Banerjee, J.:— This appeal is directed against an order, dismissing an application under Order 21, Rule 90 of the Code of Civil Procedure, on the ground that applicant had no locus standi or right to apply for having the sale set aside.
2. It appears that the respondent Charu Chandra Pal obtained a money-decree against the principal-debtor Burdwan Fisheries and Industries Ltd. and the guarantor, one Somen Roy, the Managing Director of the principal-debtor Company.
3. The decree was put to execution in money-execution case No. 18 of 1955. On the 20th December, 1955, sale proclamation was ordered to issue, fixing the 15th February, 1956 for sale.
4. On the 15th February, 1956, an application, described as, “petition on behalf of the judgment-debtor,” was filed praying for adjournment of the auction-sale on the plea, that given one month's time the decree-holder would be paid up. On that application, the auction sale was adjourned till the 14th March, 1956. No payment towards satisfaction of the decree was, however, made. Thereafter, on the 14th March, 1956, the 3rd April, 1956 and the 30th April, 1956, similar applications were filed, on behalf of the judgment-debtor, each lime waiving service of fresh sale proclamation and the auction sale was adjourned from time to time, till the 21st May, 1956.
5. The repeated adjournments were taken, with the apparent object of paying up the decree holder. No payment, however, was made.
6. The auction sale was, at last, held on the 21st May, 1956, and the decree-holder, who had been permitted to bid at the sale, purchased the auction sold property at the highest Lid, namely, Rs. 6,000
7. On the 21st June, 1956, the appellant, Basanta Kumar Roy, describing himself as a shareholder of the principal judgment-debtor Company, filed an application under Order 21, Rule 90 of the Code of Civil Procedure, praying that the sale be set aside. The application was registered as Misc. Case 19 of 1956.
8. The case made by Basanta Kumar Roy was that his valuable properties had been purchased by the decree-holder, “secretly and fraudulently and in an illegal and irregular way by causing a show of auction sale”. His further case was that the attachment had not been properly made and the sale proclamation not properly published and served. He also pleaded that the decree-holder exerted influence over the guarantor judgment-debtor (the Managing Director of the principal debtor Company) and thus obtained an exparte decree. Without the knowledge of the petitioner, the decree-holder carried on fraudulent execution of the decree and purchased highly valuable property of the petitioner at a nominal price.
9. The petition was contested by the decree-holder auction purchaser. His objections, on merits, do not concern us, because the application was not heard on merits. The case was decided on a prelimnary objection raised by the decree-holder auction purchaser to the effect that the applicant, being merely a share-holder of the principal judgment-debtor company, had no locus standi to file the application for setting aside the sale.
10. The trial court gave effect to the preliminary objection, raised by the decree holder auction purchaser and dismissed the application. The trial court relied on the decision of the Supreme Court in Charanjit Lal Chowdhuri v. Union of India (1) (1950) S.C.R 869 and also on a decision of Madras High Court (2) reported in A.I.R (1955) Madras 486 (Vaidya natha v. Bank of India Ltd.), in support of the preliminary objection.
11. Mr. Apurbadhan Mukherjee learned Advocate for the appellant contended before us that the language of Order 21, Rule 90 of the Code of Civil Procedure was wide enough to include the appellant, because he should be regarded as a person whose interest was affected by the sale. Elaborating the contention Mr. Mukherjee argued that as a shareholder, the appellant was interested in the preservation of the assets of the company; if assets of the company were allowed to be sold at an inadequate price, as was alleged to have been done in the instant case, the prospect of the appellant to receive dividends and also his prospect to share in the distribution of surplus assets in the event of winding up of the company would be jeopardised. Mr. Mukherjee contended that the expression “any person whose interests are affected by the sale” was not limited to persons whose proprietary or possessory title was affected by the sale but included persons whose pecuniary interests were affected. In that view of the matter, Mr. Mukherjee submitted, that the appellant was a person whose pecuniary interest would ultimately be affected by the sale.
12. We are of opinion that there is no substance in the contention. However wide may be the meaning of the expression “any person whose interests are affected by the sale,” such person must have an existing or present interest, which is affected by the sale of the property. The existing or the present interest must be in the property which is sold. A corporator is not the corporation, which is a distinct legal person. In the assets of a corporation, its shareholders have no legal or equitable interest.
13. In the case of Maeaura v. Northern Assuranee Co. (3) [(1925) A.C 619 (626)] Lord Buckmaster observed, “No shareholder has any right to any item of property owned by the company, for he has no legal or equitable interest therein. He is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets of the company, when the company is wound up.”
14. The position of a shareholder in a limited company was also considered by the Supreme Court in the case of Bacha F. Gasdar v. Commissioner of Income Tax, Bombay (4) [(1955) S.C.A 675 (680)] Ghulam Hasan J., in delivering the judgment observed as follows: “It was argued … on the strength of an observation made by Lord Anderson in the Commissioners of Inland Revenue v. Forest (5) [(8 Tax Cases, p. 704 at 710)], that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word ‘assets’ in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis the company was explained in the Sholapur Mills Case (1) (1950) S.C.R p. 869 at 904, That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in he property of the company. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association, to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in Buckley's Companies Act (12th Ed., page 894) where the etymological meaning of dividend is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company.
15. There is nothing in the Indian law to warrant the assumption tihat a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the Articles of Association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the, assets of the company which would be left over after winding up but not in the assets as a whole as Lord Anderson puts it.”
16. The legal position of a shareholder being as hereinbefore indicated, the appellant had no interest in the auction sold property, which was adversely affected by the sale.
17. The apprehension of the appellant that on account of collusive sale of a valuable property of the company at an unconscionably low price, the company would be put to loss and though the company ultimately also the appellant, does not advance the case of the appellant in the present proceedings.
18. In order to succeed in the present proceedings he must have an existing or present interest in the auction-sold property, which he has not and cannot be deemed to have. The appellant is not, however, without a remedy. If his apprehension are well founded, he may institute proceedings under Part VI, Chapter VI of the Companies Act 1956, for appropriate reliefs.
19. The case reported in (2) A.I.R 1955 Mad. 486 (Vaidyanatha v. Indian Bank Ltd.) is almost, similar to the present case. We respectfully agree with the following observations of Balkrishna Ayyar, J. in the aforesaid case:
“A shareholder is no doubt interested in the property of the company in which he holds shares; if the property is not properly looked after and administered, the shareholder would naturally suffer in his pocket. But this does not mean that every shareholder, who apprehends that the property of the company is being mismanaged or is even fraudulently disposed of, is entitled to come to court in the manner the petitioner has done, namely, by an application under Order 21, Rule 90 of the Code of Civil Procedure.”
20. The learned Sub-judge was right in holding that the application for setting aside the sale was not maintainable.
21. This appeal is accordingly dismissed. In the circumstances of the case, we make no order as to costs.
Renupada Mukherjee, J.:— I agree.
S.K.B