Transfer of shares convey right to dividend already declared.

These appeals arise from the Judgment of Veeraswami, J., dismissing an application filed by C. Hariprasad, the appellant in O.S.A. No. 18 of 1962, for directing the winding up of the Amalgamated Commercial Traders (Private), Limited, which will hereafter be referred to as the ‘Company’. The petition was based on the inability of the company to pay its debt due to him. The appellants in the other two appeals claim also to be creditors of the company and they supported the petition for winding up of the company. All of them are shareholders in the company.

The company was incorporated on 29th January, 1948 with a capital of Rs. 3,00,000 consisting of ten thousand tax-free cumulative preference shares of Rs. 10 each and two thousand equity shares of Rs. 100 each. Its object among other things, was to take over the selling agency of India Sugars and Refineries, Limited, Hospet and exploit an agreement obtained from it by Mr. A. C. K. Krishnaswami, one of the appellants in O.S.A. No. 70 of 1962. The agency agreement turned out to be very profitable. The company maintained its accounts on the mercantile basis, the year adopted being the calendar year. Its main source of income was the commission earned from India Sugars and Refineries, Limited. Since the year 1950 the company has been able to declare very substantial dividends to its shareholders.

For the year ending 30th December, 1959 the Directors of the company reported to its shareholders that the commission earned during the year had not yet been received from the principals and concluded by saying:

“You will note that the disbursement of the proposed dividends to our shareholders will depend on our being able to collect outstandings from our principals.”

At the General Body Meeting of the Company held on 30th December, 1959, the following Resolution relating to the declaration and payment of dividend was passed:

“......that a dividend of Rs. 100 per share (taxable) on the equity shares be paid to such shareholders as appear on the Register of Members as on date, payments to be effected when commission due from Principals are realised.”

It is admitted that the commission due from the India Sugars and Refineries, after taking into account of which, the dividends were declared for the year 1959, was received by the company some time during the second week of May, 1960.

In the meanwhile, certain events happened, which could be said to have largely contributed to the present petition. During the year 1960, misunderstandings appear to have arisen between certain groups of shareholders. Mr. A. C. K. Krishnaswami, who was the Managing Director of the company till then led one such group, while Mr. Parasrampuria was the leader of another group. In the month of March of that year, the former filed an application to this Court under sections 39 7 and 398 of the Indian Companies Act for certain reliefs. That was followed by acrimonious exchange of allegations and counter-allegations in respect of the management of the company by Mr. A. C. K. Krishnaswami. But all these received a quietus by reason of settlement between the parties which enabled Mr. Parasrampuria to purchase 216 shares owned by Mr. Krishnaswami and by Factors Limited, a concern in which the latter had a controlling interest. The transfers of the shares were completed by the third week of April, 1960. It is not very clear from the evidence placed before us whether Mr. Parasrampuria retained the shares so obtained for himself or assigned them to one Mr. M. R. Banka. It is unnecessary to refer to that matter any further, as there is no dispute between them. Mr. M. R. Banka made a demand on the company for payment of the dividends already declared ; Mr. A. C. K. Krishnaswami also claimed that he was entitled to receive the dividends declared before the date of transfer, in respect of all the shares held by him. His claim had this merit, namely that there had been no specific transfer in writing to the purchas