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Sha Hindumull Dalichand and Anr. Vs. Madras Kirana Merchants' Association and Anr. (14.02.1956 - MADHC) - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Reported in(1957)2MLJ416
AppellantSha Hindumull Dalichand and Anr.
RespondentMadras Kirana Merchants' Association and Anr.
Excerpt:
.....of statutes',tenth edition: the association shall on registration enjoy all the privileges of limited companies, and be subject to all their obligations, except those of using the word 'limited' as any part of its name, and of publishing its name, and of sending lists of members to the registrar. it may be that if hazarimal and company had tried to get re-elected they might have succeeded, but then, it may well be that members of the association who knew of exhibit p-2 might have taken exception and made their representations and lodged their protest with the members of the committee who might in consequence have refused to elect hazarimal and company......whatever may be said about exhibit p-1, exhibit p-2 gives no room for doubt for argument. in that letter hazarimal and company accuses the association of partiality and hooliganism. that letter ends with the words,it does not seem to be a suitable place for honest business men.16. in this letter hazarimal and company said as plainly as words can do it that it did not want to have anything to do with the association and that it was quitting it. to say that it is only a letter of resignation and not a letter of withdrawal is merely to play on words.17. it was next argued on behalf of the respondents that we may consider that hazarimal and company had been re-elected as a member of the association. the answer to that is that it is manifest that they have not been re-elected in the manner.....
Judgment:
ORDER

Balakrishna Ayyar, J.

1. The Madras Kirana Merchants' Association acquired its corporate life by virtue of a licence granted to it under Section 26 of the Indian G mpanies Act. The Memorandum of Association sets out that its objects are, inter alia, to remove the trade difficulties of Kirana businessmen in Madras, to formulate such lines of conduct for members as to facilitate trade, to establish just and equitable principles in trade and commerce and to simplify and facilitate transactions. Paragraph 4 of the Memorandum of Association makes it clear that it is not an association intended for profit. Paragraphs 6 and 7 state that the liability of the members of the association is limited, and that in the case of the association being wound up, the liability of the members is limited to Rs. 20. Article 4 of the Articles of Association provides:

Any person, firm, association, company or corporation enaged or interested in Kirana trade, desirous of joining the association shall be eligible for membership subject to the rules and regulations hereof.

Article 7 requires that:

A candidate for election as a member...shall be proposed by one and seconded by another committee member and may be elected by the committee.

Sub-paragraph to Article 7 lays down that unless and until the candidate is selected by the committee, he shall not be treated as a member of the association merely because he has made an application for membership and made the requisite payment. Article 9 runs as follows:

Any original member may withdraw from the association by giving not less than six months' notice in writing to the Secretary of his intention to do so and upon the expiration of the notice, such member shall cease to be a member and in the case of other ordinary members, one calendar month's notice shall be sufficient.

2. The firm of Hazarimal and Company was in 1951 a member of this association. On 25th July, 1951 Hazarimal, and Company sent a telegram Exhibit P-1 to the association which runs as follows:

Madras Kirana Merchants' Association, Govindappa Naick Street, Madras. Please accept may resignation of membership.

The following day Hazarimal and Company confirmed its telegram in a letter,. Exhibit P-2 which reads:

I write to confirm my telegram of the 25th night tendering my resignation of membership in the Kirana Merchants' Association in which there seems to be much of partiality, goondaism and rough behaviour and it does not seem to be a suitable place for honest businessmen.

The following day the Joint Honorary Secretary of the Association wrote to Hazarimal and Company acknowledging receipt of the telegram and the letter. The letter, Exhibit P-3, continues,

In this connection please refer to Article 9 of the Articles of the Association under which a month's notice is required for the withdrawal from membership of the Association. Your letter will, however, be placed before the management committee and I shall revert later.

3. It was stated at the Bar that sometime before 2nd January, 1952, there was a change in the membership of the managing committee of the association. Apparently as a result of it the President of the Association wrote to Hazarimal and Company on 2nd January, 1952, as follows:

I refer to your letter of resignation dated the 26th July, 1951, and intimate that so far the association has not taken action on the same. So, if you desire to continue as member, I am directed to request you to please withdraw your letter of resignation within three days from your receipt hereof.

Otherwise I will have to bring it to the notice of the Management Committee again for finally deciding about the same '. (Exhibit P-4).

4. Hazarimal and Company promptly accepted the invitation and replied as follows:

In consequence of the atrocious behaviour of the ex-managing committee we were forced to cease our connections then.

So long that committee has been completely reshuffled we thank you for your kind offer as we wish to continue our membership now. We hereby withdraw our resignation of the 26th July, 1951'. (Exhibit P-5).

5. On 11th March, 1952, Sha Hindumull Dhalichand wrote to the Honorary Secretary of the Madras Kirana Merchants' Association stating that in their view Hazarimal and Company had ceased to be a member of the Association and that in consequence all the transactions entered into by that firm subsequent to the termination of its membership were null and void. The letter, Exhibit P-6, continued:

In the circumstances, I content myself with drawing your attention to the above facts and an immediate reply is solicited as regards the correctness of the facts set out by me so that I may consider my position with reference to business I have done with him subsequent to his ceasing to be a member of the association. May I further request you to notify the above facts immediately also to all the members.

On 13th March, 1952, Sha Hindumull Dhalichand wrote to the Secretary of the Association asking for certified copies of the telegram and the correspondence between the association and Hazarimal and Company. No reply having been received, Sha Hindumull Dhalichand again wrote to the association on 17th March, 1952, stating that since no reply had been received they would presume that the facts set out in their letter were true.

6. On 21st March, 1952, the Association wrote a letter, Exhibit P. 9 to Sha Hindumull Dhalichand as follows:

With reference to your letters, dated 12th, 13th and 17th instant, we have to inform you as follows : It is true on 26th July, 1951, Messrs. J. Hazarimal and Company sent a letter tendering resignation of the membership but that his resignation was not immediately accepted by the management committee who wanted a month's notice. Thereafter on 2nd January, 1952, the President of the association on being instructed by the management committee wrote to Messrs. J. Hazarimal and Co., whether they desire to continue as member and if so a formal withdrawal of their resignation might be made. On the same day they replied withdrawing formally their resignation of the 26th July, 1951, with the result that he continues to be a member of the association.

On 3rd April, 1952, Sha Hindumull Dhalichand and some others wrote to the Secretary of the Association stating that in their view Hazarimal and Company had ceased to be a member of the association. The letter concluded;

Under the article in question they having ceased to be members at the expiry of one month, their name should not be on the register of members and we hereby request you to have the same removed within 24 hours from the receipt hereof and intimate to us, failing which we shall be obliged to take appropriate proceedings as advised.

7. The name of Hazarimal and Company not having been removed from the register of members, Sha Hindumull Dhalichand and Gomraj have filed this petition under Section 38 of the Indian Companies Act for the rectification of the register of members of the association by removing the name of Hazarimal and Company from it.

8. The facts set out so far are not in controversy. Learned Counsel for the respondents, however, took several objections. One was that Section 38 of the Companies Act has no application to ' associations not for profit ' and that as the Madras Kirana Merchants' Association is an 'association not for profit' the petition is incompetent. It was pointed out that Section 38 occurs in Part III of the Act of which the heading is,

Share capital, Registration of Unlimited Company as Limited, and Unlimited Liability of Directors.

The sub-heading of the Chapter under which Section 38 is included reads, 'Distribution of share capital'. The Madras Kirana Merchants' Association has no share capital and, therefore, it does not come within the scope of Section 38.

9. Reference was then made to the definition of ' company ' occurring in Section 2(2) of the Act and which runs as follows:

'Company' means a company formed and registered under this Act or an existing company.

It was argued that the Madras Kirana Merchants' Association is only an association and not a company within the meaning of the Act. It was said that this argument derives strength from Section 4 of the Act which begins,

No company, association or partnership consisting of more than ten persons ...etc.

thereby suggesting that the Act itself makes a distinction between a company and an association. It was also pointed out that Section 26 occurs under the heading 'Associations not for profit' and is thus distinguished from 'Companies'. It was finally stated that an association registered under Section 26(1) of the Act is not a company at all.

10. I am unable to accept this reasoning. So far as chapter headings and subheadings are concerned it is well to bear in mind the rules set out on page 50 of Maxwell on the 'Interpretation of Statutes', tenth edition:

The headings prefixed to sections or sets of sections in some modern statutes are regarded as preambles to those sections. They cannot control the plain words of the statute but they may explain ambiguous words.

A cross-heading in an Act can probably be used as giving the key to the interpretation of the section unless the wording of the section is inconsistent with such interpretation. 'While, however, the Court is entitled to look at the headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words, the law is clear that those headings cannot be used to give a different effect to clear words in the section, where there cannot be any doubt as to the ordinary meaning of words'.

The argument that Section 38 cannot be invoked in the present case because it occurs under the sub-heading ''Distribution of share capital ' and the Madras Kirana Merchants' Association has no share capital, will be seen to be fallacious when we make an examination of some of the sections that are grouped under that sub-heading. Section 28(1) which occurs under the same sub-heading speaks of ' the shares or other interest of any member in a company '--words which imply that the section is intended to cover cases where the company has no share capital. Section 30 is wide enough to take in companies which have a share capital and also those which have not. Under Section 30(1) the subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration shall be entered as members in its register of members. Under Sub-section (2),

Every other person who agrees to become a member of a company--the section does not say that he should have acquired any share or shares--and whose name is entered in its register of members, shall be a member of the company.

Section 31(1) requires every company to keep in one or more books a register of its members where various particulars have to be entered. In every case the names and addresses and occupations of the members have to be entered. In the case of a company having a share capital, a statement of the shares held by each member and other particulars relating thereto have to be entered. From this it is clear that Section 31(1) applies both to companies with a share capital and those without a share capital.

11. Nor am I able to accept the view that the word ' company ' as defined in the Act excludes bodies which have been given a corporate life by reason of a license granted under Section 26 of the Act. There is nothing in the definition of the word 'company' to warrant such a construction. That definition does not say that a company means a company formed and registered under the Act otherwise than under Section 26(1) of the Act. An association can be given a corporate life in various ways. Associations which seek profits may get registered and acquire a corporate life by complying with Sections 5 to 9 of the Act and certain other sections. Where the association does not seek a profit, a different mode by which it can be given a corporate life is provided for by Section 26 of the Act. That an association not for profit acquires a corporate life by reason of a licence granted under Section 26(1) of the Act does not make it any the less a company within the meaning of the Act. This is made clear by Sub-section (3) of Section 26 which runs as follows:

The association shall on registration enjoy all the privileges of limited companies, and be subject to all their obligations, except those of using the word 'limited' as any part of its name, and of publishing its name, and of sending lists of members to the Registrar.

The Sub-section means that on registration an association will have all the privileges and all the liabilities of an ordinary company except in three respects:

(a) it shall not use the word ' limited ' on any part of its name,

(b) it is not required to publish its name, and,

(c) it is not required to send a list of its members to the Registrar.

Except as regards these three matters an association registered under Section 26(r) of the Act is for every other purpose of the Act on the same plane as an association registered under the other sections of the Act.

12. Section 4 of the Act does not lend any support to the argument of the learned Counsel for the respondents. It will be further noticed that in various places of the Act the word ' company ' is used in two different senses; in some places it is used to indicate the company as a corporate body and in certain other places it is used to denote the body of individuals before they have acquired a corporate life. I would therefore overrule the objection that Section 38(1) of the Act cannot be invoked. I find that in Application No. 3550 of 1954, Ramaswami Gounder, J., has taken a similar view.

13. Learned Counsel for the respondents then raised another point. Admittedly, it was said, the association does not exist for profit. So, no member of the association has a pecuniary interest in the fact that the name of someone else is or is not on the list of members of the company. He is therefore not entitled to invoke the jurisdiction of the Court. The fallacy of the argument is manifest. A citizen is entitled to invoke the jurisdiction of the Court not merely in matters affecting him financially. The right to stand for an election or the right to vote in an election are not, for instance, matters which the law will recognise as having a pecuniary value. Nevertheless disputes relating thereto are entertained and disposed of by the civil Courts. Besides, under Section 38(b) any member of a company has a right to invoke the jurisdiction of the Court under that section.

14. It was next said that there is no case on the merits for rectifying the register. The telegram and the letter, Exhibits P-1 and P-2 which Hazarimal and Company sent to the association purports to be a resignation and a resignation can take effect only if it is accepted by the party to whom it is addressed or by some one else who has authority to accept the resignation. In the present case the resignation has not been accepted, and, in any case, it has been withdrawn. The difficulty in giving effect to this reasoning lies in Article 9, an article which has already been quoted above. It is common ground that Hazarimal and Company was not an original member of the association but only an ordinary member. Now, by virtue of Article 9 on the expiration of one month from the date of the notice of withdrawal, it automatically and without more took effect. There never was or could be any question of anybody accepting the resignation. Now, faced with this difficulty the explanation was offered that neither the telegram Exhibit P-1 nor the letter Exhibit P-2 can be treated as a notice of withdrawal by Hazarimal and Company. Both the documents purport to be resignations and resignations have no place in the scheme of the articles of association. Hazarimal and Company therefore continued to be members of the association.

15. This line of reasoning, it seems to me, ignores the plain intention of the words used in Exhibits P-1 and P-2. They make it clear that Hazarimal and Company did not want to continue to be a member of the association. Whatever may be said about Exhibit P-1, Exhibit P-2 gives no room for doubt for argument. In that letter Hazarimal and Company accuses the association of partiality and hooliganism. That letter ends with the words,

it does not seem to be a suitable place for honest business men.

16. In this letter Hazarimal and Company said as plainly as words can do it that it did not want to have anything to do with the association and that it was quitting it. To say that it is only a letter of resignation and not a letter of withdrawal is merely to play on words.

17. It was next argued on behalf of the respondents that we may consider that Hazarimal and Company had been re-elected as a member of the association. The answer to that is that it is manifest that they have not been re-elected in the manner required by the Articles of Association which provide that there should be an application for membership, that it should be proposed by one member of the committee and seconded by another member of the committee and thereafter approved by the committee. It may be that if Hazarimal and Company had tried to get re-elected they might have succeeded, but then, it may well be that members of the association who knew of Exhibit P-2 might have taken exception and made their representations and lodged their protest with the members of the committee who might in consequence have refused to elect Hazarimal and Company. If Hazarimal and Company ceased to be a member of the association at the expiry of one month from the date of Exhibits P-1 and P-2, it has not been properly admitted to the membership of the association.

18. The final argument was that under Section 38 the Court has a discretion in the matter of rectifying the register and that this is not a proper case in which there should be an order to rectify the register. No doubt under Section 38(2) the Court may either refuse an application or may order rectification of the register. But, this discretion is not an arbitrary discretion. When facts have been made out which show that the applicant is entitled to the relief he seeks, the Court will not be normally justified in refusing to grant him that relief.

19. In the result, the petition is allowed with costs.


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