{"id":175323,"date":"1994-02-15T00:00:00","date_gmt":"1994-02-14T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/shailesh-prabhudas-mehta-vs-calico-dyeing-printing-mills-ltd-on-15-february-1994"},"modified":"2015-07-18T00:49:04","modified_gmt":"2015-07-17T19:19:04","slug":"shailesh-prabhudas-mehta-vs-calico-dyeing-printing-mills-ltd-on-15-february-1994","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/shailesh-prabhudas-mehta-vs-calico-dyeing-printing-mills-ltd-on-15-february-1994","title":{"rendered":"Shailesh Prabhudas Mehta vs Calico Dyeing & Printing Mills Ltd on 15 February, 1994"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Shailesh Prabhudas Mehta vs Calico Dyeing & Printing Mills Ltd on 15 February, 1994<\/div>\n
Equivalent citations: 1994 SCC (3) 339, \t JT 1994 (1)\t671<\/div>\n
Author: K J Reddy<\/div>\n
Bench: Reddy, K. Jayachandra (J)<\/div>\n
           PETITIONER:\nSHAILESH  PRABHUDAS MEHTA\n\n\tVs.\n\nRESPONDENT:\nCALICO DYEING & PRINTING  MILLS\t LTD.\n\nDATE OF JUDGMENT15\/02\/1994\n\nBENCH:\nREDDY, K. JAYACHANDRA (J)\nBENCH:\nREDDY, K. JAYACHANDRA (J)\nRAY, G.N. (J)\n\nCITATION:\n 1994 SCC  (3) 339\t  JT 1994 (1)\t671\n 1994 SCALE  (1)624\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
The Judgment of the Court was delivered by
\nK.   JAYACHANDRA REDDY, J.- Special leave granted.\n<\/p>\n
2.   This  appeal arises out of Company Petition No.  39  of
\n1985  which was dismissed by a learned Single Judge  of\t the
\nBombay\tHigh Court by his order dated February 27, 1987\t and
\nan appeal filed against the said order was also dismissed by
\na  Division  Bench.   The order of  the\t Division  Bench  is
\nimpugned in this appeal.\n<\/p>\n
3.The appellants are the son, widow and married\t daughter
\nof  one\t late Shri Prabhudas V. Mehta who  was\tholding\t 100
\nequity\tshares of the respondent  Calico Dyeing\t &  Printing
\nMills Ltd. (‘Company’ for short) of the face value of Rs 100
\neach.  Shri Prabhudas V. Mehta died on August 26,
\n 341<\/span>
\n1974 without leaving any will.\tThe appellants are the\tonly
\nlegal heirs and representatives of Shri Prabhudas Mehta\t and
\nthey  filed  a\tcompany petition for  rectification  of\t the
\nregister  of members of the Company by deleting the name  of
\nShri  Prabhudas V. Mehta and substituting in its  place\t the
\nnames  of the appellants in respect of those 100  shares  in
\nthe Company bearing Distinctive Nos. 9101 to 9200.  Prior to
\nhis  death the deceased Shri Prabhudas V. Mehta was  holding
\nthese shares and was working as an employee of the  Company.
\nIt  appears  that there were certain disputes  between\tShri
\nPrabhudas V. Mehta and the Directors of the Company who made
\nefforts\t to purchase the said shares.  The  negotiations  in
\nthis  regard  could not be completed in view of\t the  sudden
\ndeath  of Shri Prabhudas V. Mehta.  It is also alleged\tthat
\nthe appellants entered into negotiations for sale of  shares
\nwhich\twere  carried  on  for\tseveral\t years.\t   Extensive
\ncorrespondence\t ensued\t between  the  appellants  and\t the
\nCompany.  However, as no positive reply was forthcoming\t for
\nthe transmission of shares, the appellants sent a letter  to
\nthe  Company on May 28, 1977 for transmission of shares\t and
\nfor  the notice of the annual general meeting  stating\tthat
\nthey were entitled to the same even in the absence of  their
\nnames  being taken on the register of members by  virtue  of
\nArticles of Association and the provisions of the  Companies
\nAct.   On June 27, 1977 a reminder was sent to the  Company.
\nOn  July  9, 1977 a reply was given by the  Company  stating
\ninter alia that the appellants were not entitled to exercise
\nany voting right in any of the meetings of the Company.\t  On
\nSeptember 21, 1977 the then existing Articles of Association
\nwere  replaced\tby  a new set  of  Articles  of\t Association
\nwherein new articles were introduced conferring power on the
\nCompany\t  to   reject  any  application\t for   transfer\t  or
\ntransmission  without assigning any reason in  that  behalf.
\nAccording  to  the appellants this was done mainly  with  an
\nintention   of\t defeating   the   appellants’\t rights\t  as
\nshareholders-cum-beneficiaries\tof the said shares.  In\t the
\nmonth  of March 1984 the Company closed down its  operations
\nand by arriving at a settlement with the workers  retrenched
\nall the workmen obtaining voluntary resignations from  them.
\nIt is alleged by the appellants that this was done with\t the
\nmotive\tof  making huge profits by the Directors  and  their
\nrelated\t shareholders by disposing of the plants,  machinery
\netc.   On or about June 23, 1984 the Company  requested\t the
\nappellants  to\tapproach  the Company  for  transmission  of
\nshares after obtaining the succession certificate in respect
\nof  the estate of the deceased Shri Prabhudas V. Mehta.\t  On
\nAugust\t21,  1984  the\tappellants  received  the   heirship
\ncertificate in which 100 shares were mentioned as one of the
\nassets\tstanding in the name of Shri Prabhudas V.  Mehta  in
\nthe  Company.\tOn  August 31, 1984 the\t appellants  sent  a
\nletter to the Company intimating that heirship\tcertificate-
\ncum-letter  of administration has been received by them\t and
\ntherefore the Company should give to them the details  about
\nthe  formalities  to  be complied with for  the\t purpose  of
\neffecting  the\ttransmission  of the said  shares  in  their
\nfavour.\t  On September 16, 1984 since there was no  response
\nfrom the Company a reminder was sent.  On September 19, 1984
\nthe Company requested the
\n342<\/span>
\nappellants  to\tsend  certified true copy  of  the  heirship
\ncertificate  to do the needful.\t On September 21,  1984\t the
\nappellants  addressed a letter to the Company requesting  to
\nfurnish\t the details of the procedure so as to\tcomply\twith
\nthe  prerequisites of transmission of shares.\tOn  November
\n21,  1984  the\tappellants  forwarded a\t true  copy  of\t the
\nheirship  certificate  and requested the company to  do\t the
\nneedful.   A  reminder also was sent on December  29,  1984.
\nSince there was no reply from the Company, Company  Petition
\nNo. 39 of 1985 was filed in the High Court of Bombay praying
\nfor  rectification of the register of members.\tThe  Company
\nfiled  an affidavit opposing the grant of the relief  prayed
\nfor, stating that the Directors of the Company have  decided
\nto  refuse  to\tregister the appellants as  members  of\t the
\nCompany\t in  exercise  of the  powers  conferred  under\t the
\nArticles  of  Association of the  Company.   The  appellants
\nfiled  a rejoinder.  On April 17, 1985 the Company filed  an
\nadditional  affidavit  purporting  to  enclose\ttherewith  a
\nresolution  of the Company dated April 9, 1985 by which\t the
\nBoard  of Directors declined to register the shares  of\t the
\nappellants  as\tthe  owners thereof and\t to  admit  them  as
\nmembers.  On April 17, 1985 the learned Single Judge of\t the
\nHigh  Court  dismissed\tthe  petition  on  the\tground\tthat
\nalternative  remedy was available under Section 111  of\t the
\nCompanies   Act.   Questioning\tthe  same   the\t  appellants
\npreferred  an  appeal  which  was  admitted.   Pending\t the
\ndisposal  of the appeal, the appellants took out  notice  of
\nmotion\tand  the  interim order\t was  passed  directing\t the
\nCompany\t not to dispose of its assets and that\tthe  Company
\nshould give notice of each and every general meeting to\t the
\nappellants.   The  Division  Bench  ultimately\tallowed\t the
\nappeal\tand  the  matter was remanded back  to\tthe  learned
\nSingle Judge to decide the same afresh.\t Further  affidavits
\nwere filed.  The company petition again after remand came up
\nfor hearing before the learned Single Judge and the same was
\nagain  dismissed  on the ground that the  appellants  should
\nfile either an appeal under Section 111 of the Companies Act
\nor  file a separate suit to agitate the issues\tinvolved  in
\nview  of the diverse disputes raised between the  appellants
\nand  the  Company.  Being aggrieved by the  said  order\t the
\nappellants  again filed an Appeal No. 516 of 1987.   Pending
\nthe  said appeal various applications were made for  diverse
\ninterim\t reliefs.   In respect of some of the  reliefs\tthat
\nwere  refused the appellants filed a Special Leave  Petition
\n(Civil) No. 13605 of 1988 in this Court but before the\tsame
\ncame  up for hearing, the Division Bench of the\t High  Court
\ncompleted  the hearing of the main appeal and dismissed\t the
\nappeal\ton  December  22, 1989.\t Questioning  the  same\t the
\npresent appeal is filed.\n<\/p>\n
4.The Division Bench of the High Court mainly considered two
\nquestions namely (1) whether the Board of Directors lost its
\npowers to refuse to transmit the shares to the names of\t the
\nappellants  after a lapse of two months and (2) whether\t the
\nBoard’s\t failure  to register the  transmission\t within\t the
\nperiod\tof two months and the subsequent decision  taken  on
\nApril 9, 1985 was mala fide and not taken in the interest of
\nthe  Company.\tThe Division Bench observed that  the  first
\ncontention  is\tobviously  based on the\t provisions  of\t the
\nEnglish Companies Act and cases decided thereunder and
\n 343<\/span>
\nafter referring to some decided cases held that they do\t not
\nlay  down  that on the expiry of period of  two\t months\t the
\npower would be lost and the whole question would be exercise
\nof discretion rather than any alleged loss of power and\t for
\nthat  purpose  the factual position in the case\t has  to  be
\nexamined.  Relying on Section III of the Companies Act,\t the
\nDivision Bench observed as under :\n<\/p>\n
\t      “Certainly,  if there is inaction\t beyond\t the
\n\t      period of two monts the delay, if unexplained,
\n\t      may  influence the Appellate Authority or\t the
\n\t      Court whilst considering the question  whether
\n\t      discretion has been exercised bona fide or not
\n\t      but  cannot  imply, in our  opinion,  loss  of
\n\t      power in the Board of Directors.\tIf that\t was
\n\t      to  be the consequence, then, in our  opinion,
\n\t      it was obligatory for the legislature to\thave
\n\t      provided\tthe same specifically by enacting  a
\n\t      specific deeming provision to that effect\t and
\n\t      not leaving it for argument or a fiction to be
\n\t      implied by reading of the provisions.”\n<\/p><\/blockquote>\n
Having thus disposed of the first issue, the Division  Bench
\nadverted to the second question namely whether the action of
\nthe  Directors\twas  mala fide?\t  The  Division\t Bench\talso
\nconsidered the question whether the Directors have acted  in
\nthe interest of the Company?  Having examined the  materials
\non  record  and the ratio laid down in\tseveral\t cases,\t the
\nDivision Bench ultimately held that : “It is not possible on
\nthe  material  shown to us to characterise the\tdecision  as
\ncapricious  or\tperverse  or  mala fide and  that  it  is  a
\ncommercial  decision  taken honestly by businessmen  in\t the
\ninterest of the Company and its shareholders.” The  Division
\nBench\tconcluded  that\t subject  to  the  rights   of\t the
\npetitioners to adopt such appropriate proceedings as may  be
\navailable to them, the appeal was dismissed.\n<\/p>\n
5.Shri A.M. Singhvi, learned Senior Counsel appearing for
\nthe  appellants submitted that the Company has no  power  to
\nrefuse\tregistration or transmission in absence of  specific
\nprovision  in  the Articles of\tAssociation  empowering\t the
\nCompany\t for the same and that transmission of shares is  by
\noperation  of law and was completed in 1974 itself  i.e.  on
\nthe death of Shri Prabhudas V. Mehta and that the subsequent
\namendment of Article 29 to deny registration of transmission
\nis invalid and ineffective.  His further submission is\tthat
\nin any event non-refusal within the statutory period of\t two
\nmonths\trenders such power ineffective and  exhausted.\t But
\neven  otherwise,  according  to\t the  learned  counsel,\t the
\nrefusal\t of registration by the Board was wrongful and\tmala
\nfide  exercise\tof discretion.\tShri  Ashok  Desai,  learned
\nSenior Counsel appearing for the respondent-Company, on\t the
\nother hand, submitted that there are concurrent findings  of
\nfact that the refusal was not a mala fide action and it\t was
\na  proper  exercise  of discretion in the  interest  of\t the
\nCompany\t and that the Company in the instant case is only  a
\nprivate\t company in the nature of partnership and  that\t the
\nappellants cannot force themselves to be partners.\n<\/p>\n
344<\/span><\/p>\n
6.The  first  and second submissions can  be  dealt  with
\ntogether  as they are very much based on the  provisions  of
\nthe Companies Act and Articles of Association.\tArticles  26
\nand  34\t of the Articles of Association of  the\t respondent-
\nCompany\t are relevant in this regard.  Article 26 lays\tdown
\nthat  subject  to  the\tprovisions of  Section\t111  of\t the
\nCompanies   Act,  the  Directors  may  in   their   absolute
\ndiscretion  and\t without  assigning any\t reason\t decline  to
\nregister  any  transfer of any share and  if  the  Directors
\ndecline\t to  register a transfer of any share,\tthey  shall,
\nwithin\ttwo months after the date on which the transfer\t was
\nlodged\twith  the company, send to the\ttransferee  and\t the
\ntransferor  notice  of the refusal.  Article 34\t is  to\t the
\neffect\tthat  any  person becoming entitled to\ta  share  in
\nconsequence of the death or insolvency of a member may, upon
\nsuch  evidence as may be produced and as required from\ttime
\nto  time by the Directors may elect either to be  registered
\nhimself\t as holder of the share or to make such transfer  of
\nshare  as the deceased or insolvent member could  have\tmade
\nand that the Directors shall, in either case, have the\tsame
\nright to decline or suspend registration as they would\thave
\nhad, if the deceased or insolvent member had transferred the
\nshare  before his death or insolvency.\tSection 111  of\t the
\nCompanies  Act\tgives the power to refuse  registration\t and
\nalso  provides for an appeal against such refusal.   Section
\n111(1)\tlays down that nothing in Sections 108, 109 and\t 110
\nshall prejudice any power of the Company under its  articles
\nto  refuse to register the transfer of, or the\ttransmission
\nby operation of law of the right to, any shares or  interest
\nof a member in, or debentures of, the Company.\t Sub-section
\n(2) is to the effect that if the Company refuses, whether in
\npursuance  of any power under its articles or otherwise,  to
\nregister  any  such transfer or transmission of\t rights,  it
\nshall  within  two  months  from  the  date  on\t which\t the
\ninstrument   of\t  transfer,  or\t the  intimation   of\tsuch
\ntransmission,  as  the\tcase may be, was  delivered  to\t the
\nCompany,  send notice of the refusal to the  transferee\t and
\nthe transferor.\t The later part of this sub-section reads as
\nunder :\n<\/p>\n
\t      ”\t If default is made in complying  with\tthis
\n\t      sub-section, the Company, and every officer of
\n\t      the  Company  who\t is  in\t default,  shall  be
\n\t      punishable with fine which may extend to fifty
\n\t      rupees for every day during which the  default
\n\t      continues.”\n<\/p><\/blockquote>\n
Then  sub-section  (4) provides for an appeal  against\tsuch
\nrefusal\t to  the  Central  Government.\t Relying  on   these
\nprovisions  Shri Singhvi submitted that the  appellants\t are
\nthe  persons entitled to the shares and that since a  notice
\nof intimation of refusal has to be compulsorily sent  within
\na  period of two months, it automatically follows  that\t the
\nright of refusal must be exercised within the period of\t two
\nmonths and since the Directors have not exercised this right
\nof refusal within the prescribed period of two months,\tthen
\nthe said right is lost forever and therefore the  appellants
\nget  an absolute and unrestricted right to have\t the  shares
\ntransferred  in\t their\tnames and  accordingly\tcorrect\t the
\nshares register.  In this context reliance is placed on
\n345<\/span>
\nSwaledale  Cleaners Ltd., Re’ and some of  the\tobservations
\nmade  by  Pennycuick, LJ. thereunder.  In that case  it\t was
\nheld that :\n<\/p>\n
\t      “(i)  The\t period of two months  mentioned  in
\n\t      Clause  19 of Table A under the Act  of  1929,
\n\t      and  specified  in Section 78 of\tthe  Act  of
\n\t      1948, may safely be taken as the outside limit
\n\t      after which there is unnecessary delay.\n<\/p><\/blockquote>\n
\t      (ii)The  power of veto is a  restriction\ton
\n\t      the  right of alienation and as such  must  be
\n\t      exercised at the proper time for its exercise,
\n\t      if  it  is to be exercised at all.   For\tthis
\n\t      purpose  the  proper time is the\toccasion  on
\n\t      which  the  transfers are\t placed\t before\t the
\n\t      board  for confirmation if  and it seems\tonly
\n\t      if   they\t are so placed\twithout\t unnecessary
\n\t      delay.   If  there  is  unnecessary  delay  in
\n\t      placing  the transfers before the\t board,\t the
\n\t      power  of\t veto must be regarded as  lost,  so
\n\t      that    the   right   of\t transfer    becomes
\n\t      unrestricted.   It cannot be the law that\t the
\n\t      Board  of\t a  Company  can  improperly   delay
\n\t      considering a transfer and then when driven to
\n\t      do so, as for instance here, by the  launching
\n\t      of a motion, exercise the power of veto.”
\n\t      Learned  counsel\tplaced\tstrong\treliance  on
\n\t      these observations.\n<\/p><\/blockquote>\n
\t      7.But  the observations made in this  case
\n\t      were  later considered in\t Swaledale  Cleaners
\n\t      Ltd.,  Re2 and they have been diluted  and  it
\n\t      was held by the Court of Appeal as under :
\n\t      “As to unreasonable delay, I take the view  of
\n\t      the judge (and it seems to me merely, if I may
\n\t      say  so, common sense), that, as there  is  an
\n\t      obligation on directors who refuse to register
\n\t      a\t transfer  to  inform the  persons  who\t are
\n\t      aggrieved within two months of such a refusal,
\n\t      the Act of 1948 quite clearly indicates that a
\n\t      reasonable  time,\t other things  being  equal,
\n\t      within  which  Directors must  make  up  their
\n\t      minds  either  to accept the  transfer  or  to
\n\t      refuse it must be the two months within  which
\n\t      they  have to make an answer.   Therefore,  it
\n\t      does  seem  to  me that  waiting\tfour  months
\n\t      without\tany   decision\t at   all   was\t  an
\n\t      unreasonable  delay.  One has, however, to  go
\n\t      one  step\t further than that; one has  to\t say
\n\t      that  unreasonable  delay\t has  destroyed\t the
\n\t      right so that when, in December 1967, the\t new
\n\t      board purported to refuse, they were no longer
\n\t      in  a  position to  exercise  that  discretion
\n\t      which, if they had acted promptly, undoubtedly
\n\t      would  have been theirs, to consider  and,  if
\n\t      they  thought  fit  in the  interests  of\t the
\n\t      company,\t to  refuse  registration   of\t the
\n\t      transfers.”\n<\/p><\/blockquote>\n
These  observations make it clear that the  appellate  court
\ndid  not confirm the opinion of Pennycuick, LJ. that on\t the
\nexpiry of the period of two months, the power would be lost.
\nIn this case the scope of Section 78 of the English
\n1    (1968)IAIIER1132(ChD)
\n2    (1968) 3 All ER 619 (CA)
\n346<\/span>
\nCompanies  Act was being considered and the  said  provision
\nreads as follows:\n<\/p>\n
\t      ”\t (1)  If  a company refuses  to\t register  a
\n\t      transfer\tof  any\t shares\t or  debentures\t the
\n\t      company  shall,  within two months  after\t the
\n\t      date on which the transfer was lodged with the
\n\t      company, send to the transferee notice of\t the
\n\t      refusal.”\n<\/p><\/blockquote>\n
We  find  that\tthe language of Section 78  of\tthe  English
\nCompanies  Act\tis  not\t the same  as  Section\t111  of\t our
\nCompanies  Act\tand  Section 7 8 does not  provide  for\t any
\npenalty or for any appeal.  It is necessary to note that  if
\nthe  right to refuse was to come to an end, as contended  by
\nthe learned counsel, after the expiry of two months and that
\nan  absolute right was created in favour of transferee\tthen
\nthe Legislature would have so categorically provided.\tBut,
\non the other hand, the section provides for penalty if there
\nis  failure  on\t the part of the Company  to  send  such  an
\nintimation  within two months and that itself shows that  no
\nabsolute   right  was  to  be  created\tin  favour  of\t the
\ntransferee.   Further Section 111 of the Act provides for  a
\nright  of  appeal  to  the  Central  Government\t and  if  as
\ncontended  by the learned counsel that on a mere failure  to
\nsend an intimation within two months an absolute right\tcame
\nto  be vested in transferee then the question of  transferee
\nfiling an appeal would not arise at all.  Thus this  section
\nmainly\tdeals  with  right  to\treceive\t a  notice  and\t the
\nconsequence  of\t non-sending  of such a\t notice\t results  in
\npenalty.   These provisions would go to show that  what\t was
\nintended  was to provide for a notice of refusal to be\tsent
\nand that failure thereof only resulting in levying penalty.\n<\/p>\n
8.The submission that the Company had no power to  refuse
\nregistration  of transmission of shares in the absence of  a
\nspecific  provision in the Articles of Association  is\talso
\nuntenable.   According to the learned counsel, the  Articles
\nof  Association\t at the time of death of  deceased  did\t not
\nprovide\t for  such a refusal and that even if  there  is  an
\namendment later the same cannot empower the Board to  refuse
\nthe registration of the shares.\t In our view particularly in
\nview  of  the facts of this case, the Board had\t such  power
\nwhen the registration and transfer was sought in 1984.\tEven
\notherwise   the\t facts\tshow  that  the\t  registration\t and
\ntransmission was sought only in 1984 as mentioned above.  By
\nthen the articles were amended and the Board was given power
\nto  refuse registration or transmission.  Therefore  we\t are
\nnot  able  to  see any irregularity or\tlack  of  bona\tfide
\naction,\t as contended, in bringing about  those\t amendments.
\nHowever\t we notice that before the learned Single  Judge  as
\nwell  as  before the Division Bench of the High\t Court,\t the
\nmain question urged was that of limitation of two months and
\nfor the aforesaid reasons, we are of the view that the\tHigh
\nCourt has rightly held that the right to refuse is not lost.\n<\/p>\n
9.At this stage we may refer to the factual background in
\nthe  instant  case.   Initially\t the  company  petition\t was
\ndismissed  by  the Company Judge on April 17,  1985  on\t the
\npreliminary ground.  As against that the appellants went  in
\nappeal\tand  in that appeal the order of  dismissal  of\t the
\ncompany
\n 347<\/span>
\npetition was set aside and a remand was ordered for disposal
\non  merits and that the appellate court also  permitted\t for
\nfiling further affidavits and they were in fact filed before
\nthe matter came up for rehearing before the Company Judge on
\nremand.\t  It must further be remembered that the  appellants
\nmoved the High Court even before the expiry of the period of
\ntwo months and from the dates mentioned above it can be seen
\nthat  the appellants complied with the\trequirements  namely
\nsending\t the  heirship certificate etc. only after  6  or  7
\nyears  from the date of their letter to the Company  seeking
\ntransmission.\tTherefore it has to be concluded  that\tsome
\ntime  after  November 21, 1984 when the\t appellants’  letter
\nwith  necessary\t enclosures  was received  by  the  Company,
\nnecessary  formalities to become heirs had  been  completed.
\nThe  appellants without waiting for the expiry of period  of
\ntwo  months filed the company petition on January  14,\t1985
\nfor  rectifying\t the  shares register by  bringing  them  on
\nrecord.\t  From these facts it can broadly be  accepted\tthat
\nthe power or discretion vests in the Board of Directors\t for
\ntwo  months  after  submission\tof  the\t proper\t application
\nsupported  by the necessary documents.\tHowever,  that\tdoes
\nnot  mean that right would be lost after the expiry  of\t two
\nmonths and what all that is necessary to see is whether\t the
\nBoard  has  acted  in a bona fide manner  in  rejecting\t the
\ntransmission of the shares.\n<\/p>\n
10.We  shall now therefore deal with the other\tsubmission
\nnamely whetherthe action of the Board of Directors was mala
\nfide.  In Bajaj Auto Ltd. v.N.K. Firodia3 it was laid down
\nthat  the Court can consider whether the Directors acted  in
\nthe  interest of the Company.  This case was cited  in\tLife
\nInsurance Corpn. v. Escorts4 with approval and in that\tcase
\nthe  nature  of\t the power of the  Directors  and  scope  of
\nscrutiny by the court were explained and it was observed  as
\nunder: (SCC pp. 554-55, para 12)
\n\t      “Discretion    implies   just    and    proper
\n\t      consideration of the proposal in the facts and
\n\t      circumstances of the case.  In the exercise of
\n\t      that discretion the Directors will act for the
\n\t      paramount interest of the company and for\t the
\n\t      general  interest of the shareholders  because
\n\t      the Directors are in a fiduciary position both
\n\t      towards\tthe   company  and   towards   every
\n\t      shareholder.   The  Directors  are   therefore
\n\t      required to act bona fide and not\t arbitrarily
\n\t      and not for any collateral motive.”\n<\/p>\n
Keeping\t these\tprinciples  in mind  we\t shall\texamine\t the
\nreasons\t that  weighed\twith  the  Board  of  Directors\t for
\nrefusing  transmission.\t The Board of Directors have  stated
\nin  the\t affidavits  and also appended\tthe  copies  of\t the
\nearlier\t correspondence\t including the\tproceedings  of\t the
\nmediator and the history of the disputes originally  between
\nlate  Shri  Prabhudas  V. Mehta and the\t Management  of\t the
\nCompany and subsequently between the heirs of Shri Prabhudas
\nV.  Mehta  and the Management of the Company.\tThe  learned
\nSingle Judge as well as the Division Bench have exhaustively
\nexamined  the  correspondence and the  affidavits  and\thave
\ngiven a concurrent finding that
\n3 (1970) 2 SCC 550
\n4 (1986) 1 SCC 264
\n348<\/span>
\nthere is animosity between the parties and that the decision
\nof  the\t Management  was a proper  and\tcommercial  decision
\nkeeping\t in  view  the interest of  the\t Management  of\t the
\nCompany.   Therefore  it  cannot  be  said  that  there\t was
\ndishonest  intention.\tIn any event this  is  a  concurrent
\nfinding of fact based on the affidavits and records in which
\nwe need not interfere.\n<\/p>\n
11.  We have already held that the decision of the Directors
\nwas  a\tcommercial  decision made in  the  interest  of\t the
\nManagement  of the Company.  It is also significant to\tnote
\nthat  the  appellants have only 100 shares  which  are\tonly
\ninsignificant  as  compared  to the  total  shares  and\t the
\ncontention  that the relevant articles were amended only  to
\ndefeat the rights of the appellants in respect of those\t 100
\nshares, is wholly untenable.\n<\/p>\n
12.For all these reasons, the appeal is dismissed.  In the
\ncircumstances  of  the case, there will be no  order  as  to
\ncosts.\n<\/p>\n
350<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Shailesh Prabhudas Mehta vs Calico Dyeing & Printing Mills Ltd on 15 February, 1994 Equivalent citations: 1994 SCC (3) 339, JT 1994 (1) 671 Author: K J Reddy Bench: Reddy, K. Jayachandra (J) PETITIONER: SHAILESH PRABHUDAS MEHTA Vs. RESPONDENT: CALICO DYEING & PRINTING MILLS LTD. DATE OF JUDGMENT15\/02\/1994 BENCH: REDDY, K. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-175323","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nShailesh Prabhudas Mehta vs Calico Dyeing & Printing Mills Ltd on 15 February, 1994 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/shailesh-prabhudas-mehta-vs-calico-dyeing-printing-mills-ltd-on-15-february-1994\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shailesh Prabhudas Mehta vs Calico Dyeing & Printing Mills Ltd on 15 February, 1994 - 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