PETITIONER:
\nTHE PUBLIC PASSENGER SERVICE LIMITED<\/p>\n
Vs.<\/p>\n
RESPONDENT:
\nM. A. KHADER AND TWO OTHERS<\/p>\n
DATE OF JUDGMENT:
\n30\/08\/1965<\/p>\n
BENCH:
\nBACHAWAT, R.S.
\nBENCH:
\nBACHAWAT, R.S.
\nSUBBARAO, K.
\nMUDHOLKAR, J.R.<\/p>\n
CITATION:
\n1966 AIR 489 1966 SCR (1) 683
\nACT:
\nCompanies Act (1 of 1956), s. 155–Scope of.<\/p>\n
<\/p>\n
HEADNOTE:
\nThe respondents were shareholders in the appellant company.
\nAs they did not pay the call money on their shares, a notice
\nunder Art 29 of the Articles of Association was issued and
\nas the respondents defaulted in the payment demanded, their
\nshares were forfeited under Art. 30. The respondents filed
\na petition under ss. 402 and 237 of the Companies Act, 1956,
\nand obtained. interim orders directing stay of collection of
\nthe moneys and restraining forfeiture of the shares, before
\nthe forfeiture by the appellant; but, as the call money was
\nnot paid into court as directed the interim order was
\nvacated and the petition was finally dismissed. Thereafter,
\nthe respondents filed an application under s. 155 praying
\nthat the forfeitures may be set aside -and the necessary
\nrectifications made in the share register. The High Court
\non its original side and in Patent Appeal allowed the
\napplication, holding that the notice under Art. 29 wag
\ndefective and therefore the forfeiture was invalid.
\nIn the appeal to this Court,
\nHELD : The forfeiture was invalid, and therefore the names
\nof the respondents were omitted from the share register
\nwithout sufficient cause and the jurisdiction of the High
\nCourt under s. 155 was attracted and rightly exercised. [687
\nB]
\nA proper notice under Art. 29 is a condition precedent to
\nforfeiture under Art. 30. The object of the notice under
\nArt. 29 is to give the shareholder an opportunity for
\npayment of the call money, interest and expenses. In the
\nabsence of particulars of expenses, the respondents were not
\nin a position to know the precise amount which they were re-
\nquired to pay and that slight defect in the notice
\ninvalidated it and was fatal to the forfeiture. [685 D-G]
\nSection 155(1)(a)(ii) allows rectification of the share
\nregister if the name of any person after having been entered
\nin it, is without sufficient cause, omitted therefrom The
\nissue under the section is not whether the shareholder has
\nsufficient cause to approach the Court, but whether his name
\nhas been omitted from the register without sufficient cause.
\n[686 D: 687 A]
\nWhere by reason of its complexity or otherwise the matter
\ncan more conveniently be decided in a suit, the court may
\nrefuse -relief under s. 155 and relegate the parties to a
\nsuit. But having found summaribly that the notice was
\ndefective and the forfeiture invalid, the Court could not
\narbitrarily refuse relief to the respondents. The
\nunwarranted proceedings under ss. 402 and 237 and other
\nvexatious proceedings started by the respondents have no
\nrelation to the invalidity of the forfeiture and the -relief
\nof rectification and were not valid grounds for refusing,
\nrelief, even if it was an equitable one. [688 B-D]<\/p>\n
<\/p>\n
JUDGMENT:
\nCIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 202 and 203
\nof 1965.
\n684
\nAppeals from the judgment and decree dated December 21, 1961
\nof the Madras High Court in O. S. Appeals Nos. 55 and 56 of
\n1959.
\nK. K. Venugopal and R. Gopalakrishnan, for the appellant.
\nA. V. Viswanatha Sastri, P. Ram Reddy and A. V. V. Nair,
\nfor respondent No. 1.
\nThe. Judgment of the Court was delivered by
\nBachawat, J. The appellant is a limited Company carrying on
\ntransport business in South Arcot District. M. A. Khader,
\nthe contesting respondent in Civil Appeal No. 202 of 1965,
\nholds 13 shares and his brother, M. A. Jabbar, the
\ncontesting respondent in Civil Appeal No. 203 of 1965, holds
\n163 shares in the Company. Articles 29 and 30 of the
\nArticles of Association of the Company read:
\n“29. The notice shall name a future day, not
\nbeing less than seven days from the service of
\nthe notice, on or before which such all or
\nother money and all interest and expenses that
\nmay have accrued by reason of such non-payment
\nare to be paid and the place where payment is
\nto be made, the place so named being either
\nregistered office of the Company are usually
\nmade payable and shall state that in the event
\nof non-payment at or before the time and at
\nthe place appointed the share in respect of
\nwhich such payment is due, will be liable to
\nbe forfeited.
\n30. If the requisition-, of any such notice
\nas aforesaid be not complied with, any share
\nin respect of which such notice has been given
\nmay, at any time thereafter before payment of
\nall money due thereon with interest and
\nexpenses, be forfeited by a resolution of the
\nDirectors to that effect.”
\nOn January 2, 1957, the board of directors of the Company
\npassed a resolution calling the unpaid amount of Rs. 25\/- on
\neach share. On January 3, 1957, a call notice was issued to
\nthe shareholders requesting payment on or before January 19,
\n1957. The call notices were duly served on the contesting
\nrespondents. As the call monies remained unpaid, the
\nCompany issued the
\n68 5
\nfollowing notice dated January 20, 1957 to the respondents
\nunder Art. 29
\n“Sir,
\nAs the call amount of the balance of Rs. 25\/-
\nfor every share held by you remains unpaid in
\nrespect of the notice dated 3rd January 1957
\nissued in pursuance of the resolution of the
\nBoard, I hereby issue this notice calling upon
\nyou to pay the called amount at the registered
\noffice of the Company on or before Wednesday
\nthe 30th January 1957, together with interest
\nat six per cent and any expenses that might
\nhave accrued by reason of such non-payment.
\nTake further notice that in the event of non-
\npayment as mentioned above, the shares
\nregistered in your name will be liable to be,
\nonce for all, forfeited without further notice
\nand without prejudice to any legal action that
\nmay be taken against you for recovering the
\nbalance amount due from you treating the same
\nas a debt due to and recoverable as such by
\nthe Company under Article 14.
\nBy order of the Board (Signed) A. R. Hassain
\nKhan Managing Director.”
\nIn spite of this notice, the respondents did not pay the
\ncall monies, and on February 11, 1957, the board of
\ndirectors passed a resolution under Art. 30 forfeiting the
\nshares held by them. On November 8, 1957, the respondents
\nfiled two separate applications under s. 155 of the Indian
\nCompanies Act, 1956 in the High Court of Madras praying that
\nthe forfeitures be set aside and the necessary
\nrectifications be made in the share register of the Company.
\nRamachandra Ayyar, J. allowed the applications, and passed
\nconditional orders for rectification of the registers and
\nhis decision was affirmed by the appellate Court. The
\nCourts below held that in the absence of Particulars of
\ninterest and expenses, the notice dated January 20, 1957 was
\ndefective and the forfeiture is invalid. The Company now
\nappeals to this Court by on a certificate granted by the
\nHigh Court.
\nIn all standard articles of a company, the regulations
\nrelating to calls provide for payment of interest on the
\nunpaid call money at a certain rate from the date appointed
\nfor its payment up to the time of actual payment, see
\nregulation 14 of Table A in the
\n686
\nfirst Schedule to the Indian Companies Act, 1913, regulation
\n16 of Tabie A in the first Schedule to the Indian Companies
\nAct, 1956 and Palmer’s Company Precedents, 17th Edn., Part
\n1, p. 437 and the regulations relating to calls are followed
\nby regulations relating to Forfeiture like Arts. 29 and 30
\nof the appellant Company. In the light of Art. 29 read with
\nsimilar regulations relating to calls, we would have no
\ndifficulty in holding that the notice dated January 20, 1957
\nrequired payment of Interest on tile call money from the
\ndate appointed for the payment thereof, that is to say,
\nJanuary 19, 1957 up to the time of the actual payment.
\nUnfortunately, all the regulations of the Company relating
\nto payment of calls have not been printed in the paper book,
\nand in the present state of the record, we express no
\nopinion on the question whether the notice is defective in
\nrespect of the demand for interest.
\nBut we agree with the High Court that the notice is
\ndefective in respect of the demand for expenses. The amount
\nof expenses incurred by the Company by reason of the non-
\npayment was not disclosed. The respondents were not
\ninformed how much they should pay on account of the
\nexpenses. The object of the notice under Art. 29 is to give
\nthe shareholder an opportunity for payment of the call
\nmoney, interest and expenses. The notice under Art. 30 must
\ndisclose to the shareholder presumably conversant with the
\nArticles sufficient information from which he may know with
\ncertainty the amount which he should pay in order to avoid
\nthe forfeiture. In the absence of particulars of the
\nexpenses, the respondents were not in a position to know the
\nprecise amount which they were required to pay on account of
\nthe expenses. A proper notice under Art. 29 is a condition
\nprecedent to forfeiture, under Art. 30. Here, the notice
\nunder Art. 29 is defective, and the condition precedent is
\nnot complied with. The slight defect in the notice
\ninvalidates it and is fatal to the forfeiture. The Courts
\nbelow, therefore, rightly declared that the forfeiture was
\ninvalid.
\nSection 155(1) (a) (ii) of the Indian Companies Act allows
\nrectification of the share register if the name of any
\nperson after having been entered in the register is, without
\nsufficient cause, omitted therefrom. There is no sufficient
\ncause for the omission of the name of the shareholder from
\nthe register, where the omission is due to an invalid
\nforfeiture of his shares, and on finding that the forfeiture
\nis invalid, the Court has ample jurisdiction under s. 155 to
\norder rectification of the register. me High Court said that
\nthe shareholder may approach the Court under s. 155 if be
\nhas sufficient cause. This mode of expression
\n68 7
\nwas rightly criticised by counsel for the appellant. The
\nissue under s. 155(1)(a)(ii) is not whether the shareholder
\nhas sufficient cause but whether his name has been omitted
\nfrom the register without sufficient cause. As the
\nforfeiture is invalid, the names of the respondents were
\nomitted from the share register without sufficient cause,
\nand the jurisdiction of the Court under s. 155 is
\nattracted.
\nCounsel for the appellant contended that the point as to the
\ninvalidity of the notice dated January 20, 1957 was not open
\nto the respondents in the absence of any pleading on this
\npoint. In the affidavit in support of the application, the
\nrespondents pleaded that the steps prescribed before there
\ncan be a forfeiture, have not been complied with. No
\nfurther particulars were given, but the contention as to the
\ninvalidity of the notice dated January 20. 1957 was
\npointedly raised in the argument in the firs,. Court. ‘Me
\ncontention was allowed to be raised without objection. Had
\nthe objection been then raised, the Court might have allowed
\nthe respondents to file another affidavit. The appellant
\ncannot now complain that the pleadings were vague.
\nWe may now conveniently refer to certain events which
\nhappened after January 2, 1957 when the directors resolved
\nto make the call and February 11, 1957 when the shares were
\nforfeited. On January 18, 1957, M. A. Jabbar, M. A. Khadir
\nand other shareholders filed Application No. 119 of 1957 in
\nthe Madras High Court praying for reliefs under ss. 402 and
\n237 of the Indian Companies Act, 1956, and obtained an
\ninterim order directing stay of collection of monies
\npursuant to the notice dated January 3. 1957. The stay
\norder was communicated to the directors on January 21, 1957
\nafter the notice of the intended forfeiture dated January
\n20, 1957 was issued. On January 30, 1957, the Court passed
\na modified interim order restraining the forfeiture of the
\nshares, and directed M. A. Jabbar to pay the call money into
\nCourt within one week. The call money was not paid into
\nCourt, and on February 8, 1957, the Court vacated the stay
\norder. Application No. 119 of 1957 was eventually dismissed
\non April 10, 1957. Counsel for the appellant contended that
\n(1) by reason of the aforesaid proceedings the respondents
\nwaived and abandoned their right to challenge the forfeiture
\n(2) the order dated January 30. 1957 substituted a fresh
\nnotice of intended forfeiture under Art, 29 in lieu of the
\noriginal notice dated January 20, 1957 and in the absence of
\ncompliance with this order, the forfeiture is valid.
\nNeither of these contentions was raised in the Court below.
\nWe find nothing in the proceedings in Application No. 119 of
\n1957 from
\n688
\nwhich we can infer a waiver or abandonment by the
\nrespondents of their right to challenge the validity of the
\nnotice dated January 20, 1957 and the subsequent forfeiture.
\nWe also fail to see how the order of the Court dated January
\n30, 1957 can amount to a notice under Art. 29. The only
\nnotice under Art. 29 is the one dated January 20, 1957, and
\nas that notice is defective, the forfeiture is invalid.
\nCounsel for the appellant contended that the relief under s.
\n155 is discretionary, and the Court should have refused
\nrelief in the exercise of its discretion. Now, where by
\nreason of its complexity or otherwise the matter can more
\nconveniently be decided in a suit, the Court may refuse
\nrelief under s. 155 and relegate the parties to a suit. But
\nthe point a,; to the ‘Invalidity of the notice dated January
\n20, 1957 could well be decided summarily, and the Courts
\nbelow rightly decided to give relief in the exercise of the
\ndiscretionary jurisdiction under s. 155. Having found that
\nthe notice was defective and the forfeiture was invalid, the
\nCourt could not arbitrarily refuse relief to the
\nrespondents.
\nCounsel for the appellant points out that the respondents
\nare the trade rivals of the appellant and are anxious to
\ncripple its affairs, and the appellate Court recorded the
\nfinding that the respondents were acting mala fide and
\nprejudicially to the interests of the appellant and their
\nconduct in taking various proceedings against the appellant
\nis reprehensible. Counsel then relied upon the well-known
\nmaxim of equity that “he who conics into equity must come
\nwith clean hands”, and contended that the Courts below
\nshould have dismissed the applications as the respondents
\ndid not come with clean hands. This contention must be
\nrejected for several reasons. The respondents are not
\nseeking equitable relief against forfeiture. They are
\nasserting their legal right to the shares on the ground that
\nthe forfeiture is invalid, and they continue to be the legal
\nowners of the shares. Secondly, the maxim does not mean
\nthat every improper conduct of the applicant disentitles him
\nto equitable relief. The maxim may be invoked where the
\nconduct complained of is unfair and unjust in relation to
\nthe subject-matter of the litigation and the equity sued
\nfor. The unwarranted proceedings under ss. 402 and 237 of
\nthe Indian Companies Act, 1956 and other vexatious proceed-
\nings started by the respondents have no relation to the
\ninvalidity of the forfeiture and the relief of rectification
\nand are not valid Grounds for refusing relief.
\nIn the result, the appeals are dismissed. There will be no
\norder as to costs.
\nAppeals dismissed.
\n689<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
PETITIONER: THE PUBLIC PASSENGER SERVICE LIMITED Vs. RESPONDENT: M. A. KHADER AND TWO OTHERS DATE OF JUDGMENT: 30\/08\/1965 BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. SUBBARAO, K. MUDHOLKAR, J.R. CITATION: 1966 AIR 489 1966 SCR (1) 683 ACT: Companies Act (1 of 1956), s. 155–Scope of. HEADNOTE: The respondents were shareholders in the appellant company. … Read more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4928],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29823"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=29823"}],"version-history":[{"count":0,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29823\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=29823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=29823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=29823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}