# THE PUBLIC PASSENGER SERVICE LIMITED v. M. A. KHADER AND TWO OTHERS

- **Citation:** [1966] 1 S.C.R. 683
- **Court:** Supreme Court of India
- **Decided:** 1965-08-30
- **Case number:** Civil Appeal Nos. 202 and 203 of 1965
- **Bench:** K. SUBBA RAo, J. R. MuDHOLKAR, R. s. BACHAWAT
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-public-passenger-service-limited-v-m-a-khader-and-two-others-3582
- **Pages:** 6

## Headnote

Companies Act (1 of 1956), s. 155-Scope of.
c
D
The respondents were shareholders in the appellant
company.
As
they did not pay the call money on their shares, a notice under Art. 29
of the Articles of Association was issued and as the respondents defaulted
in the payment demanded, their shares were forfeited
under Art. 30.
The respondents filed a petition under ss. 402 and 237 of the Companies
Act, 1956, and obtained irrterim orders directing stay of collection of the
moneys and restraining forfeiture of the shares, before the forfeiture by
the appellant; but, as the call money was not paid into court as directed,
the interim order was vacated and the petition
was finally
dismissed.
Thereafter, the respondents filed an application under s. 155 praying that
the forfeitures may be set aside and the necessary rectifications made in
the share register.
The High Court on its original side and in Letters
Patent Appeal allowed the application, holding that the notice under Art.
29 Wa.9 defective and therefore the foreiture was invalid.
In the appeal to this Court,
HELD : The forfeiture was invalid, and therefore the names of the
respondents were omitted from the share register without sufficient cause
and the jurisdiction of the High Court under s. 155 was attracted and
E
rightly exercised. [687 BJ
F
G
H
A proper notice under Art. 29 is a condition precedent to forfeiture
under Art. 30.
The object of the notice under Art. 29 is to give the
shareholder an opportunity for payment of the call money, interest and
expenses.
In the absence of particulars of
expenses,
the respondents
were not in a position to know the precise amount which they were required to pay and that slight defect in the notice invalidated it and was
fatal to the forfeiture. [685 D-0]
Section 155 (I) (a) (ii) allows rectification of the share register if the
name of any person after having been entered in it, is without sufficient
cause, omitted therefrom.
The issue under the section is not whether
the shareholder has sufficient cause to approach the Court, but whether
his name has been omitted from the register
without sufficient cause.
[686 D; 687 Al
Where by reason of its complexity or otherwise the matter can more
conveniently be decided in a suit, the court
may refuse relief under
s. 155 and relegate the parties to a suit.
But having found summarily
that the notice V.tas defective and the forfeiture invalid, the Court could
not arbitrarily refuse relief to the respondents.
The unwarranted pro--
ceedings under ss. 402 and 237 and other vexatious proceedings started
by the respondents have no relation to the invalidity of the forfeiture
and the ·relief of rectification and were not valid grounds for refusing
relief, even if it was an equitable one. [688 B-D]

## Text

*
..
A
THE PUBLIC PASSENGER SERVICE LIMITED
v.
M. A. KHADER AND TWO OTHERS
August 30, 1965
B
[K. SUBBA RAo, J. R. MuDHOLKAR AND R. s. BACHAWAT, JJ.]
Companies Act (1 of 1956), s. 155-Scope of.
c
D
The respondents were shareholders in the appellant
company.
As
they did not pay the call money on their shares, a notice under Art. 29
of the Articles of Association was issued and as the respondents defaulted
in the payment demanded, their shares were forfeited
under Art. 30.
The respondents filed a petition under ss. 402 and 237 of the Companies
Act, 1956, and obtained irrterim orders directing stay of collection of the
moneys and restraining forfeiture of the shares, before the forfeiture by
the appellant; but, as the call money was not paid into court as directed,
the interim order was vacated and the petition
was finally
dismissed.
Thereafter, the respondents filed an application under s. 155 praying that
the forfeitures may be set aside and the necessary rectifications made in
the share register.
The High Court on its original side and in Letters
Patent Appeal allowed the application, holding that the notice under Art.
29 Wa.9 defective and therefore the foreiture was invalid.
In the appeal to this Court,
HELD : The forfeiture was invalid, and therefore the names of the
respondents were omitted from the share register without sufficient cause
and the jurisdiction of the High Court under s. 155 was attracted and
E
rightly exercised. [687 BJ
F
G
H
A proper notice under Art. 29 is a condition precedent to forfeiture
under Art. 30.
The object of the notice under Art. 29 is to give the
shareholder an opportunity for payment of the call money, interest and
expenses.
In the absence of particulars of
expenses,
the respondents
were not in a position to know the precise amount which they were required to pay and that slight defect in the notice invalidated it and was
fatal to the forfeiture. [685 D-0]
Section 155 (I) (a) (ii) allows rectification of the share register if the
name of any person after having been entered in it, is without sufficient
cause, omitted therefrom.
The issue under the section is not whether
the shareholder has sufficient cause to approach the Court, but whether
his name has been omitted from the register
without sufficient cause.
[686 D; 687 Al
Where by reason of its complexity or otherwise the matter can more
conveniently be decided in a suit, the court
may refuse relief under
s. 155 and relegate the parties to a suit.
But having found summarily
that the notice V.tas defective and the forfeiture invalid, the Court could
not arbitrarily refuse relief to the respondents.
The unwarranted pro--
ceedings under ss. 402 and 237 and other vexatious proceedings started
by the respondents have no relation to the invalidity of the forfeiture
and the ·relief of rectification and were not valid grounds for refusing
relief, even if it was an equitable one. [688 B-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
202
and 203 of 1965.
684
SUPREME COURT
REPORTS
[I 96b] l S.C.R.
Appeals from the judgment and decree dated December 21,
A
1961 of the Madras High Court in 0. S. Appeals Nos. 55 and 56
of 1959.
K. K. Venugopal and R. Gopa/akrishnan, for the appellant
,.
A. V. Viswanatlza Sastri, P. Ram Reddy and A. V. V. Nair,
B
for respondent No. I.
The Judgment of the Court was delivered by
Bachawat, J.
The appellant j, a limited Company carrying
on transport business in South Arcot District. M. A. Khader, the
contesting respondent in Civil Appeal No. 202 of 1965, holds
13 shares and his brother, M. A. Jabbar, the contesting respondent in Civil Appeal No. 203 of 1965, holds 163 shares in the
Company.
Articles 29 and 30 of the Articles of Association of
the Company read :
"29. The notice shall name a future day, not being
less than seven days from the service of the notice, on or
before which such all or other money and all interest
and expenses that may have accrued by reason of such
non-payment are to be paid and the place where payment is to be made, the place so named being either
registered office of the Company arc
usually
made
payable and shall state that in the event of non-payment
at or hefore the time and at the place appointed
the
share m respect of which such payment is due,
will be liable to be forfeited.
30. If the requisition" of any such notice as aforesaid be not complied with. any share in respect of which
such notice has been given may, at any time thereafter
before payment of all money due thereon with interest
c
D
E
F
and expense>, be forfeited by a resolution of
the.-
G
Directors to that effect."
On January 2, 1957, the board of directors of the Company
passed a resolution calling the unpaid amount of Rs. 25/-
on
each share. On January 3, 1957, a call notice was issued to the
shareholders requesting payment on or before January 19, 1957.
The call notices were duly served on the contesting respondents.
As the call monies remahed unpaid, the Company issued the
H
'
•
(
l
P. P. SERVICE v. KHADER (Bachawat J.)
6 8 !>
A following notice dated January 20, 1957
to the respondents
under Art. 29 :
B
c
D
E
"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 3rd January 1957 issued in pursuance
of the resolution of the Board, I hereby issue this notice
calling upon you to pay the called 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 non-payment as mentioned above, the shares registered in your
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
(Signed) A. R. Hassain Khan
Managing Director."
In spite of this notice, the respondents did not pay the call
monies, and on February 11, 1957, the board of directors passed
a resolution under Art. 30 forfeiting the shares held by them.
F On November 8, 1957, the respondents filed two separate applications under s. 155 of the Indian Companies Act, 1956 in the
High Court of Madras praying that the forfeitures be set aside
and the necessary rectifications be made in the share register of
the Company. Ramachandra Ayyar, J. allowed the applications,
and passed conditional orders for rectification of the register, and
G his decision was affirmed by the appellate Court.
The Courts
below held that in the absence of particulars of interest and
expenses, the notice dated January 20, 1957 was defective and
the forfeiture is invalid. The Company now appeals to this Court
by on a certificate granted by the High Court.
In all standard articles of a company, the regulations relating
H
to calls provide for payment of interest on the unpaid call money
at a certain rate from the date appointed for its payment up to
the time of actual payment, see regulation 14 of Table A in the
686
S0PREME COURT REPORTS
[1966] l S.C.R.
first Schedule tc;> the Indian Companies Act, 1913, regulation 16
of Table A in tlie-first Schedule to the Indian Companies Act,
1956 and Palmer's Company Precedents, 17th Edn., Part I, p. 437
and the ,regulations relating to calls are followed by regulations
relating to forfeiture like Arts. 29 lilld 30 of the appellant Company.
In the light of Art. 29 read with similar r_;:gμlations
relating to calls, we would have no difficulty in holding that the
notice dated January 20, 1957 required payment of interest on
the call money from the date appointed for the payment thereof, that is to say, January 19, 1957 up to the time of the actual
payment.
Unfortunately, all the regulations of the
Company
relating to payment of calls have not been printed in the paper
book, and in the present state of the record, we express
no
opinion on the question whether the notice is defective in respect
of the demand for interest.
But we agree with the High Court that the notice is defective
A
B
c
in respect of the demand for expenses. The amount of expenses
incurred by the Company by reason of the non-payment was not D
disclosed.
The respondents were not informed how much they
should pay on account· of the expenses. The object of the notice
under Art. 2.9 is to give the shareholder an opportu.nity for payment of the call money, interest and expenses. The notice under
Art. 30 must disclose to the shareholder presumably conversant
with the Articles sufficient information from which he may know
with certainty the amount which he should pay in order to !lvoid
E
the forfeiture. In the absence of particulars of the expenses, the
respondents were not in a position to know the precise amount
which they were required to pay on account of the expenses. A
proper notice under Art. 29 is a condition precedent to forfeiture
under Art. 30. Here, the notice under Art. 29 is defective, and
the condition precedent is not complied with.
The slight defect
in the notice invalidates it and is fatal to the forfeiture.
The
Courts below, therefore, rightly declared that the forfeiture was
invalid.
Section 155(1)(a)(ii) of the Indian Companies Act allows
rectification of the share register if the name of any person after
having been entered in the register is, without sufficient cause,
omitted therefrom.
There
is
no sufficient cause for the
omission of the name of the shareholder from the register, where
F
G
the omission is due to an invalid forfeiture of his shares, and on
finding that the forfeiture is invalid, the Court has ample jurisH
diction under s. 155 to order rectificat'on of the register.
The
Hi.l!h Court said that the shareholder may approach the Court
under s. 155 if he has sufficient cause. This mode of expression
..
~-
t·
I
r
r
J
&
)
P. P. SERVICE v. KHADER (Bachmvat, J.)
687
A was rightly criticised by counsel for the appellant.
The issue
under s. 155(1)(a)(ii) is not whether the shareholder
has
suflicient cause but whether his name has been omitted from the
register without sufficient cause. As the forfeiture is invalid, the
names of the respondents were omitted from the share register
without suilicient cause, and the jurisdiction of the Court under
B s. 155 is attracted.
Counsel for the appellant contended that the point as to the
invalidity of the notice dated January 20, 1957 was not open to
the respondents in the absence of any pleading on this point. In
the affidavit in support of the application, the respondents pleaded
C that the steps prescribed before there can be a forfeiture, have not
been complied with.
No further particulars were given, but the
contention as to the invalidity of the :iotice dated January 20,
1957 was pointedly raised in the argument in the first Court. The
contention was allowed to be raised without sny objection. Had
the objection been then raised, the Court might have allowed
D the respondents to file another affidavit.
The appellant cannot
now complain that the pleadings were vague.
We may now conveniently refer to certain events which
happened after January 2, 1957 when the directors resolved to
make the call and February 11, 1957 when the shares were forfeited. On January 18, 1957, M. A. Jabbar, M. A. Khadir and
E other shareholders filed Application No. 119 of 1957 in
the
Madras High Court praying for reliefs under ss. 402 and 237 of
the Indian Companies Act, 1956, and obtained an interim order
directing stay of collection of monies pursuant to the
notice
dated January 3, 1957. The stay order was communicated to
the directors on January 21, 1957 after the notice of the intended
F forfeiture dated January 20, 1957 was issued.
On
January
30. 1957, the Court passed a modified interim order restraining the forfeiture of the shares, and directed M. A. Jabbar to
pay the call money into Court within one week. The call money
was not paid into Court. and on February 8, 1957, the Court
vacated the stay order.
Application No. 119 of 1957 was evenG · tually dismissed on April 10, 1957. Counsel for the appellant
contended that (1) bv reason of the aforesaid proceedings the
respondents waived anct abandoned their right to challenge the
forfeiture: (2) the order dated Januarv 30, 1957 substituted a
fresh notice of intended forfeiture Pnder Art. 29 in lieu of the
orfofoal notice dated January 20. 1957 and in the ahsence of
H comoliance with this o•der. ·the forfeitnre is valid.
Neither of
these contentions was raised in the Courts below. We find nothing in the proceedings in Application No. 119 of 1957 from
688
SUPllJ!MJI CO'UIT
REPORTS
(1966] I S.C.R.
which we can infer a waiver or abandonment by tile respondents
of their right to challenge the validity of the notice dated January 20, 1957 and the subsequent forfeiture.
We also fail to sec
how the order of the Court dated January 30, 1957 can amount
to a notice under Art. 29.
TI1e onlv notice under Art. 29 is the
one dated January 20. 1957, and a~ that notice is ddective, the
forfeiture is invalid.
Counsel for the appellant contended that the relief
under
s. 155 is discretionary, and the Court should have refused relief in
A
B
the exercise of its discretion.
Now, where by reason of its complexity or otherwise the matter can more convenientlv be decided
in a suit, the Court may refuse relief under s. I 55 and relegate the
parties to a suit.
But the point a" to the invalidity of the notice
C
dated January 20, 1957 could well be decided summarily, and
the Courts below rightly decided to give relief in the exercise of
the d:scretionary jurisdiction under s. 155.
!-ia;·iag, found
that
th~ notice was defective and the forfeiture was in•:alid, the Court
could not arbitrarily refuse rc!ief to the respondents.
Counsel for the appellant points out that the respondents are
the trade rivals of the appellant and are anxious to cripple its affairs,
and the appellate Courc recorded the finding that the respondents
were acting ma/a fide and prejudicially to the interests of the
appc!J:mt and their condi:ct in laking various proceedings against
the appeliant is rcprehcnsihlc.
Counsel then relied upon
the
well-known maxim of equity that "he who comes into
equity
must come with cle~n hand,". and contencfcd that the
Court.~
below should have dismiso;ed the application' as the respondents
did not come with cl~:in hands. This contention must be rejected
for several reasons.
The respondents are not seeking equitable
relief against forfeiture.
They arc asserting ~heir lc~al right to
the ':haccs on the gro!ind that the forfeiture is invalid, and they
continue to he the legal owners of the share<.
Secondly,
the
maxim does not mean- that every improper conduct of the applicant discntitles h!m to equitable relief.
The maxim may
be
invoked \\·here the coric.luct con1plaincd of is unfair and unjust
in rc'ation to the subject-matter of the litigation and the equity
sued for.
The unwarranted proceedings under ss. 402 and 237
of the Indian Companies Act. 1956 and other vexatious proceedin~< started hy the respondents ha,·e no relation to the invalidity
of the forfeiture and the relief of rectification and are not valid
.~rounds for refusin'.! relief.
In the result. the appeals arc Jismissed.
There will be no
order as to costs.
Appeals dismissed.
D
E
G
H
·,