RAJAMMAL Vs. UNION TILE WORKS P LTD
HIGH COURT OF KERALA
UNION TILE WORKS (P) LTD.
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(1.) This is a petition filed under S.397 and 398 of the Companies Act, 1956, filed before the Companies Tribunal, New Delhi and transferred to this Court. Application 208 of 1967 for hearing issues 1 and 2 as preliminary issues was allowed by me. In pursuance to that order the case came up for hearing on issues 1 and 2 on 6-6-1968 and I heard the counsel on both sides. Issuess 1 and 2 read as follows:
"1. Whether it is proved that the petitioner has no right to apply under S.397 and 398 read with S.399(1) of the Companies Act, 1956
2. Whether the petition is not maintainable under S.397 and 398 of the Companies Act, 1956 -
It is necessary to state a few facts to appreciate the contentions of the counsel for the respondents on these issues
(2.) The petitioner claims to be a shareholder holding 75 shares in the company. The nominal capital of the company is one lakh of rupees divided into 1000 ordinary shares of Rs. 100/- each. The paid up capital is Rs. 90,200/-. The petitioner alleges that she has obtained the consent in writing of members holding 325 shares among themselves. The letter of consent which is annexed to the petition is marked Ext. P1. The first respondent in the counter affidavit filed disputes the genuineness of the signature of Mrs. Ammal Kumar who is alleged to be a signatory to Ex. P1. It is also stated by the 1st respondent that the shareholders mentioned in Ext. P1 have not paid the sums due from them to the company on their shares and are therefore not competent to maintain the petition. The trial of the petition has not yet started and the parties have not adduced their evidence. The questions whether the signature of Mrs. Ammal Kumar in Ext. P1 is genuine and whether the petitioner and the other shareholders who are parties to Ext. P1 are liable to pay any amount due on their shares to the company cannot therefore be decided now. I make it clear that the sustainability of the petition based upon these factual matters is reserved and will be considered after the evidence is adduced on all the issues. A purely legal bar raised to the maintainability of the petition and which the learned counsel for the respondents wanted consideration at this stage was based on S.399 of the Companies Act and it is therefore necessary to extract the said provision:
"399. (1) The following members of a company shall have the right to apply under S.397 or 398:-
(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one tenth of the total number of its members, whichever is less, or any member or members holding not less than one tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares;
(b) in the case of a company not having a share capital, not less than one fifth of the total number of its members.
(2) For the purposes of sub-s.(1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.
(3) Where any members of a company are entitled to make an application in virtue of sub-s.(1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.
(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Court under S.397 or 398, notwithstanding that the requirements of clause (a) or clause (b), as the case may be of sub-s.(1) are not fulfilled.
(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the Court dealing with the application may order such member or members to pay to any other person or persons who are parties to the application." Under the above provision in the case of a company having a share capital:
(a) not less than one hundred members of the company or not less than one tenth of the total members of the company, whichever is less, and
(b) any member or members holding not less than one tenth of the issued share capital of the company shall have the right to apply.
In the case before me S.399(1)(a) alone is invoked. It was pointed out on behalf of the respondents that the application to satisfy the requirements of S.399(1)(a) of the Companies Act has to be filed by the petitioner holding not less than one tenth of the issued share capital of the company. This plea is the result of overlooking clause (3) of S.399. Clause (3) of S.399 reads:
"Where any members of a company are entitled to make an application in virtue of sub-s.(1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them."
S.399(3) therefore clothes the person making the application even though he does not by himself own the qualifying shares with representative capacity to make the application not only on his behalf but on behalf of others who have given their consent in writing to the application The clause "any one or more of them" in clause (3) of S.399 is very significant and only emphasises the fact that when there are several members whose value of the share comes one tenth of the issued share capital of the company all of them need not join as applicants. In these circumstances, I overrule the preliminary objection raised by the respondents that the petition is not maintainable because the applicant does not by herself have one tenth value of the share capital of the company. The other aspects raised about the maintainability of the petition are reserved to be considered at the final stage of the disposal of the petition after the evidence is adduced. The costs of these proceedings will be provided for at the final stage.;
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