MAHALAKSHMI TEXTILE MILLS LIMITED Vs. A K RM M K MEYYAPPA CHETTIAR

JUDGEMENT

(1.) AN interesting question of company law is raised for determination by this appeal. The material facts which are more or less beyond the pale of controversy - - may be briefly stated.

(2.) THE plaintiff, a shareholder of the defendant, which is a limited company, fell into arrears in respect of the third and fourth instalments of Rs. 1250 each of the total share amount of Rs. 5000 payable by him on his 50 shares of the face value of Rs. 100 each, having duly paid the amounts of the first and second instalments of Rs. 1250 each, payable along with the application for shares and at the time of the allotment thereof respectively. There was a meeting of the Directors of the company held on 3lst October 1928 as shown by the entries, Exs. D -4 and D 6, in the minutes book at which, firstly, it was resolved that the first call (i. e., the call in respect of the third instalment) made as proposed in the circular letters, Ex. D -2 series, should be confirmed and, secondly, the Managing Directors were authorised to make the second call (i. e., the call in respect of the fourth instalment) before 5th December 1928, requiring the amount of that call to be paid by 25th December 1928. It is the case of the defendant company that thereafter, as shown by Exs. D -3 and D -3 (a), the blank printed form of the call notice maintained by it and the counterfoil of the notice actually issued, notice was duly sent to the plaintiff in respect of the first call on 30th March 1928 and that, similarly, as shown by Exs. D -6 and D -6 (a), a similar printed form of the call notice and a similar counterfoil respectively, notice was duly sent to the plaintiff in respect of the second call on 4th December 1928. The plaintiff did not comply with the notices and make the payments. There were further notices, Ex. D -8 series, which also proved fruitless, The company thereupon resolved by Ex. D -9 on 2nd December 1938 to issue further notices to defaulting shareholders intimating to them its intention to forfeit their shares on default of payment within the further time to be given. Accordingly on 30th July 1940, notice (Ex. D -1O) was issued by the company to the plaintiff, demanding the payment of Rs. 2500 for the first and second calls with interest at nine per cent. per annum on 31st August 1940 and intimating forfeiture on default. Although the plaintiff received this notice, he did not respond. On 18th January 1941 the Directors resolved, as shown by Ex. D -11 (a) the entry in the minutes book, that final notice should be given to the defaulters that payment should be made by 30th April 1941, or, else that the shares would stand forfeited. Exhibit D -12 is the notice issued to the plaintiff, giving him intimation of the resolution and demanding payment. In response to this notice, the plaintiff sent to the managing agents of the company a hundi, EX. D -14, on 23rd April 1941 for Rs. 2500, and along with the hundi also paid a sum of Rs. 500, leaving a balance of Rs. 2000 still to be paid. The balance not having been paid till 11th May 1943, there was a resolution of forfeiture passed by the company on that date (EX. D -17). Intimation of the forfeiture was given to the plaintiff by letter dated 22nd May 1943 (Ex. D -18). The hundi, Ex. D -14, and Rs. 500 were also returned to the plaintiff along with a covering letter, Ex. D -19. Thereupon, notices passed between the parties, Exs. D -20 and D -20 (a) and Exs. D -21 and D -21 (a), the plaintiff challenging and the company maintaining the validity of the forfeiture. The suit out of which this appeal arises is the sequal to these notices. The plaintiff craves in his plaint a declaration of the invalidity of the forfeiture and an injunction in restraint of a sale or re -allotment of the shares or any other dealing with them by the company.

(3.) THE questions arising on the arguments advanced before us in the appeal are, (1) whether the forfeiture of the plaintiff's shares by the defendant company is illegal and invalid; and (2) whether there has been on the part of the plaintiff any waiver of the illegality and the invalidity by reason of his conduct. We do not feel called upon to say anything on the latter question; for, assuming that there was no waiver, the appellant is, in our opinion, entitled to succeed on the ground that there was sufficient warrant for its forfeiture of the plaintiff's shares. In connection with the former question, we may observe in limine that we fully realise that a forfeiture ought not to be lightly favoured and that a party thereby aggrieved is entitled to rely on any technicality of rule or regulation to invalidate it. The first submission of Mr. Venkatesa Aiyangar, the learned advocate for the respondent, in connection with this question, is that the notices for call amounts said to have been issued by the defendant to the plaintiff are not proved by the evidence on record, and that for want of notices duly conforming to the requirements of Article 42 of the Articles of Association the forfeiture made by the company must be regarded as illegal and invalid. This is a contention which the learned Subordinate Judge in the Court below has accepted. We consider that, in so accepting, he was unreasonable to a degree which we are constrained to discountenance in no mistakable terms in his appreciation of the evidence on record. The learned Subordinate Judge makes the criticism, which we cannot accept, that there is no knowing whether the blank spaces of the printed notice forms were filled up and notices were duly posted. He makes the point which, in our opinion, is not of much subatance, that the clerk who is said to have informed D. W. 1 of the despatch of notices has not been examined. Notwithstanding the abstention of the clerk from the witness box, commonsense warrants the presumption, which we are prepared to raise, that the notices were duly posted in the ordinary course of business. Notwithstanding again, the interested and of -course uncorroborated denial by the plaintiff of his receipt of the notices, the common course of human affairs warrants the further presumption, which we are prepared to raise, that the notices were duly received by the plaintiff. His conduct in keeping quiet after his admitted receipt of Ex. D -8 series and Ex. D -10 which he has produced into Court, quite apart from his conduct in sending in response to Ex. D -12, the hundi, Ex. D -14, and the sum of Rs. 500 fortifies us in our conclusion that he must have received the prior notices suggested by Exs. D -3 and D -3 (a) in regard to the first call and by Exs. D -6 and D -6 (a) in regard to the second, which he is apparently suppressing, as, if produced, they will be found to contain all the particulars required by Article 42 of the Articles of Association of the company. Asked in cross examination why he did not pay the calls as demanded in Ex. D -8 series, P. W. 1 states in reply that he did not, thinking that he might pay if D. W. 1 went to him and personally asked him to pay. The conduct of the plaintiff has been such that we have no hesitation in the circumstances in accepting and acting upon the evidence of D. W. 1 and holding that there is no substance in the respondent's complaint that notices of the kind required were not duly despatched to him or served on him. We accordingly overrule the first submission of Mr. Venkatesa Aiyangar.