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PETITIONER: THE PUBLIC PASSENGER SERVICE LIMITED

       Vs.

RESPONDENT: M.   A. KHADER AND TWO OTHERS

DATE OF JUDGMENT: 30/08/1965

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. SUBBARAO, K. MUDHOLKAR, J.R.

CITATION:  1966 AIR  489            1966 SCR  (1) 683

ACT: Companies Act (1 of 1956), s. 155--Scope of.

HEADNOTE: The respondents were shareholders in the appellant  company. As they did not pay the call money on their shares, a notice under  Art 29 of the Articles of Association was issued  and as the respondents defaulted in the payment demanded,  their shares were forfeited under Art. 30.  The respondents  filed a petition under ss. 402 and 237 of the Companies Act, 1956, and obtained. interim orders directing stay of collection of the moneys and restraining forfeiture of the shares,  before the forfeiture by the appellant; but, as the call money  was not  paid  into  court as directed  the  interim  order  was vacated and the petition was finally dismissed.  Thereafter, the  respondents filed an application under s.  155  praying that  the  forfeitures may be set aside -and  the  necessary rectifications  made in the share register.  The High  Court on  its  original  side and in  Patent  Appeal  allowed  the application,  holding  that  the notice under  Art.  29  wag defective and therefore the forfeiture was invalid. In the appeal to this Court, HELD  : The forfeiture was invalid, and therefore the  names of  the  respondents were omitted from  the  share  register without  sufficient cause and the jurisdiction of  the  High Court under s. 155 was attracted and rightly exercised. [687 B] A  proper notice under Art. 29 is a condition  precedent  to forfeiture  under Art. 30.  The object of the  notice  under Art.  29  is  to give the  shareholder  an  opportunity  for payment  of the call money, interest and expenses.   In  the absence of particulars of expenses, the respondents were not in a position to know the precise amount which they were re- quired  to  pay  and  that  slight  defect  in  the   notice invalidated it and was fatal to the forfeiture. [685 D-G] Section  155(1)(a)(ii)  allows rectification  of  the  share register if the name of any person after having been entered in  it, is without sufficient cause, omitted  therefrom  The issue  under the section is not whether the shareholder  has sufficient cause to approach the Court, but whether his name has been omitted from the register without sufficient cause.

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[686 D: 687 A] Where  by reason of its complexity or otherwise  the  matter can  more conveniently be decided in a suit, the  court  may refuse  -relief under s. 155 and relegate the parties  to  a suit.   But  having  found summaribly that  the  notice  was defective  and the forfeiture invalid, the Court  could  not arbitrarily   refuse   relief  to  the   respondents.    The unwarranted  proceedings  under ss. 402 and  237  and  other vexatious  proceedings  started by the respondents  have  no relation to the invalidity of the forfeiture and the -relief of  rectification and were not valid grounds  for  refusing, relief, even if it was an equitable one. [688 B-D]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 202 and 203 of 1965. 684 Appeals from the judgment and decree dated December 21, 1961 of the Madras High Court in O. S. Appeals Nos. 55 and 56  of 1959. K.   K. Venugopal and R. Gopalakrishnan, for the appellant. A.   V.  Viswanatha Sastri, P. Ram Reddy and A. V. V.  Nair, for respondent No. 1. The.  Judgment of the Court was delivered by Bachawat, J. The appellant is a limited Company carrying  on transport  business in South Arcot District.  M. A.  Khader, the  contesting respondent in Civil Appeal No. 202 of  1965, holds  13  shares  and  his  brother,  M.  A.  Jabbar,   the contesting respondent in Civil Appeal No. 203 of 1965, holds 163  shares  in  the Company.  Articles 29  and  30  of  the Articles of Association of the Company read:               "29.  The notice shall name a future day,  not               being less than seven days from the service of               the  notice,  on or before which such  all  or               other money and all interest and expenses that               may have accrued by reason of such non-payment               are to be paid and the place where payment  is               to  be made, the place so named  being  either               registered  office of the Company are  usually               made payable and shall state that in the event               of  non-payment at or before the time  and  at               the  place appointed the share in  respect  of               which  such payment is due, will be liable  to               be forfeited.               30.   If the requisition-, of any such  notice               as  aforesaid be not complied with, any  share               in respect of which such notice has been given               may, at any time thereafter before payment  of               all  money  due  thereon  with  interest   and               expenses, be forfeited by a resolution of  the               Directors to that effect." On  January 2, 1957, the board of directors of  the  Company passed a resolution calling the unpaid amount of Rs. 25/- on each share.  On January 3, 1957, a call notice was issued to the shareholders requesting payment on or before January 19, 1957.   The call notices were duly served on the  contesting respondents.   As  the  call  monies  remained  unpaid,  the Company issued the 68 5 following  notice dated January 20, 1957 to the  respondents under Art. 29 "Sir,               As the call amount of the balance of Rs.  25/-

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             for every share held by you remains unpaid  in               respect  of the notice dated 3rd January  1957               issued  in pursuance of the resolution of  the               Board, I hereby issue this notice calling upon               you to pay the called amount at the registered               office  of the Company on or before  Wednesday               the 30th January 1957, together with  interest               at  six per cent and any expenses  that  might               have accrued by reason of such non-payment.               Take further notice that in the event of  non-               payment   as  mentioned  above,   the   shares               registered in your name will be liable to  be,               once for all, forfeited without further notice               and without prejudice to any legal action that               may  be taken against you for  recovering  the               balance amount due from you treating the  same               as  a debt due to and recoverable as  such  by               the Company under Article 14.               By  order of the Board (Signed) A. R.  Hassain               Khan Managing Director." In  spite  of this notice, the respondents did not  pay  the call  monies,  and  on  February  11,  1957,  the  board  of directors  passed a resolution under Art. 30 forfeiting  the shares  held by them.  On November 8, 1957, the  respondents filed  two separate applications under s. 155 of the  Indian Companies Act, 1956 in the High Court of Madras praying that the   forfeitures   be   set   aside   and   the   necessary rectifications be made in the share register of the Company. Ramachandra  Ayyar, J. allowed the applications, and  passed conditional  orders for rectification of the  registers  and his  decision  was  affirmed by the  appellate  Court.   The Courts  below  held that in the absence  of  Particulars  of interest and expenses, the notice dated January 20, 1957 was defective  and the forfeiture is invalid.  The  Company  now appeals  to  this Court by on a certificate granted  by  the High Court. In  all  standard  articles of a  company,  the  regulations relating  to  calls provide for payment of interest  on  the unpaid call money at a certain rate from the date  appointed for  its  payment  up to the time  of  actual  payment,  see regulation 14 of Table A in the 686 first Schedule to the Indian Companies Act, 1913, regulation 16 of Tabie A in the first Schedule to the Indian  Companies Act,  1956 and Palmer’s Company Precedents, 17th Edn.,  Part 1, p. 437 and the regulations relating to calls are followed by  regulations relating to Forfeiture like Arts. 29 and  30 of the appellant Company.  In the light of Art. 29 read with similar  regulations  relating to calls, we  would  have  no difficulty in holding that the notice dated January 20, 1957 required  payment  of Interest on tile call money  from  the date  appointed  for the payment thereof, that  is  to  say, January  19,  1957  up to the time of  the  actual  payment. Unfortunately,  all the regulations of the Company  relating to payment of calls have not been printed in the paper book, and  in  the  present state of the  record,  we  express  no opinion  on the question whether the notice is defective  in respect of the demand for interest. But  we  agree  with  the High  Court  that  the  notice  is defective in respect of the demand for expenses.  The amount of  expenses incurred by the Company by reason of  the  non- payment  was  not  disclosed.   The  respondents  were   not informed  how  much  they  should  pay  on  account  of  the expenses.  The object of the notice under Art. 29 is to give the  shareholder  an  opportunity for payment  of  the  call

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money, interest and expenses.  The notice under Art. 30 must disclose  to the shareholder presumably conversant with  the Articles sufficient information from which he may know  with certainty  the amount which he should pay in order to  avoid the  forfeiture.   In  the absence  of  particulars  of  the expenses, the respondents were not in a position to know the precise amount which they were required to pay on account of the expenses.  A proper notice under Art. 29 is a  condition precedent  to forfeiture, under Art. 30.  Here,  the  notice under  Art. 29 is defective, and the condition precedent  is not  complied  with.   The  slight  defect  in  the   notice invalidates  it and is fatal to the forfeiture.  The  Courts below, therefore, rightly declared that the forfeiture was invalid. Section  155(1) (a) (ii) of the Indian Companies Act  allows rectification  of  the  share register if the  name  of  any person after having been entered in the register is, without sufficient cause, omitted therefrom.  There is no sufficient cause  for the omission of the name of the shareholder  from the  register,  where  the omission is  due  to  an  invalid forfeiture of his shares, and on finding that the forfeiture is invalid, the Court has ample jurisdiction under s. 155 to order rectification of the register. me High Court said that the  shareholder may approach the Court under s. 155  if  be has sufficient cause.  This mode of expression 68 7 was  rightly criticised by counsel for the  appellant.   The issue under s. 155(1)(a)(ii) is not whether the  shareholder has  sufficient cause but whether his name has been  omitted from   the  register  without  sufficient  cause.   As   the forfeiture  is  invalid, the names of the  respondents  were omitted  from the share register without  sufficient  cause, and the jurisdiction of the Court under s.   155          is attracted. Counsel for the appellant contended that the point as to the invalidity of the notice dated January 20, 1957 was not open to  the respondents in the absence of any pleading  on  this point.  In the affidavit in support of the application,  the respondents  pleaded that the steps prescribed before  there can  be  a  forfeiture, have not  been  complied  with.   No further particulars were given, but the contention as to the invalidity  of  the  notice  dated  January  20.  1957   was pointedly raised in the argument in the firs,.  Court.   ’Me contention was allowed to be raised without objection.   Had the objection been then raised, the Court might have allowed the  respondents to file another affidavit.   The  appellant cannot now complain that the pleadings were vague. We  may  now  conveniently refer  to  certain  events  which happened  after January 2, 1957 when the directors  resolved to make the call and February 11, 1957 when the shares  were forfeited.  On January 18, 1957, M. A. Jabbar, M. A.  Khadir and other shareholders filed Application No. 119 of 1957  in the Madras High Court praying for reliefs under ss. 402  and 237  of  the  Indian Companies Act, 1956,  and  obtained  an interim  order  directing  stay  of  collection  of   monies pursuant  to  the notice dated January 3.  1957.   The  stay order was communicated to the directors on January 21,  1957 after  the notice of the intended forfeiture  dated  January 20, 1957 was issued.  On January 30, 1957, the Court  passed a  modified interim order restraining the forfeiture of  the shares, and directed M. A. Jabbar to pay the call money into Court  within  one week.  The call money was not  paid  into Court,  and on February 8, 1957, the Court vacated the  stay order.  Application No. 119 of 1957 was eventually dismissed on April 10, 1957.  Counsel for the appellant contended that

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(1)  by reason of the aforesaid proceedings the  respondents waived and abandoned their right to challenge the forfeiture (2)  the  order dated January 30. 1957 substituted  a  fresh notice  of intended forfeiture under Art, 29 in lieu of  the original notice dated January 20, 1957 and in the absence of compliance  with  this  order,  the  forfeiture  is   valid. Neither of these contentions was raised in the Court  below. We find nothing in the proceedings in Application No. 119 of 1957 from 688 which   we  can  infer  a  waiver  or  abandonment  by   the respondents of their right to challenge the validity of  the notice dated January 20, 1957 and the subsequent forfeiture. We also fail to see how the order of the Court dated January 30,  1957  can amount to a notice under Art. 29.   The  only notice under Art. 29 is the one dated January 20, 1957,  and as that notice is defective, the forfeiture is invalid. Counsel for the appellant contended that the relief under s. 155  is  discretionary, and the Court  should  have  refused relief  in  the exercise of its discretion.  Now,  where  by reason  of its complexity or otherwise the matter  can  more conveniently  be  decided in a suit, the  Court  may  refuse relief under s. 155 and relegate the parties to a suit.  But the point a,; to the ’Invalidity of the notice dated January 20,  1957  could well be decided summarily, and  the  Courts below rightly decided to give relief in the exercise of  the discretionary jurisdiction under s. 155.  Having found  that the notice was defective and the forfeiture was invalid, the Court   could   not  arbitrarily  refuse   relief   to   the respondents. Counsel  for the appellant points out that  the  respondents are  the  trade rivals of the appellant and are  anxious  to cripple  its affairs, and the appellate Court  recorded  the finding  that  the  respondents were acting  mala  fide  and prejudicially  to the interests of the appellant  and  their conduct in taking various proceedings against the  appellant is  reprehensible.  Counsel then relied upon the  well-known maxim  of equity that "he who conics into equity  must  come with  clean  hands",  and contended that  the  Courts  below should  have dismissed the applications as  the  respondents did  not  come with clean hands.  This  contention  must  be rejected  for  several  reasons.  The  respondents  are  not seeking  equitable  relief  against  forfeiture.   They  are asserting their legal right to the shares on the ground that the forfeiture is invalid, and they continue to be the legal owners  of  the shares.  Secondly, the maxim does  not  mean that every improper conduct of the applicant disentitles him to  equitable  relief.  The maxim may be invoked  where  the conduct  complained of is unfair and unjust in  relation  to the  subject-matter  of the litigation and the  equity  sued for.   The unwarranted proceedings under ss. 402 and 237  of the Indian Companies Act, 1956 and other vexatious  proceed- ings  started  by the respondents have no  relation  to  the invalidity of the forfeiture and the relief of rectification and are not valid Grounds for refusing relief. In the result, the appeals are dismissed.  There will be  no order as to costs. Appeals dismissed. 689