagwati Debi in his favour by a transfer deed on October 30, 1963, and that he lodged the same with the company for effecting the necessary changes in its registers; (ii) that Sunil Kumar Ganguli, who was a shareholder and director till August 31, 1964, transferred on that date his entire holding of 500 shares in favour of the defendant's sister, Bhagwati Debi, and, as such, S.K. Ganguli ceased to be a director; (iii) that at the board meeting held on August 31, 1964, the defendant was appointed as director in the place of Ganguli; and (iv) that the various communications referred to by him will establish that he has been acting as a director from August 31, 1964. From the facts stated above it is evident that the question that arose for consideration before the learned trial judge was whether the plaintiff, to entitle it to get an order of interim injunction, has prima facie established that the defendant did not have the necessary share qualification on August 31, 1964, to make him eligible for directorship and that the defendant, in law, had no right to function as a director. A consideration of....
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....that he is the holder of a thousand ordinary (equity) shares of the company, represented by Certificate No. 5 relating to share numbers 48001 to 49000 and that he is a director of the company since August 31, 1964. In the suit he further asked for rectification of the share register of the company by including his name as a shareholder of the company. He further claims an injunction restraining the company and Kishorilal from interfering with his right to act as a director and shareholder of the company and also asks for damages. Another suit has also' been brought to our notice, and that is Suit No. 2103 of 1968 filed by Bhagwati Debi in the High Court, against the company and its directors. She also appears to have obtained some interim orders on August 14, 1968. In support of their claim for injunction, the plaintiff produced before the learned trial judge the registers of the company to establish that the defendant was not a shareholder and that he has never been appointed a director. They also produced materials to show that Sunil Kumar Ganguli who, according to the defendant, had ceased to be a director with effect from August 31, 1964, continued to be a director of the com....
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....f, is undoubtedly prima facie evidence of matters directed or authorised to be stated therein under section 164 of the Companies Act, the learned judge stated that he did not consider it proper to rely entirely on that prima facie evidence in this case and to act on the same. The learned judge then proceeded to consider the de facto claim made by the defendant of having acted as a director from 1964 and held that it was very improbable that Kishorilal would not have known about this till 1966, as claimed by him. The learned judge then refers to the order of Mitra J. passed on June 27, 1966, in the company petition, authorising the defendant to operate the account in the United Commercial Bank and takes the view that if an order is passed restraining the defendant from functioning as a director, such an order will come into conflict with the order of Mitra J. dated June 27, 1966. The learned judge further proceeds to state that as the defendant has been functioning as a director from August 31, 1964, the balance of convenience is for permitting him to continue as such. The learned judge, so far as we can see, has neither adverted to nor considered the question as to whether the pl....
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....learned judges are also of the view that there is no delay in the institution of the suit as the plaintiff knew about the defendant claiming rights as a director only as per the letter dated September 12, 1966, of the United Commercial Bank. The letter dated December 19, 1964, to the Chief Inspector of Mines, sent by the defendant and which, according to him, had been sent to Kishorilal Goenka has been adverted to by the learned judges and they are of the view that the copy of the letter sent by the Chief Inspector to Kishorilal does not refer to the defendant as a director of the company. The learned judges also refer to the fact that Bhagwati Debi has not filed any supporting affidavit to establish about the resolution of August 31, 1961, regarding the appointment of the defendant as a director. They also refer to the fact that the defendant himself has not given any particulars as to how exactly he lodged the transfer deed stated to have been executed in his favour by Bhagwati Debi in October, 1963. The learned judges are also of the view that if the defendant had really got a transfer of shares, as claimed by him, on October 30, 1963, he would have taken early steps to have th....
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....s not been validly appointed as a director of the company. When the whole question was whether the defendant was in law entitled to function as a director, the learned trial judge, instead of considering this important aspect, has given more weight to the fact that the defendant has been de facto functioning as a director. The learned trial judge was not also justified in brushing aside the share registers and other minutes books produced by the plaintiff to establish that the defendant was neither a shareholder nor had he been appointed a director. We are not able to appreciate the reasoning of the learned trial judge. The learned trial judge has been very much influenced by the order of Mitra J., dated June 27, 1966, and, according to the learned judge, this order practically recognises the defendant as a director. A close reading of the entire proceedings before the company court, which have been placed before us, will show that the order of Mitra J. has been passed without prejudice to the rights of the parties. In fact even the plaintiff restricted the relief for injunction under clause (g) to the defendant being not allowed to act as a director because of the fact that he has....