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HIGH COURT OF CALCUTTA
A. N. RAY, S. K. MUKHERJEE
STADMED PRIVATE LTD. - Appellant
Versus
KSHETRA MOHAN SAHA - Respondent
Appeal 103 Of 1967
Decided On : MARCH 8, 1968
COMPANIES ACT - SECTIONS 397, 398, 399, 111, 164 - RIGHT TO APPLY - MEMBER - CALLS - RECTIFICATION OF REGISTER - CONTINUING WRONG - INTERPRETATION.
Fact of the Case:
The petitioners, Kshetra Mohan Saha and Sridhar Sikdar, filed a petition under Sections 397 and 398 of the Companies Act, 1956, seeking the removal of certain directors from the Board of Directors of Stadmed Private Ltd. and an injunction restraining them from operating the bank accounts of the company. The company contended that only a member had the right to apply and that Sridhar Sikdar was not a member on the date of the petition, while Kshetra Mohan Saha was not a member as he had not paid the calls due on his shares. Sridhar Sikdar claimed that he was a member as a result of a decree for rectification of the share register in his favor, while Kshetra Mohan Saha argued that the call was not due until a later date and that he had paid it before that date.
Finding of the Court:
The Court held that Kshetra Mohan Saha was not entitled to apply under Sections 397 and 398 of the Companies Act as he had not paid the calls due on his shares on the date of the presentation of the petition. The Court also held that Sridhar Sikdar was a member of the company as a result of the decree for rectification of the share register in his favor, and that the company could not take advantage of its own wrong by not putting his name in the register of members. However, the Court found that the number of members of the company was 11, and that Sridhar Sikdar alone could not maintain the application in view of the provisions of Section 399 of the Act. The Court also held that the allegations in the petition did not amount to allegations of continuous acts or continuing wrong on the date of the petition, and that the petition was therefore not sustainable within the meaning of Sections 397 and 398 of the Companies Act.
Issues: 1. Whether Kshetra Mohan Saha was entitled to apply under Sections 397 and 398 of the Companies Act, 1956, despite not having paid the calls due on his shares on the date of the presentation of the petition? 2. Whether Sridhar Sikdar was a member of the company, despite his name not being in the register of members, as a result of a decree for rectification of the share register in his favor? 3. Whether the number of members of the company was 11, and whether Sridhar Sikdar alone could maintain the application in view of the provisions of Section 399 of the Act? 4. Whether the allegations in the petition amounted to allegations of continuous acts or continuing wrong on the date of the petition, and whether the petition was therefore sustainable within the meaning of Sections 397 and 398 of the Companies Act?
Ratio Decidendi: 1. A member who has not paid the calls due on his shares is not entitled to apply under Sections 397 and 398 of the Companies Act, 1956. 2. A person whose name is not in the register of members, but has been directed by a competent Court to be entered in the Register, is to be treated as a member for the purpose of an application under Sections 397 and 398 of the Companies Act. 3. The number of members of a company is to be determined by reference to the register of members, and a person whose name is not in the register of members cannot maintain an application under Sections 397 and 398 of the Companies Act, unless the provisions of Section 399 of the Act are satisfied. 4. Allegations of past acts or conduct, even if they relate to mismanagement or misappropriation of funds, do not amount to allegations of continuous acts or continuing wrong within the meaning of Sections 397 and 398 of the Companies Act, unless there is evidence of a continuing wrong on the date of the petition.
Final Decision: The appeal was allowed, the decision of the Companies Tribunal was set aside, and the petition was dismissed.
( 1 ) THIS appeal is from the order of the Companies Tribunal dated 14th March, 1967.
( 2 ) THE appeal is under Section 10 (d) of the Companies Act which provides that an appeal shall He to the High Court out of any decision, finding or order of the Tribunal only on questions of law.
( 3 ) THE order of the Companies Tribunal was made on the application of Kshe-tra Mohan Saha and Sridhar Sikdar dated 26th May 1966 under Sections 397, 398 and 403 of the Companies Act. The reliefs which were asked for were, inter alia, that Amarendra Lal Das, Sujata Saha, Ranendra Lal Das and Sushil Kumar Roy be removed forthwith from the Board of Directors and injunction do issue restraining the said persons from operating the bank-accounts of the company and also restraining them from terminating or suspending or transferring services of the employees of the company. The further reliefs asked for were that a Special Officer be appointed forthwith to take charge of any conduct and run the business and that a Receiver be appointed to take charge of the books of account
( 4 ) KSHETRA Mohan Saha, Satchidananda Sikdar and Mohit Kumar Pal started a business of medicine research institute in co-partnership in the year 1942 for manufacture of medicine Gour Gopal Saha was an employee there at ft salary of Rs. 250 per month On 31-10-1946 Standard Medical Research Institute Ltd. was formed to take over the business of partnership. Kshetra Mohan Saha was appointed the Scientific Director for life and Gour Gopal Saha became one of the managing directors. In the year, 1948 Sridhar Sikdar purchased ten ordinary shares in Standard Medical Research Institute Ltd. paying the full value of Rs. 1000. On 2nd May 1951 Sridhar Sikdar purchased five hundred ordinary shares and paid the value of Rs. 50,000 to the company Thereafter Sridhar Sikdar sold the five hundred shares to GOUR Gopal Saha On 22nd September, 1951 Standard Medical Research Institute Ltd became Stadmed Private Ltd. In the month of January, 1952 Gour Gopal Saha purchased two hundred shares in the name of Ranendra Lal Das and the said two hundred shares were transferred to Suiata Saha In the month of October. 1955 Kshetra Mohan Saha was appointed Scientific Director of Stadmed Private Ltd. for nineteen years. In the month of April 1956 the company terminated its agreement with Stadmed Private Ltd. as its district sole agent. In the month of April, 1859 Sujata Saha became a director of the company. This, in short, is the background of the present litigation
( 5 ) IT is now necessary to refer to certain facts which are in controversy in the present appeal. On 28th April, 1959 Sridhar Sikdar presented a petition to this Court for rectification of share register as his name was removed from the register, On 10th September 19 (sic)9 there was an order relegating the parties to a suit. In the year 1959, suit No. 388 of 1959 was filed in the City Civil Court, and on 29th March, 1963 there was a decree and Sridhar was declared owner of the ten shares and there was a decree for rectification On 23rd May, 1966 there was a board-meeting of the company when further shares were issued. On 26th May, 1966 the petition forming the subject-matter of the appeal was filed under Sections 397 and 398 of the Companies Act. On 18th June, 1966 the register of the Company was rectified and the name of Sridhar Sikdar was inserted. I have referred to these facts because of the controversy between the parties as to whether Sridhar Sikdar is a person who has a right to apply under Section 397, of the Companies Act. The controversy, in short, is that it is alleged by the company that only a member has the right to apply and Sridhar Sikdar was not a member in the date of the petition whereas the contention on behalf of the respondent Sridhar Sikdar is that he has a right to apply under Section 397 because he has been declared to be the owner of the shares and there was an order for rectification of the shares and, therefo
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