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Rajnikant Ratilal Shah Vs. Deccan Farms and Distilleries Ltd. (In Liquidation) and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberCompany Petition Nos. 18 of 1975, 25 and 26 of 1976
Judge
Reported in[1978]48CompCas322(Bom)
ActsCompanies Act, 1956 - Sections 155
AppellantRajnikant Ratilal Shah;harish Ratilal Shah;pravinchandra Ratilal Shah
RespondentDeccan Farms and Distilleries Ltd. (In Liquidation) and anr.;deccan Farms and Distilleries Ltd.
Advocates:M.B. Rele, Adv.;G.S. Rao, Offl. Liq.,;Dinesh Mody
Excerpt:
company - rectification - sections 155 and 155 (1) of companies act, 1956 - petitioners prayed for declaration that registers of members of company be ordered to be rectified by deletion of petitioner's name - rectification is asked under section 155 (1) if name of any person is entered in register of members of company - concept of rectification implies that there is some error in register which needs rectification and that entries in register did not reflect correct state of affairs as required by law - no membership register is in fact found anywhere amongst documents taken in possession by official liquidator either from company or from cbi - records of company did not disclose any allotment of shares - held, no relief could be granted to petitioners under section 155. - .....had allotted to the respective applicants the said shares of which rs. 5 was paid up at their board meeting held on 7th april, 1974. the letter further stated that, 'this letter of allotment should be exchanged for the share certificate which will be ready shortly'. all the three petitioners have thus admittedly paid rs. 5,500 each along with their applications for shares. 2. all the three petitioners had further received a second letter dated 30th april, 1974, intimating to them that the board of directors at the meeting held on 7th april, 1974, had resolved that the first and final call of rs. 5 per share should be made on the equity shareholders of the company whose names appeared in the register of members and should be made payable on or before 31st may, 1974. it appears that.....
Judgment:

Chandurkar, J.

1. This order will govern Company Petitions Nos. 18 of 1975, 25 of 1976 and 26 of 1976. These three petitions have been filed ostensibly under section 155 of the Companies Act, by the three petitioners who have receive letters from the respondent-company that in accordance with their application for allotment of shares, a requisite number of shares have been allotted to them. It is not in dispute that the respondent-company, which is incorporated in January, 1971, was converted into a public limited company in January, 1973, and applications for shares by means of prospectus were invited from the members of the public. So far as Petition No. 18 of 1975 is concerned, it is filed by one Rajnikant Ratilal Shah. The averments made therein is that by the letter dated 26th April, 1974, the company purported to issue a letter of allotment in respect of 1,100 equity shares of the company to the petitioner. It is not in dispute that the petitioner had applied for 1,100 equity shares of Rs. 10 each in or about October, 1973, and along with the said application had paid to the company Rs. 5,500 at the rate of Rs. 5 per share. Similar letter was also received by Harish Ratilal Shah, the petitioner in Company Petition No. 25 of 1976, and also by Pravinchandra Ratilal Shah, petitioner in Company Petition No. 26 of 1976. The letters received by these three petitioners are identical letters in printed form and it states that in response to their applications dated 15th October, 1973, for 1,100 equity shares of Rs. 10 each, the directors had allotted to the respective applicants the said shares of which Rs. 5 was paid up at their board meeting held on 7th April, 1974. The letter further stated that, 'this letter of allotment should be exchanged for the share certificate which will be ready shortly'. All the three petitioners have thus admittedly paid Rs. 5,500 each along with their applications for shares.

2. All the three petitioners had further received a second letter dated 30th April, 1974, intimating to them that the board of directors at the meeting held on 7th April, 1974, had resolved that the first and final call of Rs. 5 per share should be made on the equity shareholders of the company whose names appeared in the register of members and should be made payable on or before 31st May, 1974. It appears that the petitioners discovered that there is no meeting of the board of directs on 7th April, 1974, at which no allotment of shares was made. The petitioner, Rajnikant Ratilal Shah, thereafter, addressed a letter to the company on 10th October, 1974, pointing out that the company had knowingly and recklessly made false statements in the prospectus with a view to mislead the public, that it had agreed to allot on par or cash to the promoter, directors, their friends, relatives and associates 74,310 shares when in fact a large holding out of these 74,310 share had not been allotted or obtained by the directors, promoter, their friends, relatives and associates, The petitioner, Rajnikant, also pointed out that the allotment of shares was made in contravention of the provisions of section 73 of the Companies Act, permission of the Stock Exchange not having been obtained within the period stipulated by the said section and the company was, therefore, liable to return the sum of Rs. 5,500 with interest at the rate of 15 per cent. per annum. Similar letters were also sent by the other two petitioners.

3. The company was, however, directed to be wound up by the order of this hon'ble court in Company Petition No. 22 of 1974 and admittedly the appeal filed by the company against the winding-up order has come to be rejected on 6th September, 1976. However, prior to the order of winding-up, the present Company Petition No. 18 of 1975 came to be filed on 5th September, 1975. The other two petitions, namely, Nos 25 and 26 of 1976, were filed later on 8th October, 1976. The prayers in all the three petitions are identical and the petitioner in each petition has prayed for a declaration that the purported allotment of 1,100 shares by the company was illegal and void, that the register of the members of the company be ordered to be rectified by the deletion of the petitioner's name therefrom and that the respondent-company and the official liquidator who was made a party after the winding-up order was made, should be directed to refund to the petitioner the sum of Rs. 5,500 paid by him, together with interest at 12 per cent. per annum from 15th October, 1973, till payment or realisation.

4. This petition was opposed by the ex-managing director of the respondent-company to whom a notice was issued on the ground that if the petitioner wanted to avoid allotment of shares he would have pursued his remedies under the general law and the relief as claimed in the petition cannot be entertained. He has denied that no board meeting was held on 7th April, 1974, or that no return of allotment was filed with the Registrar of Companies. According to him, as the subsequent meeting was held in May, 1974, at the Blue Diamond Hotel, Pune, the minutes of the meeting of 7th April, 1974, were confirmed and the petitioner was, therefore, a member of the company which is now in liquidation.

5. Five directors, who had appeared at the hearing, supported the claim of the petitioners.

6. The official liquidator who was asked to make a report has now reported that the amounts alleged to have been paid by the petitioners do find a place in the ledger of the company for the period from October 1, 1973, to March 31, 1974, which show that the payment of Rs. 5,500 was received from the petitioners. The liquidator, however, has not been able to find out the register of members nor has he been able to trace any papers, which will show that the return of allotment as contemplated by section 75 of the Companies Act was made to the Registrar.

7. Mr. Rele for the petitioners has invited my attention to the minutes of the meeting of the board of directors dated 26th May, 1974, which are filed as exhibit E to the report of the official liquidator dated 8th May, 1976. Paragraph 4 of these minutes reads as follows :

'4. The managing director informed the board that as the meeting of the board held on 7th April, 1974, at the West End Hotel, Bombay, was only an informal get-together and as no business was transacted thereat no minutes of the said meeting were kept.'

8. Relying on this, Mr. Rele contended that even according to the minutes of the board of directors dated 26th May, 1974, there was no allotment of shares in favour of the present petitioners on 7th April, 1974, because it is expressly stated that no business was transacted at the said meeting which was of an informal nature. Relying on this, the learned counsel wanted to contend that this was sufficient material for rectifying the register of members by deletion of the petitioners' names therefrom and the consequent relief of a refund of Rs. 5,500 to each of the petitioners should be granted.

9. Now it was not disputed by Mr. Rele that the only relevant provision under which he could ask for any relief in this petition was section 155 of the Companies Act. The only relevant part of section 155 is sub-section (1) which reads as under :

'155. (1) If -

(a) the name of any person -

(i) is without sufficient cause, entered in the register of members of a company, or,

(ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or

(b) default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, or ceased to be, a member;

the person aggrieved, or any member of the company or the company, may apply to the court for rectification of the register.'

10. Section 155, therefore, enables a member of the company to ask for rectification of a registers in which case rectification is asked for as provided in clauses (a) and (b). It was not possible for Mr. Rele to dispute that so far as the present case was concerned, the only relevant portion of sections 155 was in sub-clause (i) of clause (a) of section 155(1). Under that clause the rectification could be asked for by a member if the name of any person is entered in the register of members of the company. The concept of rectification implies that there is some error in the register which needs rectification or some defect is to be remedied and that the entries in the register so not reflect the correct state of affairs as required by law. I, therefore, specifically put to Mr. Rele as to whether the names of the petitioners were entered in the register of members of the company. There does not now seem to be any dispute that no membership register is in fact found anywhere amongst the documents taken possession of by the official liquidator either from the company or from the CBI, who were said to have seized the documents belonging to the company.

11. The records of the company, according to the official liquidator, also do not disclose that any return of allotment of shares was sent to the Registrar. Under such circumstances, it is difficult to see how any relief under section 155 can be successfully claimed by the petitioner. If the petitioner has any other remedies open to him to avoid the so-called allotment, in the legality or otherwise of which it is not necessary to go in this petition, it is open to him to take recourse to those remedies. However, no relief as claimed under section 155 by the petitioners can be granted to them.

12. The petitions are, therefore, rejected. However, there will be no order as to costs.


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