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L. Pearey Lal Vs. Muir Mills Company, Ltd. - Court Judgment

LegalCrystal Citation
SubjectFamily
CourtAllahabad
Decided On
Judge
Reported inAIR1919All240; 51Ind.Cas.322
AppellantL. Pearey Lal
RespondentMuir Mills Company, Ltd.
Excerpt:
hindu law - joint family--company shares held by father on behalf of family--manager of family, right of, on death of father, to be registered share-holder. - - that is precisely how the present applicant has brought the matter before the court. article 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. we are satisfied that pearey 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 shareholder in lieu of his father and all the share registers are to be rectified accordingly. this is perfectly unobjectionable......register of shareholders 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 company, limited, cawnpore, recently died leaving surviving him pearey 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 pearey lal was entitled to be so registered. pearey lal made an affidavit which, with theexception i will mention in a moment, is.....
Judgment:

Walsh, J.

1. In this case a slight difficulty seems to have arisen as to who is entitled to be placed on the register of shareholders 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 Company, Limited, Cawnpore, recently died leaving surviving him Pearey 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 Pearey Lal was entitled to be so registered. Pearey Lal made an affidavit which, with theexception 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 Pearey Lal to be the hair of his deceased father, bat 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 became 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.' It must, therefore, be taken and we find as a fact that the present applicant Pearey 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 survivership upon the death of the father.

2. 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 upon the event of 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 right 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 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 recognise 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 recognised by the Articles of Association as the person entitled to the shares for the time being and entitled to be registered as the holder thereof. Turning to Article 30, speaking at any rate for myself, I find myself quite 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. Article 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 other words the Directors are not bound to recognise more than one person 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, be would be the manager or in other words in a 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 Pearey 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 shareholder in lieu of his father and all the share registers are to be rectified accordingly.

3. I will just add one word as the matter is mentioned in argument. Whether he is or he is not a member of a joint Hindu family is no concern really 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 estoppel 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 Pearey 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 Pearey 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. Pearey 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 Pearey Lal is entitled to the shares.

5. By the Court.--We allow the application, set aside the order of the Court below and direct that the name of Pearey Lal be entered in the share registers of the 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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