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TMI Blog1976 (11) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate Ltd. The shares stood in the names of: (1) M/s. Ganeshnarayan Onkarmal Khetan, (2) M/s. Sagarmal Hariram Khetan, (3) Sri Mannalal Khetan, and (4) Sri Radhakrishna Khetan. The members of the Khetan family did partnership business at various places. Civil Suit No. 337 of 1948 was filed in the Bombay High Court for dissolution of the partnership and for taking the accounts. On 3rd July, 1953, the official receiver of the Bombay High Court was appointed receiver of the properties of the partnership firms. There were large income-tax arrears and other tax liabilities outstanding against the firms and individual partners. For the realisation of the income-tax dues the income-tax department issued in 1950 a notice under section 46(5)(a) of the Indian Income-tax Act, 1922, requiring the respondent-company to pay any amount due to the firm of Ganesh Narayan Onkarnath or its partners to that department. On 16th June, 1953, a receiver was appointed by the Collector of Bombay in execution of the tax recovery certificate issued by the Income-tax Officer, S. VI, Central Bombay. Subsequently, under orders of the Bombay High Court the receiver appointed by the Collector of Bombay took ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r attachment of the income-tax authorities had been sold by the Additional Collector of Bombay on 23rd September, 1961. The notice stated that the agreements had become impossible of performance and the consideration of reciprocal promises disappeared. The notice further stated that the power-of-attorney executed in favour of the respondent-company by the appellant in respect of their shares in the Maheshwari Khetan Sugar Mills Private Ltd. and Laxmi Devi Sugar Mills Private Ltd. were revoked and cancelled. The notice concluded by saying that the respondents had no right, authority or power to act on behalf of or in the name of the appellants in pursuance of the said power-of-attorney. By another notice dated 14th January, 1962, the appellants informed the respondent-company that the transfer of shares in the company's register had been made illegally and without authority because no proper instruments of transfer duly stamped and executed by and/or on behalf of the appellants were delivered to the respondent-company and that the shares were under attachment by the Collector of Deoria for recovery of income-tax arrears on the certificate issued by the Additional Collector of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and to restore the names of the original shareholders. The learned single judge rejected the contention of the respondents that it was a case of transmission of shares. The learned judge said that the transmission of shares occurred only by operation of law and this was a case of transfer by voluntary act of the parties which could not amount to transmission. The learned judge also held that although the transferees divested themselves of all powers and control in respect of the shares in question by executing irrevocable powers-of-attorney in favour of the transferees, mere transfer of control did not amount to transfer of possession. The learned judge further held that the agreements to which reference has already been made were not instruments of transfer and the transfer of shares which were under attachment in pursuance of the certificate issued by the Additional Collector under Order 21, rule 46 of the Code of Civil Procedure was illegal and void. The transfer of the shares which had been surrendered to the receiver appointed by the Collector of Bombay was also held by the learned judge to be bad on the same ground. The respondents preferred an appeal. The Division Bench M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision imperative. In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur [1965] 1 SCR 970 (SC), this court referred to various tests for finding out when a provision is mandatory or directory. The purpose for which the provision has been made, its nature, the intention of the legislature in making the provision, the general inconvenience or injustice which may result to the person from reading the provision one way or the other, the relation of the particular provision to other provisions dealing with the same subject and the language of the provision are all to be considered. Prohibition and negative words can rarely be directory. It has been aptly stated that there is one way to obey the command and that is completely to refrain from doing the forbidden act. Therefore, negative, prohibitory and exclusive words are indicative of the legislative intent when the statute is mandatory. (See Maxwell on the Interpretation of Statutes, 11th edition, page 362, et. seq., Crawford Statutory Construction, Interpretation of Laws, page 523 and Seth Bikhraj Jaipuria v. Union of India [1962] 2 SCR 880, 893-94 (SC)). The High Court said that the provisions contained in section 108 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract, express or implied, is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect. [See Melliss v. Shirley and Freemantle Local Board of Health [1886] 16 QBD 446 (CA)]. What is done in contravention of the provisions of an Act of the legislature cannot be made the subject of an action. If anything is against law, though it is not prohibited by the statute but only a penalty is annexed, the agreement is void. In every case where a statute inflicts a penalty for doing an act, though the act be not prohibited, yet the thing is unlawful, because it is not intended that a statute would inflict a penalty for a lawful act. Penalties are imposed by statute for two distinct purposes : (1) for the protection of the public against fraud, or for some other object of public policy ; (2) for the purpose of securing certain sources of revenue either to the State or to certain public bodies. If it is clear that a penalty is imposed by statute for the purpose of preventing something from being done on some ground of public policy, the thing prohibited, if done, will be treated as void, even though the penalty imposed is not enforceable. The pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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