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Piari Lal Vs. the Muir Mills Company Limited - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAllahabad
Decided On
Judge
Reported in(1919)ILR61All619
AppellantPiari Lal
RespondentThe Muir Mills Company Limited
Excerpt:
act no. vii of 1913 (indian companies act), section 38 - shares purchased by the father of a joint hindu family and registered in his name--death of father--managing member entitled to registration. - - .....of share-holders in a limited liability company in the event of the death of the head of a joint hindu family. the facts are quite simple. one sheomukh rai who was a holder of 80 shares in the muir mills co., ld., cawnpore, recently died, leaving surviving him piari lal, his son, who is sui juris, and a grandson who is a minor. so far as we know these are the only parties concerned in this application. the company, perhaps naturally, not wishing to decide one way or the other whether the son was entitled to be registered, left him to make the necessary application to the court having jurisdiction under the companies act, to determine whether piari lal was entitled to be so registered. piari lal made an affidavit which, with the exception i will mention in a moment, is the only.....
Judgment:
1. In this case a slight difficulty seems to have arisen as to who is entitled to be placed on the register of share-holders in a limited liability company in the event of the death of the head of a joint Hindu family. The facts are quite simple. One Sheomukh Rai who was a holder of 80 shares in the Muir Mills Co., Ld., Cawnpore, recently died, leaving surviving him Piari Lal, his son, who is sui juris, and a grandson who is a minor. So far as we know these are the only parties concerned in this application. The company, perhaps naturally, not wishing to decide one way or the other whether the son was entitled to be registered, left him to make the necessary application to the court having jurisdiction under the Companies Act, to determine whether Piari Lal was entitled to be so registered. Piari Lal made an affidavit which, with the exception I will mention in a moment, is the only material we have before us with regard, to the facts. However, such as it is, this material is uncontradicted, inasmuch as the company do not oppose the application. The affidavit sets forth a claim by Piari Lal to be the heir of his deceased father, but in a letter subsequently written by him to the court on the, 23rd of October, 1918, he corrected this defect explaining that it was a mistake of legal terminology and adding these facts which we are prepared to accept as though they were part of the original affidavit:

Sheomukh Rai and myself were the members of a joint Hindu family. I become entitled to the joint family property as the sole survivor on the death of Lala Sheomukh Rai because there was no other member of the family then in existence.

2. It must, therefore, be taken, and we find as a fact, that the present applicant, Piari Lal, is the manager of the existing joint Hindu family and he and the other member of the family are entitled to the beneficial interest in these shares by right of survivorship upon the death of the father. It is perhaps unnecessary to, say that where any difficult and complicated question of fact arising out of a dispute between two adverse claimants to be placed upon the register on the death of the prior holder occurs, the directors may, if they think fit, decide the matter on the material before them, but they are not bound to do so. They may think the material insufficient or the decision of the question too difficult, and leave the rival applicants to fight out their rights through the machinery of an application to the court to rectify the register under Section 38 of the Companies Act. That is precisely how the present applicant has brought the matter before the court. Article 30 provides that "any committee of a lunatic member and any person becoming entitled to shares in consequence of the death, bankruptcy, or insolvency of any member, upon producing such evidence etc., may, with the consent of the directors, be registered himself as a holder." It is to be borne in mind that articles of association are no part of the general law. They are rather terms of the contract or regulations by which persons joining a limited company agree to be bound and regulated in the conduct of the affairs of the company, and the provisions made by the articles of association are usually and must necessarily be made with due regard on the one hand to the rights of the share-holders and of their successors in interest, but on the other hand to the convenient management of the affairs of the company. And, amongst other things, it would be extremely embarrassing to the books and the management of the company, if, in the case of a joint Hindu family, all the members of which are by law entitled to the shares which have been purchased out of the joint funds, they had the right as against the company to insist, each one of them, upon having their names entered amongst the holders of the shares. A similar difficulty is likely to occur where there are several executors of a will or several trustees entitled under a trust deed, and the company have, therefore, provided, what is almost a common form, by Article 9 that, though they may, they cannot be compelled to, register more than one name as the holder of a particular block of shares. Similarly, they are not compelled to recognize trusts. The trustee or holder, for the time being, of any block of shares in which other persons may be beneficially interested, is the person recognized by the articles of association as entitled to the shares for the time being and entitled to be registered as the holder thereof. Turning to Article 30, I am unable to agree with the view of the District Judge that the articles do not contemplate and are not appropriate for the recognition of the rights of a joint Hindu family Articles 30, as I have already pointed out, provides for any person becoming entitled to shares in consequence of death to be registered if the directors are satisfied with the evidence of his title. I think those provisions are quite wide enough to cover the members of a joint Hindu family. The survivors are all entitled to the shares in consequence of death by survivorship. If that be the correct view it is only necessary to superimpose upon the provision made by Article 30, the provision made by Article 9, or in the other words, the directors are not bound to recognize more than one member of such joint Hindu family as the person entitled to be placed upon the register. Who is such person, is, as I have said, in every case a mere question of fact and in this case a particularly simple one. Ordinarily speaking, he would be the manager, or in other words, in the great majority of cases, the senior male surviving adult member of the family. Applying these principles to the present case, we think that there was no reason for rejecting the application. We are satisfied that Piari Lal is the manager of this joint Hindu family and that as such, under the general provisions of Articles 30 and 9, he is entitled to be registered as the share-holder in lieu of his father, and the share registers must be rectified accordingly.

3. I will add one word, as the matter was mentioned in argument. Whether he is or is not a member of a joint Hindu family is no concern of the directors, although, as I have said, they may decide whether he is prima facie entitled to be registered on such evidence as they think sufficient in each case. But, so far as this case is concerned, we have acted upon the sworn statement of the applicant, corrected by his letter, to the effect that he is the manager of this joint Hindu family. So far as he is concerned, in any question which may arise with regard to the beneficial interest in these shares, he is estopped for ever by having obtained this order upon his own representation from alleging that he has a separate and self-acquired interest.

Stuart, J.

4. I concur. The case put forward by Piari Lal is that the shares were purchased by his father, Sheomukh Rai, on behalf of the joint Hindu family, of which Sheomukh Rai was the head, and of which Piari Lal and his son are members. In other words, all the shares were the property of the joint Hindu family. They were entered in the name of the karta. This is perfectly unobjectionable. When the karta died, it became necessary to substitute the name of his successor. Article 30 of the articles of association appears to me to cover the case. Piari Lal has become entitled to the entry of his name, in consequence of the death of Sheomukh Rai. It is pointed out by the learned Counsel for the company that the words of the article are "any person becoming entitled to shares" and that I am interpreting the article as though the words were "any person becoming entitled to registration," but I think I am stating the intention of the framers, and I do not think that I am stretching the words unduly in finding that Piari Lal is entitled to the shares.

5. We allow the application, set aside the order of the court below and direct that the name of Piari Lal be entered in the share registers of Muir Mills Company, Limited, in place of Lala Sheomukh Rai, deceased, and that all the share registers of the company be rectified accordingly. Each party should bear its own costs.


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