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Daddy S. Mazda and ors. Vs. K.R. Irani - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberA.O. Order No. 185 of 1973
Judge
Reported in[1977]47CompCas39(Cal),78CWN872
ActsCompanies Act, 1956 - Section 155; ;Evidence Act - Section 114
AppellantDaddy S. Mazda and ors.
RespondentK.R. Irani
Appellant AdvocateS.C. Sen, Adv.
Respondent AdvocateR.C. Deb and ;S.B. Mookerjee, Advs.
Cases ReferredTechno Metal India (P.) Ltd. v. Prem Nath Anand
Excerpt:
- b.c. mitra, j. 1. this appeal is directed against a judgment and order dated may 9, 1973, directing rectification of the share register of a company known as property company (private) ltd., and also issuing amandatory injunction directing the company and the appellants to pay to the respondent all dividends accrued and declared in respect of 170 shares, an injunction restraining the company (the third appellant), its servants and agents from paying any dividend to any one other than the respondent and an order directing the appellants to hand over to the respondent the share scrips and/or duplicate share scrips in respect of 170 shares to the respondent. 2. in 1943 the third appellant (hereinafter referred to as ' the company ') was incorporated with an authorised capital of rs......
Judgment:

B.C. Mitra, J.

1. This appeal is directed against a judgment and order dated May 9, 1973, directing rectification of the share register of a company known as Property Company (Private) Ltd., and also issuing amandatory injunction directing the company and the appellants to pay to the respondent all dividends accrued and declared in respect of 170 shares, an injunction restraining the company (the third appellant), its servants and agents from paying any dividend to any one other than the respondent and an order directing the appellants to hand over to the respondent the share scrips and/or duplicate share scrips in respect of 170 shares to the respondent.

2. In 1943 the third appellant (hereinafter referred to as ' the company ') was incorporated with an authorised capital of Rs. 12,00,000 divided into 1,,200 ordinary shares of Rs. 1,000 each. The issued share capital was Rs. 6,00,000 divided into 600 fully paid up ordinary shares of the face value of Rs. 1,000. The main object of the company was to purchase, take on lease or exchange or otherwise acquire land and buildings in Calcutta or elsewhere and to acquire the property situate at No. 1 and 1/1, Bishop Lefroy Road, Calcutta. The founder-director of the company, which was a family concern, was one S. F. Mazda who held 540 shares, the other shares being held as follows :

F. F. Mazda (brother of S. F. Mazda) ... 10 sharesD. S. Mazda (son) ... ... 10 sharesMrs. D. K. Irani (daughter) .. ... 20 sharesMrs. K. R. Irani (daughter)... ... 20 shares

3. In 1956 the 10 shares held by F. F. Mazda were transferred to thefounder-director, S F. Mazda, whose total holding, therefore, became550 shares. Thereafter, on December 21, 1955, S. F. Mazda transferred40 shares to his son, D. S. Mazda, and 150 shares to the respondent, who isa son-in-law of S. F. Mazda, and to the brother of the respondent, who isthe other son-in-law of S. F. Mazda. The respondent's case is that150 shares were given to him by way of a valid lawful gift and wereaccepted by the respondent during the lifetime of S. F. Mazda. In 1956the respondent's wife, Mrs. K. R. Irani, transferred her 20 shares to therespondent and in consequence of this transfer the respondent became theregistered holder of 170 shares of the company. It is alleged that in thesame year the respondent's brother's wife, Mrs. D. K. Irani, also transferredin favour of the respondent's brother 20 shares standing in her name, sothat the respondent's brother also became the registered holder of 170 sharesof the company. In 1956 the shares of the company were held as follows:

S. F. Mazda ... ... ... ... 210 sharesD. S. Mazda (first appellant) ... ... 50 sharesK. R. Irani (respondent) ... ... 170 sharesD.K.Irani ... ... ... ... 170 shares

4. The founder-director, S. F. Mazda, died on May 25, 1969, and thereupon the respondent and his wife who are residents of Poona, came to Calcutta, and made enquiries as to the position of assets and liabilities of the deceased. But it is alleged that the first appellant did not make a full disclosure of the assets, and, thereupon, disputes and differences arose between the heirs and legal representatives of the deceased under the Parsee Law of Inheritance. According to the respondent, the share scrips of the 170 shares held by him and registered in his name were in the possession of the first appellant, who was in management and control of the company. The respondent demanded delivery of the said share scrips and thiswas refused.

5. The company owns valuable house property, namely, the two premises mentioned above and they yield an annual income of Rs. 1,20,000. The respondent, thereafter, made various searches and enquiries and also inspected various records of the company filed with the Registrar of Companies. He claims to have discovered that the respondent's 170 shares in the company were purported to have been transferred to the first appellant on or about June 18, 1965, and the 170 shares belonging to the respondent's brother were purported to have been transferred to the second appellant who is the wife of the first appellant on February 5, 1969. Thereafter, the respondent demanded return of the share certificates belonging to him, and later caused a lawyer's notice dated May 26, 1972, to be issued and served. In answer to this demand the appellant's solicitor denied that any shares were registered in the name of the respondent or that the respondent was the registered holder of any shares in the company.

6. On March 20, 1972, the respondent with his brother's wife and others issued a requisition for an extraordinary general meeting of the company. The validity of this requisition was challenged by the company's solicitor. Thereafter, a suit was filed in this court on June 23, 1972 (Suit No. 226 of 1972--Daddy S. Mazda v. Grover R. Irani) for delivery and cancellation of the notice convening extraordinary general meeting of the company and for various other reliefs. This suit was filed by the first appellant and his wife. A declaration was also prayed for that the first appellant and his wife were the legal and real owners of 170 shares of the company. In this suit an interlocutory application was made for an injunction and various other reliefs. Thereafter, an application under Section 155 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), was made and in this application the order under appeal was made.

7. The main question involved in this appeal is where serious disputed questions of fact are involved in an application under Section 155 of the Act, is it open to the court to make an order for rectification without taking evidence on the disputed questions of fact or without relegating the parties to a suit In other words in a case where prima facie serious disputed questions of fact are raised by the petitioner himself in an application under Section 155 of the Act, is it open to the court to proceed to adjudicate upon the disputes without taking into consideration oral and documentary evidence on the question of the disputes raised The decision of this appeal would depend upon the answer to this question.

8. In paragraph 15 of the petition it is alleged that the respondent came to know upon inspection of the records of the Registrar of Companies that 170 shares of the respondent had been transferred to the first appellant. It is further alleged that the respondent was shocked and surprised at this, and according to the respondent the transfer of the shares is false, fictitious, sham,' colourable and a mere nullity. In paragraph 16 of the petition it is alleged that on coming to know of the fraudulent transfer, the respondent's lawyer demanded return of the share certificates from the company. In paragraph 23 of the petition the respondent states that he came to know from the plaint in the suit filed by the first and the second appellants that the respondent is alleged to have transferred his 170 shares to the first appellant for valuable consideration of Rs. 1,62,860 through a firm of share brokers by the name of Abdullah Gangee and Sons. The respondent also alleges to have come to know that the shares have been registered in the share register of the company in the name of the first appellant. In paragraph 24 of the petition the respondent denies that the sum of Rs. 1,62,860 or any other sum had been paid by the first appellant to the respondent. In paragraph 25 it is again alleged that the transfer of the shares is false and fraudulent, and that the respondent never executed any transfer deed for transfer of the shares to the first appellant or to any other person. In paragraph 26 the respondent denies the genuineness, correctness and validity of the broker's bill dated May 17, 1965, and also denies that he ever wrote any letter expressing a desire to dispose of 170 shares of the company. There is also a denial that the respondent ever requested that accrued dividends on the said shares be paid to the credit of the respondent's alleged account with the American Express Co. In paragraph 27, the respondent denies that he ever had any account with the American Express Co. and it is also denied that dividends amounting to Rs. 68,900 were ever paid to the respondent or credited to his bank account. The account itself is alleged to be a fraudulent account opened at the instance of the appellants and the entire sum of money deposited therein is alleged to have been fraudulently misappropriated by the appellants.

9. It is amply clear from these allegations in the petition that there were serious allegations of fraud, fictitious and sham transactions, impersonation in opening bank account and operating the same, misappropriation of moneys and false transaction involving a firm of share brokers. These allegations in the petition are seriously disputed and denied by the appellants. It is, therefore, to be seen if such disputed question relating to the title to shares can and ought to be adjudicated upon in summary proceedings under Section 155 of the Act.

10. Mr. S. C. Sen, counsel for the appellants, contended that the respondent on his own petition had raised such questions as could not be adjudicated upon in a summary proceeding under Section 155 of the Act. He argued that the respondent himself had alleged that a fraud had been committed by the appellants in purporting to sell the 170 shares which stood in his name. There were also allegations, it was argued, that the bank account with the American Express Co. was opened and operated upon by someone impersonating the respondent. Further, there are allegations of making false and fraudulent entries in the share register of the company. These allegations, it was argued, were seriously and strongly denied by the appellants. Questions such as these, it was contended, could not possibly be dealt with and disposed of on affidavit evidence. Allegations of fraud in the sale of shares, falsification of the company's records, impersonation in opening and operating a bank account could not be adjudicated upon by the court, it was further argued, without testing the truth of the allegations by cross-examination of witnesses. The summary procedure prescribed by the statute, it was further argued, could be adopted only in cases of simple disputes, where the court could come to a conclusion as to the truth of the allegations on the affidavit evidence. But in this case it was contended the allegations were of a serious nature and involved an investigation into charges of fraud, falsification of records, impersonation and conspiracy. Such questions could not be determined except on evidence which could be tested by cross-examination.

11. Before dealing with these contentions of counsel for the appellants, I should refer to the relevant correspondence that passed between the parties. On May 26, 1972, the repondent's lawyer addressed a letter to the first appellant and his wife stating that the respondent was the holder of 170 shares of the company, and since he had not received the share certificates relat-to the said shares, a request was made that the share certificates should be forwarded to the lawyer. In answer to this letter the appellants' solicitor wrote to the respondent's advocate on June 14, 1972, that the 170 shares claimed by the respondent were not registered in the name of the respondent and he was not the registered holder of those shares and, therefore, the question of sending the share certificates did not arise. This was followed by further correspondence between the parties reiterating their respective positions with regard to the 170 shares and also claiming inspection of the register of members, the register of transfer, transfer deeds, minutes book and other documents. In the letter dated June 22, 1972, from the respondent's advocate to the company, it was alleged that the respondent's signature had been forged on the transfer form in respect of his shares and the respondent was confirmed in this view by reason of the appellant's refusal to give inspection of the company's records. It is not necessary for the purpose of this appeal to refer to the other correspondence that passed between the parties, some of which was acrimonious in nature.

12. The first appellant in the affidavit-in-opposition says that on May 17, 1965, he purchased from his personal resources 170 shares in the capital of the company standing in the name of the respondent through Abdullah Gangee and Sons, share brokers, for valuable consideration of Rs. 1,60,860. The transfer of the shares is alleged to have been registered in the share register of the company and have been approved at the general meeting of the company held on June 18, 1965. A copy of the broker's bill in respect of the sale of shares is annexed to the affidavit. The allegations of fraud, bogus sale of the shares through the share broker and falsification of the company's records are denied.

13. Mr. R. C. Deb and Mr. S. B. Mookherjee appearing for the respondent argued that their client has denied having executed any transfer deed for transfer of the said 170 shares to the appellants or to any other persons. They argued that the appellants were called upon to produce the transfer deed, but this had not been done. They further argued that the respondent did not write any letter to the American Express Co. expressing his desire to sell 170 shares. It was argued that if the appellants had produced the transfer deed, as they were bound to do, the dispute with regard to the sale of the shares would have been immediately resolved. It was argued that it was true that various allegations were made with regard to the transfer of the shares in the affidavit-in-reply filed by the respondent, but the appellants, it was argued, were given an opportunity by the trial court to file a further affidavit in order to deal with the allegations made in the affidavit-in-reply. But this opportunity was not availed of by the appellants, and it was in these circumstances that the trial court came to the conclusion that the allegations made in the affidavit-in-reply were true.

14. Counsel for the first respondent drew our attention to the minutes of the extraordinary general meeting of the company held on June 18, 1965, in which it was recorded that a letter dated April 26, 1965, was placed before the meeting and in this letter, the writer, K. R. Irani, stated that he would be disposing of his holding of 170 shares in the company and requesting that the accrued dividends due to him should be paid to the credit of his account with the American Express Co. It was argued that the appellants should have produced this letter along with the transfer deed, as these two documents would have made it amply clear if the respondent had transferred the 170 shares to the first appellant.

15. Counsel for the appellants firstly criticised the judgment under appeal on the ground that no opportunity was given to his client to meet the new allegations made by the respondent for the first time in the affidavit-in-reply. Regarding the observations in the judgment under appeal that counsel for the first appellant was given the opportunity of filing a further affidavit dealing with the affidavit-in-reply, it was submitted that towards the very close of the arguments in the court below, junior counsel appearing for the appellants was asked if the appellants intended to file a further affidavit by way of rejoinder to the affidavit-in-reply and the court was informed that the appellants did not wish to file any further affidavit as according to them no relief could be granted to the respondent in his application. In support of the contention that counsel should have been put to his election as to whether he would call evidence and if counsel elected not to do so then the judge must decide whether or not the petitioner had established his case. Mr. Sen relied on two English decisions in Yuill v. Yuill [1945] Probate 15 and Storey v. Storey [1961] Probate 63. We do not think this question really arises in this appeal as the principal question is firstly whether serious disputed questions relating to title to the shares have been raised in the application, and, secondly, if there are such questions whether an order for rectification of the share register could have been made in a summary proceeding under Section 155 of the Act. It is to be noticed that in the affidavit-in-reply allegations have been made by the respondent that the first appellant caused a sub-poena to be served on Abdullah Gangee & Sons and American Express Co. and pursuant to this sub-poena several documents were produced, namely, a letter dated May 17, 1965, forwarding 170 shares for sale, and areceipt dated January 28, 1969, signed by B. R. Irani acknowledging receipt of sale proceeds of 170 shares. There is also a reference to a letter dated April 15, 1965, from American Express Co. producing several documents, namely, a letter of April 15, 1965, from K. R. Irani to American Express Co. requesting the latter to sell 170 shares of the company through a broker and credit the proceeds to his account and also purporting to forward the shares along with the letter, an account opening form signed by Keki Rusi Irani, specimen signature card, a letter from K. R. Irani of March 25, 1965, intimating the bank that since he has to move about all over India he was unable to give any permanent address. The respondent further says in this affidavit that he never had any account with the American Express Co. nor was there any occasion for him to request that bank to open any account in his name. It is further alleged that the cheques by which moneys have been withdrawn from the bank are suspected to have been signed by Daddy Shappor Mazda in the name of K. R. Irani and that the receipt dated January 28, 1969, produced by the brokers and alleged to have been signed by B. R. Irani, has been signed by Soli F. Dubash, the secretary of the company. It is in paragraph 7 of this affidavit that the respondent called upon the first appellant to produce before this court the transfer deed relating to the transfer of the said 170 shares and also the receipt alleged to have been granted by the respondent in respect of the sale proceeds of the said shares. These allegations have been made in the affidavit-in-reply so that in the normal course the appellants had no opportunity of dealing with them.

16. We have no doubt that an opportunity was given to the appellants to file a further affidavit by way of rejoinder to the affidavit-in-reply. But we fail to see how such an affidavit, even if it was filed by the appellants, would have enabled the court to adjudicate upon the serious allegations made by the parties against each other. The appellants' contentions with regard to the sale of the shares had been made amply clear in the affidavit-in-opposition filed on their behalf and denial and contradiction of the allegations in the' affidavit-in-reply, by a further affidavit, would in no way have advanced matters so as to enable the court to adjudicate upon the serious disputes raised and the serious charges made in the pleadings.

17. On the materials on record there can be no doubt or dispute that S. F. Mazda, the respondent's father-in-law, transferred 150 shares of the company to the respondent. These shares were registered in the respondent's name in the register of members of the company. This was followed by transfer of 20 shares by the respondent's wife to the respondent and this transfer was also registered in the respondent's name in the company's register of members. Thus, in 1956, 170 shares stood registered in the respondent's name. It appears that on 29th March, 1965, one Keki Rusi Irani desired to open an account with the American Express Co. and signed an account opening form. He also sent to this bank 170 shares of the company with a request to sell these shares and credit the sale proceeds to his account. In the forwarding letter signed by K. R. Irani it was stated that the shares would fetch about Rs. 930 per share, the face value being Rs. 1,000 per share. This was followed by a letter from the assistant manager of the bank on May 6, 1965, to Abdullah Gangee & Sons, share brokers, for sale of the said 170 shares at a price round about Rs. 950 per share. On May 8, 1965, the share brokers replied to the bank accepting the order for sale of 170 shares of the company. On May 10, 1965, the share brokers sent to the bank a contract for sale of 170 shares at Rs. 948 per share and asked for delivery of the shares. The bank delivered the shares on May 17, 1965, to the share brokers and received a cheque for Rs. 1,61,160. The proceeds of the cheque were credited to the account of Keki Rusi Irani by the bank, who charged a commission of Rs. 50.35 for its service. Various withdrawals from this account was made and ultimately the account was closed. The respondent's name, it is to be remembered, is Khodadad Rustam Irani and he is also known as K. R. Irani.

18. The first appellant claims to have purchased the 170 shares on May 17, 1965, through Abdullah Gangee & Sons for Rs. 1,62,860. According to him, the 170 shares have been duly registered in his name in the share register of the company, and this transfer of the shares is alleged to have been approved at a general meeting of the company held on June 18, 1965. The respondent's case is that he did not open any account with the American Express Co. nor did he instruct that bank to sell the 170 shares belonging to him. He denies having ever executed a transfer deed in respect of the transfer of the said 170 shares and further denies having received the consideration of Rs. 1,62,860 or any other sum. The genuineness of the brokers' bill of May 27, 1965, is also dented by the respondent. According to the respondent, the cheques by which moneys were withdrawn from the bank have been signed by the first appellant. The bank account was opened and operated, according to the respondent, by the first appellant.

19. There is no doubt that serious charges of fraud, forgery, impersonation and falsification of the company's records have been made in the application out of which this appeal arises. Counsel for the appellants contended that serious and complicated questions with regard to the title to the shares had been raised by the respondent in the petition, and also in the affidavit-in-reply. The title to the shares, he argued, is seriously disputed. The first appellant claims to have purchased the shares through a well-known share broker and the transaction had been put through by a well-known bank of Calcutta. The shares also have been registered by the company in the name of the first appellant. Mr. Sen argued that serious charges of fraud, forgery, impersonation and falsification of. records cannot be gone into in a summary proceeding under Section 155 of the Act. In support of this contention he firstly relied on a passage in Buckley, 13th edition, page 260, and also several decisions, namely, British Sugar Refining Co., In re [1857] 69 ER 1168, London Hamburgh and Continental Exchange Bank, In re [1867] 2 Ch App 431, Dhelakhat Tea Co. Ltd., In re [1958] 28 Comp Cas 62 (Cal), Jayashree Shantaram Vankudre v. Rajkamal Kalamandir Private Ltd. [1960] 30 Comp Cas 141 (Bom), Smt. Soma Vati Devi Chand v. Krishna Sugar Mills Ltd. and Diwan Singh v. Minerva Films Ltd. [1959] 29 Comp Cas 263 (Punj). It is settled on very high authority that rectification of the share register of a company can and indeed ought to be allowed where the questions involved are of simple nature and can be easily disposed of in a summary proceeding, But it is also equally well-settled that where there are serious questions of title arising out of disputed facts, and the controversy is of such a nature that it cannot be disposed of on the affidavits affirmed by the parties, the remedy provided by Section 155 of the Act ought not to be invoked and rectification ought not to be allowed, I should note that the trial court has also noticed this principle of law in the judgment under appeal. But the question is whether the disputes raised by the parties with regard to the transfer of the shares are such as cannot and ought not to be disposed of in a summary proceeding under Section 155 of the Act. Counsel for the appellants criticised a judgment of Tek Chand J. in People's Insurance Co. Ltd. v. C. R. E. Wood and Co. [1961] 31 Comp Cas 61 (Punj) on the ground that the learned judge in that decision held something contrary to what he had held in two earlier decisions mentioned above. It is not necessary for us in this appeal to deal with this contention because Tek Chand J. observed in that case that the summary remedy under Section 155 of the Act is not available to a litigant as of right and that if the case is one of difficulty and complication, it should be decided at a regular trial, as this provision was not intended to settle controversies which necessitated regular investigation. The learned judge has, therefore, accepted the well-established principle on which rectification of share register is allowed in a summary proceeding. But, on the facts of that case, rectification was ordered even though questions of forgery and fraud were raised,

20. Mr. S. B. Mookherjee, counsel for the respondent, argued that even though questions of fraud, forgery and impersonation were raised in the application, it was open to the court to come to a conclusion on the petition and the affidavits filed by the parties. He argued that the trial court gave the appellants an opportunity to controvert and dispute the allegations and materials contained in the affidavit-in-reply, and since the appellants chose not to avail themselves of this opportunity, the trial court was right in coming to its conclusion that the transaction of sale pushed through by a firm of share brokers, opening of a bank account, the deposit of the sale proceeds of the shares in this account and withdrawal of the money were all bogus and sham transactions and, therefore, there was no bona fide and genuine sale of the shares by the respondent to the first appellant. Mr. Mookherjee relied on a decision of the Supreme Court in Indian Chemical Products Ltd. v. State of Orissa [1966] 36 Comp Cas 592 (SC). In that case the Maharaja of Mayurbhanj held 7,500 shares of a company and the remaining 150 shares were held by others. On the lapse of paramountcy of the British Crown in India on August 15, 1947, the State of Mayurbhanj became integrated with the Dominion of India and the Maharaja thereafter agreed to the merger of the State with the Dominion. As a consequence of the integration of the State with the Dominion of India all public properties of the State including 7,500 shares of the company vested in the Dominion and these shares devolved upon the Dominion of India as the succeeding sovereign. By a subsequent order the Government of India delegated to the Government of Orissa the power to administer the territories of the merged State. There was, therefore, a transmission of the shares from the Maharaja to the State of Orissa by operation of law. But, in spite of such transmission, the State of Orissa had a deed of transfer signed by the Maharaja and then lodged the same with the company for rectification of the share register. The company refused to make the necessary rectification and, thereafter, an application was made under Section 38 of the Indian Companies Act, 1913, and ultimately the matter went up to the Supreme Court. The refusal of the company was on the ground that the Maharaja was under obligation to execute an agreement conferring valuable rights on the company, but the State of Orissa failed to honour this obligation. It was found that this ground was an after-thought as the Maharaja's bank was pressing for registration of the transfer. On these facts it was held that the right of refusal to register shares must be reasonably exercised in good faith and the discretion of the directors is liable to be controlled by the court so that the directors were not allowed to act capriciously. This decision, to our mind, is of no assistance to the respondent in this appeal because there was no dispute in that case that a transfer deed was executed by the registered holder in the name of the transferee and there was also transmission of the shares by operation of law.

21. Mr. R. C. Deb, also appearing for the respondent, contended that the question involved in this appeal was short and simple, namely, that there was no transfer of shares. He argued that the appellants did not produce the transfer deed although they were called upon to do so by the respondent in his affidavit-in-reply, nor did the appellants produce the letter dated April 26, 1965, by which K. R. Irani expressed his desire to dispose of the 170 shares held by him. Mr. Deb argued that if these documents were produced before the court, it would have been amply demonstrated that the respondent never transferred the 170 shares of the company through the American Express Co. and indeed he had never intended to transfer these shares. Mr. Deb argued that vital documents in the possession of the appellants had been withheld from the court and, therefore, the court was justified in drawing the inference that these documents, if produced, could go against the contention of the appellants and that the shares in fact were never transferred by the respondent to the first appellant.

22. We are unable to accept the contention of the counsel for the respondent. It is true that the transfer deed and the letter dated April 26, 1965, have not been produced. But can it be said that because of non-production of these documents an adverse inference ought to be drawn against the appellants We think not. The jurisdiction to draw an adverse inference under Section 114(g) of the Evidence Act can be exercised only where there is an obligation to produce a document and not otherwise. Can it be said that the appellants were under any obligation to produce the documents mentioned above There was no obligation in law imposed upon the appellants to produce these documents. The position would have been otherwise if the court had directed them to produce the documets at or before the hearing of the application. No such order was made directing the appellants to produce the documents. No adverse inference can be drawn for failure to do something which a party is not bound in law to do. In a summary proceeding under Section 155 of the Act, the rules framed under the Act do not require parties to disclose or give inspection of documents. The provisions in Order 11 of the Civil Procedure Code regarding discovery, production and inspection of documents are not required to be followed in a summary proceeding under Section 155 of the Act. It certainly was open to the court to direct the appellants to produce the documents and if this order was made, and not complied with, it would have been open to the court to draw the inference it had drawn. But, in the absense of any provision in law requiring a party to a summary proceeding to disclose, produce and give inspection of documents and in the absence of an order of court directing a party to produce the documents before the court, there is no scope for drawing an adverse inference against a party for non-production of any document. The trial court appears to have come to the conclusion that the order for rectification should be made because the transfer deed was not produced and the appellants did not choose to controvert the allegations made in the affidavit-in-reply filed by the respondent. As I said earlier, the filing of further affidavit by way of rejoinder to the aftidavit-in-reply would by no means have enabled the court to adjudicate upon the serious charges made by the respondent against the first appellant. It would merely have added further controversy and ended in reiteration of allegations already made in the affidavit-in-opposition filed in the application.

23. Our attention was drawn by counsel for the respondent to two decisions reported in Gopal Krishnaji Ketkar v. Mohamed Haji Latif : [1968]3SCR862 and Durgapada v. Land Acquisition Officer, Burdwan [1967] 71 CWN 499 (Cal) in support of his contention that an adverse inference should be drawn against the appellants under Section 114(g) of the Evidence Act for non-production of the transfer deed. It should be noticed that the first appellant was for the first time called upon to produce the transfer deed in paragraph 7 of the affidavit-in-reply filed by the respondent. Ordinarily, the appellants have no right to file a rejoinder to this affidavit-in-reply but in this case an opportunity was given to the first appellant to file such an affidavit. But, as I have noticed earlier, the first appellant did not avail himself of this opportunity. The appellants were under no obligation to produce the transfer deed, firstly, because in a summary proceeding under Section 155 of the Act there is no provision either in the statute or in the rules framed thereunder for discovery, production and inspection of documents and, secondly, because no order was made against the appellants for production of the documents. A party to a litigation may have numerous documents in his posssssion or control and it cannot be said that merely because he has failed to produce one or other of these documents which would be helpful to his opponent in the litigation, an adverse inference ought to be drawn against him. An adverse inference under Section 114(g) of the Evidence Act, in our view, is permissible only where a party is obliged to produce documents either under the provisions of a statute or rules or under order of the court.

24. In our view the intensity, the depth and the sweep of the allegations are such that it is not possible for the court to come to any conclusion about the truth of the allegations except upon evidence which can be tested by cross-examination of witnesses. There can be no doubt that the allegations relate to serious disputed questions of fact and such disputes can only be resolved by oral testimony tested by cross-examination and by no other means. To hold that disputes such as those raised in the application can and ought to be resolved on averments made in the affidavits would defeat the purpose and object of the summary procedure prescribed by Section 155 of the Act. The principles to be followed by courts in such cases are well-settled and the trial court had taken notice of those principles. But, having taken notice of those principles, the trial court ought not to have directed rectification of the share register having regard to the serious disputes raised by the parties with regard to the title to the shares.

25. Counsel for the appellants is right in his contention that the discretion of the court should not have been exercised in favour of the respondent directing rectification of the share register of the company in a summary proceeding under Section 155 of the Act, having regard to the serious disputed questions of fact involved and also the serious charges of fraud, forgery and impersonation made by the respondent. We cannot, however, accept the appellant's contention that the parties should be relegated to a suit, as, in our view, the same object can be achieved if the application is directed to be tried on evidence after discovery and inspection of documents by the parties. The purpose of having the disputes adjudicated upon by a suit can be achieved if the application is heard and disposed of after taking into consideration the evidence to be adduced by the parties, both oral and documentary.

26. Before concluding, however, we should note one other contention on behalf of the appellants, namely, that the application is barred by limitation. Counsel for the respondent sought to repel this contention by relying upon a Bench decision of this court in Techno Metal India (P.) Ltd. v. Prem Nath Anand [1973] 43 Comp Cas 556 (Cal) We do not wish to express any opinion on this question as we propose to remand this matter to the trial court to be tried on evidence and we accordingly leave the question of limitation urged on behalf of the appellants open. It will be for the trial court to deal with this question when the matter will be heard and disposed of on remand.

27. For the reasons mentioned above, the application is remanded to the trial, court to be heard on evidence. The appellants will be at liberty to file a further affidavit by way of rejoinder to the affidavit-in-reply filed by the respondent (the affirmation date of which has been left blank in the copy of the affidavit printed in the paper book, but which is to be found at page 122 of the paper book) within a fortnight from this date. There will be a cross-order for discovery within 3 weeks thereafter, inspection forthwith thereafter and the matter to appear before the learned judge dealing with company matters 8 weeks from this date to be tried on evidence. All parties to act on a copy of the minutes countersigned by the court officer. This order to be drawn up expeditiously.

28. In the premises this appeal is allowed and the judgment and order under appeal are set aside. Costs of and incidental to this appeal and the costs of the trial court to abide by the result of the application remanded under this order.

Ghose, J.

29. I agree.


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