Back
HIGH COURT OF CALCUTTA
G. N. DAS, S. C. LAHIRI
MAHADEO LAL AGARWALA - Appellant
Versus
NEW DARJEELING UNION TEA CO. LTD. - Respondent
A. F. O. D. 94 Of 1947
Decided On : FEBRUARY 22, 1951
COMPANY - TRANSFER OF SHARES - AUCTION SALE - VALIDITY - OMISSION TO SERVE NOTICE UNDER ORDER 21, RULE 22, C. P. CODE - EFFECT - ARTICLE 25 OF THE ARTICLES OF ASSOCIATION - APPLICABILITY - LIMITATION - ARTICLE 120, INDIAN LIMITATION ACT - STARTING POINT.
Fact of the Case:
Plaintiffs purchased 7/8th share of shares of the defendant company in an auction sale held in execution of a decree obtained by them against one Kazi Md. Ismail and others. The defendant company refused to register the transfer of shares in the plaintiffs' name and mutated the name of Rajani Kanta Mukherjee, who had purchased the shares privately. The plaintiffs filed a suit for declaration of their title to the shares, mutation of their names in the share register, recovery of dividends, and a permanent injunction restraining the company from paying dividends to the defendants.
Finding of the Court:
1. The omission to serve notice under Order 21, Rule 22, C. P. Code upon the heirs of Isfaque rendered the sale invalid to the extent of his share. 2. Article 25 of the Articles of Association, which requires a joint letter from the transferor and transferee for registration of the name of the transferee, does not apply to auction sales. 3. The starting point of limitation under Article 120, Indian Limitation Act, is the date on which there is a clear and unequivocal threat to the plaintiff's right by the defendant. 4. Section 28 of the Indian Limitation Act, which extinguishes the right to property on the expiry of the period of limitation for instituting a suit for possession, does not apply to a suit for declaration of title.
Issues: 1. Whether the omission to serve notice under Order 21, Rule 22, C. P. Code upon the heirs of Isfaque rendered the sale invalid? 2. Whether Article 25 of the Articles of Association, which requires a joint letter from the transferor and transferee for registration of the name of the transferee, applies to auction sales? 3. When does the starting point of limitation under Article 120, Indian Limitation Act, begin? 4. Whether Section 28 of the Indian Limitation Act, which extinguishes the right to property on the expiry of the period of limitation for instituting a suit for possession, applies to a suit for declaration of title?
Ratio Decidendi: 1. The omission to serve notice under Order 21, Rule 22, C. P. Code upon the heirs of Isfaque rendered the sale invalid to the extent of his share, as held by the Judicial Committee in 'Raghunath Das v. Sundar Das', 41 Ind App 251. 2. Article 25 of the Articles of Association, which requires a joint letter from the transferor and transferee for registration of the name of the transferee, does not apply to auction sales, as held in 'Mohideen v. Tirmevelly Mills Co.', AIR (15) 1928 Mad 571. 3. The starting point of limitation under Article 120, Indian Limitation Act, is the date on which there is a clear and unequivocal threat to the plaintiff's right by the defendant, as held by the Privy Council in 'Bolo v. Koklan', 57 Ind App 325. 4. Section 28 of the Indian Limitation Act, which extinguishes the right to property on the expiry of the period of limitation for instituting a suit for possession, does not apply to a suit for declaration of title.
Final Decision: The appeal was allowed in part. The judgment and decree of the Court below were set aside and the case was remanded to the trial Court for the determination of the question whether Isfaque died before or after the filing of the Money Execution Case No. 29 of 1932. The Court was directed to determine the extent of the plaintiffs' share and the amount of dividend declared by the defendant company between the years 1938 and 1943. The appellants were entitled to half the costs of the appeal.
( 1 ) THIS appeal by the plaintiffs arises out of a suit for declaration of title of the plaintiffs' 7/8th share in respect of two hundred shares of the New Darjeeling Union Tea Co. , Limited, (defendant No. 1) and for mutation of the plaintiffs' names in the share register of the said company, for recovery of the dividends and for a permanent injunction restraining the said company from paying any dividend to defendants Nos. 2 and 3.
( 2 ) THE plaintiffs' case is that in Money Suit No. 36/31 the plaintiffs obtained a decree against one Kazi Md. Ismail and 9 others and in execution of that decree (which was Money Ex. Case No. 29/ 32) auction purchased 7/8th share of shares Nos. 4818 to 5017 of the defendant company on 28-3-32. Thereafter the plaintiffs obtained a share transfer deed executed by the Court in terms of Order 21, Rule 80, and wrote to the defendant no. 1 in 1940 asking lor information as to what should be done to get their names mutated. As there was no reply to that letter the plaintiffs in 1941 complained to the Registrar Joint Stock Company who after enquiries informed the plaintiffs that the shares stood in the name of Rajani Kanta Mukherjee (deceased) who had obtained mutation on the basis of his auction purchase and private purchase of the said shares. In the plaint the plaintiffs alleged that in the execution case started, by them the judgment-debtors as well as the Secretary of the defendant no. 1 company were duly served with the prohibitory order under the C. P. Code. In spite of that the judgment-debtors sold their shares to the said Rajani Kanta Mukherjee by private treaty and Rajani Babu also auction-purchased the interest of Kari Md. Ismail on or about the 25th July, 1936. As the said Rajani Kanta Mukherjee was an influential Director of the defendant no. 1, company, the company fraudulently, illegally and dishonestly entei'ed the name of Rajani Kanta Mukherjee as the sole share-holder of the said 200 shares. Rajani Kanta Mukherjee having died his interest devolved upon defendants no. 2 and 3 as his heirs. The plaintiffs accordingly prayed for a declaration of their title in respect of 7/8th share out of shares nos. 4818 to 5017 of the defendant company and that the mutation of the names of defendants 2 and 3 and of their predecessors is illegal and fraudulent and that the plaintiffs are entitled to mutation of their names in the share register of defendant no. 1. The second prayer made by the plaintiffs was for a cancellation of the said mutation and a direction upon defendant no. 1 to mutate the name of the plaintiffs in respect of the aforesaid shares in the shares register. The third prayer was for a decree for dividend wrongfully paid by defendant no. 1 to defendants 2 and 3 and their predecessor-in-interest from 1938 to 1943 after taking accounts. The fourth prayer was for a permanent injunction restraining the defendants from paying or taking the dividends in future.
( 3 ) THE suit was contested by the defendants by three separate written statements. The defendant No. 1 pleaded that the Court of the Subordinate Judge had no jurisdiction to try the suit and the proper Court is the Court having jurisdiction under the Indian Companies Act, that the allegations of fraud and collusion between defendant no. 1 and Rajani Kanta Mookerjee were untrue; that the plaintiffs did not apply formally according to law for mutation of their names; that the defendant No. 1 mutated the name of Rajani Kanta Mookerjee in good faith without any knowledge of the auction-purchase of the plaintiffs, that the discretion of the directors in granting mutation to Rajani Kanta Mookerjee and refusing it to the plaintiffs should not be lightly interfered with. The defendants nos. 2 and 3 after traversing the material allegations in the plaint raised the plea that the plaintiffs' suit was barred by limitation and that the auction sale at which the plaintiffs purchased was a nullity inasmuch as some of the judgmen
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
