JUDGMENT
Venkatadri, J.
(1) These appeals are preferred from the order of Ramachandra Iyer, J. (as he then was) dated 30-4-1959 in Appln. Nos. 2182 and 2183 of 1958 whereby it was declared that the forfeiture of certain shares held by the respondents herein in the appellant company is invalid and liable to be set aside and it was directed that, on payment by the respondents of the call money due by them in respect or their shares, the forfeiture effected by the company should be set aside. The only point for determination in these appeals is whether the appellant company acted and complied strictly in accordance with the provisions of the Articles in forfeiting the shares of respondents herein.
(2) It is necessary to state the salient facts necessary for the purpose of the disposal or these appeals. The company called the New India Newtone Transport Co. Ltd., is a joint stock company concerned with the running of buses in the South Arcot Dt. The share capital of the company under its a articles in Rs., one lakh divided in to 500 ordinary shares of Rupees 100 each and 500 preference shares of al like value. It is stated that subsequently the capital of the company was reduced, but no details are now available in regard to the same. In respect of the ordinary shares of Rs. 75 per share had been paid up and what remained due from the members was only Rs. 25 per share. M. A. Khader, the first respondent in O. S. A. No. 55 of 1959, held 13 ordinary shares in the company of the value of Rs. 1300 and M. A. Jabbar, his brother first respondent in the other appeal O. S. A. No. 56 of 1959, held 162 shares of the value of Rs. 16200.
(3) Originally the company had four route permits with buses, but due to various reasons three routes with buses had been sold away and the company had only one route with one bus and a spare bus permit at the relevant time. The Regional Transport Officer, condemned even this one bus subsequently as unfit. Therefore, in order to avoid the closing down of the company and to prevent the authorities concerned from taking drastic action against the company and forfeiting the route itself for not providing service therein, the Directors of the Company convened a meeting on 2-1-1957, and passed a resolution to the effect that the company should call the balance amount of Rs. 25 on every share of the company immediately. Accordingly call notice was issued to all the shareholders on 3-1-1957.
The first respondent in both the appeals on receipt of the said notice filed Appln. No. 119 of 1957 on the file of the Original Side (company jurisdiction) alleging that the whole administration of the company and its affairs are under the control of A. R. Hussain Khan, the second respondent in the appeals, that there has been gross mismanagement of the company and its affairs coupled with falsification of accounts and misappropriation of the company’s funds, that there was no managing directors validly appointed by the company, that the Board of directors do not meet at least once in three months, that the appointment of A. R. Hussain Khan as sole managing director is illegal and void, that the Central Government has not accorded approval of the appointment of the said Hussain Khan as sole Managing Director, that it is necessary to have an investigation into the affairs of the company under S. 235(C) of Central Act I of 1956 by an Inspector appointed by the Central Government and that-(this is relevant for the purpose of these appeals)-the call notice dated 3-1-1957 is illegal and mala fide. The applicants in Appln. No. 119 of 1957 therefore prayed that this court should pass an interim order under S. 403 of Central Act I of 1956 staying all further proceedings in pursuance of the notice dated 3-1-1957 issued by the Managing director calling for payment of the balance of the share capital.
When this application came before Balakrishna Aiyar J., on 8-1-1957 the learned Judge passed an interim order (ex parte) directing a stay of all further proceedings including the collection of moneys in pursuance of the notice dated 3-1-1957. There is no evidence on record to show that this ex parte order dated 18-1-1957 was communicated to the company or its officers either through the court or by the party interested in the order. But it is seen from the records that only a letter was addressed by the Advocate for the first respondent herein to the managing director of the company (Hussain Khan) intimating that an ex parte order staying all further proceedings in pursuance of the call notice was passed by Balakrishna Aiyar J., on 18-1-1957. Hussain Khan received this letter only on 21-1-1957.
(4) Before the Managing Director of the Company received this letter on 21-1-1957, the company issued a notice on 20-1-1957 to all the shareholders informing them that the call amount of Rs. 25 for every share still remains unpaid and calling upon them to pay the call 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 reasons of such non-payment, failing which their shares will be forfeited without further notice and without prejudice to any legal action that may be taken against them for recovering the balance amount due.
(5) On receipt of the communication from the first respondent’s advocate about the order of stay dated 18-1-1957, the company took prompt steps for vacating the stay and applied to the court for permission to collect the call money from the shareholders as it was absolutely necessary for the company to realise the money for the purchase of a new bus in the place of the condemned bus. When the matter came before Balakrishna Aiyar, J., on 30-1-1957, the learned Judge vacated the interim stay granted by order dated 18-1-1957 and directed further that the shares held by the first respondent should not be forfeited and granted a week’s time for the first respondent to pay the call money into court. The first respondent in both the appeals however did not pay the call amount as per the order dated 30-1-1957 or gave any indication of their intention to deposit the call money into court at any time. So when the application again came before the learned Judge on 8-2-1957, he vacated the direction in the order dated 30-1-1957, granting stay in regard to the forfeiture of the shares and adjourned the application to a later date for disposal of the other prayers. The application was eventually dismissed by the learned Judge on 10-4-1957.
(6) When once the learned Judge vacated the direction regarding forfeiture of the shares by his order dated 8-2-1957, there was no legal impediment or disability for the company to forfeit shares if the call moneys were not paid in pursuance of the notice dated 20-1-1957. Accordingly, the Board of directors passed a resolution on 11-2-1957 forfeiting the shares of the first respondent in the appeals under Art. 30 of the Articles of the company. In pursuance of that resolution the company issued a notice to all the shareholder informing them that as they committed default in paying the call money in spite of the notices given by the company dated 3-1-1957 and 20-1-1957 calling upon them to pay the balance of the share capital with interest, and expenses thereon on or before 30-1-1957, their shares had been forfeited. The notice further called upon them to surrender their share, immediately to the company.
(7) The first respondent then filed the present applications out of which these appeals arise for a declaration that the forfeiture of their shares is illegal and void and also praying that their respective share numbers should be restored in the share register maintained by the company. Their main contentions are the following. The original notice calling upon them to pay the call money was mala fide and issued with some ulterior intention. The second notice some ulterior intention. The second notice dated 20-1-1957 calling upon them to pay the balance of the share amount on or before 30-1-1957 was illegal as the company had not right to issue that notice especially when there was an order dated 18-1-1957 by Balakrishna Aiyar J., staying all further proceedings in pursuance of the notice dated 3-1-1957. The Board of directors which met on 11-2-1957 and passed the resolution forfeiting the shares was not duty constituted and was incompetent to act. The first respondent herein therefore prayed that the forfeiture of the share should be set aside and also expressed willingness to pay the unpaid call money.
(8) The appellant company in its counter stated that money was urgently required for the needs of the company and for replacing with a satisfactory vehicle the bus which was condemned by the authorities as unfit and that when there was reserve balance of capital available to be collected from the shareholders, it would not be in the interest of the company to raise a loan in the open market and borrow at a heavy rate of interest, and that in the interest of the shareholders and in the interests of the company the Board of Directors thought it fit to collect the balance of capital amount from all the share holders to run the company in a prudent manner. They further contended that having regard to the rules and regulations of the company, the board of directors by which the respondents’ shares were declared to have been forfeited was duly constituted and was competent to act and its resolution of 11-2-1957 and the consequent forfeiture were valid.
(9) When the applications came before Ramachandra Iyer J., the learned Judge held that it was unnecessary for the company to issue a fresh notice after the order of the High Court dated 5-2-1957 for forfeiting the shares and that the second notice dated 20-1-1957 was not invalid as the company was not aware of the order for stay passed on 18-1-1957 and that the resolution passed by the Board of directors forfeiting the shares on 11-2-1957 was duly passed by a Board properly constituted and competent to pass that resolution.
The learned Judge however found that the notice dated 20-1-1957 was not a proper notice and it was defective as it did not comply with the strict requirements of the Act. The notice was vague and did not specify the amount of interest payable by the shareholder or mentioned how much was due towards the expenses that might have accrued by reason of the non-payment of the balance of share capital. The above defects, the learned Judge pointed out, would invalidate the notice. The learned Judge was therefore of opinion that the forfeiture of the shares effected by the company at its meeting dated 18-2-1957 was invalid and should be set aside. He therefore set aside the forfeiture and allowed the respondent herein to pay the call money due by them with interest thereon at six per cent per annum from 30-1-1957 and directed that, on such payment, their names should be restored in the share register and the register should be rectified accordingly. It is against this order passed on 30-4-1959 that the company has preferred the above appeals.
(10) Now the question to be considered in these appeals is whether the appellant company forfeited the shares after following strictly the procedure prescribed in the rules and articles of the company and the Act.
(11) The articles of a company generally contain provisions for the forfeiture of share for non-payment of calls or instalments. The power of forfeiting the shares is not inherent in a company. It only exists where it is given by the articles or introduced into them as it may be by a special resolution. When a power of forfeiture is provided in the articles of a company, it is like other powers of Director fiduciary and it is to be exercised for the benefit of the company. When the company forfeits the shares, the shareholder whose shares are forfeited ceases to be a member of the company. He loses the privileges and rights of the membership. The money he paid on the shares is irrecoverable. But on the other hand, he continues to remain liable to pay to the company the moneys which are due and payable by him on the date of forfeiture in respect of his shares and he becomes a qua debtor of the company. Forfeiture, being a penalty and sometime a very sever one, the greatest care should be taken to comply exactly and similarly (sic) (strictly?) with all the provisions relating to it in the articles. Any irregularity in the procedure or any departure from the rules laid down however slight will as against the company invalidate the forfeiture.
(12) Therefore, this power to forfeit is a trust, the execution of which will be scanned by the court. Where a power of forfeiture exists, it is to be treated as strictissimi juris. A very little inaccuracy in complying with conditions precedent to a forfeiture is as against the company as fatal as the greatest. It was held by the Court of appeal as early as in 1877 3 Ch. D. 687 that a forfeiture was invalid where the notice claimed interest from the date of the call, instead of from the date fixed for payment. In that case James L. J. Observed,
“It was the established rule of the court of Chancery and of the Courts of Common Law that no forfeiture of property could be made unless every condition precedent had been strictly and literally complied with. A very little inaccuracy is as fatal as the greatest.”
(13) Another noble Lord, Mellish L. J. Expressed his opinion thus :
“I think it is clear that a forfeiture of shares is, to all intents and purposes, the same thing as any other forfeiture which deprives a man of his property. The rule at common law was, that before any forfeiture can take place, all the conditions precedent must have been strictly complied with.”
(14) In the same case, another Lord Baggalley J. A., observed:
“The Legislature has though fit to impose very heavy penalties for the non-payment of calls upon shares. Not only are the shares liable to forfeiture, but the shareholder can also be sued for the unpaid calls. The Legislature has pointed out the steps which are to be taken previously to, the forfeiture, and it is essential that all these steps should be strictly followed.”
(15) In Premila Devi v. Peoples Bank or Northern India, 1939-1 Mad LJ 98 : (AIR 1938 PC 284), which was decided by the Judicial Committee, Lord Justice Romer observed as follows :
“This may seem to be somewhat technical, but in the mater of forfeiture of shares technicalities must be strictly observed, and it is not as is sometimes apt to be forgotten, merely the person whose shares are being forfeited who is entitled to insist upon the strict fulfillment of the conditions prescribed for forfeiture.”
(16) In Lakshmiah Chetti v. Adoni Electric Supply Co., Ltd., 1944-1 Mad LJ 107 : (AIR 1944 Mad 322), a Bench of this court consisting of Leach C. J., and Lakshmana Rao J., following the decision in (1877) 3 Ch D 687, held that as the notice issued by the company to the shareholder in that case did not state where the payment should be made and did not correctly state the dates on which the calls were to be met, the notice was inaccurate and bad and that the forfeiture of shares was invalid.
(17) In Halsbury’s laws of England Vol., 6, Simonds Edn. Page 266, para 552, the position in regard to forfeiture is thus summarised:
“In the matter of forfeiture of shares, technicalities must be strictly observed. Accordingly as against the company the shareholders resist forfeiture on the ground that the conditions precedent to forfeiture have not been strictly complied with…..”
(18) In Handbook of Joint Stock Companies by Gore Browne, 41 Edn, there is the following passage at page 535-536.
“When a forfeiture is about to be made the directors must see, first, that they have power to forfeit, and, secondly, that they conform very strictly to all the preliminaries prescribed by the articles… Forfeiture must be preceded by all the proper notices, contained in all the matters prescribed by the articles, and giving all the time required, but if the forfeiture is regular, the omission to inform the member, or to strike his name off the register, will not invalidate it. If the notice claiming payment claims too much, a forfeiture based on such notice will be bad; e.g., if interest is claimed from too early a date.
(19) Report R. Pennington in his book Principles of Company Law, 1955 Edn., states at page 212:
“The procedure prescribed for forfeiture must be strictly followed so that if the original call is not enforceable against the share-holder or if the notice threatening forfeiture is detective, for example, by demanding interest on the call was payable, the forfeiture will be valid.”
(20) Now bearing these principles in mind, we have to examine the notice sent by the appellant company in this case to find whether the procedure prescribed by the rule and Articles of Association of the company and the Act has been strictly complied with. It is necessary now to set out the terms of the notice.
“To
Sri Janab Member of N. I. N. T. Co., Ltd.,
Sir,
as the call amount of the balance of Rs. 25 for every share held by you remains unpaid in respect of the notice dated 3-1-1957 issued in pursuance of the resolution of the Board, I hereby issue this notice calling upon you to pay the call 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 the non-payment as mentioned above, the shares registered in you 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.
Chidambaram
Sd. A. R. Hassan Khan,
Managing director.”
20th January 1957.
(21) The notice lacks details in regard to interest claimed by the company and the amount of expenses incurred by the company the reason of non-payment of the balance of share capital. The notice does not say from which period the shareholder has to pay interest. The shareholder would have no idea of the expenses incurred by the company by reason of such non-payment of call money. It is the duty of the company to give such minute details when it was to exercise its power to forfeit the shares of a shareholder. There is no obligation or duty on the part of the shareholder to call upon the company to give particulars in regard to the payment of interest and the amount of expenses incurred by the company, when he receives notice calling upon him to pay the call money. On the other hand, the company is bound to observe strictly all the rules of procedure when issuing notice to the shareholders. Therefore learned Judge, (Ramachandra Iyer J.) was right in holding on this ground alone, that, as the notice was defective and did not contain particulars about interest and expenses, the forfeiture of the shares was invalid and should be set aside. We entirely agree with the learned Judge in the conclusion arrived at by him on this point.
(22) Mr. Vasantha Pai, learned advocate for the appellant company strenuously contended that the learned judge was in error in allowing the shareholder to raise a point which has not even been suggested or alluded in the pleadings or called to the attention of the party to the action. He referred in this connection to Order 6 Rule C.P.C., and Rule 6 of the Companies (Court) Rules, 1959 issued by the Supreme Court. We carefully looked into the pleadings in the case and we cannot say that the share-holder did not at all mention the defects in the notice issued by the company as now pleaded in court. The relevant portion of the pleading on this point is in paragraph 6(a) of the affidavit of Khader, and it is as follows :
“The steps prescribed before there can be a forfeiture have not been complied with.”
Therefore, we are not very much impressed with the objection taken by the learned counsel for the appellant-company. The matter was argued before the learned Judge by the senior counsel appearing both for the company a the shareholders. The point has been taken in the grounds of appeal and it was argued at great length once again before us. We do not think that the company is handicapped in any way as the shareholders did not raise the pleas in their pleadings specifically or at length. On the other hand, it is the duty of the company to observe strictly the formalities and technicalities while giving a statutory notice, before it could exercise its right to forfeit the shares.
(23) The next contention seriously put forth by the learned counsel for the appellant-company is that the company court has no jurisdiction to set aside the forfeiture of share validly effected by the company in an application filed by the shareholder for rectification of the share register of the company. He contends further that the resolution for effecting such forfeiture of shares was passed by the directors in a properly constituted meeting and the court has no power or jurisdiction to set aside the forfeiture. Really this is a moot point and there is no direct authority in support of such contention. But in Palmer’s Company Law, 1939 Ed., under the heading rectification of register, there is the following passage at page 452 :
“This jurisdiction is exercisable after as well as before winding up and is frequently exercised. It may be invoked by the company, or by the person aggrieved (whether a member of not) or by any member. The following are a few illustrative cases in which orders have been made where the applicant was induced to take shares by misrepresentation; where the company improperly neglected to register a transfer; where shares had been issued to the applicant as paid up without filing a contract in compliance with that is now Sec. 52 of the Act of 1948; where shares were improperly forfeited….”
(24) The learned author refers to the case of In RE Ystalyfera GA Co. 1887 WN 30, as an instance where shares were improperly forfeited and an order was passed by the court. But when we looked into the report of that case, we find that the decision is not clear on this point and is not exhaustive or instructive to afford any guidance. In the Jawahar Mills Ltd., Salem v. Mulchand and Co. Ltd., , Satyanarayana Rao J., while dealing with a similar point observed at page 97 (of Mad LJ): (at p. 576 of AIR),
“There is no decided case in the reports in which the validity of a forfeiture was canvassed in a proceeding for rectification. Palmer on Company Law (1942 Edn.) at page 110 refers to the case in 1887 WN 30 as an instance in point, but on a reference to the report the citation does not seem to be correct.”
(25) Mr. G. Vasantha Pai argues that the trial Judge should not have allowed the shareholders to raise the point at the last moment in a summary proceeding under the guise of an application under S. 155 for rectification of the share register, and should have directed the shareholder to file a regular suit in a civil court to establish their right and to get a declaration that the forfeiture effected by the company is illegal and void. IN support of his contention he relied on the following observations of K. K. Desai J., of Bombay High Court in Jayashree Shantaram Vankudre v. Rajkamal Kalamandir Private Ltd., .
“It is not however, that complicated questions of facts must be tried on a petition where remedy for action is available to a party. It appears to me that the observations made in English decision sin this connection are relevant and that where discovery and inspection are necessary and complicated question s such as forgery and fabricated documents arise for decision the summary procedure of trial by petition under S. 155 should not be allowed to be proceeded.” The learned counsel also drew our attention to the observations of Tek Chand J., of the Punjab High Court in Bhagat Singh v. Piar Bus Service Ltd.
“The object of enacting S. 38 of the Indian Companies Act of 1913 which is analogous to S. 155 of the Companies Act, 1956 was to provide a summary remedy in non-controversial matters or in matters where a quick decision was necessary in order to obviate an irreparable injury to a party. This provision was not intended for settling controversies under several heads necessitating a regular investigation. When serious disputes are involved–as in this case–the proper forum for their adjudication is a civil court.”
It is worthwhile to cite here a passage from the judgment of Swift, J., in In re Greater Britain Products Development Corporation Ltd, (1924) 40 TLR 488,
“Where it was clear that there was something to be answered and something to be investigated, the ordinary course, as far back as the court had been able to trace, had been for the Judge to dismiss the summons or motion, but to leave it open to the party to bring his action.”
In Halsbury’s Laws of England, 3rd Edn. Vol. 6, it is stated at page 218 :
“It (the application) may be motion or summons or by action commenced by writ. If the court thinks that the case, by reason of its complexity or on the ground that there are matters requiring investigation or otherwise, could more satisfactorily be dealt with by an action, the court will decline to make an order on a motion without prejudice to the right of the applicant to institute an action for rectification. An action may, without any direction by the Court, be instituted for rectification of the register, a course which should be followed where there is much complexity, or where other relief is required.”
Relying on the principles laid down in the above cases Mr. Vasantha Pai further argues that this pint should not have been decided summarily in a rectification application. According to him the question is of a complex nature and evidence has to be let in an d the point could be decided only in a proper suit brought for the purpose. We do not agree with this contention of the learned counsel. The point is very simple. The question for consideration is whether the notice issued to the shareholders contains all the minute details and particulars and whether the rules and procedure provided in the Act and the Articles of the company have been strictly complies with. No evidence need be let in. Nor do we think that the matter involved is a very complex one. The question whether a party should be referred to a separate suit or not will depend on the circumstances of each case and may be left to the discretion of the court. We think that it is unnecessary to refer the parties to a regular suit because the matter involved is a purely technical one and the question is whether the company has strictly observed all the formalities prescribed while issuing the statutory notice.
(26) On the other hand, the learned Advocate General contends that the court has got jurisdiction to set aside the forfeiture when it is not properly made by the company, in an application for rectification of the share register. He referred to S. 155(1) which is as follows:
“If (a) the name of any person-
(i)……………….
(ii) after having been entered in the register, is, without sufficient cause, omitted there from…… The person aggrieved, or any member of the company or the company may apply to the court for rectification of the register.”
The shareholder has a right to have his name placed on the register of members of the company concerned. If his name is not placed on the register, or if the shares held by him are misstated or if there is a material detect or mistake in the making of the entry on the register of members, he can apply to the company for rectification of the register and if the company fails to do so, he can apply to the court so that the court may order the company to make the necessary rectification. The question that now arises is whether a shareholder can approach the court for a rectification of the register if his shares are forfeited. By reason of the forfeiture of the shares, naturally his name would be removed from the register or, to sue the words or the provision in S. 155, his name would be omitted from the register of the company. I if the aggrieved shareholder has got sufficient cause certainly he has got a legal right to approach the court to rectify the register on the ground that the forfeiture is irregular, illegal and void.
(27) What is sufficient cause depends on the circumstances of each case. The defects i he notice such a s failure to specify the date form which interest was to run and the non-mention o expenses would make it invalid and the share-holders have got therefore sufficient cause to apply to the court for setting aside the forfeiture and for rectification of the register of the company. It is specifically mentioned in Table A, Art. 16 of Sch. I to the Companies Act, 1956, that the shareholder when he is called upon to pay the call money, he should pay the amount with interest thereon from the day appointed for payment thereof to the time of actual payment at five per cent per annum or at such lower rate, if any, as the Board may determinate. But there is no such provision in the old Act. We are inclined to agree with the learned Advocate General that the Court has got jurisdiction to decide whether the forfeiture made by the company could be set aside when the share-holder files an application for rectification of the register.
In Premila Devi’s case, 1939-1 Mad LJ 98 : (AIR 1938 PC 284) the Official Liquidator filed an application to rectify the register so as to enable him to place the appellant in that case upon the list of contributories notwithstanding the fact that in the year 1933, the directors of the bank purported to forfeit the appellants shares and removed the appellants’ names from the register of members in respect thereof. The Privy Council held that the forfeiture is bad and set aside the forfeiture made by et company and allowed the Liquidator to put the appellants in this list of contributories. This order was passed on the application filed by the liquidator. But the substance of the application was one for rectification of the register. The Judicial Committee set aside the forfeiture order in order to rectify the register of the company. Such a procedure is recognised in the courts and it is immaterial whether it is in the liquidation proceedings or in a proceeding under S. 155 of the Act.
(28) In the Jawahar Mills case, though Satyanarayana Rao J., observed that there is no decided case in the reports in which the validity of a forfeiture was canvassed in a proceeding for rectification, the learned Judge set aside the order for forfeiture on the ground that the company has not observed the principle of Strictissimi Juris. Further the words “sufficient cause” in S. 155(1)(a)(ii) may include an invalid forfeiture.
(29) We therefore hold that the court has got jurisdiction to set aside the forfeiture in an application for rectification of the register of the company and we are unable to accept the contention of the learned counsel for the appellant.
(30) The next contention raised by Mr. G. Vasantha Pai is that the shareholder should not be allowed to contend that the forfeiture is invalid, as there was considerable delay or laches on their part in coming to the court for seeking such relief. First of all, there was no pleading by the company that there were laches or considerable delay on the part of the share-holders in filing the application. On the other hand, the shareholders were always active and vigilant in protecting their shares, ever since the company decided to collect the share money from the shareholder. Immediately on receipt of the call notice, the shareholders filed an application for an injunction restraining the company from collecting the call money in pursuance of the resolution of the directors and obtained an order of stay. Subsequently, when the order of stay was vacated and when their application was dismissed, they filed the applications out of which these appeals arise for a declaration that the forfeiture made by the company is invalid and for rectification of the register.
It is impossible for us to say that the share-holders were by their conduct guilty of laches or that there was considerable delay in filing the present applications Nor has the company proved on the facts of this case that there was acquiescence or waiver on the part of the share-holders. Further, we are also not inclined to allow the company to raise the pleas of waiver, acquiescence and estoppel, especially when the company has not raised them in the pleading. The learned Counsel for the company cited a number of cases especially the mines cases in support of his proposition that, if there is considerable delay in approaching the court for setting aside the forfeiture, the shareholders should not be allowed to seek that relief. The leading case cited by the learned counsel in Clarke and Chapman v. Hart, (1858) 6 HLC 633, and our attention was invited to the following passage in the judgment at p. 656 :
“The case of mines has always been considered by a court of equity as a peculiar one. The property is of a very precarious description, fluctuating continually, sudden emergencies arising which require an instant supply of capital, and in which the faithful performance of engagements is absolutely necessary for the property and even the existence of the concern. And, therefore, where parties under those circumstances stand by and watch the progress of the adventure to see whether it is prosperous or the contrary, determining that they will intervene only in case the affairs of the mine should turn out prosperous, but determining to hold off if a different state of things should exists, courts of equity have said that those are parties how are to receive no encouragement ; that if they come to the court for relief, its doors shall be closed against them; that their conduct being inequitable, they have no right to equitable relief.”
Indeed, it has been held in the Garden Gully United Quartz Mining Co., v. Mclister, (1875) 1 AC 39 that mere laches does not disentitle the holder of shares to equitable relief against an invalid declaration of forfeiture. Sire Barness Peacock in delivering the judgment of the Privy Council observed at pp. 56.-57 as follows :
“There is no evidence sufficient to induce their Lordships to hold that the conduct of the plaintiff did amount to an abandonment of his shares, or of his interest therein, or stop him from averring that he continued to be the proprietor of them. There certainly is no evidence to justify such a conclusion with regard to his conduct subsequent to the advertisement of the 30th Mary 1869. IN this case as in that of Prendergast v. Turton, 1841-IY and CCC 98, the plaintiff’s interest was executed. In other words he had a legal interest in his shares, and did not require a declaration of trust or the assistance of a court of equity to create in him an interest in them. Mere laches would not, therefore disentitle him to equitable relief : (1858) 6 HLC 633. It was upon the ground of abandonment and not upon that of more laches that 1841-IY and C. C. C. 98 was decided.”
But we have the decision of the Supreme Courts in Sha Mulchand and Co. Ltd., v. Jawahar Mills Ltd, Salem, where Das J., observed at p. 369 : (of Mad LJ) : (at p. 101 of AIR):
“Further, what ever be the effect of mere waiver, acquiescence or laches on the part of a person on his claim to equitable remedy, to enforce his rights under an executory contract, it is quite clear, on the authorities, that mere waiver, acquiescence or laches which does not amount to an abandonment of his right or to an estoppel against him cannot disentitle that person from claiming relief in equity in respect of his executed and not merely executory interest (see per Lord Chelmsford in Clarke’s case (1858) 6 HLC 633 at p. 657.”
(31) Therefore it is clear that the company cannot now contend that there is acquiescence or waiver on the part of the shareholder or raise any plea of estoppel.
(32) Lastly Mr. Vasantha Pai placed reliance on the observations of Cranworth LC in Spackman v. Evans, (1868) 3 HL 171 at p. 186, that
“The duty of the directors when a call is made, is to compel every shareholder to pay to the company the amount due from him in respect of that call; and they are guilty of a breach of their duty to the company, if they do not take all reasonable means for enforcing that payment.”
He contends that the directors passed a valid resolution in the interest of the company to collect the balance of share money with a view to purchase a bus to replace a condemned bus and that the shareholders were given an opportunity to pay their call money, but they neglected to pay the money to the company. The shareholders are not interested in promoting the interest of the company, but, on the other hand, are very particular to retain their share for their own purposes. The company also filed an affidavit with the permission of this court stating that the shareholder have got motive to retain their shares in spite of the fact that the company offered to purchase their shares at more than the preset market value, that the shareholders are the company’s trade rivals and are operating a bus on the route in which the company i s running a service, that they are anxious to see that the company is crippled, that their intention in seeking the reliefs claimed in their application is not bona fide and that they want to retain their shares and, if possible, also corner the other shares with a view to have full control of the company ultimately.
No doubt, there are sufficient facts to show that the intention of the shareholder is not bona fide and they are acting prejudicially to the interest of the company. Their conduct in taking various proceedings against the company may of course be reprehensible. Still, in the present proceedings, we are not called upon to consider the bona fides of their applications and we have only to decide whether the forfeiture effected by the company is valid or not. The Act makes ample provisions for seeking appropriate reliefs in case of oppression (S. 397) in case of mismanagement (S. 396) and for winding up for just and equitable cause (S. 433). It is true the shareholder are succeeding in the appeals on mere technical grounds such as omission of minute details in the notice issued to them. But they are entitled to ask the court to set aside the forfeiture of their shares on the principle of strictissimi juris. We are constrained to uphold the contention of the shareholders and to set aside the forfeiture effected by the company in spite of the fact that the conduct of the share-holder is not above board.
(33) Accordingly the appeals are dismissed. But in the circumstances we direct the first respondent in the appeals to pay to the company its costs, Rs. 500. I. E., Rs. 250 in each appeal.
(34) Appeal dismissed.
