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High Court Of Orissa
G. K. Misra, C. J. And N. K. Das, J.
BIKRAM KISHORE PARIDA - Appellant
Versus
BENUDHAR JENA - Respondent
A. H. O 28 Of 1974
Decided On : 02/28/1975
COMPANY LAW - SHARE TRANSFER - AGREEMENT BETWEEN PARTIES - GENUINENESS OF DOCUMENTS - INTERPRETATION OF AGREEMENT - TRANSFER OF SHARES - SPECIFIC PERFORMANCE - DISCRETIONARY RELIEF - DECLARATION OF FUTURE TRANSFER OF SHARES.
Fact of the Case:
Plaintiffs and defendant No. 1 agreed to start a foundry business under the Pilot Project Scheme of the Government of Orissa. They entered into an agreement that the name of defendant No. 1 would be shown as the private entrepreneur, but the money for the shares was to be advanced by the plaintiffs; defendant No. 1 shall transfer 26, 250 shares out of 35,000 shares ostensibly held in his name; each of the plaintiffs and defendant no. 1 would have 1/4th interest in the shares standing in the name of defendant No. 1. Plaintiffs would invest according to their ability and the excess investment by any of the plaintiffs over and above Rs. 8750/-would carry interest at the rate of 61/2a p. c. p. a. till such excess investment is repaid in cash or by adjustment; the money due from defendant No. 1 as his share would be repaid by him to the plaintiffs out of the amount to which he may be entitled along with interest thereon at the rate of 61/2 p. c. p. a. In pursuance of the agreement, the plaintiffs allowed the name of defendant No. 1 to be shown ostensibly as the private entrepreneur so that the work would be carried out smoothly at the Government level. The company was registered and the plaintiffs paid the entire money. Defendant No. 1 became the Managing Director of the Board of Directors and got a resolution passed for transfer of 7000 shares in name of plaintiff No. 1 and 7000 share in the name of plaintiff No 2 and 3000 shares in the name of plaintiff No 3 and the same was sent for sanction of the Government. Defendant no. 1 assured that further shares would be transferred to the plaintiffs. On a resolution of the meeting of the Board of Directors after approval of the government for transfer of 17000 shares, the defendant No. 1 did not transfer the same.
Finding of the Court:
The court found that the agreement (Ex. 5) and receipts. Exs. 3, 4. 6, 8, 9 and 30 are genuine and the payment of Rs. 15,000/- to defendant No. 1 by the plaintiffs was towards share money and not towards loan. The court also found that the balance amount of Rs. 20,000/-was contributed by plaintiffs towards share money. The court further found that there was an agreement between the parties that defendand No. 1 is liable to transfer 17000/-shares in favour of plaintiffs.
Issues: 1. Whether the agreement (Ex. 5) and receipts. Exs. 3, 4. 6, 8, 9 and 30 are genuine? 2. Whether the payment of Rs. 15,000/- to defendant No. 1 by the plaintiffs was towards share money or towards loan? 3. Whether the balance amount of Rs. 20,000/-was contributed by plaintiffs towards share money? 4. Whether there was an agreement between the parties that defendand No. 1 is liable to transfer 17000/-shares in favour of plaintiffs?
Ratio Decidendi: 1. The court held that the agreement (Ex. 5) and receipts. Exs. 3, 4. 6, 8, 9 and 30 are genuine based on the evidence of independent witnesses, comparison of signatures, and the conduct of the parties. 2. The court held that the payment of Rs. 15,000/- to defendant No. 1 by the plaintiffs was towards share money based on the absence of any pleading as to loan, the conduct of the parties, and the documentary evidence. 3. The court held that the balance amount of Rs. 20,000/-was contributed by plaintiffs towards share money based on the evidence of independent witnesses, comparison of signatures, and the conduct of the parties. 4. The court held that there was an agreement between the parties that defendand No. 1 is liable to transfer 17000/-shares in favour of plaintiffs based on the conduct of the parties, especially of defendant No. 1.
Final Decision: The court decreed the plaintiffs suit and ordered that each of plaintiffs is entitled to hold 8750 shares out of 35000 held by defendant No. 1 and directed defendant No. 1 to execute an instrument of transfer in respect of 17,000 shares the title of which had already passed at the rate of 7000, 7000 and 3000 in favour of the plaintiffs nos. 1, 2 and 3 respectively.
DAS, J.
( 1 ) PLAINTIFF's case may be stated in short. Plaintiffs and defendant No. 1 were well acquainted with one another since a long time and they proposed to start a foundry business under the Pilot Project Scheme of the Government of Orissa. In pursuance of that they agreed to start a company under the name and style of 'utkal Foundry and Engineering Co. " The Government insisted that there would be difficulty in having a number of partners from private entrepreneurs. Accordingly, an agreement was entered into by the plaintiff and the defendant no. 1. The essential terms were that the name of the defendant No. 1 would be shown as the private entrepreneur, but the money for the shares was to be advanced by the plaintiffs; defendant No. 1 shall transfer 26, 250 shares out of 35,000 shares ostensibly held in his name; each of the plaintiffs and defendant no. 1 would have 1/4th interest in the shares standing in the name of defendant No. 1. Plaintiffs would invest according to their ability and the excess investment by any of the plaintiffs over and above Rs. 8750/-would carry interest at the rate of 61/2a p. c. p. a. till such excess investment is repaid in cash or by adjustment; the money due from defendant No. 1 as his share would be repaid by him to the plaintiffs out of the amount to which he may be entitled along with interest thereon at the rate of 61/2 p. c. p. a. In pursuance of the agreement the plaintiffs allowed the name of defendant No. 1 to be shown ostensibly as the private entrepreneur so that the work would be carried out smoothly at the Government level. This was done as defendant No. 1 had influence with the political party then in power. The company was registered and the plaintiffs paid the entire money. The plaintiffs have fully paid the money for the 35,000 shares allotted in the name of defendant No. 1 and after subscribing the money, the plaintiffs carried on the work of the business of the company and continued to manage the work jointly as agreed upon by them. Defendant No. 1 became the Managing Director of the Board of Directors and got a resolution passed for transfer of 7000 shares in name of plaintiff No. 1 and 7000 share in the name of plaintiff No 2 and 3000 shares in the name of plaintiff No 3 and the same was sent for sanction of the Government. Defendant no. 1 assured that further shares would be transferred to the plaintiffs. On a resolution of the meeting of the Board of Directors after approval of the government for transfer of 17000 shares, the defendant No. 1 did not transfer the same.
( 2 ) DEFENDANT No. 1 in his written statement has denied the agreement said to have been executed by him and averred that the agreement is false and fabricated and he never put his signature to such a document. At one time he thought of promoting the business along with plaintiffs and others and this was not practicable. The plaintiffs filed application for transfer of some shares in their favour which was approved by the Board of Directors. But subsequently, the Board of Directors withdrew that resolution on the ground that it will not be beneficial to the interest of the company. Defendant No. 1 further stated in the written statement that he had great trust in plaintiff No, 1 and the other two plaintiffs are associates of plaintiff No. 1. On the suggestion of plaintiff No. 1 he had thought of promoting a company with all the plaintiffs, and some other persons as members but the same could not materialise. Subsequently he allowed the plaintiffs 1 and 2 as partners in the Pilot Project Scheme and he described himself as partner in all correspondence. But the attempts were not preceded or succeeded by any agreement oral or written. The plaintiff No. 1 was assisting him in the affairs of the company. Plaintiff No. 1 was expecting that the defendant No. 1 would persuade the Board of Directors to take him as share-holder in the company. He had full confidence in plaintiff No. 1 and very often left paper
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