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2001 (4) TMI 939

and A.K. Mylsamy, Advs. ORDER 1. The petition in CP 52 of 1995 is filed under section 111(4) of the Companies Act, 1956 ('the Act') against South India Tea and Coffee Estates Limited ('the Company') and three others for the following reliefs :- (a) to rectify the register of members of the company (i) by deleting the name of the third respondent in respect of 3,250 equity shares belonging to the estate of the deceased M.A. Coelho and the corresponding rights shares of 9,750 equity shares and entering the name of the petitioners in respect of their interest therein; (ii) by deleting the name of third/fourth respondent in respect of 21,000 rights shares which should have been allotted in favour of the petitioners; and (b) to direct payment of dividend to the petitioners in respect of the impugned shares. After the petition was filed, other legal heirs of the deceased M.A. Coelho were impleaded as petitioners Nos. 2 to 9. The petitioner No. 1 and 8 are sons; petitioner No. 2 and 7 are daughters and the other petitioners are wife and children of I.R. Coelho, deceased son of Mrs. Coelho. 2. The petition in CP 84 of 99 is filed by the petitioners holding 16.20 per cent of .....

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tinued in her name as borne out from the annual returns of the Company made up to 29-10-1981, 31-10-1983 and 31-10-1984, The petitioners came to know from the annual return filed up to 30-10-1986 that entire impugned shares were shown as transferred in favour of the third respondent, who is the wife of the second respondent. The petitioners being the legal heirs are entitled to the impugned shares. The second respondent taking advantage of his position as the managing director of the Company placed the impugned shares in the name of third respondent, as if the shares were transferred in her favour. The second respondent further gave the benefit of right shares to the third respondent by allotting shares in the ratio of 3:1, i.e., 9750 shares on 15-3-1989. The second respondent has, therefore, illegally placed 13,000 shares in favour of the third respondent to which otherwise all the legal heirs of the deceased M.A. Coelho are entitled. The first petitioner had sent a legal notice on 24-4-1993 for which respondents 1 to 3 caused a reply dated 15-6-1993 making absolutely false and unsubstantiated allegations that the shares were transmitted in the name of the third respondent in acco .....

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our of the third respondent. Even in a partition, it can be only between persons having antecedent title. There can be antecedent title only among the legal heirs of the deceased. The third respondent cannot be a party to any such family arrangement and hence instrument of transfer is absolutely necessary. If there is no antecedent title among the parties, all the requisite formalities regarding the transfer shall have to be observed. The provisions of section 108 are mandatory. The respondents have taken a different stand in their reply notice dated 15-6-1993. (Exhibit A-7 of page 82 of CP 52 of 1995) regarding the transfer of impugned shares in favour of the third respondent . In the circumstances, the impugned shares are liable to be automatically restored to the name of the petitioners and other legal heirs. The transmission of impugned shares was never effected with consent of legal heirs of the ceased M.A. Coelho nor was approved at the Board meeting held on 23-7-1986. There was no understanding among the legal heirs of the deceased M.A. Coelho on appropriation and division of the assets and interest in the estate of M.A. Coelho and consequent transmission of shares in favour .....

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petitioners 2 to 9 in the year 1996. Mr. I.R. Coelho, one of the sons, since deceased in not a party before the CLB. Mr. Ramani has further submitted that the company railed to produce any copy of the Board Resolutions in support of the offer regarding issue of 1,80,000 equity shares by way of rights to the existing shareholders. The respondents have disputed the letter dated 21-4-1987 (Annexure A-9 at page 90 of CP 52 of 1995) by which the first petitioner had requested the second respondent to adjust the amount that is due to the first petitioner in the Adikehole account towards the rights shares. However, the second respondent has not questioned the Setter dated 29-4-1987 (Annexure A-10, at page 91 of CP 52 of 1995) of the deceased I.R. Coelho, one of the brother of the first petitioner addressed to the second respondent containing similar request as in the letter dated 21-4-1987 sent by the first petitioner. Though the first petitioner has sought for production of certain documents regarding allotment of shares including an extract from the bank account to find out whether the respondents had paid money for the rights issue, the Company failed to produce any of those documents .....

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onveyance is involved in the process as a conferment of a new title is not necessary." • Sahu Madho Das v. Mukand Ram AIR 1955 SC 481 - to state that- ... the formalities of law about the passing of title by transfer would have to be observed if there is no antecedent title among the parties. • Gopat Krishanji Ketkar v. Mohamed Haji Latif AIR 1968 SC 1413, Irudayam Ammal v. Salayath Mary AIR 1973 Mad. 421 and Pefer Alan Basi v. East India Pharmaceutical Works Ltd AIR 1976 Cal. 182 to state that- "A practice has grown up in Indian procedure of those in possession of important documents or information lying by, trusting to the abstract doctrine of the onus of proof, and failing, accordingly, to furnish to the Courts the best material for its decision. With regard to third parties, this may be right enough- they have no responsibility for the conduct of the suit, but with regard to the parties to the suit it is, their Lordships' opinion, an inversion of sound practice for those desiring to rely upon a certain state of facts to withhold from the Court the written evidence in their possession which would throw light upon the proposition." • Maheshwari K .....

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After the demise of the father, the management of the estate was taken over by the second respondent, being the eldest son. In the year 1981, a company by name Silver Cloud Estates Private Limited was promoted and all the assets and properties belonging to the partnership firm, namely, Silver Cloud Estates vested in the Company and later a subsidiary company was formed to own and manage the said plantation. In the year 1991, disputes arose with regard to increase of the paid-up share capital of Silver Cloud Estates Private Limited between the second respondent and the first petitioner. Consequently, the second respondent caused a notice dated 16-12-1992 which prompted the first petitioner to retaliate by issuing the notices dated 24-4-1993 (A-6 & A-11 annexed to the petition CP 52 of 1995) in relation to the Company. Shri Raghavan further submitted that Mrs. M. A. Coelho died on 24-9-1981 leaving behind her, a number of properties and also the impugned shares. After the demise of Mrs. M.A. Coelho, the question of distribution of assets was discussed among the legal heirs and after such mutual discussion all the properties and the interest in the estate of the deceased M.A. Coel .....

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capital to meet its business needs. At the annual general meeting held on 30-10-1986. it was approved to increase the share capital and accordingly rights issue of shares was undertaken. The record date for rights issue was 28-7-1987. The Company sent letters to all the shareholders on 3-4-1987. The last date for subscribing to the rights issue was 25-4-1987. The 1st petitioner received the rights issue application form, but did not make any payment. The 1st petitioner never made any request for adjustment from the Adikehole Estate Account. He did not chose to subscribe to the rights issue after having received rights issue offer. Even if the letter dated 21-4-1987 of the first petitioner, namely, A-9 is a genuine letter, it has no legal sanctity in view of the fact that A-9 is conditional. No payment has been made. Hence, no allotment can be made in favour of the 1st petitioner. Moreover, the legal notice caused by the 1st petitioner does not make a reference to the disputed letter dated 21-4-1987 (A-9). The CLB cannot compel the parties to allot shares in a section 111 proceedings. The petitioners cannot ask for rectification without allotment of shares. If the prayer of the peti .....

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aches. Shri Raghavan emphasized that the proceedings under section 111 are summary in nature. The CLB will have no jurisdiction to make any order relating to assets of the deceased M.A. Coelho, which can be agitated only in a Civil Court. The family arrangement agreed upon by the respondents can be investigated only with oral and documentary evidence which can be gone into in a Suit for administration of the estate of the deceased M.A. Coelho. The present proceedings are barred by limitation, especially when Mrs. M.A. Coelho died in 1981 and the impugned shares were registered in the name of the 3rd respondent in the year 1986. The petitioners' action to dispute the said transaction after a period of 11 years is barred by time. The CLB is a Court within the meaning of the Indian Limitation Act, 1963 and the present proceedings would be barred by the provisions of the Indian Limitation Act. The transmission of impugned shares reflected in the Annual Return is a public document. The petitioners have public notice of the transmission of the impugned shares even in the year 1986 by which time section 155 of the Act was in force and not section 111(4). The proceedings under section .....

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eputy Director of Consolidation - AIR 1976 SC 807 - to state that "the Members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the Courts will find no difficulty in giving assent to the same." • Muthuveeran Chetty v. Govindan Chetty AIR 1961 Mad. 470 - to state that "A member to whom a promissory note is allotted at a partition of the joint family properties, is entitled to sue on the note without an endorsement or deed of assignment in writing." • Ramprasad Dagaduram v. Vijaykumar Motilal Hirakhanwala AIR 1967 SC 278-to state that- "the Court has power to add new plaintiff at any stage of the suit, (under Order 1 Rule 10 of Civil Procedure Code, 1908) and in the absence of statutory provision like section 22 (of the .....

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ssion of 3,250 shares held in the name of the deceased M.A. Coelho and also the non-allotment of 21,000 rights shares to the petitioners. They have also challenged the corresponding rights issue of 9,750 shares made in respect of 3,250 shares registered in the name of the third respondent. These allotments have taken the percentage holding of the respondents group to about 51 per cent, which in other words has created a new majority. The settled position of law is, that, if by allotment or issue of shares, a new majority is created, then the same could be considered to be an act of oppression. Keeping in view this legal proposition in mind, allegations contained in the petition have to be examined. In so far as the registration of 3,250 shares held in the name of the deceased M.A. Coelho, in the name of the third respondent is concerned, the challenge is that since the third respondent is not a legal heir, the shares should not have been registered in her name and should have been registered in the name of the legal heirs. The respondents have relied on an alleged family settlement among the family members and also the wishes of the deceased M.A. Coelho for getting the shares regis .....

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esent case, since the identity of all the legal heirs is apparent and since there are no disputes in regard to the legal heirs, we consider it appropriate to direct that simultaneously with the removal of the name of the third respondent from the register of members, these shares will be transmitted in the name of all the other legal heirs proportionately. This should be done within 60 days of this order. 10. Since the third respondent was allotted 9,750 shares by way of rights shares in respect of these 3,250 shares which we have already held she was not entitled to, her name in respect of these rights shares of 9,750 will also have to be removed from the register of members provided the other legal heirs are interested in acquiring these shares in the same proportion in which the shares held in the name of Mrs. M.A. Coelho are distributed among the legal heirs. In case these legal heirs are not interested in acquiring the proportionate shares, these shares will be retained in the name of third respondent. The legal heirs should exercise their option of getting these shares within a month from the date of transmission of shares as directed in the earlier paragraph, along with the .....

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