9911796707
TMI Blog1974 (5) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... he issued share capital was Rs. 6,00,000 divided into 600 fully paid up ordinary shares of the face value of Rs. 1,000. The main object of the company was to purchase, take on lease or exchange or otherwise acquire land and buildings in Calcutta or elsewhere and to acquire the property situate at No. 1 and 1/1, Bishop Lefroy Road, Calcutta. The founder-director of the company, which was a family concern, was one S.F. Mazda who held 540 shares, the other shares being held as follows : F.F. Mazda (brother of S.F. Mazda) ... 10 shares D.S. Mazda (son)... ... 10 shares Mrs. D.K. Irani (daughter)... ... 20 shares Mrs. K.R. Irani (daughter)... ... 20 shares In 1956 the 10 shares held by F.F. Mazda were transferred to the founder-director, S. F. Mazda, whose total holding, therefore, became 550 shares. Thereafter, on December 21, 1955, S. F. Mazda transferred 40 shares to his son, D.S. Mazda, and 150 shares to the respondent, who is a son-in-law of S.F. Mazda, and to the brother of the respondent, who is the other son-in-law of S.F. Mazda. The respondent's case is that 150 shares were given to him by way of a valid lawful gift and were accepted by the respondent during the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the respondent was the registered holder of any shares in the company. On March 20, 1972, the respondent with his brother's wife and others issued a requisition for an extraordinary general meeting of the company. The validity of this requisition was challenged by the company's solicitor. Thereafter, a suit was filed in this court on June 23, 1972 (Suit No. 226 of 1972-Daddy S. Mazda v. Grover R. Irani) for delivery and cancellation of the notice convening extraordinary general meeting of the company and for various other reliefs. This suit was filed by the first appellant and his wife. A declaration was also prayed for that the first appellant and his wife were the legal and real owners of 170 shares of the company. In this suit an interlocutory application was made for an injunction and various other reliefs. Thereafter, an application under section 155 of the Companies Act, 1956 (hereinafter referred to as "the Act"), was made and in this application the order under appeal was made. The main question involved in this appeal is where serious disputed questions of fact are involved in an application under section 155 of the Act, is it open to the court to make an order for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the American Express Co. In paragraph 27, the respondent denies that he ever had any account with the American Express Co. and it is also denied that dividends amounting to Rs. 68,900 were ever paid to the respondent or credited to his bank account. The account itself is alleged to be a fraudulent account opened at the instance of the appellants and the entire sum of money deposited therein is alleged to have been fraudulently misappropriated by the appellants. It is amply clear from these allegations in the petition that there were serious allegations of fraud, fictitious and sham transactions, impersonation in opening bank account and operating the same, misappropriation of moneys and false transaction involving a firm of share brokers. These allegations in the petition are seriously disputed and denied by the appellants. It is, therefore, to be seen if such disputed question relating to the title to shares can and ought to be adjudicated upon in summary proceedings under section 155 of the Act. Mr. S.C. Sen, counsel for the appellants, contended that the respondent on his own petition had raised such questions as could not be adjudicated upon in a summary proceeding unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares and also claiming inspection of the register of members, the register of transfer, transfer deeds, minutes book and other documents. In the letter dated June 22, 1972, from the respondent's advocate to the company, it was alleged that the respondent's signature had been forged on the transfer form in respect of his shares and the respondent was confirmed in this view by reason of the appellant's refusal to give inspection of the company's records. It is not necessary for the purpose of this appeal to refer to the other correspondence that passed between the parties, some of which was acrimonious in nature. The first appellant in the affidavit-in-opposition says that on May 17, 1965, he purchased from his personal resources 170 shares in the capital of the. company standing in the name of the respondent through Abdullah Gangee and Sons, share brokers, for valuable consideration of Rs. 1,60,860. The transfer of the shares is alleged to have been registered in the share register of the company and have been approved at the general meeting of the company held on June 18, 1965, A copy of the broker's bill in respect of the sale of shares is annexed to the affidavit. The allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e affidavit-in-reply, it was submitted that towards the very close of the arguments in the court below, junior counsel appearing for the appellants was asked if the appellants intended to file a further affidavit by way of rejoinder to the affidavit-in-reply and the court was informed that the appellants did not wish to file any further affidavit as according to them no relief could be granted to the respondent in his application. In support, of the contention that counsel should have been put to his election as to whether he would call evidence and if counsel elected not to do so then the judge must decide whether or not the petitioner had established his case. Mr. Sen relied on two English decisions in Yuill v. Yuill [1945] Probate 15 and Storey v. Storey [1961] Probate 63. We do not think this question really arises in this appeal as the principal question is firstly whether serious disputed questions relating to title to the shares have been raised in the application, and, secondly, if there are such questions whether an order for rectification of the share register could have been made in a summary proceeding under section 155 of the Act. It is to be noticed that in the affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares had been made amply clear in the affidavit-in-opposition filed on their behalf and denial and contradiction of the allegations in the affidavit-in-reply, by a further affidavit, would in no way have advanced matters so as to enable the court to adjudicate upon the serious disputes raised and the serious charges made in the pleadings. On the materials on record there can be no doubt or dispute that S. F. Mazda, the respondent's father-in-law, transferred 150 shares of the company to the respondent. These shares were registered in the respondent's name in the register of members of the company. This was followed by transfer of 20 shares by the respondent's wife to the respondent and this transfer was also registered in the respondent's name in the company's register of members Thus, in 1956, 170 shares stood registered in the respondent's name. It appears that on 29th March, 1965, one Keki Rusi Irani desired to open an account with the American Express Co. and signed an account opening form. He also sent to this bank 170 shares of the company with a request to sell these shares and credit the sale proceeds to his account. In the forwarding letter signed by K. R. Irani it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply. The title to the shares, he argued, is seriously disputed. The first appellant claims to have purchased the shares through a well-known share broker and the transaction had been put through by a well-known bank of Calcutta. The shares also have been registered by the company in the name of the first appellant. Mr. Sen argued that serious charges of fraud, forgery, impersonation and falsification of records cannot be gone into in a summary proceeding under section 155 of the Act. In support of this contention he firstly relied on a passage in Buckley, 13th edition, page 260, and also several decisions, namely, British Sugar Refining Co., In re [1857] 69 ER 1168, London Hamburgh and Continental Exchange Bank, In re [1867] 2 Ch App 431, Dhelakhat Tea Co. Ltd., In re [1958] 28 Comp Cas 62 (Cal.), Jayashree Shantaram Vankudre v. Rajkamal Kalamandir Private Ltd. [1960] 30 Comp Cas 141 (Bom.), Smt. Soma Vati Devi Chand v. Krishna Sugar Mills Ltd. AIR 1966 Punj. 44 and Diwan Singh v. Minerva Films Ltd. [1959] 29 Comp Cas 263 (Punj.). It is settled on very high authority that rectification of the share register of a company can and indeed ought to be allowed where the questions invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this account and withdrawal of the money were all bogus and sham transactions and, therefore, there was no bona fide and genuine sale of the shares by the respondent to the first appellant. Mr. Mookherjee relied on a decision of the Supreme Court in Indian Chemical Products Ltd. v. State of Orissa [1966] 36 Comp. Cas. 592 (SC). In that case the Maharaja of Mayurbhanj held 7,500 shares of a company and the remaining 150 shares were held by others. On the lapse of paramountcy of the British Crown in India on August 15, 1947, the State of Mayurbhanj became integrated with the Dominion of India and the Maharaja thereafter agreed to the merger of the State with the Dominion. As a consequence of the integration of the State with the Dominion of India all public properties of the State including 7,500 shares of the company vested in the Dominion and these shares devolved upon the Dominion of India as the succeeding sovereign. By a subsequent order the Government of India delegated to the Government of Orissa the power to administer the territories of the merged State. There was, therefore, a transmission of the shares from the Maharaja to the State of Orissa by operation of law. But, in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is true that the transfer deed and the letter dated April 26, 1965, have not been produced. But can it be said that because of non-production of these documents an adverse inference ought to 1 e drawn against the appellants ? We think not. The jurisdiction to draw an adverse inference under section 114(g) of the Evidence Act can be exercised only where there is an obligation to produce a document and not otherwise. Can it be said that the appellants were under any obligation to produce the documents mentioned above ? There was no obligation in law imposed upon the appellants to produce these documents. The position would have been otherwise if the court had directed them to produce the documents. at or before the hearing of the application. No such order was made directing the appellants to produce the documents. No adverse inference can be drawn for failure to do something which a party is not bound in law to do. In a summary proceeding under section 155 of the Act, the rules framed under the Act do not require parties to disclose or give inspection of documents. The provisions in Order 11 of the Civil Procedure Code regarding discovery, production and inspection of documents ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents and, secondly, because no order was made against the appellants for production of the documents. A party to a litigation may have numerous documents in his possession or control and it cannot be said that merely because he has failed to produce one or other of these documents which would be helpful to his opponent in the litigation, an adverse inference ought to be drawn against him. An adverse inference under section 114(g) of the Evidence Act, in our view, is permissible only where a party is obliged to produce documents either under the provisions of a statute or rules or under order of the court. In our view the intensity, the depth and the sweep of the allegations are such that it is not possible for the court to come to any conclusion about the truth of the allegations except upon evidence which can be tested by cross-examination of witnesses. There can be no doubt that the allegations relate to serious disputed questions of fact and such disputes can only be resolved by oral testimony tested by cross-examination and by no other means. To hold that disputes such as those raised in the application can and ought to be resolved on averments made in the affidavits woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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