M.S. MADHUSOODHANAN AND ANR. v. KERALA KAUMUDI PVT. LTD. AND ORS.

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A of the Managing Director with immediate effect for effective running of the Organisation". The resolution that an extraordinary general body meeting be convened at a date suitable for the Chairman "to discuss and take decisions on matters arising out of the above decisions" was therefore confined to this limited resolution. Exhibit R -5 is the notice dated 25th July 1986 purporting B to call an extraordinary general meeting of the shareholders ofKerala Kaumudi on 16th August 1986 at 11 AM to inter alia consider and if thought fit to pass as a special resolution the following:

"Resolved that the consent of the Company be and is hereby accorded in order to satisfy the requirements of section 192 (c) and other

c applicable provisions, if any, of the Companies Act 1956, to ratify the following resolutions adopted by the Board of Directors of the Company at its meeting dated 23. 7. 1986.

I. "Resolved that Smt. C.N. Madhavi, Chairman, shall assume the executive powers of the Managing Director of the Company with immediate effect for effi<;ient running of the Organisation". D ·There is no mention whatsoever in the notice of any intention or proposal to amend the articles of the company. The Explanatory statement annexed with the notice states (in so far as it is relevant) " Special resolutions have been brought before the General Body, since it is felt that the effect of the said resolutions taken by the Board and being implemented may have the effect of curbing the powers of the Managing Director vested with him by the General body".

What has been deliberately and completely glossed over is that Madhusoodhanan's power was not sought to be merely curbed, but completely denuded. At the Extraordinary General _meeting held on 16th August 1986 (Ex.P 57 (a)), when the special resolution was taken up for consideration, Madhavi said that she would like to submit a report "in continuation of the Explanatory statement mentioned in the notice" and then proposed that "another special resolution also be passed deleting Article 74 of the Articles G of Association of the company".

This acknowledges that there was no earlier extraordinary general meeting deleting Art.74 as Madhavi had claimed in the meeting dated 23.7.1986. Furthermore it shows that the special resolution which was proposed in the notice was not the resolution which was ultimately passed. In the garb H of ratifying the resolution taken by the Board of Directors on 23.7.1986 ,

M.S. MADHUSOODHANAN "· KERALA KAUMUDI PVT. LTD. [RUMA PAL, .I] 149

what was in fact "ratified" was not only the proposal to remove Madhusoodnan A as Director but also the immediate deletion of Article 74 Of the Article$ of Association of the Company. The expression of intention in the notice under section 81( l) (corresponding to Section 189 (2)(a) of the 1956 Act) should be sufficiently specific so as to effectively inform each member of the company of the actual resolution sought to be passed in the general meeting. The B notice must be frank, open, clear and satisfactory. If it is not, the notice is bad and the special resolution vitiated and cannot be acted upon. "If a:ny attempt is made by the directors to get the sanction of the shareholders; it must be made on a fair and reasonably full statement of the facts upon which the directors are asking the shareholders to vote ... and special resolutions obtained by means of a notice which did not substantially put the shareholders in the position to know what they were voting about cannot be supported" (see Baillie v. Oriental Telephone and Electric Co Ltd:, [1915] l Ch. D 503,514-515; [1914-15] All E.R.Rep. 1420,1425,1426).

Since the further resolution to delete Art. 74 formed no part of the notice of the Extraordinary General Meeting, which in all fairness it should have, we have no doubt in our minds that the special resolution on the basis of such defective notice is insupportable in law and cannot be given effect to. This finding is sufficient to hold that the deletion of article 74 of the Articles of the company was invalid and that therefore Madhusoodhanan continued to be the Managing Director of Kerala Kaumudi as claimed by him in CS 3/89.

However we may also indicate briefly here our additional reasons for reaching this conclusion. The notice (Ex.R-35) was required to have been served on all the members of the company either by post or personally in terms of Article 108 or section 53 of the Act. The second imperative for a F special resolution to be validly passed is that notice of the general meeting must be 'duly' given. The mode of service of notice on members has been provided for under Article l 08 which is similar to Section 53 of the 1956 Act in all material respects. The two modes envisaged are personal service and service by post. There is no other mode envisaged. We are not satisfied that G the service of the notice was effected either on Madhusoodhanan or any other share holder in his group, including KIPL by either of the modes specified:

The submission of the respondents that under Article 49 of the Articles of Association of the Company even if no notice were given of the Extraordinary General Meeting, this would not vitiate the proceedings is: H

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A misconceived. This was no ordinary general meeting, but a meeting where a special resolution was to be passed. This had to be done under section 81 of the 1913 Act, to which Article 49 is expressly subject, and the requirement for giving due notice under section 81 is mandatory. Furthermore, Article 49 speaks of an " accidental omission " to give notice not officiating the proceedings. In other words the omission must be bona fide, and not an omission which was wilful as it was in this case.

Furthermore, The third condition to be fulfilled before the Articles can be amended under section 81(1) of the 1913 Act, (S. 189 (2) (c) of the 1956 Act ) is that at least 75 percent of the members entitled to vote and voting must support the resolution. This mandatory need to have the special resolution passed by a statutory majority of 75% was also sought to be circumvented by the respondents by the purported issue of additional shares to Ravi and Srinivasan. Both these aspects are deal~ with in connection with the issue of additional shares.

D (B) Issue of additional shares.

. - In order to push through the so-called special resolution deleting Article 74 with the requisite majority of 75 percent, it was necessary from the respondents' point of view to ensure that Madhusoodhanan's shareholding which was more than 50% of the paid-up share capital of the company was E reduced to 25 percent. This was sought to be achieved by the respondents in two stages. First, by taking a decision to increase the paid up share capital of the Company by issuing an additional 425 shares. Second, by not giving Madhusoodhanan or any of his group to any chance participate in the fresh allotment of shares and ensuring that the shares were allotted to Ravi and F Srinivasan. The evidence on record amply bears this out.

As we have seen, Madhavi assumed charge as Managing Director of the company on 23.7.86 with the object of ousting Madhusoodhanan from his control over the affairs of Kerala Kaumudi. This needed to be ratified by the general body of shareholders. The minimum period of notice fora general G body meeting under Article 49 read with Section 81 of the Act is "not less than 21 days'_', that is there should be a clear if!terval of 21 days and in computing the period the date of the meeting and the date of service of the notice is to be excluded. (See Nagappa Chettiar v. The Madras Race, Club AIR (1951) Mad 831, 838; In re Hector Whaling Lt., [1936] l Ch.208. So H the notice dated 25.7.86 (Ex. R.-35) was issued for holding the extraordinary

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general meeting on 16th August 1986 with the requisite statutory majority of A 75 percent.

A decision was taken by the respondents at the meeting of the Boarq on I st August 1986 (Ex .. P-62(1)), to increase the share capital of the company to Rs. 20 lakhs by issuing additional shares worth Rs 4.25 lakhs. At the same meeting , the Chairman (Madhavi) was authorised by the two other directors B present namely Ravi and Srinivasan "to issue noticzs to the existing shareholders to apply for shares within seven days". What is noteworthy is that the last day for making an application for allotment of any of these additional shares was fixed at seven days from the date of the Board meeting so that Madhusoodhanarl's shareholding could be recluced to 25% before the C Extraordinary General Meeting to be held on 16th August 1986.

According to Madhusoodhanan and his group they neither knew of the meeting dated 1st August 1986 nor did they receive any notice with regard to the allotment of additional shares nor of the meetings said to have been held on 8.8.86 and 16.8.86, in which the allotment of additional shares tq D Ravi and Srinivasan were made and later confirmed.

The Learned Single Judge held that no notice either of the Board meeting held on l st August 1986 or for the issue of additional shares had been served on Madhusoodhanan. He also referred to Articles 40, 41 and 18 of the Company to hold that the notice period of seven days to apply for allotment of additional shares was far too short. He upheld the contention of Madhusoodhanan that no meetings were in fact held on 8.8.86 or 16.8.86 and that there was as such no valid allotment of the additional shares to Ravi and Srinivasan.Madhusoodhanan's claim for rectification of the share register of Kerala Kaumudi was accepted and a fresh allotment of the additional shares was directed to be held. The Division Bench disagreed on all counts with the learned Single Judge, in our view, erroneously. Let us consider in the first place whether the notice of the meeting dated 1st August 1986 was served on Madhusoodhanan.

The evidence produced by the respondents in this regard is as follows: G (i) an entry dated 25th July 1986 in the local delivery book of Kerala Kaumudi (Ex. R. 8 (a)) which shows against the name and address of Madhusoodhanan that "one letter regarding Board and General Body Meetings" was acknowledged as having been received on behalf of Madhusoodhanan H

152 " SUPP. 2 S.C.R. SUPREME COURT REPORTS [2003]

A by one Mohanraj , the then personal assistant of Madhusoodhanan (P.W.2) who has written that he "handed same over to Mrs. Madhusoodhanan through Mr. Raghunathan, peon". There is no remark under the column "By whom delivered". '· (ii) an entry in the outward register of Kerala Kaumudi (Ex.p 93 (p)) B which shows that "one letter Board meeting on 1.8.86.Gl. Body meeting on 16.8.86" was dispatched. on 25.7.86 to Madhusoodhanan with copies to Srinivasan, Ravi and Mani.

(iii) an affidavit of Mohan Raj affirmed on 25th August 1986 in 0. S. C 1329 of 1986 (Ex. R-7) in which he has affirmed "sealed envelopes from the Chairman, Kerala Kaumudi (P) Ltd was served on me on 25.7. 86 and l.8.86 and I have signed the local delivery book as a token of its acknowledgement and I have duly forwarded the letters to Sri M.S. Madhusoodhanan".

Not one of these pieces of evidence at all establish that the notice dated D 25th July 1986 of the Board meeting to be held on l st August 1986 was served on Madhusoodhanan. As far as item (i) is concerned, it certainly does not amount to personal service on Madhusoodhanan as required under the Articles or section 53 of the Companies Act, 1956. Apart from this fatal legal flaw, the exhibit merely records that an unknown or at least an unnamed person handed over a sealed envelope to Mohan Raj who then handed it over to a peon, Raghunathan, who was to hand it over to Mrs. Madhusoodhanan. No one has come forward to say that the sealed envelope contained the notice dated 25th July 1986. Assuming it did, there is nothing to show that the envelope ultimately reached Madhusoodhanan. The affidavit affirmed by Mohan Raj on 25t)l August 1986 (Ex R 7) contradicts the entry in the local delivery book. Apart from anything else, Mohan Raj has himself admitted that he had not forwarded the notice to Madhusoodhanan in several documents namely in Exhibits P.36, P.46, P.53 and in an affidavit exhibited as P.49, besides also giving oral evidence to this effect. We find no reason to disbelieve Mohan Raj's oral testimony as to the circumstances under which he had affirmed the affidavit relied on by the respondents. G As far as the outward register is concerned, it has not been proved as to who dispatched the notice nor does the register show how the dispatch was effected. It is unclear on what material the Division Bench proceeded on the basis that it was sent by post under certificate of posting. In any event, if this were indeed so, where is the certificate? Its absence is significant . H

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Also significant is the absence of the actual notice alleged to be dated A 25th July 1986 of the Board meeting held on lst August 1986 .Why was it not produced by the respondents? What did the notice say? Did it indicate the intention to issue additional shares for the purposes of increasing the share capital company as it should have? We do not know. But we can only observe that the absence of the notice raises a presumption against the respondents. And in so far as the outward dispatch register is omcerned, the mode of B dispatch has not been mentioned nor is there anything to show that the notice was in fact dispatched. In the circumstances, we have no doubt that Madhusoodhanan was not given any notice of the Board meeting said to have been held on lst August 1986.

The respondents have relied on Madhusoodhanan's letter dated .8th c August 1986 to Srinivasan (Ex. P.35) in which he complained that he had not , been receiving his personal mail or letters addressed to him as Managing Director since 4th August 1986 and that the usual method of handing over such mail to his personal assistant was not been followed, to contend that' the notice dated 25th July 1986 had been duly served on Madhusoodhanan and D received by him.

The letter is a complaint regarding the complete blocking of all 111ail both personal and official by the respondents since 4th August 1986. It cannot be construed as an admission that all mail prior to that date had been duly received. In fact, on the same date that exhibit P.35 had been written by E Madhusoodhanan to Srinivasan, he also wrote to Madhavi (Ex.P.24) that on 3rd August 1986 he came to know "while holding discussions with the Deputy Manager of Canara Bank, Trivandrum, that you purported to hold a Board meeting on 1.8.86. I have had no notice of this meeting and consequently this was illegal. Any decision taken there is invalid and not binding on the company . F or me. You purported to pass a resolution regarding the operating of the bank accounts. My power to operate bank accounts of the company on my own as , managing director is not depended (sic) on any resolution of the board. The board cannot take away those powers or make it necessary that someone else who sign (sic) with me". The letter was admittedly received but not replied to. Apart from the categorical assertion of lack of notice of the meeting held G .,.. I

on 1.8.86, it is clear from. the contents of the letter that Madhusoodhanan had no knowledge· of what actually transpired there.

Since Madhusoodhanan did not know of the meeting held on lst August 1986, he was not aware, as the respondents were, either that additional shares H

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A were being issued or that the application for additional shares had to pe made within seven days of the meeting. Exhibit R. 26 ls a Notice Dated 1.8.86 issued under the signature of Madhavi. It refers to financial difficulties faced by the company which made it necessary for the Board by its Resolution dated 1.8.86 to issue 425 equity shares of Rs. I 000/- each for subscription to the existing shareholders. The notice which appears to be addressed to B Madhusoodhanan, his two children, Srinivasan and his daughter, Ravi and his daughter and finally to KIPL finally states: "You are eligible to apply for additional shares within seven days".

Article 40 of the Articles of the company requires all new shares to be C offered to all existing shareholders "in proportion, as nearly as the circumstances admit to the amount of the existing shares to which they are entitled". The offer is required to be made by notice "specifying the number of shares offered, and limiting the time within which the offer, if not accepted, will be deemed to be declined ... "

D The notice, exhibit R-26, is not in this form at all. However, the respondents have sought to rely upon the following evidence in support of their contention that Madhusoodhanan was given an opportunity to apply for the additional shares by service of a notice dated l .8.86. :

(a) an entry in the local delivery book of Kerala Kaumudi (Ex. R-8 (b)) E which ostensibly records that on lst August 1986, Madhusoodhanan, Managing Director, Kerala Kaumudi, Trivandrum was "Authorised to issue notices to the existing shareholders & one letter for Board meeting". There is an unidentified signatory who has acknowledged receipt of this document on l- 8-86. Acc~rding to Srinivasan's oral testimony, the signature is that of Mohan F Raj

(b) Exhibit P. 93 (a) is an entry in the outward register of Kerala Kaumudi indicating the dispatch· of the notice

(c) A Certificate of Posting dated l .8.86 (Ex.R.25) which purports to G relate to service of the notice on Madhusoodhanan, his children and KIPL Both the learned Single Judge and the Division Bench accepted that the signature of the person acknowledging receipt of the notice was Mohan Raj. Where they have differed is whether this amounted to service upon Madhusoodhanan, his children or on KIPL either in fact or in law. The H learned single judge held it did not. The Division Bench disagreed. Considering

M.S. MADHUSOODHANAN v. KERALA KAUMUDI PVT.LTD. [RUMA PAL, J.) J55

the facts, we have no hesitation in holding the learned Single Judge was right.

We have already held that service on Mohan Raj did not amount to ·- personal service within the meaning of Article 108 of the Articles of Association of the Company or Section 53 of the Companies Act, 1956. Even on the factual score, for the reasons set out by us earlier in connection with service of the notice dated 25-7-86, we are not satisfied that Madhusoodhanan was in fact served with a notice through Mohan Raj. Besides, the relevant entry does not refer to the notice.

"We have not felt safe to decide the controversy at hand on the basis of the certificates produced before us, as it is not difficult to get such postal seals at any point of time". E Despite this ground reality and on a misinterpretation of the provisions of section 53, the Appellate Court came to the indefensible conclusion ,that "evidence regarding dispatch of a communication under certificate of posting attracts the irrebuttable statutory presumption under section 53 (2) (b) that the notice had been duly served'', that " it is not open now to project a plea of absence of service of notice and a substantiation thereof by evidence" and F that even if it were proved that the notice did not reach the addressee, the evidence could not be " formally accepted and formally acted upon bY' the "' court" such contrary evidence " being necked(sic) out at the threshold".

This Court in Ummu Saleema 's case (supra) said that a certificate of posting might lead to a presumption if the letter was addressed and was G 't posted, that it; and in due course, reached the addressee. "But, that' is only a permissible and not an inevitable presumption. Neither section 16 nor section 114 of the Evidence Act, compels the Court to draw a presumption. The presumption may or may not be drawn. On the facts and circumstances of case, the Court may refuse to draw the presumption. On the other hand the H

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A presumption may be drawn initially but on a consideration of the evidence the Court may hold a presumption rebutted and may arrive at the conclusion that no letter was received by the addressee or that no letter was ever dispatched as claimed".

This general rule regarding certificates of posting has not been changed B under section 53 of the Companies Act., although it does provide that if a document is sent by post in the manner specified, "service thereof ~hall be deemed to be effected". The word "deemed" literally means "thought of' or, in legal parlance "presumed".

C There is a distinction between "presumption" and "proof'. A presumption has been defined as "an inference, affirmative or. disaffirmative of the truth or falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted" (Jzhar Ahmad v. Union of India : AIR (1962) SC 1052, 1060). They are rules of evidence which attempt to assist the judicial mind in the matter of weighing the probative D or persuasive force of certain facts proved in relation to other facts presumed or inferred (ibid.). Sometimes a discretion is left with .the Court either to raise a presumption or not as in Section 114 of the Evidence Act, On other occasions, no such discretion is given to the Court so that when a certain set of facts are proved, the Court is bound to raise the prescribed presumption. But that is all. The presumption may be rebutted. E While construing section 28-B. of the U.P. Sales Tax Act which inter alia provides that if a transit- pass is not produced at the check post on entry and at the point of exit, "it shall be presumed that the goods carried thereby have been sold within the State", the contention that the phrase "it shall be presumed that " meant that "it shall be conclusively held" was negatived. After referring to section 4 of the Evidence Act it was held by this Court in Mis. Sodhi Transport Co. v. State of U.P., AIR (1986) SC 1099, l 105:):

"The words "shall presume" require the Court to draw a presumption accordingly, unless the fact is disproved. They contairi a rule of rehuttable presumption. These words i.e. "shall presume" are being used in the Indian judicial lore for over a century to convey that they lay down a rebuttable presumption in respect of matters with reference to which they are used and we should expect that the U.P. legislature also has used them in the same sense in which Indian Courts have understood them over a long period and not as laying down a rule of conclusive proof. In fact these presumptions are not peculiar to the

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Evidence Act. They are generally used wherever facts are to be ascertained by the judicial process"

It was accordingly held that the words "shall presume" contained in section 28B of the U.P Sales Tax Act only require the authorities concerned to raise a rebuttable presumption that the goods must have been sold in the State if the transit pass is not handed over at the check post at point of exit and that it was open to the transporter to still prove that the goods had been disposed of in a different way. (See also Syed Akbar v. State of Karnataka, AIR (1979) SC 1848; State of Madras v. Vaidyanatha, AIR (1958) SC 61.

Raising of a presumption, therefore, does not by itself amount to proof. The result of a mandatory requirement for raising a presumption cast on C Court, as there is under section 53 (2) of the Companies Act, is that the burden of proof is placed on the person against whom the presumption opera~es for disproving it. It is only if such person is unable to discharge the burden, that the court will act on the presumed fact. (See Dahyabhai v. State of Gujarat, AIR (1964) SC 1563. A presumption however is of course not always rebuttable. But the mere use of the word "shall" before the word "presume" or other like word does not mean that the presumption is irrebuttable or conclusive. An irrebuttable presumption is couched in different language, • normally indicating that proof of one set of facts shall be "conclusive proof' of a second set. An example of this is Rule 3 of the Rules framed in 1956 under .section 18 of the Citizenship Act, 1955 which was the subject matter of challenge in lzhar Ahmad's case (supra). Section 53(2) contains no such language. I

Consequently, the words "shall presume" in section 53 subsection (2) means a rebuttable presumption which the Court must raise provided the basic facts namely the due posting of the document is proved, the onus being on the addressee to show that the document referred to in the certificate of posting was not received by him.

In the present case, the certificate of posting is suspect. Assuming that such suspicion is unfounded, it does not in any event amount to conclusive proof of service of the notice on Madhusoodhanan or on any of the other addressees mentioned in the certificate as held by the Division Bench. Except for producing the dispatch register and the certificate of posting, no one on behalf of the respondents came forward to vouch that they had persona,lly sent the notice t~rough the post to Madhusoodhanan and his group. H

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A Madhusoodhanan had written two letters contemporaneously dated 4.8.86 and 8. 8.86 (Ex.P-24 and Ex.P-35) to Srinivasan, the General Manager of Kerala Kaumudi and to Madhavi complaining that he was not·receiving any mail at all. These letters were admittedly received but not replied to by the respondents. It is also apparent from a perusal of those letters that Madhusoodhanan had no knowledge whatsoever of the notice for application B for allotment of additional shares. Had there been such notice it is improbable that Madhusoodhanan who was fighting for retaining his control over Kerala Kaumudi, would have risked losing such control by abstaining from applying for the additional shares.

c In the circumstances we hold that Madhusoodhanan and his group were not served with the notice dated 1.8.86 . It is therefore unnecessary to decide whether the period prescribed in the notice to apply for the shares was too short or contrary to the Articles of Association of Kerala Kaumudi.

Once we have held that Madhusoodhanan and his group, all of whom D held shares. in Kerala Kaumudi, were not given notice to apply for allotment of the additional shares, it must be held that the subsequent allotment of the shares to Ravi and Srinivasan at the meeting held on 8.8.86 and the affirmation of such allotment at the meeting allegedly held on 16.8.86 were vitiated thereby and invalid.

E Although there appears to be substance in the submission of Madhusoodhanan, as accepted by the learned Single Judge ; that no meetings were in fact held on 8.8.86 or on 16.8.86, in view of our finding relating to the non-service of the notice dated 1.8.86, we refrain from deciding the issue.

We, therefore, set aside the decision of the Division Bench in MFA F 330/90, AS No. 164/90 and AS No. 165/90 and affirm the judgment and order of the learned Single Judge in CP 14/86 and the decree in CS No. 31 89 .and CS No. 5189 including the directions in connection with the allotment of the additional 425 shares.

G KIPL's application CP 31/88 was dismissed by the Single Judge and the appeal therefrom (MF A 559/90) also rejected. Since the subject matter of "" KIPL's application is covered by Madtiusoodhanan's application CP 14/86 and was for identical reliefs, we merely dispose of the appeal in terms of this judgment without any further observation.

H Specific Performance of the Karar 16th January, 1986

M.S. MADHUSOODHANAN v. KERALA KAUMUDI PVT. LTD. [RUMA PAL, J.] { 59

The last proceeding relating to Kerala Kaumaudi was CS 6/89 which was a suit filed by Madhusoodhanan for specific performance of the Karar dated 16th January 1986.

We have already held that by May, 1985, Mani and his group had transferred their shareholding in Kerala Kaumudi to Madhusoodhanan, a~d that as a result of such transfer Madhusoodhanan and his group held more than 50% of the shares in the company. On 15th July 1985, Madhavi is alleged to have executed two agreements and a will transferring the 9 shat.es of the late Sukumaran and her own 3 shares to Ravi and Srinivasan [Ex.R.- 59, Ex.R.-59(a) and Ex.R. 60)

It is in this background that the agreement dated 16th January 1986 C must be read. The original of which is in Malayalam and which has be~n described by the parties as the Karar, has I I clauses. It is admittedly written by Mani and is signed by Madhavi, Mani, Madhusoodhanan, Srinivasan and Ravi. It seeks to record the partition of assets by mutual consent. Clause I of the Karar provides that Madhavi ~ould be the chairman ofKerala Kaumu<;ii during her lifetime. Clause 2 provides that there will be no change in the existing share structure during the lifetime of Madhavi and that after the death of Madhavi, the shares of Kerala Kaumudi should be so given that Madhusoodhanan gets 50% of the total shares of the company including the shar.es owned by Mani, and Srinivasan and Ravi get 25% each. It was also agreed that the shares of the late Sukumaran and Madhavi should be divided according to this percentage. The shares of KIPL in Kerala Kaumudi wer~ . also to be given to Madhusoodhanan, Ravi and Srinivasan in the same ratio. Then comes clause 3. While there is no controversy on the translation of clauses I, 2, 4, 5, 6, 7, 8, 9, IO or 11, the translation of clause 3 is seriously in dispute. We give the three different versions as put forward by p Madhusoodhanan, the respondents and finally the official translator of this Court.

(A) "Mr M. S. Mani is selling some of his shares in Kerala Kaumudi to Mr M. S. Madhusoodhanan and the price of that share will be informed to the other parties in time". ·G

(B) "the value of the shares ·of Kerala Kaumudi which is to be sold by M. S. Mani to M. S. Madhusoodhanan will be informed to others at the appropriate time".

(C) "the price paid by M. S. Madhusoodhanan on the sale of Kerala H

p. 160 Copy page pinpoint

A Kaumudi shares by M. S. Mani will be intimated to other parties as and when (it is done)".

Having regard to our finding on the question of transfer of Mani's 390 shares to Madhusoodhanan in May, 1985, perhaps the appropriate translation is the one put forward by the official translator which is set out above as (C). B This difference of opinion, however, is really of no moment, because the subject matter of Madhusoodhanan' s claim for specific performance is limited to that part of the Karar which provides for the division of shares of the late Sukumaran and Madhavi in the percentage of 50: 25: 25 between Madhusoodhanan, Ravi and Srinivasan, on Madhavi's death. Before C considering the merits of this claim, we may briefly refer to the remaining clauses of the Karar. Clauses 4 to l 0 relate to the division of assets and shareholding in various family concerns so that each of the brothers had 52 percent shareholding in different concerns as specified below:

Mani Laisa Publications Private Ltd D Madhusoodhanan Kaumudi Investment Private Ltd ;

Kaumudi Exports Private Ltd;

Kaumudi News Service Private Ltd E Ra:vi Ravi Printers an'd .Publishers Private Ltd;

Kaumudi Films Outdoor Unit ; Electronics

and Equipment Corporation; Ravi Transport

F Srinivasan Srinivasan Printers and Publishers Private. Ltd.

All other establishments were required to be closed down and Madhusoodhanan was appointed for that purpose. Clause 9 provides that if any shareholder in any of the concerns wishes. to sell his shares, they must G be offered to the "52% shareholders" at a price to be fixed by the others. If I '•. .the 52% shareholders refuse to purchase the share, the others would have to do so at the value fixed by the concerned company's auditors according to I' the Company's balance-sheet for the previous year. Clause IO provides that the agreement would bind the four brothers and their heirs in the event of the L H death of any one Of them before the agreement was completely implemented.

M.S. MADHUSOODHANAN "· KERALA KAUMUDI PVT. LTD. [RUMA PAL,J) 161 The last clause in the Karar is clause 11. ft provides that all penc{ing litigation A regarding the subject matter of the Karar, should be withdrawn and that ~II disputes should be mutually settled, and if this is not possible the matter should be referred to an acceptable third party whose decision would be binding.

On 2nd December 1987 Madhavi died and on 10th October 1988, B Madhusoodhanan filed C. S. 6/89 for transfer of 50% of the late Sukumaran and Madhavi's shares to him and the transfer of 50% of KIPL's shareholding in Kerala Kaumudi to Ravi and Srinivasan in terms of the Karar. The defendants in the suit were Mani, Srinivasan, Ravi, Kerala Kaumudi and . KIPL. They first filed a four page written statement in which they contended C ..that the suit was not maintainable, that the suit was bad for mis-joinder and non-joinder of parties, that the suit had been improperly valued and proper court fees not paid, that the suit was barred by limitation, that the Karar was barred by the provisions of the Specific Relief Act, 1963 and that the court did not have the jurisdiction to entertain the suit. D The learned Single Judge decided each of the issues raised in favour of Madhusoodhanan and decreed the suit. The Division Bench allowed the appeal (A.S. 211/9). The reasons which persuaded the Division Bench to allow the appeal were first: no steps had been taken by Madhusoodhanan for determination of the price of 390 shares or the 'inherited shares' or for making the same known to the other parties or for carrying out the other E provisions in the Karar - in particular closing down of Blue Travels, Kaumudi Hotels and Blue Transports. Second, there was no averment in the plaint regarding consideration and no relief sought for in relation to the fixation or payment of consideration. Third, in contravention of Section 16 of the Specific Relief Act there was no averment in the plaint about the preparedness of F Madhusoodhanan to pay the consideration; fourth, since there had been no transfer of the 390 shares, it was not possible to enforce the Karar in respect of the bulk of shares regarding which specific performance had been claimed. Fifth, Madhusoodhanan could not claim specific performance of only that part of the agreement which was in his favour without performing the obligations which were cast on him by the other clauses. These clauses were G inseparable and part performance of the agreement was not possible. Sixth, there was an undue delay in filing the suit. Seventh, compared to the assets owned by Kerala Kaumudi and Kf PL, both of which were to go to Madhusoodhanan in terms of the Karar, the worth of Kala Kaumudi (allotted to Mani) and Ravi Printers (allotted to Ravi) was insignificant, the last fact H

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A justifying the court's refusal to grant specific performance of the Karar under section 20 of the Specific Relief Act. The appeal was, therefore, allowed and the suit dismissed.

We have already said that except for clauses 1, 2,3 and I I, all the other clauses of the;) Karar related to the division of the several concerns among the four brothers. In deciding whether the agreement should be implemented, the Appellate Court overlooked the basic f~ct that each of brothers had been given the majority shareholding of 52 p·ercent in the companies specified ; against their names in the Karar. Since the other three brothers had taken the full benefit of the Karar, they were bound to comply with all its terms. It was not open to them to accept that portion of the Karar which was in their favour and jettison the rest. And the Karar which is in the nature of a family settlement seeking to settle disputes between brothers, having been already acted upon at least to the extent that the four brothers were each given the majority shareholding in the different companies as mentioned in the Karar, sh-Ould not be lightly interfered with. (See: K.K. Modi v. KN. Modi and Ors., [I998] D 3 sec 573.

The Division Bench has not adverted to this all. It is also on record that Madhusoodhanan had transferred the bulk of his shareholding in the companies which were to be under the majority control of the other three brothers. The learned Single Judge had held that Madhusoodhanan had given evidence that E .he had taken steps for closing down the companies not mentioned in the Karar. This finding has not been questioned. All the clauses except for the transfer of the 'inherited shares' to Madhusoodhanan had been acted on. Madhusoodhanan was entitled to insist on the performance of this clause as well. F The respondents cited Article 29 of the Articles of the company in support of their argument that exhibits R. 59 and 60 overrode the Karar insofar as it required that 50% of the shares of the late K. Sukumaran and Madhavi had to be transferred to Madhusoodhanan on Madhavi's death. Article 29 says that the executors or administrators of the deceased sole G holder of a share shall be the only persons recognised by the company as having any title to the share. It was the contention of the respondents that insofar as the Karar provided for the transfer of the shares of the late Sukumaran and Madhavi to Madhusoodhanan , it was contrary to Article 29 of the Articles of Association of the company and could not be enforced. This submission is made on the basis of the decision of this Court in V.B. H

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Rangaraj v. B, Gopalakrishnan: (AIR} (1992) SC 453. A That decision must be understood and read after enunciating certain basic principles relating to the transfer of shares and in the background of earlier. decisions on the subject. It is settled law that shares are movable properties and are transferable. As far as private companies like Kerala Kaumudi are concerned, the Articles of association restrict the shareholder's B right to transfer shares and prohibit any invitations to the public to subscril)e for any shares in, or debentures of, the company. This is how a "private company" is now defined in section 3 (1) (iii) of the Companies Act, 1956 and how it was defined in section 2 (1 3) of the 1913 Act.

Subject to this restriction, a holder of shares in a private company may C agree to sell his shares to a person of his choice. Such agreements are specifically enforceable under section 10 of the Specific Relief Act, 1963, which corresponds to section 12 of the Specific Relief Act, 1877. The section provides that specific perfonnance of such contracts may be enforced when there exists no standard for ascertaining the actual damage caused by t~e D non-perfonnance of the act agreed to be done; or when the act agreed to be done is such that compensation in money for its nonperfonnance would not afford adequate relief. In the case of a contract to transfer movable property, nonnally specific perfonnance is not granted except in circumstances specified in the Explanation to section 10. One of the exceptions is where the property is "of special value or interest to the plaintiff, or consists of goods which are E not easily obtainable in the market". It has been held by a long line of authority that shares in a private limited company would come wit!·in the phrase "not easily obtainable in the market" (See: Jainarain Ram Lundia v. Surajmull Sagarmull and Ors.. , A.LR (36) (1949) F.C. 211, 218;). The Privy Council in The Bank of India Ltd versus J.A.H. Chinoy: (A.LR. 1950 P.C. F 90) said: "it is also the opinion of the Board that, having regard to the nature of the company and the limited market for its shares, damages would not be an adequate remedy" specific perfonnance of a contract for transfers of shares in a private limited company could be granted.

In 1965, this Court while dealing with proceedings rising out of sections G 397, 398, 402 and 403 of the Companies Act, 1956 in the case of S.P. Jain v. Kalinga Tubes: A.l.R. (1965) SC 1535, had occasion to consider the effect of an agreement relating to the issue of new shares in a company between two shareholders and an outsider. It may be noted at the outset that there i~ a distinction between the issue of new shares by a company and the transfer H

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A of shares already issued by a shareholder. In the first case, it is the company which issues and allots the new shares. In the second, the transaction is a private arrangement and the company comes into the picture only for the purposes of recognition of the transfe~ee as the new shareholder. Therefore, while it is imperative that the company should be a party to any agreement relating to the allotment of new shares, before such an agreement can be enforced, it is not necessary for the company to be a party in any agreement relating to the transfers of issued shares for such agreement to be specifically enforced between the parties to the transfer.

In S.P. Jain's case, the company was a private limited company to begin with. An agreement was entered into between two shareholders and S.P. Jain, who was not a member, whii:h internally provided that S.P. Jain would be allotted shares after the share capital of the company was increased equal to those held by the said two shareholders. The company was not a party to it nor were the other shareholders. In terms of the agreement there was an increase in the share capital and shares were allotted to S.P. Jain. D Some years later, after the company had been converted into a public company, a decision was taken by the company to issue fresh ~hares. The shares were not allotted to S.P. Jain. Alleging oppression by the majority shareholders, S.P. Jain fiied proceedings in which it was contended that the subsequent allotment of the new shares was in violation of the agreement beriveen S.P. E Jain and the two shareholders. In this context, this Court rejected S.P. Jain's plea on the grounds that S.P. Jain was not a member of the company when the agreement was entered into; the company was not a party to the agreement and was not bound by its terms; there was no provision in the agreement as to what would happen if and when the share capital was actually increased beyond the increase at the time of the agreement. Therefore it was held that as far as the company was concerned, it was free to dispose of shares as its directors or shareholders in a general meeting ~onsidered proper without regard to the agreement.

The decision does not in any way hold that the transfer of shares agreed to between shareholders inter se does not bind them or cannot be enforced like any other agreement.

In Rangaraj's case, relied upon by the respondents, an agreement was entered into between the members of the family who were the only share holders of a private company. The agreement was that for all times to come each of the branches of the family would always continue to hold equal

M.S. MADHUSOODHANAN 1•. KERALA KAUMUDI PVT. LTD. [RUMA PAL, J.] 165 number of shares and that if any member in either of the branches wished to sell his share/shares, he would give the first option of purchase to the members of that branch and only if the offer so made was not accepted, the shares would be sold to others. This was a blanket restriction on all the shareholders, present and future. Contrary to the agreement, one of the shareholders of one branch sold his shares to members of the second branch. Such sale w"s B challenged in a suit as being void and not binding on the other shareholders. This Court rejected the challenge holding that the agreement imposed a restriction on shareholders' rights to transfer shares which was contrary to the articles of association of the company. It was therefore held that such a restriction was not binding on the company or its shareholders. The decision is entirely distinguishable on facts. There is no such restriction on the transferability of shares in the Karar. It was an agreement between particular shareholders relating to the transfer of specified shares, namely those inherite'-1 from the late Sukumaran and. Madhavi, inter se. It was unnecessary for the

... company or the other shareholders to be a party to the agreement. As provided in clause 10 of the Karar, Exhibits R-59 and R-60 did not obviate compliance with the Karar. Both Ex. R-59 and R-60 were executed on 15.7.85 several months prior to the Karar. The parties who had consciously entered into the agreement regarding the transfer of their parents shares are therefore obligeq to act in terms of the Karar. The defence of Ravi and Srinivasan based on Ex.R-59 and R-60 shoulq not, in the circumstances, have been accepted by the Division Bench. Having regard to the nature of the shareholding, on the basis of the law as enunciated by the Federal Court and Privy Council in th~ decisions noted above, it must be held that the Karar was specifically performable.

As far as the question of consideration is concerned, we have alread~ held that parties can agree to subsequently determine the price at which the shares were sold and section 9 of the Sale of Goods Act, 1930 expressly provides that such contracts are perfectly legal. Besides, the Karar in terms does not call upon parties to determine the consideration. All it says is that once the consideration was determined by Madhusoodhanan and Mani, it would be made known to the others. Since there was no such determination, there was no question of informing anyone. The finding that there was no determination of the consideration in respect of the inherited shares as a ground for holding that the Karar was not specifically performable is similarly incorrect as the determination of the price formed no part of the Karar.

Coming to the reasoning of the Division Bench with regard to non- H

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A compliance with section 16 of the Specific Relief Act, 1963. The section provides :

"S. I 6. Personal bars to relief.- Specific performance of a contract cannot be enforced in favour of a person -

B xxxxxxxxxxxxxxxxxxxxxxxxxx

(c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be perfonned by him, other than terms of the performance of which has been prevented or waived by the defendant. c Explanation.- For the purpose of clause (c),-

(i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the Court; D (ii) the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction."

We called for the plaint filed by Madhusoodhanan in order to verify whether the Division Bench was correct in coming to the conclusion that section 16 of the Specific Relief Act had not been complied with. We found that paragraph 14 of the plaint reads :

"the plaintiff was always ready and willing to perform his part of the. agreement and is even now ready to perform his part of contract. The transfer of shares in respect of other companies have already taken place in accordance with the Karar dated 16 -1-86".

In view of this clear averment, the finding of the Division Bench regarding the contravention of section I6 of the Specific Relief Act, was perverse.

G On the question of delay the cause of action arose when Madhavi died in December, I 987. It cannot reasonably be said that filing of the suit ten months later was unreasonably delayed since some time must be given to see whether the parties did what they were required to do under the Karar after Madhavi 's death.

H Finally, the exercise of discretion by the Division Bench purportedly

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under section 20 of the Specific Relief Act was contrary to the terms of the A section itself. Guidelines for the exercise of the Court's discretion to decree specific ·perfonnance of an agreement have been statutorily laid down in sub- section (2). The Division Bench appears to have relied on clause (a) ,of section 20(2) to deny specific perfonnance of the Karar by holding that Madhusoodhanan had obtained an unfair advantage over others under t~e Karar because he had been allotted the more 'substantial' companies. This B logic flies in the face of clause (a) of sub-section (2) to section 20 and the explanation thereto - which say :

"S.20. Discretion as to decreeing specific performance.- x x

(2) The following are cases in which the court may properly exercise discretion not to decree specific performance -

(a) where the tenns of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; xxxxxxxxxxxxxxxxxxxxxxxxxxx

Explanation 1.- Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b)."

This section is an instance of such legislative clarity that it needs no paraphrasing to highlight its intent. The Division Bench was clearly wrong in its foray into the qu~stion of the value of the assets allotted under the Karar. It has, despite Explanation I to Section 20(2) refused specific perfonnance of the Karar on one of the excluded grounds viz., inadequacy of consideration.

The parties are at loggerheads and it is unlikely that they will mutually agree to a price to be paid for the 390 transferred shares or the 'inherited shares' as envisaged at the meeting held on 23rd April, 1985 (Ex. P.62(b)) or to a mutually acceptable third party in tenns of clause 11 of the Karar dated 16th January, 1986 (Ex.P-3). The solution to this impasse is available under sub Section 9(2) of the Sale of Goods Act, 1930 read with Art. 25 of the Articles of Association of Kerala Kaumudi. Under the first if the price is

p. 168 Copy page pinpoint

A not fixed in the manner agreed to in the contract of sale, the buyer shall pay the seller a reasonable price and what would be a reasonable price would be dependent on the circumstances of the case. Article 24 of the Articles of Association of the company speaks of the 'fixed price' and the 'fair price'. Both of these relate to the ostensible price shown on the transfer deeds. Nevertheless for the purposes of this case, Article 25 which lays down B guidelines for the resolution of disputes between the transferor· and transferee, may be relied on. It says: ·

Article 25: "The fair value of a share shall be fixed by the Company by a resolution passed by a majority of not less than three c fourths of the holders of such shares declaring the fair value. Such resolution shall remain in force for two years from the date of its passing or until annulled whichever is earlier. If at the time a transfer notice is given no resolution fixing the· fair value is in force: then any difference in regard thereto shall be referred to two arbitrators, one to be appointed by each party and the provisions of the Indian D Arbitration Act, 1940, shall apply".

Although the learned Single Judge in disposing of CP 26/87 gave directions for the appointment of Arbitrators, to determine the value of the shares, in our view it would be more appropriate to do so in decreeing the suit for specific performance of the Karar. It is also not clear from the material on record, in which of the brothers' name 9 shares of the late Sukumaran and the 3 shares of Madhavi now stand. Who ever is recorded as the owner of the shares shall further transfer six of those shares to Madhusoodhanan.

For all these reasons, we have no hesitation in setting aside the decision of the Appellate Court and restoring the decree as passed by the Trial Court as modified below.

"Madhusoodhanan will appoint one Arbitrator and Mani and his children, Sukumaran and Ravi will appoint one Arbitrator within one month to decide the following matters. Failing this any one of them may move this Court to appoint an Arbitrator to decide:

(a) What was the fair value of one share of Kerala Kaumudi (P) Ltd. on 21.5.1985? (b) What amount was paid or adjusted by or on behalf of M.S. Madhusoodhanan to M.S. Mani towards the value of shares ? H What is the balance amount due from Madhusoodhanan to Mani

p. 169 Copy page pinpoint

and his children in respect of the transfer of the 390 shares A transferred to M.S. Madhusoodhanan.

(c) What would be the value of one share on the date of Madhavi's death ?

It will be open to the parties entitled to the consideration as determintld by the Arbitrators to recover the sums due to them from Macihusoodhanani>. B Rectification of the Share register of K/PL

The application for the rectification of the share register of KIPL under Section 155 of the Companies Act was filed by Mani's wife and daughter - Kastoori and Valsa respectively, Srinivasan's wife - Laisa, and Ravi's wife - Shylaja. Of the 1000 shares issued of KIPL, Madhavi had 10, Kastoori had 240, Valsa had IO, Madhusoodhanan's wife, Geetha, hM 250,Laisa had 250 and Shylaja had 240 shares in 1985. On 4th March 1985, Laisa who, along with Geetha, was a director of the company till then, resigned. She has admitted her resignation in her evidence when she said "I became the director of the company in 1972. I became a shareholder of the company in

1972. I'm not a director of the company now. In March, 1985 I ceased to be a director. I resigned my directorship in March, 1985".

According to Madhusoodhanan, at the Board meeting held on 4th March 1985, which was attended by Geetha and Laisa, Laisa's resignation was accepted and he was appointed as additional director. At the same meeting, the Board approved the transfer of shares by Laisa, Shylaja, Madhavi and Kasturi to Madhusoodhanan, Ravi 's minor sons-Deepu and Darsan, Valsa (Mani's daughter) and Srinivasan so that the shareholding in KIPL became as follows : F Geetha 250 shares I

Madhusoodhanan 270 shares

Srinivasan 160 shares G Va Isa 160 shares

Deepu Ravi 80 shares

Darsan Ravi 80 shares H

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A According to the four applicants for rectification, they had effected no such transfer. Of the four, only Laisa came forward to give evidence in support of the case for rectification of the share register of KIPL [Ex. P-123 (F)] by restoring the position with regard to the shareholding as it existed prior to March 1985. In her deposition Laisa admitted that she had signed the B attendance register ofKIPL (Ex.P.-123) which showed that she had attended the Board Meeting on 4th March 1985. She also admitted that she had signed the minute books of the company including the minutes of the meeting held on 4th March 1985 as well as blank share transfer forms . However she has come forward with this explanation :

"I have given blank share transfer forms and other papers signed c when Sri Madhusoodhanan brought them to me. I signed those blank transfer forms and papers because Mr Madhusoodhanan was looking after the affairs of all sister concerns and my husband told me to sign whatever papers be brought by Mr Madhusoodhanan".

The learned Single Judge dismissed the application for rectification. He D held that the 4 brothers had admitted their signatures in Exhibit P· 190 which is a record of decisions taken at a meeting held on 29.I 1.1984 when one of the decisions taken was to entrust separate concerns ~o each of the brothers, depending upon who was taking an active interest in the company. The decision was implemented by the share transfers in the sister concerns of E Kerala Kaumudi and it was not disputed that in respect of Laisa Publications, Srini Printers, Ravi Printers etc., the respective brothers who were in control of those concerns were given 52 percent shares. As far as KIPL was concerned it was decided :

"3 (b). In Kaumudi Investments and Kaumudi Exports 52 percent of shares will be held by Sri. M. S. Madhusoodhanan and family and 16 percent each of shares will be held by Sri. M.S. Mani and family, Sri M. S. Srinivasan and family and Sri M. S. Ravi and family".

This was effected as far as KIPL was concerned on 4th March, 1985 It was held that the evidence showed clearly that all the necessary steps had been taken to effect the share transfers and that it was immaterial that the petitioners were not parties to exhibit P-190 because the share transfer deeds had been signed and the signatories were bound by that, particularly when they had not established that they had signed the share transfer documents · under any misrepresentation, fraud or undue influence or mistake. H

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The Division Bench reversed the decision of the learned single judge in M. F. A. No 312 of 1990. It was held that since exhibit P-3, or the Karl).r, had not been accepted as a valid document, "the projected basis of the transfer disappears" and "the further recording in the minutes of the company would not be sufficient to give legal efficacy to the transfer of shares".

Since we have held that the Karar was a valid agreement, this reason of the Division Bench will not stand. Besides, as observed by the learned single Judge, all the necessary documents had been duly executed to effect the transfers of the shareholding as approved in the meeting held in Marqh

1985. In the annual return of KIPL in respect of the year ending on 30 September 1985, this share holding is reflected. (Ex.P-212). Further this is in keeping not only with the Karar but also with Ex.P.190 according to both of which Madhusoodhanan and his group were to have 52 percent shareholding in KIPL and the remaining three brothers - 16 percent each.

The explanation given by Laisa that she used to sign whatever papers had been sent by Madhusoodhanan is unbelievable. The Division Bench by relying upon a narrative in a biography of Norman Birkett (The Life of Lord Birkett of Ulverston by H. Montgomery Hyde) chose to accept it. According to Laisa herself, she had been a director of the company, operated the banking accounts and otherwise done whatever was necessary in the discharge of her duties as a director since 1972. As we have noted earlier, differences between the 4 brothers had been simmering for a long time which manifested itself in E

1984. This was also noted by the Division Bench when it said, "in the year 1984, differences became somewhat apparent". In the circumstances, Laisa'.s facile explanation, that she signed every document in 1985 because of her faith and trust in Madhusoodhanan is clearly false.

The next reason given by the Division Bench for allowing the application for rectification was that the original share transfer deeds had not beeri produced. Madhusoodhanan had filed an application for production of the original share transfer deeds. He said that he could not produce the share transfer deeds because they were in the administrative office of KIPL and that he had been prevented from entering that office. That the administrative office of KIPL is within the_Kerala Kaumudi premises in a separate room was also the finding of the Division Bench. Madhusoodhanan and his group's grievance that they were being denied access to KIPL's offic' since April,I 1986 was not rejected by the Division Bench as not genuine. But the Division Bench observed "A mere alibi of inability to enter the office, cannot be H

p. 172 Copy page pinpoint

A accepted as a sufficiently strong reason for their grievous omission". This c9nclusion is as startling as it is unreasonable. For the-reasons given earlier in connection with transfer of shares in Kerala Kaumudi, we are of the view that here also, the minutes an~ the other records of the company, which prima facie raise a presumption of their veracity, have not been sufficiently B disproved by the evidence tendered on behalf of the petitioners in the application for rectification.

Apart from the provisions of the Companies Act, Article 41 of the Articles of Association of KIPL (Ex. P-180) also provides :

"Where minutes of the proceedings of any general meeting of the c company or of any meeting of the Board of Directors has been made and signed in accordance with provisions contained in the preceding article I 0 unless the contrary is proved, the meeting shall be deemed to have been duly called and held and all proceedings thereat to have duly taken place, and in particular, all appointment of directors made D. at the meeting shall be deemed to be valid".

The only evidence or "proof' to the contrary in this case is Laisa's unacceptable oral evidence. Therefore the minutes of the meeting held on 4th March, 1985 must be taken to have correctly recorded the transfer of shares resulting in the present shareholding, the appointment ofMadhusoodhanan as E additional director and the resignation of Laisa as a director of KIPL.

The next reason given by the Division Bench for permitting rectification of the share register of KIPL was that no price had been fixed for the shares and that there were not even negotiations with parties regarding such fixation of price. This is, for reasons already stated, an incorrect statement of the law. F Moreover in this case there is the additional factor which has persuaded us to hold that the Division Bench was wrong, namely Article 16 of the Articles of Association of KIPL which says :

"the Board of Directors shall fix price at which the shares for the time being forming part of the capital of the company may be purchased G in pursuance of transfer notice and the price thus fixed shall be known as the 'fair value'. Until the 'fair value' has been fixed as herein provided, a sum equal to the capital paid up on any share shall be deemed to be the fair value of such share."

The Division Bench's final conclusion that there had been a non- H

M.S. MADHUSOODHANAN v. KERALA KAUMUDI PVT.LTD. [RUMA PAL, J.] J 73

compliance with section 108 of Companies Act because there was no indication A about any purchase of stamps or about the share transfer deeds having been duly stamped, is an exercise in speculation. The Articles of Association of KIPL themselves require compliance with section 108 before any transfer can be effected. When the minutes recorded that share transfer deeds had been placed before the Board, when the transfers were approved by the B

.. Board in the presence of the only witness for the petitioners, and when none of the documents which were duly maintained by the company recording the transfers of the shares had been disproved, we cannot uphold a finding that the share transfer deeds must have been improperly stamped or executed in violation of the provisions of Section 108 of Companies Act.

No further reason has been given by the Division Bench for upholdibg c the prayer for rectification of the share register of KIPL. We have, therefore, no compunction in setting aside the decision of the Division Bench and restoring that of the learned Single Judge dismissing the application.

Rectification of the Share Register of Kala Kaumudi D The next matter is the application for rectification of the Share Register of Kala Kaumudi filed by the minor son of Madhusoodhanan, Visakh ( CP 11187; MFA No. 285/90; CA 3261/91). This appeal need not detain us as both the courts below have concurrently held that the application had no merit. E In keeping with the Karar, Mani and his family have the controlling interest in the company. In June 1985, of the 500 issued shares, Mani and his family held 260, Madhusoodhanan and his children held 80 shares, Srinivasan and his children held 80 shares and Ravi and his children held 80 shares a~~r effecting share transfers by the brothers and their respective groups inter se. F A decision was taken by the Board of Directors to increase the paid-up capital of company from Rs 5 lakhs to Rs 10 lakhs by the issue of 500 equity shares of Rs l 000 each. Notice of this was given to the applicant who received it but did not apply to be allotted any of the additional shares. Mani and h.is G - wife, Kasturi, offered to purchase 279 shares each. The offer was accepted and additional shares issued in the name of Marti and his wife. According to Visakh, he had not been given notice of the offer of the additional shares. The trial court considered the various exhibits tendered in evidence by Mani and his group, including the local delivery book (Ex. R.-48), which was signed by Madhusoodhanan, the father and guardian of Visakh, to negative the submission of Visakh. We see no reason to interfere with this finding of H

p. 174 Copy page pinpoint

A fact. It is true that the Division Bench proceeded on an erroneous basis when it held that the learned Single Judge had dismissed the application on the ground of delay. Since we have upheld the factual finding of the court of the first instance, this misreading of the Trial Court's judgment by the Division Bench is of no consequence.

B We accordingly dismiss .the appeal being C.A. 3261/91 without any order as to costs.

Civil Suit No. 4 of 1989

This brings us to the remaining appeal which arises from a decree passed in a suit filed by KIPL. The suit was originally numbered as OS 1569/ 88 when it was filed in the Munsiffs court in Trivandrum. After it was withdrawn on 16 February 1989 by the order of the High Court, it was renumbered as C. S. 4/89. In the suit, KIPL had prayed for a decree of l, pennanent injunction restraining Kerala Kaumudi or any of its Directors or staff or anyone claiming through or under them or any of their agents from disturbing or preventing the peaceful functioning of KIPLs administrative office or in any·way obstructing the peaceful possession and enjoyment of the said premises by the defendants until KIPL was evicted under due process of law.

E That the administrative office of KIPL was in Kaumudi Buildings, Pettah, Tri van drum cannot be in dispute in view of the categorical finding of the Division Bench to this effect, as noted earlier. According to KIPL, the entire administration of KIPL was carried on from this office. It has been further averred in its plaint, that Geetha, Madhusoodhanan's wife, had been de~ied access to the administrative office when she went there along with a F staff in August 1986. She was infonned by the reception office that the keys to the room were with Srinivasan who refused to hand over the keys to Geetha.

Srinivasan filed a written statement on behalf of Kerala Kaumudi in G which it was denied that KIPL had its administrative office in Kaumudi Buildings. According to Srinivasan, Geetha used to sit in Madhusoodhanan's office when he was the Managing Director of Kerala Kaumudi

On behalf of the plaintiffs, entries in the telephone directory (Ex.p- 181 ), notices and letters issued by the income tax office addressed to KIPL H at Kaumudi Buildings (Ex-p 182, 184 and 185) as well as a letter from the

M.S. MADHUSOODHANAN •. KERALA KAUMUDI PVT. LTD. [RUMA PAL,J.) J 75

Commissioner oflncome Tax (Ex.P. 183) similarly so addressed were proved A by Madhusoodhanan. Srinivasan has been unable to explain why the letters and notices to KIPL by the concerned authorities should be addressed to Kaumudi Buildings unless KIPL was functioning from that place. Additionally, Srinivasan also said, in his evidence, "All the sister concerns of Kerala Kaumudi had postbox No 99 and post office was instructed to put tl;!e correspondence addressed to the sister concerns in that postbox No". The B postbox number in question was Kerala Kaumudi's. He also said, "At the time when application for telephone was given, applications were given in the name of all sister concerns as well as Kerala Kaumudi, in order to get telephone easily. These telephones were allotted. All the telephones are installed in Kerala Kaumudi Buildings "and that for all the sister concerns the telex No is the same. In view of all this evidence, including the admission by Srinivasan, amply justifies the conclusion reached by the Trial Court while decreeing the suit that KIPL had an office in Kaumudi Buildings to which members of its management and staff have the right of access.

A similar suit had been filed by Kaumudi Exports which was decreed by the learned Single Judge on substantially the same evidence. (C. S. No 2 of 1989). The appeal from the decree was dismissed by the Division BeQch (A S. No 205 of 1990). No further appeal has been preferred by the respondents.

Logically, the Division Bench should have also rejected the appeal preferred from the decree in CS No 4/49. However the Division Bench rejected the appeal on the sole ground that although KIPL had been denied access in 1986, the suit had been filed only in 1988. According to the Division Bench "The inaction for a period of two years can be taken to have resulted in the extinction of the present possession. If the plaintiff does not have present possession, injunction could not be an available relief'. This strange piece of reasoning appears to proceed on the basis that the period of limitation for extinction of a possessory right is two years which it is not. Besides the claim of KIPL was that it was being denied access. The denial was a continuous one. It was therefore open to KIPL to file a suit while such denial continued by seeking to injunct the obstructers from continuing with the obstruction. G Srinivasan's evidence and the documents referred to hereinabove prove beyond a shadow of doubt, that the administrative office of KIPL was in Kaum,udi Buildings. That is also what the Division Bench has held. Having come to this conclusion, the division bench erred grievously in denying KIPL the relief it claimed only on the ground of delay, as if what was being dealt with H

p. 176 Copy page pinpoint

A by the Division Bench were an interlocutory application for interim relief.

This appeal, C.A. 3259/9 l, is therefore allowed.

To sum up: Civil Appeals 3253-58 of 1991 from M. F. A 330/90 are allowed, and the decision of the Trial Court affirmed with the directions earlier specified. Civil Appeals 3260 and 3261 of 199lare dismissed. Civil Appeal No. 3259 of 1991 is also allowed . The decision of the Division Bench is set-aside and the decree of the Trial Court is restored.

Before concluding our judgment in all these appeals, we would like to record our displeasure in the manner in which the paper books have been prepared. Documents which are vital for decision on the several issues raised, continue to remain in Malayalam without being translated , several exhibits as well as the pleadings, such as plaints, written statements etc. are not on record. Therefore, although our deCisions in_.these nine appeals, except for two, are in favour of Madhusoodhanan and his group, we make no order with regard to the costs to which the appellants would otherwise have been entitled.·

N.J. Appeals disposed of.