Judgment

S. R. DAS. J,: This appeal arises out of an application made by the Official Receiver representing Sha Mulchand & Company Ltd. (in liquidation) under S. 38, Companies Act, for rectification of the register of the Jawahar Mills Ltd.

2. Sha Mulchand & Company Ltd. (hereinafter referred to as "the Company") was incorporated in 1937 as a private limited company. At all material times it consisted of two members, T. V. T. Govindaraju Chettiar and K. N. Sundara Ayyar. The Jawahar Mills Ltd. (hereinafter called "the Mills") was also incorporated in 1937 with an authorised capital of Rs. 10,00,000 divided into one lac shares of Rs. 10 each. The Company was the managing agent of the Mills from its inception and applied for and was allotted 5000 ten-rupee shares Nos. 15048 to 20047 on which Rs. 5 per share had been paid. The Company continued to act as the managing agent of the Mills till the 30th June 1939 on which date it resigned the managing agency, Prior to the company s resignation the two members of the Company had entered into an agreement with one M. A. Palaniappa Chettiar, a partner of the incoming Managing agency firm, upon certain terms which need not be referred to in greater detail.

3. Within two months after the change of managing agents, the Mills made two calls, namely, one on 22-8-1939 for Rs. 2 per share payable on 1-10-1939 and the other on 1-10-1939 for Rs. 3 payable on 1-12-1939. The Company did not pay either of the calls. On 23-1-1940 Govindaraju Chettiar was adjudged insolvent on the application of Sundara Ayyar. This insolvency of Govindaraju Chettiar was eventually annulled in 1944. During this period Govindaraju Chettiar, in law, ceased to be a director of the Company, although it is alleged that he nevertheless continued to take part in the management of the Company.

4. By a resolution of the Board of Directors of the Mills passed on 12-8-1940 the new managing agents were empowered to give notices to such persons as had not paid the allotment money and the call money within the date fixed and to intimate them that in default their shares would be forfeited. A notice was issued on 16-9-1940 and two copies thereof are said to have been sent to Sundara Ayyar and Govindaraju Chettiar. No payment having been made, the 5,000 shares held by the Company were forfeited by a resolution of the Board of Directors of the Mills. The auditor of the Mills having pointed out that the purported forfeiture was irregular and illegal, this forfeiture was cancelled.

5. By a resolution passed by circulation on 25-2-1941, the Board of Directors of the Mills resolved that a notice be sent to the Company informing it that it was in arrears with calls to the extent of Rs. 25,000, that the amount must be paid on or before 31-3-1941 and that, in default, its shares would be forfeited. A notice dated 15-3-1941 was accordingly addressed to the Company an sent by registered post with acknowledgment due. It appears that the notice was actually posted on 17-3-1941 and was received by Govindaraju Chettiar on 20-3-1941. The Company did not pay the arrears of calls. On 5-9-1941, the Board of Directors of the Mills resolved that "the 5000 shares Nos. 15048/20047 standing in the name of the Company have been forfeited." On 10-9-1941 the Mills wrote a letter to the Company informing the latter that the directors of the Mills had at their meeting held on 5-9-1941 forfeited the 5000 shares. There is no dispute that this letter which was sent by registered post was returned undelivered.

On 1-10-1941 an entry was made in the share ledger of the Mills recording that the 5000 shares of the company had been forfeited. On 16-11-1941 these 5000 shares "were reallotted to 14 different persons and on 17-11-1941 a letter was sent to the company intimating that the forfeited shares had been reallotted and calling upon the Company to send back to the Mills all the documents relating to the original allotment of the 5000 shares to the Company. In the meant