T H CONDON AND A BUTTERWORTH Vs. MUIR MILLS COMPANY LIMITED OF CAWNPORE
T H CONDON AND A BUTTERWORTH
MUIR MILLS COMPANY LIMITED OF CAWNPORE
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Burkitt, J -
(1.) In this case I have had an opportunity of perusing the judgment which is about to be delivered by my brother Henderson. I fully concur in it, and have but little to add.
(2.) As to the preliminary points, in discussing which so much time was, I think unnecessarily, spent at the hearing of these appeals, I fail to see why they should have been raised at all by the applicants in the Court below (respondents here), where most of them were incidentally raised during the hearing of the applications. Though the proceedings before the lower Court were in form applications under Section 58 of the Indian Companies Act, they were tried most elaborately as regular suits. Regular pleadings were filed on both sides and issues joined on them. By their pleadings the Muir Mills Company admitted that the respondents had formally applied to have the shares registered in their names, and that the Company had refused to allow registration. The applicants in fact said that the Company had improperly refused to register the transfers. The Company, in reply, admitted the refusals, and justified their action by relying on Art. 21 of their Articles of Association. It is difficult to understand why on such pleadings the applicants should during the hearing below have endeavoured to prove that in some of the cases there had not been any refusal to register owing to a legal defect in the constitution of the Board by which the refusals in those cases purported to have been made. In those cases if the contention of the applicants had been sustained they would have succeeded in showing that they had come into Court without any substantial cause of action. But anyhow as to all these preliminary matters I think my learned brother has come to a right conclusion.
(3.) On the merits it is abundantly clear that, though the appellant Company was not by law bound to disclose the reasons which actuated the Directors in declining to register the transfers which form the subject of these appeals, those reasons have been very fully disclosed. The question we have to consider is, whether those reasons are legitimate or are arbitrary and unjustifiable. Those reasons succinctly put are that the Directors of the Muir Mills Company knew the transferees, the applicants, to be employees of Mr. McRobert of the Woollen Mills; that Mr. McRobert had not long previously been a Director of the Muir Mills; that he quarrelled with Mr. Johnson the Managing Director of the Muir Mills, saying he "distrusted the management"; that he had prosecuted one of the other Directors fora technical offence under the Companies Act, and refused to seek re-election as a Director; and that the Directors of the Muir Mills Company therefore feared that these transferees being his employees would support him by their votes as shareholders at shareholders meetings of the Muir Mills Company, that they would be "litigious and cantankerous," and would "harass the management," the meaning of which phrase no doubt is that they would support Mr. McRobert's views as to the advisability of making a change in the management. There was evidence given to show that the Managing Director, Johnson, threatened to resign if McRobert had anything to do with the management, and that the Directors believed that the loss of Johnson's services would be injurious to the interests of the Company. Shortly put, the Directors were apprehensive that any increase in McRobert's voting power would assist him in enforcing his views as to the management, and as the transferees were McRobert's subordinates in another Mill the Muir Mill Directors refused to register the transfers to them. It should be mentioned here (1) that McRobert was, at the time when these transfers were made, the largest shareholder in the Muir Mills Company; (2) that he did not, for the purpose of increasing his own voting power, transfer any of his own shares to his subordinates as his nominees, but on the contrary assisted them in purchasing the shares in open market; (3) that the Cawnpore Woollen Mills Company is in no way a rival in business to the Muir Mills Company which is a Cotton Mill; and (4) that admittedly there is no personal objection to any of the transferees; they are acknowledged to be perfectly proper persons to become members of the appellant Company, and to be unobjectionable in all respects except in that they are subordinates of McRobert at the Woollen Mills.;
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