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Vidyasagar Cotton Mills Ltd. Vs. Mt. Nazmunnessa Begum - Court Judgment

LegalCrystal Citation
SubjectCompany;Constitution
CourtKolkata High Court
Decided On
Case NumberAppeal No. 195 of 1961 (Company Petn. No. 25 of 1961)
Judge
Reported inAIR1964Cal335
ActsCompanies Act, 1956 - Sections 2(27), 41, 111, 111(3), 155, 155(1) and 155(3); ;Constitution of India - Article 133(1)
AppellantVidyasagar Cotton Mills Ltd.
RespondentMt. Nazmunnessa Begum
Appellant AdvocateSamiran Sen and ;S.B. Mukherji, Advs.
Respondent AdvocateSambhu Ghosh, Adv.
DispositionApplication dismissed
Cases ReferredRajaram v. Radhakrishnayya Chetty
Excerpt:
- .....an appeal preferred against an order of the learned company judge directing rectification of the share register of the appellant company dated the 8th september, 1961.2. the petitioner vidyasagar cotton mills ltd. was incorporated in or about the year 1932 under the indian companies act and it has its registered office at sodepur in the district of 24 parganas in west bengal. the authorised capital of the company is rs. 25,00,000/- divided into five thousand -- seven per cent cumulative preference shares of rs. 100/- each and two lakhs ordinary shares of rs. 10/- each. the subscribed capital of the company is rs. 8,18,570/-at all material times the company has been managed by its managing agents -- united commercial agency private ltd. one mohammad bashir was the holder of 11,825 fully.....
Judgment:

Bose, C.J.

1. This is an application for a certificate under Article 133(1) of the Constitution in respect of a decision of a Division Bench of this Court dated the 18th July, 1963 dismissing an appeal preferred against an order of the learned Company Judge directing rectification of the Share Register of the appellant company dated the 8th September, 1961.

2. The petitioner Vidyasagar Cotton Mills Ltd. was incorporated in or about the year 1932 under the Indian Companies Act and it has its registered office at Sodepur in the District of 24 Parganas in West Bengal. The authorised capital of the company is Rs. 25,00,000/- divided into five thousand -- seven per cent Cumulative Preference Shares of Rs. 100/- each and two lakhs Ordinary Shares of Rs. 10/- each. The Subscribed capital of the Company is Rs. 8,18,570/-At all material times the Company has been managed by its Managing Agents -- United Commercial Agency Private Ltd. One Mohammad Bashir was the holder of 11,825 fully paid-up Ordinary Shares and 591 fully paid-up Cumulative Preference shares of the Company and he was registered as such in the books of the Company. Mohammad Bashir died intestate on the nth March, 1960 leaving the respondent Nazmunnesaa his sole widow, one son namely Mohammad Riaz and several married and unmarried daughters. On 14th March 1966 Nazmunnessa was appointed Managing Director of the Managing Agents -- 'United Commercial Agency Private Ltd., and on the 17th March 1960 Nazmunnessa was co-opted as a Director of the petitioner Company in the place of Mohammad Bashir deceased. On 16th December 1960 Nazmunnessa applied to this Court for grant of Letters of Administration of the property and credits of Mohammad Bashir deceased including 11,825 fully paid-up Ordinary Shares and 591 fully paid-up seven per cent Cumulative Preference Shares standing in the name of Mohammad Bashir in the Register of the petitioner Company. On 24th December 196o the petitioner Company's Directors including Nazmunnessa resolved to hold the annual general meeting of the Company on 9th February 1961 and a notice was issued for the holding of such annual general meeting. On the same date the Board of Directors also passed an order directing the Share Register of the Company to be closed. On 29th December 1960 a letter was written by one Manzoor Ahmed, the son of Abdul Hakim -- the brother of Mohammad Bashir, stating that he was a co-sharer in respect of the shares standing in the name of Mohammad Bashir and requesting the Company to register his name to the extent of his interest therein. On the 20th January 1961 this Court granted Letters of Administration to Nazmunnessa Begum and on the same day the Solicitors of Nazmunnessa Begum wrote to the petitioner Company to insert the name of Nazmunnessa in the Share Register of the Company as the holder of the shares in the place and stead of Mohammad Bashir. The application for rectification of the Register along with other documents were received by the Company on 21st January 1961 which was a holiday on account of Saraswati Puja and the registered office of theCompany was closed on that day. As 22nd and 23rd January 1961 were also holidays being Sunday and Netaji's birthday, a meeting of the Board of Directors of the Company was purported to be called on 24th January 1961 to be held at 11 a.m. on 25th January 1961 for the purpose of considering the application for certification (sic--rectification?) of the Share Register of the petitioner Company. The meeting held on 25th January 1961 however did not prove to be effective and Nazmunnessa was unable to obtain rectification of the Share Register. It appears that from 26th January 1961 to 9th February 1961 the Share Register of the Company remained closed. On 28th January 1961 the petitioner Company wrote to the Solicitors of Nazmunnessa that her application for rectification would be placed at the next meeting of the Board of Directors and information was also given in this letter that the Share transfer Book of the Company had beenclosed from 26th January, to 9th February 1961as the annual general meeting of the company was due to be held on the 9th February. Prior to that on the 27th January 1961 the petitioner company had received another letter from Manzoor Ahmed asserting his right as a co-sharer in respect of the shares of Mohammad Bashir and requesting the Company to register his name to the extent of the interests in the said shares. On the 3oth January 1961 Nazmunnessa Begum madean application to this Court under Section 155 of the Companies Act, 1956 for rectification of the Share Register of the petitioner company. On8th February 1961 the learned Company Judge, S. P. Mitra, J. passed an order restraining thecompany and its Directors from holding the annual general meeting on the 9th February except for the purpose of adjourning the same and directed the company to hold a meeting of its Board of Directors on 14th February 1961 for considering the application of Nazmunnessa for rectification of the Share Register and for taking a final decision thereon and also gave direction for filing offarther affidavits. An appeal was taken by the company from this order of S. P. Mitra, J. but the same was dismissed. From the further affidavits which were filed pursuant to the order of S. P. Mitra, J. dated 8th February, it appears that Manzoor Ahmed had made an application on the 14th February for revocation of the grant of Letters of Administration which was obtained by Nazmunnessa in respect of the estate of Mohammad Bashir deceased. On the same date (14th February 1961) a meeting of the Board of Directors was held pursuant to the order dated 8th February and it was resolved that the application of Nazmunnessa be adjourned till the decision of the Court in respect of Manzoor Ahmed's application for revocation of the Letters of Administration. On 10th April 1961 the application of Manzoor Ahmed for revocation of the Letters of Administration was dismissed by 'Mallick, J. and on 24th April 1961 another application by Manzoor Ahmed for being added as aparty to the application of Nazmunnessa for rectification of the Share Register was dismissed bythe learned Company Judge. On the 8th September 1961 the application of Nazmunnessa for rectification or the Share Register was allowed by S. P. Mitra. J. and the Court directed rectification by inserting the name of Nazmunnessa as holder of the shares standing in the name of Mohammad Bashir in the place and stead of the deceased. S. P. Mitra, J. inter alia held:

'(i) that there had been no unreasonable delay;

(2) that although there was no delay, there was in the facts and circumstances of the case 'default';

(3) that the expression 'member' meant the same thing as a share-holder and as such Section 155 of the Companies Act, 1956 was applicable;

(4) that as Administratrix she was entitled to have the shares registered in her own name.'

3. The petitioner company preferred an appeal against the order of S. P. Mitra, J. This appeal was registered as No. 195 of 1961. The appeal came up for hearing before a Division Bench of this Court consisting of Bachawat, J. and Arun K. Mukherjea, J. The hearing of the appeal was concluded on 18th July 1963 and the Division-Bench delivered judgment on that day dismissing the said appeal with costs. The Division Bench inter alia held that there was no unreasonable delay or default before the application for rectification of the Share Register was made before the Court. It further held that Section 155 of the Companies Act was applicable on a line of reasoning which was different from that given, by S. P. Mitra, J. The Division Bench further took into consideration certain subsequent events which had taken place after the filing of the petition of rectification and came to the conclusion upon a consideration of those events that Nazmunnessa was entitled to an order for rectification. It is against this decision of the Division Bench that the petitioner now intends to prefer an appeal to the Supreme Court.

4. The principal points which the petitioner intends to urge before the Supreme Court relate to interpretation of the scope and effect of Section 155 of the Companies Act, 1956 and also the said Act as amended by the Companies Amendment Act, 1960 read with Section 41 of the said Act and Section 111 of the said Act. The other point which the petitioner company intends to agitate before the Supreme Court is that the Division Bench was not justified in taking into consideration the events subsequent to the presentation of the petition for rectification and in any event, the Division Bench was not justified in considering some of such subsequent events and in ignoring other relevant subsequent events disclosed in the further affidavits.

5. The contention raised with regard to the interpretation of Section 155 of the Companies Act, 1956 as amended by the Act of 1960 is that the Court has no power to pass an order of rectification of the Register of members in cases of transmission or transfer of shares. It is pointed-out that in view of the definition of member as given in Sections 41 and 2(27) of the Act and the provisions of Clause (b) of Sub-section (1) of section 155 of the Act, a person claiming title to the share by transfer or transmission cannot claim registration of the fact of his 'having become a member' considering that such a person is not a member, his name never having been entered on the Register of members. In other words, the point formulated by the petitioner is that Section 155(1)(b) empowers the Court to order rectification of members who are subscribers to the Memorandum of Association and whose names have been improperly omitted from the Register but Section 155 does not cover cases of persons claiming to be the holders of shares as a result of transfer or transmission of shares and the only remedy of such persons is by way of an appeal to the Central Government under Section 111(3) of the Companies Act or by filing an independent suit. In dealing with this contention the Division Bench has pointed out that a wide and liberal construction has always been given to Section 38 of the Indian Companies Act, 1913 which dealt with rectification of Share Register and it was well settled under that section that where the name of the transferee or the legal representative entitled to the shares by virtue or Transfer or transmission had been omitted from the Register of members without sufficient cause and there had been default or delay in entering on the Register the fact of the transferor or the deceased member haying ceased to be a member, the case was covered by Section 38 of the Act of 1913. In interpreting Sections 155(1)(a) and (1)(b) as they stood in the Act of 1956 it is pointed out by the Division Bench that since there was overlapping to some extent with regard to these provisions the amending Act of 1960 was passed but it was never the intention of the Legislature to confine the summary remedy of Section 155(1)(b) to the very few cases of subscribers to the Memorandum of Association and to exclude from its purview the vast majority of the cases of persons claiming title to the shares by transfer or transmission. The Division Bench has also considered the decision of the Supreme Court in the case of Harinagar Sugar Mills Ltd. v. Shyam Sundar, : [1962]2SCR339 and observed:

'Under Section 155 of the Indian Companies Act, 1956 as it stood before its amendment in 1960, it was well settled that a person aggrieved by the refusal to register the transfer of shares had two remedies namely, (i) to apply to the Court for rectification of the Register under Section 155 and (2) to appeal against the resolution refusing to register under Section 111. (See : [1962]2SCR339 ). We are satisfied that under the amended Act also the remedy by way of an application under Section 155 as also the remedy by way of an appeal under Section 111 are open to the aggrieved person.'

6. It may be pointed out that the Supreme Court in the case of Harinagar Sugar Mills had occasion to consider principally the question whether an appeal lay to the Supreme Court under Article 136 of the Constitution from an order made by the Central Government under the provisions of Section in of the Indian Companies Act, 1956 and the Supreme Court in dealing with the question whether the Central Government while exercising its function under Section in was acting judicially or not had incidentally to refer to the scope of Section 38 of the Companies Act, 1913 and Section 155 of the Companies Act, 1956 and had made certain pertinent observations to which reference may usefully be made. In paragraph 9 of the judgment the following observations were inter alia made:

'There was no provision similar to Section 111 of the Indian Companies Act, 1956 in the Act of 1913 nor is our attention invited to any provision in the English Companies Act on which our Act is largely based, to a similar provision. Prior to 1956 if transfer of shares was not registered by the Directors of a company, action under the Companies Act of 1913 could only be taken under Section 38 by petition for rectification of the Share Register......The power had to be exercised for thebenefit of the Company and bona fide but a heavy onus lay upon those challenging the resolution of the Directors to displace the presumption of bona fide exercise of the power. The discretion to refuse to register transfer was not liable to be controlled unless the Directors acted oppressively, capriciously or corruptly or in some way mala fide. Re: Bell Bros Ltd. ex parte Hodgson, (1891) 65 LT 245.'

Then in paragraph 10 of the judgment it was further observed inter alia as follows:

'The power given to the Court under Section 38 is now confirmed with slight modification by Section 155 of the Companies Act, 1956. Under that section the Court may rectify the Register of holders if the name of any person is without sufficient cause entered in or omitted from the Register of members of a Company or default is made or unnecessary delay has taken place in entering on the Register the fact of any person having ceased to be a member. The Court is in exercising this jurisdiction competent to decide any question relating to the title of the person claiming to have his name registered and generally to decide all questions which may be necessary or expedient to decide for the rectification. A person aggrieved by the refusal to register transfer of shares has, since the enactment of the Companies Act, 1956, therefore two remedies for seeking relief under the Companies Act: (i) to apply to the Court for rectification of the Register under Section 155 and (2) to appeal against the resolution refusing to register transfer under Section 111..... The extent of the power which may be exercised by the Central Government is not delimited by express enactment, but the power is not on that account unrestricted. The power in appeal to order registration of transfers has to be exercised subject to the limitations similar to those imposed upon the exercise of the power of the Court in a petition for that relief under Section 155.' Then in paragraph 15 of the judgment the following observation appears :

'The authority of the Central Government entertaining an appeal under Section 111(3) being an alternative remedy to an aggrieved party to a petition under Section 155, the investiture of authority is in the exercise of the judicial power of the State.'

7. Similar observations are also made by the Supreme Court in paragraph 21 of the judgment. It is thus quite clear from the decision of the Supreme Court that Section 155 and Section in of the Companies Act, 1956 are interpreted to provide two alternative remedies for a person aggrieved by refusal of the Company to rectify the Share Register. The aggrieved person has two forums for his choice -- one is to approach the Court and the other is to approach the Central Government.

8. The learned counsel appearing for the petitioner company has drawn our attention to the decisions of the Bombay High Court reported in Sadasbiv Shankar v. The Gandhi Sewa Samaj Ltd., : AIR1958Bom247 where it has been held that Section 155 is not dependent upon Section 111 but on the contrary Section 155 is the controlling section and gives the Court an overriding power notwithstanding any previous order of the Central Government. Attention of the Court has also been invited to two decisions of S. P. Mitra, J. which is under consideration before us and which is reported in Nazmunnessa Begum, v. Vidyasagar Cotton Mills Ltd., : AIR1962Cal380 where the learned Judge has followed the construction put upon Section 155 and Section in by the Bombay decision just referred to. The learned counsel has also referred to the recent decision of the Punjab High Court in the case of Arjan Singh Bir Singh v. Panipat Woollen and General Mills Co. Ltd., . In the last mentioned case it has been held by a single Judge of the Punjab High Court that Section 155 does not purport to confer overriding powers on the Court and Sections 155 and 111 provide alternative remedies. This decision of the Punjab High Court has referred to the Supreme Court decision in Harinagar Sugar Mills Ltd. and has pointed out that since the Supreme Court has held that the Central Government hearing act appeal under Section 111(3) is also exercising judicial function, it is not feasible to hold that under the Act a position could arise in which there could be a conflict between the orders made by two authorities acting judicially, the Central Government under Sub-section (5) of Section 111 and the Court under Section 155. It appears to us that in view of the very definite observations of the Supreme Court in the case of Harinagar Sugar Mills Ltd., it is difficult to come to the conclusion that the point intended to be raised before the Supreme Court with regard to the question of construction of Section 155 of the Companies Act read with Section 41 and Section 111 thereof presents a substantial question of law which we shall be justified in passing on to the Supreme Court for further consideration.

9. The other point sought to be raised is that the Division Bench was not justified in taking into consideration subsequent events which took place after the presentation of the petition for rectification of the Share Register and reference was made to the decision of the Supreme Court in the case of Rajahmundry Electric Supply Corporation Ltd. v. A. Nageshwara Rao, : [1955]2SCR1066 which has held that the validity of a petition under Section 153-C of the Companies Act must be judged on the facts at the time of the presentation of the petition and it does not cease to be maintainable by reason of certain events which took place subsequent to its presentation. In this case what happened was that the required consent which had been given by certain persons for presenting a petition under Section 153-C had been withdrawn by some of the persons who had given their consent and it was contended that the fact of such withdrawal was to render the petition incompetent. In repelling this contention the Supreme Court observed that the validity of a petition is to be judged by the state of affairs existing at the time of the presentation of the petition and not by reference to events which happened afterwards. So it is abundantly clear that this case is of no assistance to the petitioner and the principle laid down there does not militate against the well-settled principle enunciated in the decision of Sir Asutosh Mukherjee in Raicharan Mondal v. Biswanath Mondal, 20 Cal LJ 107 : (AIR 1915 Cal 103) laying down that the Court can take notice of subsequent events for the purpose of affording complete relief to the parties. Therefore, this question also does not appear to us to be a substantial question which will justify us in granting a certificate under Article 133 of the Constitution.

10. A point was raised that since the reasonings given by the learned trial Judge S. P. Mitra, J. and the Division Bench in arriving at the conclusion that the respondent is entitled to an order of rectification are not on the same lines, the judgment delivered by the Division Bench is not a judgment of affirmance and therefore the petitioner is entitled to a certificate as a matter of course, but in view of the decision of the Supreme Court reported in Rajaram v. Radhakrishnayya Chetty, : [1962]2SCR452 , we do not think that this point is of any substance. The ultimate conclusion of the Division Bench is that the order of the learned trial Judge should be upheld and the appeal dismissed with costs. So there can be hardly any room for doubt that the judgment of the Division Bench is a judgment of affirmance and unless the petitioner succeeds is establishing that there is any substantial question of law involved in the proposed appeal which will justify us in granting a certificate under Article 133(1) of the Constitution, the petitioner is not entitled to succeed in this application. In view of our finding that there is no substantial question of law involved in the case before us, the application must fail and it is accordingly dismissed and the certificate asked for is refused. There will be no order as to costs.

11. This order will not be drawn up for four weeks from date.

Mitter, J.

12. I agree.


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