Decided on August 17,1946



CHAGLA, J. - (1.)THE question raised by the Tribunal on this reference is whether, upon the facts found by the Tribunal, the assessee company is one in which the directors had a controlling interest within the meaning of Section 2(21)(a) of the Excess Profits Tax Act and rule 7(1) of Schedule I to that Act.
(2.)THIS reference came before me and my learned brother Mr. Justice Kania on the 19th September, 1945, and we sent the reference back to the Tribunal under Section 66(4) of the Act and requested them to record their findings on the three questions which we raised. The three questions were :-
Who are the directors of the respondent Company ? (2) What is the interest in fact of each of the directors in the respondent company ? and (3) Whether the Scindia Steam Navigation Company Limited and/or Mrs. Nanavati are the directors of the respondent company as contended by the respondent assessee ?

The supplementary statement of the Tribunal is now before us and they have answered the three questions raised by us. Their findings are that Mr. P.N. Vevaina, Dewan Bahadur I.X. Pereira, Mr. J.E.A. Pereira, Mr. Walchand Hirachand, Mr. Shantikumar N. Morarji, Sir Chunilal B. Mehta, the honourable Sir Shantidas Askuran and Mr. S.C. Sheth are the eight directors of the assessee company. They have also stated that the number of shares held by the directors are as follows :-

Mr. P.N. Vevaina..... 9 shares Dewan Bahadur I. X. Pereira...... 5 shares Mr. J.E.A. Pereira..... 3 shares Mr. Walchand Hirachand..... 1 share Mr. Shantikumar N. Morarji..... 1 share Sir Chunilal B. Mehta..... 1 share Honourable Sir Shantidas Askuran..... 1 share

(3.)SO it will be found that the shares held by these seven directors total 21 shares. The total ordinary shares of the company are 60 and therefore on this finding, out of the 60 ordinary shares 21 shares are held by the directors. As the finding stands, there can be no question that these directors have no controlling interest in the company. Before a controlling interest can be established, the directors must hold a majority of the shares and when the Tribunal has found that the directors hold only 21 out of 60 shares it is impossible to contend that the directors have a controlling interest.
To get over this almost insuperable difficulty sir Jamshedji has advanced a rather ingenious argument. What he says is this, that the Scindia Steam Navigation Company hold 20 shares and they have nominated Mr. Walchand Hirachand, Sir Chunilal Mehta and Honourable Sir Shantidas Askuran as the nominees. Therefore, these three nominees are not the real directors, but the real director is the Scindia Steam Navigation company and as such the Scindia Steam Navigation Company controls 20 shares. This argument is based on the contention that as it is not possible for a limited company to be a director of another company, therefore, the Scindia Steam Navigation Company was compelled to nominate these three gentlemen as the directors.


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