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TMI Blog1964 (11) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... enth of the issued share capital of the company. 2. The point for consideration, therefore, is if the appellants have not paid all the sums clue on their shares; and if so, their application under Section 398 of the Companies Act shall not he maintainable till they have paid all such sums. 3. For the disposal of the appeal, it is not necessary to give the post history or the disputes between the parties to the appeal. The total issued share capital of the company, namely, the Lakshmi Devi Sugar Mills (Private) Limited, Chhitauni respondent No. 1, is ₹ 12,61,500, and the value of the shares registered in the names of tie appellants is to the tune of ₹ 2,29,500. Before the learned Single Judge the respondents had given the figure of ₹ 14,413.39 paise as the amount due From the appellants and hence on their shares. The respondents had produced the account books of the company, but did not lead any evidence to prove the items due from the appellants. In the interest of justice we considered it necessary to record additional evidence of the parties; and the respondents were, in the first instance, called upon to give a statement of the sums due to the company from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the amount was not paid under instructions of Rai Bahadur Kedar Nath Khetan as an amount payable by him, of course, towards the Khetan Agricultural Farm Naraipur. In spite of the opportunity given Rai Bahadur Kedar Nath Khetan did not have the courage to make a statement on oath that what the witnesses were deposing was not true. It is thus proved that this sum of ₹ 6,425 was payable by the appellants under the account of Khetan Agricultural Farm, Naraipur belonging to them. 8. As is proved from the statement of Suraj Prakash Sabherwal the second and third items of ₹ 737.16 and ₹ 182.45 paise were paid to him as liquidator of Ganga Devi Sugar Mills to be debited to the account of Khetan Agricultural Farm, Naraipur. This was also done under instructions of Rai Bahadur Kedar Nath Khetan who was that day (25-6-1960) present in Chhitauni. From the statement of Suraj Prakash Sabherwal and also from the papers on record it is clear that this was not the solitary instance of the amounts being withdrawn to the account of Khetan Agricultural Farm, Naraipur. We have no hesitation in accepting the statement of Suraj Prakash Sabherwal all the more when Rai Bahadur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of one assertion in isolation, and not on consideration of the counter affidavit as a whole which would show that the attachment was in pursuance of the notice under Section 46(5-A) of the Income Tax Act. This was made clear in para 5 (h) of the above counter affidavit. This is also apparent from Resolution No. 13 of the minutes of the meeting of the Board of Directors of Lakshmi Devi Sugar Mills (Private) Limited, Chhitauni held at its registered office at Chhitauni on April 5, 1952, and also Resolution No. 7 of the minutes of the meeting held on October 3, 1959. The minutes of both the meetings were annexed to the rejoinder affidavit filed by and on behalf of the appellants. The fact that the Income Tax Officer had issued notices under Section 46(5-A) of the Income Tax Act is also proved from para 43 of the rejoinder affidavit of the appellants. 12. This naturally leads us to the consideration of the effect of a notice under Section 46(5-A) of the Income Tax Act, whether after the issue of the notice the dividend is still payable to the share-holders, and if not paid, can the dividend be adjusted to their accounts. Sub-section 5-A of Section 46 of the Income Tax Act runs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 46(5-A), it is necessary for the person, from whom money is due or may become due to the assesses, or who holds or may subsequently hold money for or on account of the assessee, to pay the Income Tax Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice so much of the money as is sufficient to pay the amount due by the tax-payer in respect of arrears of Income Tax and penalty or the whole of the money, when it is equal to or less than that amount. It is not in dispute that Income Tax arrears exceed the amount of the dividend. Any account paid by the person in compliance with the notice is, in the eve of law, an amount paid under the authority of the assessee; and if the person discharges any liability to the assessee after receipt of the notice shall be personally liable to the Income Tax Officer to the extent of the liability discharged or to the extent of the liability of the assessee for tax and penalties, whichever is less. 14. It is thus clear that after the receipt of the notice the respondent company could not pay the dividend to the appellants: the account of the dividend was to be paid to the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the supposed intention of the legislature, on the presumption that certain words were, due to drafting error, omitted. The words "other sums" shall thus include any amount due from the share-holder other than the amount of calls, provided that such amount is due on the shares, that is, can be recovered by the sale of such shares. 18. The above discussion covers the first point which was raised on behalf of the appellants. The contention was that the above proviso to Section 399 of the Companies Act pertains to statutory liability, and not any private loan or advance. Considering that the Courts cannot add words to an enactment and the general words, for so long as they are clear and unambiguous and are capable of one interpretation, must be given their general meaning, of course, as mentioned above, it is necessary that a charge should exist on the shares before an amount due from the share-holder shall debar him from making an application under Section 397 or 398 of the Companies Act. 19. The second point contended is that under Article 12 of the Articles of Association of the Lakshmi Devi Sugar Mills (Private) Limited. Chhitauni a Company's lien exists upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each member, and such lien extends to all dividends from time to time declared in respect of such shares. It is under Article 13 that the Directors can, for the purposes of enforcing the lien, sell the shares after giving notice to the share-holder or his executors or administrators, and as provided in Article 14, the sale proceeds after payment of costs of the sale can e applied in or towards satisfaction of the debts, liabilities or engagements due to the company. The company's lien thus does not merely extend to the retention of the shares, but amounts to an equitable charge with a right to the Directors of the Company to sell the shares in accordance with Article 13 of the Articles of Association. When the shares can be sold for the recovery of any amount due from the share-holder, in other Words, there exists an equitable charge upon the shares, the amount due from the share-holder is an amount due on his shares. 22. In AIR1959Cal715 (supra), it was observed that "lien at law" merely meant the possessor lien on the share scripts recognised by the law in this country and understood by all. This finding was recorded on consideration of Articles 16 and 17 of the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 12 of the Articles of Association of the Company can be on such shares as are sufficient to meet the liability and cannot extend to all the shares belonging to the appellants and registered in their names, whether solely or jointly with others. In this connection it was mentioned that the shares held by the appellants were of the face value of ₹ 2,29,500/- and the sum alleged to be due from the appellants does not exceed ₹ 18,000/- and odd. The appellants are bound by Articles 12 to 14 of the Articles of Association of the Company. Article 12 clearly lays down that the Company shall have a first and paramount lien upon all the shares registered in the name of each member, whether solely or jointly with others and no equitable interest in any share shall be created except upon the footing and condition that the above clause is to have full effect, namely, that the company has the first lien on all the shares. When the Hen exists on all the shares of the appellants, they cannot take advantage of the fact that the face value of the shares far exceeds the liability. In the eye of law, a sum is due on all the shares of the appellants and for so long as the liabilities a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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