Smt. Mohadevi vs Motiram Roshan Lal Coal Co.

Wort, J.—This, in my judgment, is a very clear case excepting on one point. There is an application u/s 38, Companies Act, primarily directed against the company itself for the rectification of the share register. In the first place I should like to observe that on 1st December of last year, I made the following order on the first application of Srimati Mohadevi:

The following issue will be tried u/s 38, Companies Act. Whether the document dated 22nd April 1927, purporting to be a transfer of shares in the Motiram Roshan Lai Goal Co., Ltd., was executed by the Hindu firm Sagar Mall Subhkarart or by one of them on behalf of the said Hindu firm?

This order in a sense has become infructuous as the parties, although they expressed the desire to examine witnesses, have now failed to do so, and I am thrown back to the position of deoiding the original application on affidavit evidence. I have mentioned the facts set out above in connexion with the argument addressed to me by Mr. Mahabir Prasad appearing on behalf of the company to the effect that my powers u/s 38 are discretionary, and that in the circumstances of the case, which will appear from the observations I am about to make, I should refuse to exercise my discretion in favour of the applicant, and refuse to decide the points at issue and leave the applicant to her remedy in a suit. Whether I should or should not exercise my discretion in the sense of the argument advanced is the one point of difficulty which I find in the case. When once I have decided that question, the matter becomes very plain. When I made the order in December 1938, it was stated by the parties that they intended to call witnesses, as I have already stated, and that the petitioner Srimati Mohadevi was to be examined on commission.

The respondents intimated, as I understood, that they proposed to call witnesses in the ordinary course and stated (as my memory goes) they had not yet decided and could not put the Court into possession of the list of witnesses. Now, when once the order was made that witnesses should be examined orally, the parties were entitled to call such witnesses as they thought proper in the circumstances. At a later date it was stated that the petitioner could not be examined on commission and that reliance was going to be placed upon affidavits only. At a very late stage, in fact the date before the case came on for hearing, the respondents asked for time in order to ascertain what witnesses they should call. This application was refused because, as I have already indicated, there was no obligation to the parties to give a list of witnesses and the respondent company had ample time to make up its mind as to the witnesses which they desired to call. As I have already said, the respondents application was refused, and I have very grave doubts about the bona fides of that application. That is all I propose to say as regards that.

It is in those circumstances that Mr. Mahabir Prasad contends on behalf of the company that I should refuse to exercise my discretion u/s 38, Companies Act, in favour of the applicant or refuse to decide the question of title as between the transferor of these shares and the transferee. It was intimated on the last occasion, and I think that intimation was sufficiently brought out by the order which I made in December last, that there was some sort of coercion or forgery or some circumstances which, if established, would entitle the respondents to argue that the signature on the transfer was not that of the firm; but, as it will appear from the affidavits filed, there is no dispute that it was the signature of the firm, that is to say, one member of the firm. The only matter in dispute is the circumstances under which the transfer was executed. My mind has changed very considerably during the course of the argument; but I have now quite clearly come to the conclusion that I should exercise my discretion u/s 38 of the Act, and I am assisted in that conclusion by a number of authorities. I decline to follow the Calcutta decision to which reference was perhaps made. I think it will sufficiently appear from the statement of facts that the matter of title is abundantly clear. The further fact which I should have mentioned in connexion with the point as to exercise of my discretion is that the transfer was made in the year 1927.

As far as the facts of this case go, it appears that nothing was done, apart from perhaps certain oral requests, until the year 1931, calling upon the company to register the shares. It is on this long delay, and the fact that the application to this Court was not made until the year 1938, that reliance is also placed for the suggestion that I should not decide the matter u/s 38, but leave the parties to a suit. That is a delay which needs some explanation. There are various explanations given such as the company was paying at the time no dividend and that certain persons had asked the managing director to register the shares but they were told to wait. But there is the remarkable fact, that although this transfer had taken place in 1927 (I am assuming for the moment that it did take place in the circumstances), nothing was done by the transferor to get the transfer (which had been executed) back from Srimati Mohadevi, the lady, because on the respondent''s own showing it was a transfer made for a contingency which did not arise. Therefore, quite clearly, if the facts are true, the respondent company were entitled to get back the certificate within a very short time of the date upon which it was executed. Their case is that they trusted the lady and therefore there was no reason why they should demand the certificate baok. Frankly speaking, I do not accept this explanation offered by the respondents, and my not accepting it gives some sort of support to the applicant''s story. The mere delay in itself is not a ground why I should refuse to order the register to be rectified. It may very well be that, had it not been for the fact that the unacceptable explanation was put forward by the respondents. I am referring to their explanation why they did not demand the certificate back the fact of delay might have led me to say that it was a case in which the applicant should have brought a suit. But I am of opinion that the case is so clear that I think that I should decide the matter u/s 38, Companies Act.

Section 38 of the present Act is almost on the same terms as Section 35, Companies Act of 1862, which in England has now been superseded by a number of subsequent Acts. I refer to the Companies Act of 1862 because, as I have already stated and repeat, the words are substantially the same with one rather important exception and it is on the Act of 1862 that the leading cases have been decided. There are provisions in Section 35 of the Act of 1862 such as references to Courts of Equity and Courts of Common Law. But apart from matters of that kind Section 35 of the Act of 1862 is substantially the same as Section 38 of the present Act. The one important exception is that the Court may either admit or refuse such application with or without costs to be paid by the applicant. Now the Courts in England have construed that as meaning that whatever else may happen, the Courts cannot award costs against the transferor: I refer to the case in In re Tahiti Cotton Co., Ex parte Sargent (1893) 17 Eq 273. Section 38, Companies Act, in India, gives a wide discretion and the provision in that regard is to this effect: "and may make such order as to costs as it in its discretion thinks fit." As far as the costs are concerned therefore, I am not limited in the same way as the Court was in the case to which I have just referred.

The applicant in her affidavit, sworn by her husband Jamnadas Khemka, says that it was on 22nd April 1927, that the transfer was executed for the sum of Rs. 5334. There was a parcel of 889 shares and the numbers are referred in para. 5 of the affidavit. There is no dispute about the numbers. It is to be noticed in the first place that there was no statement as to the circumstances under which the transfer was executed but merely, as I have stated, for the consideration of the sum to which I have referred. The owner of the shares (transferred) was Sugar Mull Subhkaran, a firm of merchants amongst the original share-holders and subscribers to the Memorandum of Association. It was Subhkaran Chaudhry who filed an affidavit in reply to the application, stating that he had received a telegram from Srimati Mohadevi, who was a close relation of theirs, "to proceed to Jaipur." That is important and highly important; I refer to para. 4 of his affidavit in reply. According to the story the father was ill and his case was that the lady had asked him to go provided with adequate funds to meet the possible or probable expenses of his father''s medical treatment and Subhkaran''s case is that he declined to accept the proposal. The statement in itself is remarkable. I can understand a relation in the circumstances asking this boy (as he claimed to be) whether he was in need of funds, but I do not accept the suggestion, even if there was any truth in the story at all, that she was pressing funds upon him. According to his affidavit he was pressed by the lady and pressed to execute a, certificate of transfer of shares in the company which she could use by way of security for any money to be provided. There is also a statement in para. 8 of the counter affidavit setting out a story which it is difficult to follow. It is to the effect that the lady suggested to Subhkaran Choudhury that.

some sort of arrangement should be made against the contingency of my falling short of funds in the matter of my father''s treatment, and I was asked to keep a number of ornaments belonging to our family and the certificate of shares in the aforesaid company with her in Calcutta to be utilized and held by way of security.

I understand by that, that according to this young man''s story he was carrying about the ornaments of the family and the lady requested him to let the ornaments and the share certificate remain with her as security, or at least he had control of them. The story sounds highly improbable. Paragraph 10 of the counter affidavit is very important and there Subhkaran says:

The said lady being one of my respectable elders I had every confidence in her and did not suspect that she could have any ulterior motive by making me do the act stated in the preceding paragraph.

And he says in para. 12 that.

no money was ever taken from the said lady either by sale, transfer or mortgage of the said shares.

It is to be noted that there is no proof whatever or suggestion how the certificate got to Jaipur. If I am to take the affidavit at its face value, this youth (as he then was) according to the case was a person travelling with family ornaments and much of their moveable property and had apparently with him the transfer deed of shares in Motiram Roshan Lai Coal Company, Ltd. There is no suggestion in his affidavit that the lady asked him to go back to his home to fetch these things; in fact there are no circumstances whatever excepting the bare statement that the lady asked for the ornaments and the transfer deed. The story as told leads me to the conclusion that the transfer was executed in circum. stances other than those stated by the respondents.

But the important fact which is established by this affidavit of 19th August 1938, is that Subhkharan Chowdhury executed the transfer deed, and there is no suggestion by him that he executed it contrary to the authority of the firm, of which he was a member. There is no suggestion either of coercion or anything of the kind. It was a voluntary act on his part, on the suggestion of the lady it is true, for the purposes of providing security for any money which he might require from the lady in the circumstances. In a supplementary affidavit of October of the same year, he tells a story contradicting his first story. That story is that he was made to put down the name on the printed form in which there was nothing written in hand. He asserts that he was "sure that the printed form had been later on filled up without his know-ledge to set up as a transfer deed." In para. 5, he says:

That on 22pd April 1927, the date of the alleged sale of sharps at Galoutta, I was at Sardar Shahar in Bikaner State in connexion with the marriage of Kishori Lall.

That is a clear suggestion that it was a forgery. Then in para. 8, the following statement appears :

With reference to para. 19 of the affidavit of Jamnadaa Khemka I say that the fact that the ornaments belonging to my family and share scripts were deposited with Srimati Mohadevi is knowil to Surajmal Chowdhuri, Badridas Chowdhuri, Ratanlal Chowdhuri and Harmukhrai Chowdhuri who may bear witness to the fact. I further say that there have been good relations between my family and Srimati Mohadevi until the date of the knowledge of the present proceeding, and as such, I believed that the said ornaments and share scripts were lying fully safe on our behalf in the custody of Srimati Mohadevi who is one of our closest relations.

It will be seen that there is a complete contradiction of the story: on the one hand, he was not sure when the certificate was executed and when was it suggested that the ornaments and the transfer deed should be handed over to the lady, while on the other hand there is the clear case that he executed the transfer in the circumstances which I have narrated, and thirdly that he thought that everything was safe in the hands of the lady. If I were to accept the story at its face value, it would be impossible to come to any conclusion as to what the facts were, and I frankly say that I do not believe for one moment any one statement made in the counter-affidavit and the supplementary affidavit by Subhkaran Chowdhury.

I pass on to another matter. The suggestion made by Sagar Mall, the father of Subhkaran Choudhury, in his affidavit is that Subhkaran was a minor at the time, i.e. in 1927. Jamnadas Khema, the husband of Srimati Mohadevi, states in his affidavit that Subhkaran was about 19 years, 6 months and 17 days old on 22nd April 1927, when he transferred the shares. That by a simple process of arithmetic would fix Subhkaran''s birthday. The father Sagar Mall says in para. 5 of his affidavit this:

It is absolutely true that my son Subhakaran Chowdhury was minor at the date when Srimati Mohadevi made him write out the name of Sagar Mall Subhkaran Chowdhury on the printed form which was later on set up as a deed of transfer.

Although, as I have stated, the husband of the applicant swore to the actual years, months and days of the age of Subhkaran Chowdhury, the father Sagar Mall says in his affidavit in his para. 6: "It is altogether false because my son Subhkaran was not born on the Dewali day of Sambat 1964." But he does not volunteer the information on what date he was born. One person who could have spoken of the date of birth of Subhkaran was the father. His statement in his affidavit may be perfectly true, but it does not necessarily follow that the son was a minor in 1927; he may have been born on the day following the Dewali or later or even earlier but still be major. I do not accept the father''s statement for one moment. I have not been placed in possession of facts which would entitle me to come to a conclusion in the matter.

But the important point in this case is this, that when the application was made to the company to rectify the register their answer was that the transfer was not authorised by Article 16 of the Articles of Association which provides:

Any share may be transferred at any time by a member to his or her father or mother or grandfather or grandmother or to any lineal descendant (male or female),

and the respondent''s case is that the lady was not a lineal descendant. Although the company represented by Mr. Mahabir Prasad resists this application, it is not contended that the applicant is not within the relationship set out in Article 16. Sagar Mall is the brother of the applicant and Subhkaran, the son, is the nephew. The point put forward is that, as the father and the son and other members of the family constituted a joint Hindu family concern or business under the style of Sagar Mall Subhkaran Chowdhury, the applicant could have no concern therein. I characterize that as a disingenious argument and not worthy of consideration. It is perfectly clear from the list of subscribers and the circumstances of the case that this is a family concern; that the company itself is nothing more than a family or connexions of the family; and that it ''is perfectly obvious that they must have been, if I may use the expression, working hand in glove.

Although there is no evidence on the point, I have not the slightest doubt, having regard to the correspondence appended to the affidavit in support of the application, that the company must have known of the circumstances under which the transfer was executed. I wish to make myself clear. I am assuming for the purpose of the argument that the case of the respondent is true. If that be the fact, I am perfectly certain that the company knew and yet they contended that the registration could not be put through because the application was not within the relationship contemplated by Article 16. I am not concerned in this case with the question whether this transfer was executed for joint family necessity; it does not arise and was never put forward. Indeed if the case the respondent put forward were true, that is to say the money was advanced for the purposes of the family or one part of the family, then if the applicant had advanced the money, there is not the slightest doubt that that would be a legal necessity. But I decide that point merely on the footing that it was not put forward in this case.

The defence put forward, if I may call it such, was that the transfer was for a contingency which did not arise and therefore there are certain equities in favour of the transferor. If that alone had been a question to be determined, I should have said long since that the case put forward by the applicant lady (in reply to the story set up by the respondent) that she had paid off some of the debts of the family firm and that the lady was owing Rs. 31,020 at the time this transfer was executed as part payment of that debt to the extent to which I have referred in my opening observation was true.

But in my judgment there is no truth in the story of the respondents whatever. It is a story which I cannot accept for reasons which perhaps I have not given to very great detail. I fail to understand why there has been so much delay on the part of the applicant. On the other hand, as 1 have already observed, there is no reason, why the Court should not exercise its discretion under the Section. Equally difficult questions of fact were decided under similar circumstances in In re Tahiti Cotton Co., Ex parte Sargent (1893) 17 Eq 273, to which I have already referred, and in Ex parte A.R. Shaw (1876) 2 Q.B. 463 where the decision of Lord Cairns in In re Ward and Henry�s case (1867) 2 Ch. 431 was discussed. I have no doubt that I should, in this case, although the facts appear-at first sight to be somewhat complicated, exercise my discretion in favour of the applicant and order the company to rectify their register by placing Srimati Mohadevi on the register as owner of shares Nos. 40001 to 40500, 56401 to 56700 and 59911 to 59999 inclusive.

Before I leave the case I would like to repeat what the son stated in his affidavit, namely that the applicant was closely related to the members of their firm. I have already pointed out that under the present Act, differing from the Act of 1862 upon the construction of which the, decisions to which I referred were made? I have the-widest discretion as to costs, and I order the costs to be paid both by the company and the respondents to the applicant. The claim for damages has not been established and I disallow it. The hearing fee is assessed at fifteen gold mohurs.