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Jayshree Shantaram Vankudre v. Rajkamal Kalamandiar Private Ltd. And Another,
Factual and Procedural Background
On 31-12-1947 the petitioner and one Shantaram (then husband and wife) floated the first respondent company as a private limited company. The petitioner was registered as a shareholder in respect of 251 ordinary shares of the first respondent company. Both the petitioner and Shantaram continued to act as directors of the first respondent company on 1-7-1955.
A deed of transfer dated 28-6-1955 (annexed as Ex. 2 to the affidavit in reply of the first respondent) bears the petitioner's signature and records transfer of the 251 ordinary shares to the second respondent. The company register as at 1-7-1955 shows these shares transferred to and registered in the name of the second respondent; the minutes of a directors' meeting dated 1-7-1955 record that the petitioner and Shantaram were present and that the transfer was accepted.
The petitioner disputes the genuineness of the minutes and the deed of transfer. She contends she was never present at the meeting of 1-7-1955 and that the minutes are fabricated to deprive her of the shares and her directorship. She denies having executed the deed of transfer (while not denying that the signature on the deed is hers), and alleges fabrication/forgery. The first respondent company, by affidavit in reply, denies these allegations.
The matter came before the Court on a petition under S. 155 of the Companies Act (summary remedy). Counsel for the first respondent argued that the summary procedure under section 155 should not be used where complicated questions (including forgery/fabrication) arise, and urged that the petitioner be referred to file a regular suit. The Court considered authorities and the parties' positions and ultimately dismissed the petition, with liberty to the petitioner to file a regular suit and specific directions on costs.
Legal Issues Presented
- Whether the summary procedure provided under S. 155 of the Companies Act is an appropriate forum to decide disputes that involve allegations of fabrication and forgery and other complicated factual questions.
- Whether, in the circumstances of this petition (dispute between the petitioner and her erstwhile husband concerning share transfer and alleged fabricated documents), the petition should be allowed to proceed or the petitioner should be referred to file a regular suit for rectification and related relief.
Arguments of the Parties
Petitioner's Arguments
- The minutes of the directors' meeting dated 1-7-1955 are fabricated and no such meeting was held.
- The deed of transfer of 28-6-1955 (Ex. 2) is a fabricated document executed for the purpose of depriving the petitioner of her shares and directorship.
- Despite the signature appearing on the deed, the petitioner contends the document is not genuine.
First Respondent's Arguments (as presented by Mr. Khambatta)
- The procedure under S. 155 of the Indian Companies Act is a summary remedy and is available to an aggrieved person; it need not be displaced in all cases.
- However, summary procedure should not be used where complicated questions requiring investigation (for example, allegations of forgery or fabrication) arise; such matters are better suited to a full action/suit.
- Counsel relied on texts (Halsbury's Laws of England, Art. 448) and referred to case law to support the proposition that a Court should decline to decide matters on summary application where complexity indicates a full action would be more appropriate.
- The first respondent denied the petitioner's allegations in the affidavit in reply.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Matheran Steam Tramway Co. v. B.N. Lang, 33 Bom LR 184 | That the Court has discretion whether to hear a petition under the Companies Act (S. 38 in that context) or to require the parties to proceed by a separate suit; summary procedure is discretionary and may be declined where an action is more appropriate, but the trial Court's discretion will not be lightly interfered with. | The Court treated this authority as demonstrating that discretion lies with the trial Court; however, on the facts before this Court it found the petition involved complicated questions (forgery/fabrication) and declined to exercise the summary remedy. The Matheran case was taken as supporting the principle that discretion exists but does not compell summary disposal in complex matters. |
| Smt. Savitadevi Jhunjhunwala v. Harinagar Sugar Mills Ltd., I.C. No. 67 of 1954 (Coyajee J., 23-3-1955) | On facts considered in that decision, Coyajee J. refused to allow a petitioner to proceed by the summary procedure under S. 38 of the Companies Act and referred the matter to a regular action. | The Court relied on this case as an example where a judge declined the summary procedure in favour of a suit, and considered it persuasive authority for the proposition that where complexity exists the petitioner should be referred to file a suit. |
Court's Reasoning and Analysis
The Court set out the competing positions and relevant authorities and proceeded by considering whether the summary procedure under S. 155 (the Companies Act provision applicable in the present matter) was appropriate in the circumstances of this petition.
The Court noted authoritative statements (cited from Halsbury's Laws of England, Art. 448) and case law indicating that:
- The summary remedy under the Companies Act is designed to be a speedier and cheaper process for rectification of registers and related relief.
- Nevertheless, where the matter is complex or there are matters requiring investigation (for example questions of forgery, fabrication, the need for discovery and inspection), the Court may decline to exercise the summary jurisdiction and instead require the parties to proceed by an ordinary action.
- The decision in Matheran Steam Tramway Co. v. B.N. Lang demonstrates that the appellate court will not lightly interfere with a trial Court's discretion to hear or to refer to a suit; however, that discretion remains for the trial Court to exercise in each case.
Applying these principles to the facts before it, the Court observed that the core disputes were between the petitioner and her erstwhile husband Shantaram and that the petition involved complicated questions of alleged fabrication and forgery of documents (the minutes and the deed of transfer). The Court considered that discovery, inspection and perhaps fuller investigation would be necessary to resolve those issues satisfactorily.
For these reasons the Court concluded that the petition was not appropriate for summary disposal under S. 155 and that the petitioner should be at liberty to institute a regular suit for the relief claimed if she so chose.
Holding and Implications
DISMISSED — The petition is dismissed.
Consequences and immediate effects on the parties:
- The petitioner is granted liberty to file a regular suit seeking the relief claimed in the petition.
- If the petitioner files a suit within four months from the date of the order, the costs of this petition will be treated as costs in that suit.
- If no suit is filed within that four-month period, the costs of this petition will be payable by the petitioner.
Broader implications: The opinion does not purport to lay down a new principle of law; it applies existing discretionary principles (as reflected in cited authorities) and confines its decision to the direct effect on the petition before the Court. No new precedent was set by this order beyond the application of well-established discretion to refuse summary procedure where complex questions (such as alleged forgery and fabrication) require full investigation.
Order signed: Petition dismissed. Costs: as stated above. Counsel certified.
On 31-12-1947, the petitioner and one Shantaram then being wife and husband floated the first respondent company as a private limited company. The petitioner was registered as a shareholder in respect of 251 ordinary shares of the 1st respondent company being the subject matter of this petition. The petitioner and the said Shantaram both continued to act as and were directors of the 1st respondent company on 1-7-1955.
2. From the deed of transfer dated 28-6-1955 a copy whereof is annexed as Ex. 2 to the affidavit in reply made on behalf of the 1st respondent company, it appears that the petitioner had signed the deed of transfer in respect of these 251 ordinary shares of the company. In the register of shares of the 1st respondent company as on 1-7-1955 these shares were transferred and registered in the name of the 2nd respondent. From the minutes of the meeting of the directors held on 1-7-1955 it appears that the petitioner and the said Shantaram were both present at the said meeting and the application for transfer of the shares from the name of the petitioner to the second respondent was resolved to be accepted and the shares were resolved to be transferred to the name of the 2nd respondent.
3. I understand from counsel that there have been disputes and differences between the petitioner and the said Shantaram from 1-7-1955. This petition appears to be one of the litigations arising in consequences of such disputes. In para 7 of the petition the petitioner has referred to a suit which she has filed against the 1st respondent company and the said Shantaram. In the written-statement in that suit the minutes of the meeting of the directors held on 1-7-1955 were referred to and annexed. It is the petitioner's case that she was never present at such meeting and that no such meeting of directors was held on 1-7-1955. The petitioner's contention is that the minutes are fabricated for the purpose of depriving the petitioner of the shares in question and of her position as a director of the 1st respondent company. The petitioner denies having at any time executed a deed of transfer of the kind which is annexed as Ex. 2 to the affidavit in reply made on behalf of the 1st respondent company; the petitioner however does not deny her signature on the deed of transfer. The petitioner's case is that the deed of transfer which bears her signature is a fabricated document. In the affidavit in reply made on behalf of the 1st respondent company all these allegations are denied.
4. Mr. Khambatta on behalf of the 1st respondent company has contended that the procedure prescribed under S. 155 of the Indian Companies Act is a summary remedy and should not be allowed to be resorted to in matters involving complicated questions such as have arisen in this petition. He contends that questions of forgery and fabrication of documents are not proper to be tried under the summary procedure of application made under section 155 of the Companies Act. He has in that connection referred me to various text-books. In Vol. VI of Halsbury's Laws of England the summary of the purport of the English decisions in this connection appears in Art. 448. The relevant observations in that article are as follows:
“The application may be made by the person aggrieved, ………. It may be by 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 x x x.”
5. Mr. Khambatta and Mr. Mody both have referred me to the case of Matheran Steam Tramway Co. v. B.N Lang, 33 Bom LR 184. In that case the trial Court in its discretion heard on merits and decided a petition made under S. 38 (which is the same as the present section 155) of the Companies Act. In the appeal Court before the Division Bench one of the contentions raised was that a complicated matter requiring trial by evidence should not have been allowed to be heard by petition and a suit should have been directed to be filed. That contention was dealt with as follows:
“It was next said that this was not a matter which could be determined under S. 38 of the Indian Companies Act and that the petitioners should be left to a separate suit, more especially as Mr. Dinshaw had threatened a suit to enforce his lien. But section 38 is widely worded. At the most it is a matter of discretion for the Court whether in any particular case it will hear the petition or leave the parties to a separate suit. An express issue was raised on this plaint, and the learned Judge exercised his discretion by deciding to hear this petition. Under those circumstances, we do not think we ought to overrule him, and force the parties to begin de novo. Mr. Dinshaw's explanation as to why he did not bring a separate suit was because it would in effect be carried on at his own expense. There is the additional circumstance that a petition under S. 38 should be a speedier and cheaper process than an ordinary suit.”
6. The effect of the above observations appear to me to be that the appeal Court was not willing to interfere with the discretion that was used by the trial Court in refusing to refer the petitioner in that matter to an action. The appeal Court also pointed out that the terms of section 38 of the Companies Act were wide and the remedy was speedier and cheaper. The matter is therefore entirely in the discretion of the trial Court.
7. Mr. Khambatta has referred me to the case of Smt. Savitadevi Jhunjhunwala v. Harinagar Sugar Mills Ltd., I.C No. 67 of 1954 decided by Coyajee J. on March 23, 1955. In that case after considering the position as arising under the decision in 33 Bom LR 184 on the facts of that case Coyajee J. refused to allow the petitioner to proceed by the summary procedure prescribed under S. 38 of the Companies Act and referred him to an action.
8. In all matters arising under the Companies Act the rules of this Court provide that the application must be by petition. It is not therefore 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 decisions in this connection are relevant and that where discovery and inspection are necessary and complicated questions such as forgery and fabricated documents arise that summary procedure of trial by petition under S. 155 should not be allowed to be produced. This is not a matter where remedy of action is not available. On the contrary it is admitted by both sides that the procedure of filing a suit for rectification is not unknown and is generally resorted to where rights of third parties are concerned. In the matter of petition before me it appears to me that the real disputes are between the petitioner and her erstwhile husband Shantaram and complicated questions of fabrication and forgery must arise. In my view this is not a petition which I should allow to proceed to a hearing. The petitioner may if she so chooses file a suit for the relief which is claimed in the petition.
9. The order which I therefore make is: the petition must stand dismissed with liberty to the petitioner if so advised to file a regular suit. Costs of this petition if the suit is filed by the petitioner within four months from to-day will be costs in the suit. In default of any suit being filed the costs of this petition will be paid by the petitioner, Counsel certified.
KC/K.S.B
Petition dismissed.
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