TMI Blog1988 (10) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be substituted as the holder of such shares in the place of the said Associated Printers (Madras) Ltd. The third respondent in the appeals was the third respondent before the learned judge in all the company petitions. He is none other than the brother of the petitioner before the learned single judge and the appellant before us. Since it was agreed between the parties that the pleadings in C.P. No. 31 of 1976, if referred to, would be enough to focus the controversy which is identical in all the cases, the learned judge noted that excepting in the matter of variance of the number of shares and the value thereof, the point of law being one and the same, it would be sufficient to confine the consideration only to the pleadings in C.P. No. 31 of 1976. The short facts are as follows : Mr. Anantharamakrishnan, a leading industrialist, died on April 18, 1964, leaving his widow, two sons and two daughters. The third respondent is the eldest son. On the death of the said Anantharamakrishnan, his estate became liable to pay estate duty in the sum of over Rs. 150 lakhs. There were other liabilities also. Principally, the estate of Anantharamakrishnan consisted of agricultural la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to another was effected by him bona fide and as administrator of the estate. It was not intended to defeat the rights of any one. A letter to this effect was written on August 26, 1974, by the third respondent to the appellant and it reads as follows : "Madam, Reference our letter of the 10th June, I am detailing the position below. The shares in Reichhold Chemicals India Ltd., Bimetal Bearings Ltd., Shardlow India Ltd., Tractors and Farm Equipment Ltd. and India Pistons Ltd. in the name of father were transferred to Associated Printers (Madras) Private Ltd. on 8th March, 1974, in partial liquidation of the amounts due to them by the estate. Details of the shares with the price realised are given below : Name of company No. of shares Value per share Rs. Price Rs. 1. Shardlow India Ltd. 100 10 1,010 2. Reichhold Chemicals India Ltd. 10 100 583 3. Tractors and Farm Equipment Ltd. 100 10 , 897 4. Bimetal Bearings Ltd. 400 10 9,644 5. India Pistons Ltd. 1 10 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. You will observe from the covering letter to the Wealth-tax Officer relating to the wealth-tax return that the shares in Amalgamations P. Ltd. were already transmitted to the five legal heirs. The wealth-tax assessments are pending from assessment year 1965-66 and the wealth-tax liability, if any, would be known when a ruling on the basis of valuation of shares, in Amalgamations P. Ltd. is given by the Central Board of Direct Taxes with whom this matter is pending. A copy of the estate account for the period 1st July, 1973, to 30th June, 1974, with Amalgamations P. Ltd. is sent herewith." On October 21/25, 1974, the appellant's husband, as power of attorney-holder, replied to the third respondent that the appellant was very sorry and surprised to be informed that the shares held by their father in the various companies have been sold by the third respondent in alleged satisfaction of debts due to Associated Printers (Madras) P. Ltd. He also stated that she was surprised that she was never informed about the alleged debt and that she would have paid the amount if any amount was really due and kept the shares herself. According to her, the third respondent did not even choose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitions, a stand was taken that the third respondent had no authority or power to transfer any assets belonging to the estate of the father without her knowledge or consent specifically and that any such transactions are not binding on her. The third respondent had, by virtue of his overwhelming authority and control over the said companies, either prevented the name of the petitioner being properly entered in the books or otherwise transferred or disposed of the shares belonging to her late father in which she is entitled to 1/5th share, to companies controlled by the third respondent. In the counter-affidavit filed on behalf of the first respondent, the principal stand taken was that section 155 of the Companies Act provides only a summary remedy. It is intended only to adjudicate upon questions arising under the said Act between members. The petitioner does not claim to be a member of the respondent-company. She claims to be one of the heirs of a deceased member. The third respondent had explained that he administered the estate and signed the transfer document with the knowledge, connivance and acquiescence of the petitioner. In a petition of this nature, complicated questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which had to be discharged. In the counter-affidavit, the details of the borrowing from each of the companies are also furnished. There were also debts incurred during the lifetime of Anantharamakrishnan himself. The transfer of shares was made in the best interests of the estate in his capacity as the administrator of the estate. The transfer was made only to a 100 per cent. subsidiary of Amalgamations P. Ltd. in which the petitioner has one-fifth shareholding. Therefore, the petitioner cannot be said to be prejudicially affected by such transfer of shares whose value is insignificant, namely, Rs. 12,184. This clearly shows that these petitions had been filed with ulterior motives. In the reply affidavit, the petitioner reiterated her stand. Ramaprasada Rao J. held that there was no evidence to show that the third respondent was controlling all the directors in the concerned companies ; nor did he have a sway over them so as to lead them to the goal which he desired. The learned judge further found that it was only on April 20, 1972, that the petitioner-appellant herein decided to cancel the power of attorney in favour of the third respondent and further decided to handle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case, such transmission of shares did occur on the death of Anantharamakrishnan, the father of the appellant and the third respondent. Such a transmission clause is found in article 21 of the articles of association of the first respondent-company. The various requirements under the said article remain unsatisfied in this case. Therefore, the transfer cannot stand in the eye of law. The learned single judge had completely missed this vital aspect of the matter. Equally, there is no scope for the application of section 108 of the Companies Act. That will arise only if the title of the appellant is in question. Here, it cannot be denied that, on the death of Anantharamakrishnan, the appellant became entitled to one-fifth share. On the death of a Hindu male dying intestate, the heirs succeed to the estate as, tenants-in-common under the provisions of section 19 of the Hindu Succession Act and not as joint tenants. As such, the appellant had every right to question the action of the third respondent, more so, when the authority of the third respondent had been cancelled on June 12, 1972. Under these circumstances, section 108 of the Companies Act cannot be a bar for the relief p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one in the absence of the other co-sharers, because it is well-settled now that the proceedings under section 155 are in the nature of a summary trial. In support of this submission, learned counsel relies on Hemlata Saha v. Stadmed Pvt. Ltd. [1964] 34 Comp Cas 875 (Cal.). Therefore, the company court has no power to partition and divide the shares. This case arose, after the amendment. As held therein, an allotment can be done only in an action for partition. Again, in Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1965] 35 Comp Cas 651 (All.), it was held that where title to the share was disputed, section 155 of the Companies Act could not apply and the parties were referred to a suit, since section 155 proceedings were summary in nature. In Daddy S. Mazda v. K.R. Irani [1977] 47 Comp Cas 39 (Cal.), a serious charge of forgery in the company records arose and it was held that, without letting in evidence, section 155 cannot be invoked. This respondent would take it that his position is that of an intermeddler. Even then, whether his actions could be questioned is the point to be determined. Learned counsel referred to section 2(11) of the Code of Civil Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is the case of a judge having discretion but failed to exercise the same, how could it amount to substantial question of law, enabling this court to interfere. Mr. Vedantham Srinivasan, in his reply, submits that the principle of English law of administrator de son tort does not arise. As submitted earlier, under the Hindu law, when a Hindu male dies intestate, the heirs take the estate as tenants-in-common. That is clear from section 19 of the Hindu Succession Act. As such tenant-in-common, the petitioner has every right to question the actions of the third respondent; more so when his authority had been revoked. To a wrong-doer, the court cannot extend its protection. Section 155 of the Companies Act is not summary in nature. It has been so laid down in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel of Baroda [1978] 48 Comp Cas 438 (Guj.). It states that all questions in relation to transfer, right to transfer and heirship should be decided by a court. With regard to transmission, Schedule I, Table A of the Companies Act deals with the same. Therefore, that alone will be applied. The company has a fiduciary duty to recognize only the legal representative. Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged debt and she would have paid the amount, if any, really due and kept the shares herself. You did not even choose to offer the shares to a co-owner who is entitled to a pre-emptive right to purchase the same." Therefore, rightly, it is urged by Mr. Chitaley that throughout the appellant is thinking only in terms of purchase of shares. This pre-emptive right is based on the right found in section 19 read with section 22 of the Hindu Succession Act, 1956. Section 22 reads as follows : "(1)Where, after the commencement of this Act, an interest in any immovable property of an intestate, or in any business carried on by him or her, whether solely or in conjunction with others, devolves upon two or more heirs specified in class I of the Schedule, and any one of such heirs proposes to transfer his or her interest in the property or business, the other heirs shall have a preferential right to acquire the interest proposed to be transferred. (2)The consideration for which any interest in the property of the deceased may be transferred under this section shall, in the absence of any agreement between the parties, be determined by the court on application being made to it in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pedient to decide in connection with the application for rectification. (4) From any order passed by the court on the application, or on any issue raised therein and tried separately, an appeal shall lie on the grounds mentioned in section 100 of the Code of Civil Procedure, 1908 (5 of 1908) ( a )if the order be passed by a District Court, to the High Court; ( b )if the order be passed by a single judge of a High Court consisting of three or more judges, to a Bench of that High Court. (5) The provisions of sub-sections (1) to (4) shall apply in relation to the rectification of the register of debenture holders as they apply in relation to the rectification of the register of members." Sub-section (1)( a ) clearly talks of "without sufficient cause". In this case, it cannot be contended that there was no sufficient cause. It would equally follow that sub-section (3) cannot apply because the question of title cannot be decided in the absence of the other co-sharers. It is only a disgruntled co-sharer who has come forward to claim right in the shares. We do not know how she could be definite before a partition by metes and bounds takes place. But, we will ultimately deal wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as we observed above, Mr. Vedantam Srinivasan would urge that the pre-emptive right of a coparcener, conferred under section 22 of the Hindu Succession Act cannot be taken away. We will now refer to the Hindu Succession Act. First of all, we find no application to this section, because it does not say how and when the right of preference is to be exercised. Secondly, at any rate, that cannot be a matter to be agitated under section 155 of the Companies Act. In Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1965] 35 Comp Cas 651 (All.) at pages 653 and 654, it is stated thus : "It is well settled that section 155 confers a jurisdiction of a summary nature and that it contemplates a relief which is available at common law as well. The primary remedy is the remedy under the general law. The remedy under the Companies Act is a summary remedy. The object of this provision is not to supersede or oust the remedy at common law. As observed by Shah J. in Rao Saheb Manilal Gangaram Sindore v. Western India Theatres Ltd. [1963] 33 Comp Cas 826 , 828 (Bom.) : '....this procedure is resorted to by persons aggrieved by the refusal of the directors of a company to rectify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved 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 rectification without taking evidence on the disputed questions of fact or without relegating the parties to a suit ? In other words, in a case where prima facie serious disputed questions of fact are raised by the petitioner himself in an application under section 155 of the Act, is it open to the court to proceed to adjudicate upon the disputes without taking into consideration oral and documentary evidence on the question of the disputes raised ? The decision of this appeal would depend upon the answer to this question." It was answered as follows (at page 53) : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it it to make it fruitless by a process of interpretation ? It was then said that a long line of decisions has clinched the issue and the matter is no more res integra. The matter having been examined on principle, I would now turn to the authorities relied upon on either side to show whether the conclusion reached by me on the language of section 155 is in any way in conflict with the legal position which was more often repeated to me to be a settled legal position." But, we are obliged to note the following observations (at page 456) : "A.H. Mehta, however, said that, apart from the authorities hereinbefore discussed By me, the point is no more res integra and is finally clinched by a decision of the Supreme Court in Public Passenger Services Ltd. v. M.A. Khader [1966] 36 Comp Cas 1 . The pertinent observation specifically relied upon reads as under (page 6) : 'Counsel for the appellant contended that the relief under section 155 is discretionary, and the court should have refused relief in the exercise of its discretion. Now, where by reason of its complexity or otherwise the matter can more conveniently be decided in a suit, the court may refuse relief under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of jurisdiction exercised by the original authority. The positive stand of the third respondent is that he dealt with the estate as an administrator de son tort. No doubt, a letter was given on December 15, 1964, stating : "We agree to abide by the accounts so rendered by him and any explanation furnished by himo with regard to estate duty matters will be binding on us." This came to be revoked on June 12, 1972. The complaint of the appellant is that in spite of such revocation, without informing her, the transfer of shares had been made. It is important to note at this stage that in the petition filed before the learned single judge, it is not challenged any where that the transfer of shares was not in due course of administration of the estate, but what is challenged is the authority to transfer (emphasis supplied). Even in the grounds of appeal, grounds Nos. 2 and 3 read as follows : "2. The learned company judge has erred in holding that respondent No. 3 was authorised to borrow moneys or to administer the estate of the late Anantharamakrishnan forgetting that he was given a very limited authority to represent the petitioner before the Estate Duty Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative which a rightful executor would have been bound to perform in due course of administration, bind the estate.... A person who takes possession of or intermeddles with the property of a deceased person without the authority of the personal representatives or the court is, as regards any liability for payment of death duties or capital transfer tax, a 'personal representative' within the definition contained in the Administration of Estates Act, 1925." About 'executor de son tort intermeddling' Williams, Mortimer and Sunnucks on executors, Administrators and Probate, 16th edition, at page 92, state : "Executor de son tort intermeddling. A person not lawfully appointed executor or administrator and without title to a grant may by reason of his own intrusion upon the affairs of the deceased be treated for some purposes as having assumed the executorship. Such an intermeddler is called a tort executor or an executor de son tort ( i.e. , on his own wrong). The same term is used whether the deceased died testate or intestate, for the law knows no such appellation as 'administrator de son tort'." We may now see the position under the Indian Succession Act. In Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such as estate duty or wealth-tax, it could never be surmised or much less inferred that the dealings of the third respondent as an administrator of the estate in his capacity as the eldest member of the family is illegal or deemed to prejudice other heirs or co-sharers of the estate. We are in entire agreement with this finding of the learned single judge. Even if it is a case of a constructive trust, section 94 of the Indian Trusts Act would come to the help of the third respondent. That section reads : "In any case not coming within the scope of any of the preceding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property for the benefit of the persons having such interest, or the residue thereof (as the case my be), to the extent necessary to satisfy their just demands." Article 21 of the company, on which reliance is placed by Mr. Vedantam Srinivasan, talks of transmission of shares. The said article is to the following effect: "Any person becoming entitled to shares in consequence of the death or insolvency of any member upon producing such evidence that he sustained the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding one rupee may be charged upon any registration under the transmission clause hereinafter contained and also upon the registration of any transfer, and shall if required by the Board, be paid before registration. ( c ) Every instrument of transfer shall be left at the office duly stamped for registration accompanied by the certificate of shares proposed to be transferred and such other evidence as the board may require to prove the title of the transferor or his right to transfer the shares. The Board may waive the production of the certificate upon evidence satisfactory to them of its loss or destruction. ( d ) All instruments of transfer which shall be registered shall be retained by the company, but any instrument of transfer which the board may decline to register shall (except in any case of fraud) be returned to the person depositing the same. ( e )( i )On the death of a member, the survivor or survivors where the member was a joint holder, and his legal representatives where he was a sole holder shall be the only person recognised by the company as hav ing any title to his interest in the shares. ( ii )Nothing in the above clause shall release the estate of a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termed the Aggarwal group had been inducted as shareholders as a result of which the percentage of shareholding of the petitioners was reduced to less than 5% as against 167/1000 when S died. On a petition by the heirs of S for rectification of the share register and cancellation of the new shares : Held, ( i ) that the controversy was a simple one and could be adjudicated upon under section 155 ; ( ii ) that in the case of transmission of shares by operation of law, estate duty clearance certificate should not be insisted upon. Moreover, the status of the petitioners as children of S had not been disputed, and in the circumstances, the respondents should not have insisted upon asking for succession certificate or estate duty clearance. It had been mutually agreed that S's widow would become the shareholder in his place. The respondents could not take advantage of the agreement to obstruct the rights of the petitioners when S's widow had died. The respondents had not taken the stand at any stage in the proceedings that S's mother had a share in the estate of S. The facts showed that S's mother had never claimed such share. It should, therefore, be taken that she had relinqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 156, it is clear that it is not possible to file a separate suit in the ordinary civil court for obtaining relief of rectification of the register of members of a company. In case of resort to a civil court, the provisions in section 156 may even be defeated. Where the petitioner has still to establish his title to shares in the company, non-compliance with section 108 of the Companies Act, 1956, is not fatal to his petition under section 155. The question of compliance with the provisions of section 108 will arise only if it is found that the petitioner has title to the shares in question ..." On this basis it is argued that section 108 of the Companies Act is no bar. But, we would like to note the following passage in paragraph 50-14 of Palmer's Company Law, twenty-third edition : "It is a corollary from the principle that the register of members is to be the creditors' guarantee, showing them to whom and to what they have to trust, that the register should be properly kept and that the names appearing therein should be the names of the persons really for the time being liable to the creditors. But, if there is an error in the register this cannot be rectified by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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