Holding

The Court held that the share transfers and the subsequent issue and allotment of additional shares were invalid due to non‑compliance with Section 108 and the Articles of Association, and that a petition under Section 155 could not grant rectification but could award compensation.

Summary

The appellant, a beneficiary of a trust, claimed a pre‑emptive right under Article 57‑A of the company's Articles of Association to purchase 3,417 and 93 shares held by joint executors, but the executors sold those shares to a third‑party group without complying with the Articles or Section 108 of the Companies Act. The appellant also challenged the issuance and allotment of 17,666 new shares to the same third‑party group, alleging violations of the Articles, Section 188 and the notice requirements of Articles 93 and 94. The Supreme Court examined whether a petition under Section 155 could be used to rectify the register of members and whether the alleged violations could be cured by ratification. It held that the transfers were invalid because the required notices and signatures under the Articles and Section 108 were missing, and that the share‑capital increase was ultra vires due to defective notice and non‑compliance with the Articles. The Court concluded that rectification of the register could not be granted, but the appellant was entitled to compensation, and the appeals were dismissed.

Issues considered

The jurisdiction and maintainability of a petition under Section 155 of the Companies Act for rectification of the register of members.
Whether the transfer of 3,417 and 93 shares to a third‑party group violated Section 108 and the Articles of Association, rendering the transfer invalid.
Whether the issue and allotment of 17,666 shares to the third‑party group complied with the Articles, Section 188 and the notice requirements of Articles 93 and 94.
Whether the violations of Section 108 and the Articles could be cured by ratification by the Board of Directors.
Whether compensation could be awarded in lieu of rectification under Section 155.

Legislation cited

Companies Act, 1956s. 100, s. 101, s. 102, s. 103, s. 104, s. 108, s. 155, s. 173, s. 188, s. 36, s. 402, s. 81
Sale of Goods Act, 1930s. 10(1), s. 32, s. 9(1)
Transfer of Property Act, 1882s. 51, s. 52

Subjects

pre‑emptive rightshare transferSection 108Section 155Companies Act 1956Articles of Associationshare allotmentrectification of registercompensationultra viresratificationnotice requirementsspecial resolution

Judgment

- SMT. CLAUDE-LILA PARULEKAR
v.
MIS. SAKAL PAPERS PVT. LTD. AND ORS.
A

MARCH l 8, 2005

[RUMA PAL AND P. VENKATARAMA REDDI, JJ.] B

Companies Act, 1956-Sections 36, 108, 155 and 188:

Company Shares-Transfer, issue and allotment of-Joint shares and
shares of two of the shareholders-Transfer of-By 3 of the 4 shareholders- C
To third party skipping the hierarchy ofpurchasers of shares provided under
Artir:les ofAssociation of Company-Despite acceptance of offer made to first
category ofpurchasers-Validity oftransfer-By virtue ofthe transfer ofshares,
third party got majority of shares-Issue of increased share capital by the
third party-Without compliance ofArticles ofAssociation and Section 188 of D
the Act-Allotment of the same in favour of the third party-Validity of issue
and allotment of increased share capital-Held : The transfer of the shares to
third party was invalid being violative of Articles of Association of Company
and Section 108 of the Act-The transfer was in breach of concluded contract
between the transferors and the first category of purchasers~The issue and
allotment of the shares in favour of third party was invalid being without E
compliance of the Articles of Association and Section 188-In view of the
facts of the case the relief of rectification cannot be granted-Hence
compensation awarded-Sale of Goods Act, 1930-Section 9(1)-Transfer of
Property Act, 1882.

Section 108-Provision under-Nature of-Held : It is mandatory- F
Non-compliance of the same is not a technicality.

Section 155-Petition under-Challenging transfer of shares, issue of
increased share capital and allotments of the same to third party-Seeking
rectification of Register of Members-Maintainability of-Held : Maintainable. G

Appellant's father and her mother 'S' promoted respondent No. 1
company. Appellant's father died after executing a will and appointing
'S' and respondent Nos. 2 to 4 as Executors thereof. The will empowered
the Executors, inter alia, to sell the properties vested in them by the Will
10~ H
1064 SUPREME COURT REPORTS [2005] 2 S.C.R.

A and invest the same as the Executors and the Trustees thought fit. All the
four executors were entered in the register of members of the Company
as joint shareholders of 3417 shares of the Company held by the Appellants
father. Respondent Nos. 2 and 3 also had 93 shares of the compa~y.

The Articles of Association of the Respondent-Company gave the
B hierarchy of the persons entitled to purchase the shares upon transfer.
First right is a preemptive right under Article 57 A claimed by the
appellants, second is 'any member who is willing to purchase' the shares
at a fair value as given under Article 58 r/w Article 64, third is a 'person/
persons selected by Directors as being desirable in the interest of the
C Company to admit to membership, and the last category is 'person to
whom the transferor may choose to sell the shares'.

Respondent Nos. 3 and 4 offered to sell 93 shares to 'S' or her
nominee under Article 57 A at a price of Rs. 2250 per share. In ttie letter
written by them to 'S' it was stated that if she was not agreeable to pay
D the price the letter would be treated as notice to the Directors calling upon
them to fix the price under Article 61; that if she was not agreeable to
pay the price the letter would be treated as notice to the Directors calling
upon them to fix the price under Article 61; and that if she would not
exercise her right und~r Article 57-A, or not willing to pay the price or
not willing to complete the transaction in accordance with .\rticle 61,
E respondent Nos. 3 and 4 would be free to sell the shares to any other person
in accordance with the Articles of the Company. In a Board meeting
attended by two of the four executors, one of the executors was authorized
to sell the sliares. The request of 'S' to adjourn the meeting due to her
illness was not accepted by the respondent-executors on the ground that
F she would be given notice under Article 57-A. In the meeting, in respect
of 93 shares it was resolved to offer the same to the other members of the
Company subject to the preemptive right of 'S'. In respect of 3417 shares
it was resolved that if 'S' did not exercise her rights or did not pay the
price fixed under Article 61, then the Executors could sell them to any
other person/persons for the price of Rs. 2250 per share. Executors gave
G the notice to 'S' in respect of the shares. Company also gave notice to all
the shareholders to indicate whether they w_ere willing to purchase the
shares subject to right of 'S' under Article 57-A.

'S' and Appellant wrote a letter that 'S' was agreeable to buy 3417
shares by herself/or her nominee (her daughter-appellant) and agreeable
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT.LTD. } 065

to pay the price as certified by the Auditors of the Company as stipulated A
in Article 57-A. After draft certificate by the Auditor, 'S' demanded the
copies of the documents submitted by the Company to the Auditors. But
without heeding to the request, Auditors straightway issued certificate
certifying the price of the 93 shares as Rs. 2,10,273 and of the 3417 shares
as Rs. 77,25,837. Respondents 3 and 4 called upon 'S' to pay the certified '
amount in respect of 93 shares within a stipulated time, failing which they B
would dispose of the shares as they thought fit.

'S' and the appellant protested the certification. Without prejudice
to their protest they were willing to deposit an amount of Rs. 20 lacs as
an earnest of their bonafides to purchase the shares. C'
Two suits were filed by the appellant and 'S' in 1985 praying for
permanent injunction to restrain the respondents from selling the shares
contrary to the concluded contract with them. The suits were rejected.

The shares were then sold to respondent No. 5 and his group. A D
notice was issued by the Board of Directors to hold a meeting. Request of
'S' and the appellant to adjourn the meeting was not heeded to. At the
meeting despite there being no item in agenda, a resolution was passed to
register the transfer of the shares to respondent No. 5 and his group, and
respondent No. 5 was appointed as an Additional Director of the Company

• together with another member of his group.

Thereafter the appellant and 'S' wrote to respondent Nos. 2 to 4
saying that they were willing to purchase the shares at the price fixed by
E

the Auditors, in answer to which the respondents told that the shares h.<.1d
already been sold.
F
In an Annual General Meeting, it was resolved to immediately issue
increased share capital of Rs. 17,66,600of17,666 shares of Rs. 100 each.
The same were allotted to respondent No. 5 and his group.

'S' and appellant filed application under Section 155 of Companies
Act, 1956, challenging transfer of 3417 and 93 shares and issue and G
allotment of 17,666 shares in the name of respondent No. 5 and his group.
Single Judge of High Court held that the transfer of 3417 shares was made
contrary to the appellants right of preemption under Article 57-A and in
violation of Section 108 of Companies and of Articles of Association of
the Company. It was also held that the issue and allotment of 17,666 shares H
1066 SUPREME COURT REPORTS [2005) 2 S.C.R.

A was invalid. However, it set aside the transfer of shares conditional upon
the appellants depositing a particular sum in the Court As regards 17,666
shares, it was directed that they should be allotted to such persons at such
price as the Board of Directors may decide. The Company was directed
to pay back Respondent No. 5 and his group Rs. 17,66, 600 in respect of
B the 17,666 shares.

The appellants as well as the respondents filed appeals. In the
meanwhile in 1988 appellants filed two suits against respondents seeking
specific performance of the contracts of sale of3417 and 93 shares to them.
--
,.'

Alternatively they sought for damages by way of compensation of Rs. 4
C crores. The suits are pending.

Division Bench of High Court dismissing the appeal of the appellants
and allowing that of the respondents, held that violation of Section 108
was mere irregularity which was curable; that transfer of3417 shares had
been validly made and that although there was irregularity in issuing the
D 17,666 shares, the same had been cured by the subsequent ratification of
the decision. Hence the present appeals.

Disposing of the appeals the Court

HELD: 1.1. The Court exercising juris<liction under Section 155 of
the Companies Act was competent to entertain the applications filed by
E the appellants. Even assuming that the decision is wrong and that
jurisdiction of~he Company Court under S. 155 and the Civil Court under
Section 9 CPC is concurrent, there is no reason to refuse to entertain the
application under Section 155. The fact that the matter has been awaiting
disposal by the Courts at the different levels for almost 18 years would
F render it grossly inequitable and be an improper exercise of judicial
discretion if the appellants are turned away at this stage to pursue an
alternative remedy (if any) available under the general law. (1080-A-E]

Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers
Pvt. Ltd and Ors., (19981 7 SCC 105 and Canara Bank v. Nuclear Power
G Corporation of India Ltd. pnd Ors., JT (1995) 3 SC 42, referred to.

1.2. The power of the Court under Section 155 is limited to the
rectification of the register of members of a Company in three situations
(a) when the name of a person is wrongly entered in such register (b) when
the name of a person, whose name having been entered in the register is
H omitted therefrom and (c) when default is made in entering the name of
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. } 067

any person who has already become or who has ceased to be a member. A
None of the three situations envisaged under sub-section (I) of Section 155
would allow the person whose right as a member qua the disputed shares
is yet to be established to apply for rectification by inclusion of such
person's name. The appellants could not have applied for transfer of the
disputed shares in their favour under Section 155 of the Companies Act. :a
They would have to establish that right by way of a separate suit or
otherwise. In the present case, there was no prayer for transfer of the
disputed shares to the appellants. The only prayers related to the
cancellation of the impugned transfers and rectification of the Register
of Members of the Company. (1077-F-H; 1078-A)

1.3. If there is any issue in the suit which was required to be and
c
has been determined in the Company Petition, the effect of that
determination would no doubt be the subject matter of consideration in
the suits that are pending. But the possibility of overlapping of such issues
does not preclude the filing of the suits by the appellants. (1079-G)

2.1. There was a concluded contract which was breached by the
D
respondent Nos. 2, 3 and 4 when they purported to sell their shares to
respondent No. 5 and his Group. (1095-E)

2.2. Section 36 of the Act, makes the Memorandum and Articles of
Company, when registered, binding not only on the Company but also the E
members inter-se to the same extent as if they had been signed by the
Company and by each member and covenanted to by the Company and
each shareholder to observe all the provisions of the Memorandum and
of the Articles. The Articles of Association constitute a contract not merely
between the shareholders and the Company but between the individual
shareholders also. The Articles are a source of powers of the Directors F
who can as a result exercise only those powers conferred by the Articles
in accordance therewith. Any action referable to the Articles and contrary
thereto would be ultra vires. (1084-D-E)

Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd.,
(1971) 1 sec 50, 107 and H.P. Gupta v. Heera Lal, (1970) 1 sec 437, G
referred to.

2.3. In the present case, the entire transaction of sale is riddled with
illegalities. The notices issued in respect of the 93 and 3417 shares were
not in keeping with the Articles as far as Articles 58 to 63 were concerned.
Notices to willing members or to selected persons under Article 58 must H
1068 SUPREME COURT REPORTS (2005] 2 S.C.R.

A succeed and not precede the actual operation of Article 57-A. The notices
issued by the respondent Nos. 2, 3 and 4 also did not constitute the
Directors as the transferor's agents for the purposes of selling the shares
in terms of Article 59. There was, in the circumstances, no question of the
transferors selling their shares to any 3rd party under Article 63 unless
B proper notice had been issued to the 2nd and 3rd category of persons if
any. There was also no question of the transferor invoking Article 61
bypassing the right of a willing member or selectee, if any, to negotiate a
fair price. (1092-G-H; 1093-A)

2.4. If the notices could be combined notices under Article 57-A and
C Article 58, then the appellants' acceptance of the offer as made in the
notices should also be construed as a combined assent under both the
Articles. Whatever offer was made whether under Article 57-A or under
Article 58 by the two notices, that offer was accepted by the appellant
And upon such acceptance, there was a concluded. contract between the
respondent Nos. 2, 3 and 4 on the one hand and the second appellant on
D the other. [1093-C-D-E-F]
2.5. It cannot be said that a contract could not be said to be concluded
until the price was in fact paid. The legal consequence of a concluded
contract will remain irrespective of how a particular party in a given
situation might abuse the rights flowing from it. It is platitudinous that
E the possibility of abuse of a right cannot determine whether the right exists
as a matter of law. (1094-G~H]

Sudbrook Trading Estate ltd. v. Eggleton and Ors., (1982] 3 All ER 1,
64, referred to.

p 2.6. Article 57-A does not by itself indicate when the contract is
concluded between the offeror and offeree. Having regard to Section 9(1)
of Sale of Goods Act, 1930, it can be concluded that with the a~ceptance
of the offers of the respondent Nos. 2, 3 and 4 by the appellants, the
contract to purchase the shares under STA was concluded. 11094-A-B)

G 2. 7. If the notices issued by the respondent Nos. 2, 3, and 4 were not
under Article 58, then it was not open to the respondent Nos. 2, 3 and 4
to have sold the shares to the Group of respondent No. 5 without issuing --4,

such notices. Hence irrespective of whether there was a concluded contract
between the appellants and the respondent Nos. 2, 3 and 4 in respect of
the 3417 and 93 shares, the shares could not have been sold to the Group.
fl 11095-E-Fl
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. l 069

2.8. There was also no repudiation of the contract by the appellants. A
Facts of the case do not show that the appellants were renouncing the
contract nor that they were absolutely refusing to perform th~ contract.
It may be that they were mistaken in their challenge to the Auditors' ,
Certificate, but that is a long way from saying that they were unwilling
to pay. The challenge to the certification may be taken as a method of , B
negotiating a fair value under Article 58. Be that as it may, the appellants
in fact accepted the price as certified by the auditors on 1st October, 1985.
(1096-B; 1997-D; 1098-DI

Freeth v. Burr (Lord Coleridge, CJ. (1874-80), All ER 753 and Sweet
and Maxwell Ltd. v. Universal News Services Ltd., (1964) QBD 699 (CA) 179, C
referred to.

2.9. The stand of the respondent Nos. 2, 3 and 4 with regard to the
disqualification of 'S' as a purchaser of the shares under Article 57-A is
wholly inconsistent with their conduct ante /item. The matter was referred
to the company's auditors in purported compliance with Article 57-A D
Certification of the price was made by the auditors also under that Article.
The notice of the respondent Nos. 2, 3 and 4 calling upon the appellants
to pay the certified price was also under Article 57-A. [1103-D-E)

- 2.10. As there was no time fixed either under Article 57-A or in the
offer letters, the question of time being of the essence did not at all arise E
and it was not open to a party to unilaterally stipulate a time and then
cancel the contract because of an alleged failure of the other party to act
within the time stipulated. [1096-D-F)

S.C. Gomathinayagam Pillai v. Palaniswami Nadar, AIR (1967) SC 868,
relied on. F
National Co-operative Sugar Mills Ltd., Alanganallur v. Mis. Albert and
Co., AIR (1981) MAD 172 (D.B.), referred to.

2.11. Compliance with the provisions of Section 108 was and is
mandatory. Before the sale of the 3417 shares was made to the Group of G
Respondent No. 5 by the Executors, it was abundantly clear from the
conduct of 'S' (i) that she had revoked consent she may have given qua
Executor and Trustee to the sale of the 3417 shares to third parties and
(ii) that the appellants were desirous of purchasing the shares themselves
in whatever capacity. Executors' resolution authorizing one of them to H
1070 SUPREME COURT REPORTS (2005] 2 S.C.R.

A effect the transfer of the shares could not override the provisions of Section
108 of the Companies Act. It would be of no consequence as far as Section
108 is concerned to exclude the reluctant share holder on the ground that
the share holder had refused to execute the form. The remedy of the other
joint share holders to compel the reluctant share holder to sign the transfer
B form would lie elsewhere and not in a breach of the requirement of Section
108 of the Companies Act. [1098-D; 1099-D; 1100-EI

Manna/al Khetan v. Kedar Nath Khetan and Ors., (19771 2 SCC 424;
Jarnail Singh v. Bakshi Singh, (1960130 C.C. 192 and L. Janakirama Iyer v.
P.M Ni/kanta Iyer and Ors., (19621 Supp.I SCR 206, referred to.
c Barton v. London and North Western Railway Co., (1889) 24 QRD 77
(CA), referred to.

Halsbury's Law of England, 4th edn.Vol.7 para 1632 and Palmers
Company Law, 24th Edn. Pg.63, referred to.
D 2.12. The instruments of transfer had admittedly been improperly
executed. It was therefore not lawful for the company to register the
transfer. The principle that a Court will not interfere in the affairs of the
company if the defect complained of can be cured would apply ifthe defect
is a technicality and is curable. The non-compliance of Section 108 is not
E a technicality. [1100-G-HI

2.13. The Division Bench erred in holding that the violation of Section
108 was ratified at the Board Meeting. Ratification is possible in respect
of an act which is incompetent, by a person who would have been
competent to do such act. The violation of Section 108 could not be ratified
F by the Board of Directors as the act was one which the Board was
incompetent to allow. The Board of Directors never had the legal capacity
to direct the registration of shares invalidly transferred. (1101-GJ

2.14. Under Sections 51 and 52 of the Transfer of Property Act, 1882
a trustee may not use or deal with trust property for his own profit or
G any other purpose in connection with the trust. And no trustee whose duty
it is to sell trust property may directly or indirectly buy the same or any
interest therein, on his own account or through his agent or third person.
Article 57-A does not envisage 'S' purchasing the shares through her
nominee. One of her rights under Article 57-A was no doubt to purchase
H the shares herself. But she could also nominate any other person to
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. 1071

purchase the shares. The transferor then would have to make an offer to A
such other person who would then, independently of 'S', be entitled to a
transfer of the shares. In the latter case there is no question of any conflict
of interest between 'S' in her capacity as trustee under the Will and as a
nominator under Article 57-A. Here, 'S' was not purchasing the shares.
It is true that she could have done so in exercise of her preemptive right B
under Article 57-A, but she did not and only nominated her daughter as
the person to whom shares should be sold. [1102-C-D-E-F]

3.1. The increase in issuance of share capital does not fall within the
exceptions carved out in Article 94 as not being special business. Article
94 reflects the substance of Section 173 of the companies Act, 1956 and it C
was, therefore, incumbent for notice to be given not only indicating the
issuance of the share capital as a special item of business but also giving .
a statement setting out all material facts relating thereto. The violation of .
Article 94 by the company is patent and the Annual General Meeting is
to the extent of the violation vitiated thereby. [1105-F-G]
D
LIC v. Escorts, (1986) 1 SCC 246, referred to.

Pacific Coast Coal Mines Ltd. v. Arbuthnot and Ors., (1917) AC 607
·~ PC Baillie v. Oriental Telephone and Electric Company Ltd., (1915) 1
Ch.D.503 (CA), referred to.
E
3.2. Section 188 of the Act provides that a meeting could be
requisitioned by the prescribed number of members, after notice ·or any
resolution which may properly be moved and is intended to be moved at
a meeting together with a statement with respect to the matter referred
to in any proposed resolution. It is clear from the Articles that compliance
with Section 188 was in addition to the requirements with the other parts F
of Article 94 which admittedly have not been complied with.
(1106-G; 1107-B]

3.3. As the sale of 3417 and 93 share to the Group of Respondent
No. 5 was bad, the Group did not legally have the majority to push through G
the decision to increase the share capital or to allot the further shares to
themselves. Besides, the majority cannot be permitted to ride rough sh.od
over the provisions of the Articles and the Companies Act merely because
they could if they so desired follow the proper procedure. The haste with
which the Group sought to ensure their position in the company is evident
from the fact that a Board Meeting was held immediately after the Annual H
1072 SUPREME COURT REPORTS [2005] 2 S.C.R.

A General Meeting at which the Board resolved to issue the additional 17,666
shares at par to the Group. There was no notice given of the Board meeting
at all. (1107-E-G]

3.4. Increase of share capital is dealt with in Articles 14 and 15. No
offer was made by notice in writing in terms of this Article. The fresh
B shares were allotted on the day they were issued before the expiry of 15
days without waiting for the expiry of the period. The allocation of shares
to the Group contrary to this Article was invalid. [1108-F]

3.5. The Respondent Company was bound to offer the further shares
C on a fresh issue of capital to the existing equity share holders in proportion
to the capital paid up on the shares at that date.[1107-H]

4. Although the logical conclusion of findings of the Court would be
to set aside the transfers and restore the status quo ante, but in view of a
sea change in the factual scenario aµd weighing in the balance the
D i:omparative advantages and disadvantages of granting the appellant the
relief of rectification, it would not be appropriate at this stage to exercise
discretion to grant the relief of rectification. However, the fact remains
that the appellant has been wronged and she is entitled to be compensated ..
Section 155 of the Companies Act, allows the giving of damages in addition
to or in lieu of rectification. The ends of justice would be met by directing
E that the appellant should be compensated with an amount of Rs. 3 crores
to be paid by the Company to the appellant in full and final settlement of
the appellant's claims in respect of the 3417 and 93 shares. Additionally,
the company will also allot shares to the appellant out of the 17,666 shares
on par proportionate with the appellant's present share holding. The
F appellant is at present employed by the company and is also a Director of
the company. The appellant shall continue in this capacity for the
appellant's life time. [1111-B-C)

Needle Industries (India) Ltd v. Needle Industries (Newey) India Holding
Ltd., [1981] 3 SCC 333, relied on.
G
CIVIL APPELIATE JURISDICTION : Civil Appeal Nos. 698-700 of
1995.

From the Judgment and Order dated 30.4.91/2.5.91 of the Bombay
High Court in A. Nos. 742, 711 and 1214 of 1998.
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.) 1073

Manoj Goel, Shuvodeep Roy and Wajeeh Shafiq for Ms. Suruchi A!
Agarwal for the Appellant

F.S. Nariman, K.K. Venugopal, Ashok H. Desai, P.H. Parekh, Sandeep
Parekh, Arun Francis, Sumit Goel, Anip Sachthey, Shriniwas R.Khalap, E.
Vanu Kumar and Harshad V.Hameed, with them for the Respondents.
B
The Judgment of the Court was delivered by

RUMA PAL, J. In 1933 Dr. N. B. Parulekar and his wife Shanta,
started a Newspaper called Sakal. In 1948, Dr. Parulekar and Shanta promoted
a company known as M/s. Sakal Papers Pvt. Limited, which is the respondent C
No. 1 and is referred to hereafter as 'the company". Dr. Parulekar died in
1973. Shanta died during the pendency of the appeal before this Court. The
appeal which is now being prosecuted by the daughter of Dr. Parulekar and
Shanta, arises out of proceedings initiated by Shanta and the appellant under
Section 155 (as it stood in 1986) of the Companies Act, 1956 (referred to
hereafter as 'the Act') in_ the Bombay High Court. D'
The appellant was brought on record as Shanta's only legal heir and
representative. As Shanta was alive during the proceedings before the High
Court, to avoid unnecessary verbiage, the appellant and Shanta are referred
to hereafter as 'the appellants'.
E
One of the matters in dispute in this appeal relates to the transfer of
3417 shares in the company belonging to the estate of late Dr. Parulekar by
three of the four executors of the will of Dr. Parulekar. The executors named
in the will were Shanta, the respondent No. 2, the respondent No. 3 and the
respondent No. 4. There is also a challenge to the transfer of 93 shares by F
the respondent Nos. 3 and 4 in the company. The basis of the claim of the
appellant and Shanta with regard to the 3417 and 93 shares was the failure
to allow the appellants to exercise their undisputed right of preemption in
respect of the shares. The ~econd branch of the appellants' grievance pertains
. to the issue and allotment of 17,666 shares of the company. The beneficiary
of these transfers/allotments is the respondent No. 5 and his group represented
by the respondents Nos. 6 to 16 (hereafter referred to collectively as the
Pawar Group). According to all the respondents briefly speaking, the appellants
were precluded from exercising any right of preemption and had in any event
failed to exercise their right of preemption in respect of the 3417 and 93
shares. As far as the issue of 17 ,666 shares are concerned it is submitted that H
1074 SUPREME COURT REPORTS [2005] 2 S.C.R.

A it was validly done and the allotment of the shares was duly made to the
Pawar group.

The learned Single Judge held that the transfer of the 3417 shares was
made contrary to the appellants rights of preemption. He also held that the
transfers had been made in violation of the provisions of the Section 108 of
B the Companies Act, 1956 and the Articles of Association of the Company. It
was held that the respondent No. 5 and his group were not bonafide purchasers
of the shares as they were aware of the preemptive right of the appellants to
the shares. On the issue and allotment of 17,666 shares the Trial Court held
that they were invalid. Having effectively held in favour of the appellants on
C merits, the Trial Court did not set aside the transfer of the 3417 and 93 shares
but set aside the transfer of 3417 and 93 shares to the respondent No. 5 and
his group conditional upon the appellants depositing a sum or Rs. 80, 73,000
in the Court within a period of six weeks. As far as the 17 ,666 shares were
concerned, it was directed that they should be allotted to such persons or
D persons at such price as the Board of Directors may decide. The Company
was directed to pay back the Pawar group a sum of Rs. 17,66,600 in respect
of the 17,666 shares. It was then said that in the event the appellants did not
deposit a sum of Rs. 79,86,110 within six weeks the entire petition filed by
the appellants would stand dismissed. The appellants filed an appeal from
this order in so far as it was made conditional on the deposit of the sum of .
E Rs. 79,86, 110. They also filed an application for extension of time for
....._
'

depositing the amount in terms of the Trial Court's order before the Trial
Court. The application was dismissed.

In the meanwhile the Appellants filed two suits being CS 225 and 226
F of 1988 before the Court in Pune against the respondents seeking specific
performance of the contracts of sale of 3417 and 93 shares to them.
Alternatively for damages by way of compensation of Rs. 3 Crore or 4
Crore? The suits are pending. Also between the decision of the single Judge
and the filing of the appeal by the appellants, the company became a Public
Limited Company by virtue of Section 43A of the Act.
G
At the time of admissiqn of the appeal an interim order had been
passed by the Division Bench on 21st December, 1989 directing that pending
disposal of the appeal, the appellants' right of preemption was not to be
disturbed and the company was directed not to issue or invite any fresh
H· capital.
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT.LTD. [RUMA PAL, J.] 1075
The appeal filed by the appellants against the Judgment and order of A
the learned Single Judge as also cross appeals filed by the respondents were
heard and disposed of by a common judgment. The Division Bench dismissed
the appellants' appeal and allowed the cross appeals filed by the respondents
holding inter alia that the violation of S.108 was a mere irregularity which
was curable, that the sale of 3417 shares had been validly made to the Pawar
group and that although there was some irregularity in issuing the 17,666 B
shares, the irregularity had been cured by the subsequent ratification of the
decision. At the instance of the appellants the interim order passed by the
High Court on 21st December, 1989 was directed to continue for 8 weeks.

Before the eight weeks expired, the appellants filed the pre.sent appeal C
and an interim order was granted on 16th September, 199 l in terms of the
order passed by the High Court on 21st December, 1989. That interim order
is operating till today. The matter has been pending before this Court since
1991 and has been heard in part by different Benches from time to time.
Efforts for an amicable settlement were not fruitful. In the meantime several
of the parties including Shanta died. The applications for substitution were D
allowed.

The respondents have raised a preliminary objection questioning the
entertainment of the appellant's application under Section 155 of the Act in
the first place. It is submitted that complex questions of fact were involved
and the ordinary procedure of a civil suit as opposed to the summary remedy E
available under Section 155 was more appropriate. This was more so because
not only had the appellant and Shanta reserved their right to file a suit for
transfer of the disputed shares to them in the Section 155 application they
had in fact filed suits being CS No. 225 of 1988 and 226 of 1988 before the
Courts in Pune claiming specific performance of the contract alleged to be p
existing in favour of the appellants for transfer of the 3417 and 93 shares. It
is submitted that the issues involved in the Civil Suits and the proceedings
under S. 155 overlapped in so far as the 3417 shares are concerned and that
this appeal should be considered only with regard to the challenge to the
issuance and allotment of the 17,666 shares.
G
The appellants have submitted that they had no alternative but to file
the Company Petition for rectification of the company's Register of Members
by deleting the names of the respondents No. 5 and his group under Section
155 of the Companies Act. Reliance has been placed on the decision of this
Court in the case of Ammonia Supplies Corporation (P) ltd v. Modern H
1076 SUPREME COURT REPORTS [2005] 2 S.C.R.

A Plastic Containers Pvt. Ltd. and Ors., [ 1998] 7 SCC I05 in which this Court
said that :-

"So far as exercising of power for rectification within its field there
could be no doubt the court as referred under Section 155 read with
Section 2(11) and Section IO, it is the Company Court alone which
B has exclusive jurisdiction''.

It is also submitted that even if the jurisdiction under Section 155 was
not exclusive and the Company Court had concurrent jurisdiction with Civil
Courts, this Court should not relegate the appellants to the alternative remedy
of a Civil Suit having regard to the facts of this case, especially, the pend ency
C of the matter before the different Courts from 1986. ·

The Trial Court had rejected the preliminary objection and held that it
was open to the parties to choose any one of the remedies available to such
party and that the remedy under Section 155 of the Companies Act was
D equally "efficacious, definitely more speedy and certainly appropriate". The
Division Bench did not go into the issue having held in favour of the
respondents on the merits.

Section 155 of the Act (as it stood in 1986) provided inter a/ia as
follows : -
E S.155, Power of Court to rectify register of members- If-
(a) the name of any person-

(i) is without sufficient cause, entered in the register of members
of a company, or
F
(ii) after having been entered in the register is, without sufficient
cause, omitted therefrom; or

(b) default is made, or unnecessary delay takes place, in
entering on the register the fact of any person having become,
or ceased to be, a member, the person aggrieved, or any
G
member of the company, or the company, may apply to the
Court for rectification of the register.

(2) The Court may either reject the application or order rectification
of the register, and. in the latter case, may direct the company to
H pay the damages, if any, sustained by any party aggrieved.
CLAUDE-LILA PARULEKAR ''·SAKAL PAPERS PVT. LTD. [RUMA PAL, J) 1077
In either case, the Court in its discretion may make such order as to A
costs as it th inks fit.

(3) On an application under this section, the Court-

(a) may decide any question relating to the title of any person
who is a party to the application to have his name entered B
in or omitted from the register, whether the question arises
between members or alleged members, or between members
or alleged members on the one hand and the company on
the other hand; and

(b) generally, may decide any question which it is necessary C
or expedient to decide in connection with the application for
rectification.

(4) From any order passed by the Court on the application, or on any
issue raised therein and tried separately, an appeal shall lie on the
ground mentioned in Section 100 of the Code of Civil Procedure D
1908 (V of 1908)-
(a) if the order be passed by a District Court, to the High
Court;

(b) ifthe orders be passed by a single Judge ofa High Court
consisting of three or more Judges, to, a Bench of that High E
Court.

(5) The provisions of sub-sections (1) to (4) shall apply in relation to
the rectification of the register of debenture-holders as they apply
in relation to the rectification of the register of members".
F
The power of the Court under Section 155 is limited to the rectification
of the register of members of a Company in three situations (a) when the
name of a person is wrongly entered in such register (b) when the name of
a person, whose name having been entered in the register is omitted therefrom
and (3) when default is made in entering the name of any person who has
already become or who has ceased to be a member. None of the three situations G
envisaged under sub-section (1) of Section 155 would allow the person whose
right as a member qua the disputed shares is yet to be established to apply
for rectification by inclusion of such person's name. The appellants could
not, therefore have applied for transfer of the disputed shares in their favour
under Section 155 of the Companies Act. They would have to establish that H
1078 SUPREME COURT REPORTS [2005] 2 S.C.R.

A right by way of a separate suit or otherwise. The appellants in paragraph 26
of the Company Petition correctly reserved their right to file appropriate
action for transfer of the 3,417 shares to themselves.

The relevant prayers in the appellants Company Petition 476/86 were
as.follows : -
B
"(a) That this Hon'ble Coui'Fbe pleased to order the rectification of
the Register of Members of the 1st respondent Company and
order that the names of Respondent Nos. 5, 6, 8, 11, 12, 13 and
14 be removed from the Register of Members of the 1st
Respondent Company in respect of 3,417 shares belonging to the
c estate of Dr. N.R Parulekar and 93 shares belonging to the 2nd
Respondent;
(b) That this Hon'ble Court be pleased to order rectification of the
Register of Members of the I st Respondent Company and do
order that the names of Respondent Nos. 11, 12, 13, 15 and ·16
D be removed from the Register of Members of the I st Respondent
Company in respect of 17,666 shares;
(c) That Respondent Nos. 5, 6, 8, 11, 12, 13 and 14 be ordered and
directed by a mandatory order and injunction of this Hon 'hie
Court to deliver up to the I st respondent the share certificates in
E respect of the said 3417 shares and 93 shares for removal of their
names there from;
(d) That the Respondent Nos. 11, 12, 13, 15 and 16 be ordered and
mandatory injunction of this Hon'ble Court to deliver up to the
I st Respondent the share certificates held by them in respect of
F 17,666 shares allotted on 16.11.1985 to the I st Respondent for
cancellation";
. .

As had been noted by the learned Single Judge, there was no prayer for
transfer of the disputed shares to the appellants. The only prayers related to
the cancellation of the impugned transfers and the rectification of the Register
G of Members of the Company by removal of the names of the Respondent 5
and his group.

The prayers in the appellants' suits pending in Pune are inter alia as
follows :

H "(a) that this Hon'ble Court be pleased to declare that there is a valid
CLAUDE-LILA PARULEKAR '"SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] J 079

and subsisting contract entered into between the Plaintiffs, on the A
one hand and the Defendants 2, 3 and 4 on the other for the sale
by the Defendants 2, 3 and 4 and purchase by the Plaintiffs of
3417 shares of the I st Defendants bearing distinctive numbers
more particularly described in Exhibit ' - '

(b) that the Defendants 2, 3 and 4 be directed to specifically perform B
the said contract by executing the necessary Transfer Forms and
doing all other acts necessary to effectually carry out the said
transfer;
(c) that the lst Defendant be directed to register the said shares upon
such transfer under prayer (b) in favour of the 2nd Plaintiffs; C
(d) that in the alternative to prayer (b) above, the Defendants 2, 3 and
4 be ordered and decreed by this Hon'ble Court be pay to the
Plaintiffs a sum of Rs. 3 Crores or such other sum as this Hon 'ble
Court may determine as damages for breach of the .contract.''

Similar prayers were made in respect of the 93 shares. Clearly the D'
reliefs prayed for in the Company Petition were different from for the reliefs
claimed in the Civil Suits filed by the appeHants. The Civil Suits arose out

-
of and were consequent upon the findings of the learned single Judge on the
petition under Section 155 that there was a concluded contract between the
holders of the 3417 and 93 shares and the appellants for transfer of those E
shares to the appellants.

The learned single Judge correctly held that

"This suit was necessary as even ifthe Petitioners had m:i'laged
to deposit the amount and got an order of rectification of the register p
in their favour, there was still no order of any Court which directed
the respondents to deliver these shares to the peti!ioners' '.

If there is any issue in the suit which was required to be and has been
determined in the Company Petition, the effect of that determination would
no doubt be the subject matter of consideration by the Civil Judge, Pune, G
before whom the suits are pending. But the possibility of overlapping of such
issues does not preclude the filing of the suits by the appellants. The appellants
advisedly did not pray for the transfer and registration of the disputed shares
in their favour in the proceedings under Section 155. They could not have
done so.
H
1080 SUPREME COURT REPORTS [2005] 2 S.C.R.

A That the Court exercising jurisdiction under Section 155 of the
Companies Act was competent to entertain the applications filed by the
appellants cannot be disputed. The only question is whether the discretion to
do so was proper!)' exercised. Despite the respondents' submissions to the
contrary, we do not consider this case as an appropriate one to decide whether
this Court's decision in Ammonia Supplies Corporation (supra) was correct
B in so far as it has held that the jurisdiction to grant relief provided under
Section 155 was exclusive. It may be noted that the view has been reiterated
by a larger Bench in Canara Bank v. Nuclear Power Corporation of India
ltd and Ors., JT (1995) 3 SC 42 para 31. But assuming that the decision is
wrong and that jurisdiction of the Company Court under S. 155 of the
C Companies Act and the Civil Court under Section 9 of the Code of Civil
Procedure is concurrent, there is no reason for us to refuse to entertain the
application under Section 155 of the Companies Act. The questions raised in
the petition for rectification were determined on the basis of the material
-
available both by the Single and the Division Bench. Neither of the Courts
were of the view that the materials were inadequate or that the disputes were
D such which could not be resolved under Section 155. Apart from any other
circumstance, the fact that the matter has been awaiting disposal by the
Courts at the different levels for almost 18 years would render it grossly
inequitable and be an improper exercise of judicial discretion if we were to
tum the appellants away at this stage to pursue an alternative remedy (if any)
E available under the general law. The preliminary objection rai~ed by the
respondents is accordingly rejected.

Moving to the merits of the appeals the various issues raised relate to
the appellants' right to purchase the disputed shares; the transfer of 3417 and
93 shares and the issue and transfer of 17,666 shares.
F
I. I. The preemptive right which is being claimed by the appellants
arises from Article 57A of the Articles of Association of the
Company. The right i~ admitted by the respondents, but as the
extent of the right is in dispute, it is quoted verbatim.

"57-A. In the event of any member of Company desires
G
to transfer his shares he shall be bound to offer the same
either to Dr. N.B. Parulekar or to Madame Shanta Parulekar
or such other person or persons as Dr. N. B. Parulekar or
Madame Shanta Parulekar m·ay direct or may nominate and
in which event the transferee or transferees shall pay such
H price as may be certified by the Auditors of the Company."
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] l 08 l
1.2. Analysed, the right contains four elements which are cumulative: A
(i) the desire of any member to sell his shares.

(ii) the offer by such member of the shares to Dr. Parulekar or
to Shanta or to their nominee.

(iii) the certification of the price by the Auditors of the Company. B
(iv) The payment of such price by the Transferee/transferees.

1.3. The other relevant Articles are Articles 58 to 64. All these articles
are under a group entitled "Transfer and transmission of shares".
Article 57-A is the first of the group. The remaining articles read C
as under : -
58. Subject to Cl.57 A no shares shall be transferred so long as any
member or any person selected by the Directors as one to whom
it is desirable in the interest of the Company to admit to
membership, is willing to purchase the same at the fair value as D
mentioned herein below.: ,;;-_

59. Except where the transfer is made pursuant to Article 58 here of,
the person proposing to transfer any share shall give notice in
writing to the Company that-he- desires to transfer the same. Such
notice shall constitute the Directors his agents for the sale of the E
share to any member or persons selected as aforesaid, at a fair
value to be agreed upon between the Transferor and the purchaser
and in default of such agreement to be fixed by the Auditors of
the Company. The notice may include several shares and in such
· case shall operate as if it were a separate notice in respect of each
share. The notice shall not be revocable except with the Sanction F
of the Directors.

60. If the Directors, shall, within the space of 30 days after being
served with the Transfer Notice, find a purchasing member or a
person selected as aforesaid willing to purchase the share and
shall give notice thereof to the proposing transferor, he shall be G
bound upon payment of the fair value fixed as aforesaid to transfer
the shares to the purchaser.

61. In case any differences arises between the Transferor and the
Purchaser as to the fair value of a share, the Auditors of the
Company shall certify in writing the sum which in their opinion H
1082 SUPREME COURT REPORTS (2005] 2 S.C.R.

A is the fair value and the same be binding on the transferor and the
purchase. Provided however that the Auditors so certifying shall
not be considered to be acting as Arbitrators and the Indian
Arbitration Act 1940 shall not apply. The Auditor shall be
considered to be acting as an expert.

B 62. If in case the proposing transferor, after having become bound as
aforesaid, makes default in transferring the share, the Directors
may receive the purchase money and shall there upon cause the
name of the purchaser to be entered in the Register as the holder
of the share and shall hold the purchase money in trust for the
Transferor. The Directors may appoint any person to execute a
c transfer of the said share on behalf of the defaulting transferor.
The receipt of the Directors for the purchase money shall be a
good discharge to the purchaser and after his name has been
entered in the Register in purported exercise of the aforesaid
power the validity of the transfer shall not be questioned by any
D person.

63. If the Directors, shall not, within the time prescribed as aforesaid
after being served with the Notice, find a purchasing member or
select a person as aforesaid willing to purchase the shares or any
of them and give notice in manner aforesaid, the transferor shall
E at any time within 30 days thereafter be at liberty subject to
Article 65 thereof to sell and transfer the shares to any person and
at any price.
64. Every share specified in the Notice given pursuant to the Article
59 hereof shall be offered to the members in such order as shall
be detennined by the Directors and in such manner as the Directors
F
think fit. If no member is ready and willing to take up such shares
the same may be offered to any person selected by the Directors
as one to whom it is desirable in the interest of the company to
admit to its membership''.
/. 4.1. The Articles give the hierarchy of the persons entitled to purchase
G
shares upon transfer. The first right is given to the preemptors
under Article 57-A. Next in the hierarchy is any member who is
willing to purchase the shares at a fair value. This follows from
a reading of Article 58 with Article 64. The third category is of
any person or persons selected by the Directors as being desirable
H in the interest of the company to admit to membership. The last
CLAUDE-LILA PARULEKAR '"SAKAL PAPERS PVT. LTD. [RUMA PAL. J.] } 083

category is the person to whom the transferor may choose to sell A
the shares. As long as there is any person in a higher category,
there is no question of sale or purchase by a person in a lower
category. Thus for example the right of a member or a person in
the 2nd category to purchase shares can arise only in the event
there is a default or refusal on the part of the preemptor and so B
on. A person may fall .within any one or more of these four
categories and would, by virtue of these articles have distinct and
separate rights to purchase the shares in each of the four categories.
So even if a preemptor or .a nominee of a preemptor does not
exercise his/her right under Article 57-A to purchase the shares
at a price certified by the company's Auditors, such person may ,C
choose to exercise the right as an ordinary member and purchase
the share at a fair value or the transferor may choose to sell the
shares to such person under Article 63.
1.4.2. In the case of a transfer to a person in the 2nd and 3rd categories
of putative purchasers, the Directors are appointed agents of the D
transferor. The notice of transfer is required to constitute the
Directors as the transferor's agents. This notice is distinct from
the other required to be given under Article 57-A. In respect of
these two categories, the price of the shares is at first to be
negotiated with the transferor. It is only in the case of a default E
in such agreement being reached that the company's Auditors
step in and fix a "fair price". The third distinctive feature of
these two categories is that upon refusal/default of the preemptor,
the transferor is required to give a notice in writing of his desire
to transfer. Giving of this notice must necessarily be subsequent
to the failure of Article 57-A for whatever reason, as the Directors F
are required to find a willing person either in the 2nd and if not
the 3rd category within a period of 30 days. There is no time
limit specified for the completion of the preemptive transfer under
Article 57-A. Therefore unless the transferor gives a separate
notice of the failure of Article 57-A how would a willing member G
know whether he/she has a right or when the period fixed for
intimating their willingness to purchase was to lapse? Article 60
also requires the Directors to give a notice to the transferor after
finding. a willing purchasing member or selectee under Article
58. Giving of this notice is important because if 30 days expires
without such notice by the Directors, Article 63 would come into H
1084 SUPREME COURT REPORTS (2005] 2 S.C.R.

A play and the transferor would be at liberty to sell the shares to
any person and at any price, albeit also within a period of 30 days
from the expiry of the first period of 30 days. It follows that a
notice issued prior to the preemptor exercising or failing to exercise
the right under Article 57-A would not be in keeping with Articles
59 and 60 as this would .make the period of 30 days uncertain if
B not illusory. Thus the notice by the transferor under Article 58
must succeed the factual failure of Article 57-A and notice, if
any, under Article 60 must follow the failure of Article 58.
1.4.3. Assuming there is a willing purchaser under Article 58, there is
no time limit fixed either for the parties to arrive at a negotiated
c price or for the Auditor to fix a fair value. But Article 63 indicates
that the entire transaction envisaged by Articles 59, 60, 61 and 62
would have to be completed within a period of 60 days after
Article 57-A failed to operate.
1.4.4. Section 36 of the Companies Act, 1956 makes the Memorandum
D and Articles of Company, when registered, binding not only on
the company but also the members inter-se to the same extent as
if they had been signed by the company and by each member and
covenanted to by the company and each shareholder to observe
all the provisions of the Memorandum and of the Articles. The
E Articles of Association constitute a contract not merely between
the shareholders and the company but between the individual
shareholders also. The Articles are a source of powers of the
Directors who can as a result exercise only those powers conferred
by the Articles in accordance therewith. Any action referable to
the Articles and contrary thereto would be ultra vires.
F
1.4.5. Thus in Hunter v. Hunter, (1936) AC 222, the shareholders in
a private company challenged the transfer of shares by another
shareholder to 3rd parties without compliance with the provisions
of Articles of Association. In terms of the articles a member
could not transfer his shares until he had given notice to the
G Secretary offering to sell the shares at a price to be fixed by the
auditor and until the Secretary had offered them to the other
members. It was found that in violation of this article, one of the
shareholders had sold the shares to nominees of a bank from
which that shareholder had obtained loans. The application for
rectification of the share register was resisted by the purchaser in
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1085

whose favour the shares had already been registered with the A
company. The House of Lords came to the conclusion that the
purchas~ was not in terms of the Article and that the transfer in
violation of the Articles was inoperative.

1.4.6. A similar situation arose in the case Lyle and Scott Ltd. Scott's
Trustee, [ 1959] 2 All ER 66 l. There was a similar article which B
provided for inter alia the preemptive right in the existing
shareholders to purchase shares. There was no dispute that the
article had been violated.

"The purpose of the Article is plain : to prevent. sales
of shares to strangers so long as other members of the C
appellant company are willing to buy them at a price
prescribed by the Article. And this is a perfectly legitimate
restriction by the Article. And this is a perfectly legitimate
restriction in a private company". (p.667)

The House of Lords was of the view that the Article would have to be D
complied with in order to effect a valid transfer. [See : Naresh Chandra
Sanyal v. Calcutta Stock Exchange Association ltd, [1971] l SCC 50, 107;
H.P. Gupta v. Heera Lal, [1970] l SCC 437, 440 and 441]. With this prefatory
statement of the relevant Jaw we may now look at the facts.

II Facts E
II. 1. The narration of facts starts with the will of Dr. Parulekar by
which he appointed the four Executors, viz. Shanta and the
respondents 2, 3 and 4 as Executors and Trustees of the will. The
will inter alia empowered the Executors and Trustees to sell or
to postpone the sale from time to time of all the properties vested F
in them by the will for payment of estate duty and to invest the
same as the Executors and Trustees thought fit. After providing
for specific legacies, the Executors and Trustees were directed to
hold the rest and residue of the estate on trust (I) for the spread
of education through newspapers, magazines and periodicals (2) G
for effecting improvement of the quality and standard of journalism
and training of personnel in journalism (3) for purchase of shares
of concerns, firms, companies or from persons or persons interested
in or concerned with newspapers, n:iagazines, periodicals and
otherwise in journalism (4) for publication of books and literature
for masses at low and reasonable prices, and (5) for such other H
1086 SUPREME COURT REPORTS (2005] 2 S.C.R.

A objects and acts that may be necessary to bring about improvement
of information amongst the masses and also which may be
incidental or conducive to the above objects. The trust was to be
known as "Sakal Papers Trust". Although the probate of the will
had been granted in 1975 to the four Executors and all four of
them had been entered in the register of members of the company
B as joint shareholders of the 3417 shares belonging to the estate of
late Dr. Parulekar on 26.4.1977, no steps were taken by the
Executors to convert the shares into money till 1984.
11.2. It is the claim of the respondent Nos. 2, 3 and 4 that in 1984 a
company by the name of Mis. Jain Plastic Pvt. Ltd. offered to
c purchase the 341 7 and 93 shares at a price of Rs. 2250 per share~
The offer is not on record. What is on record is a letter dated
I 0.11.1984 written by the respondents Nos. 3 and 4 as the holders
of 93 shares to Shanta as well as the Board of Directors of the
Company offering to sell those shares to Shanta or her nominee
D under Article 57-A. at a price of Rs. 2250 per share. The letter
further stated that in the event Shanta was not agreeable to pay
the price, the letter should be treated as notice to the Directors
within the meaning of Article 57-A to Article 61 who were called

E
upon to take steps to get the price fixed under Article 61. It was
further stated that if Shanta did not exercise her rights under
Article 57-A or was not willing to pay the price or not willing to
complete the transactions in accordance with Article 61, then the
respondent Nos. 3 and 4 would be free to sell the shares to any
-
other person in accordance with Articles of the company. Article
61, as we have already seen, pertains to the valuation of shares
F when a shareholder expresses his or her willingness to purchase
the shares.
11.3. On 27.1 l.1984 the Board of Directors resolved that the 93 shares
held by the respondent Nos. 3 and 4 should be offered to the
other members of the company subject to the preemptive right of
Shanta under Article 57-A.
G
//.4. A~ far as the 3417 shares are concerned, a similar resolution was
taken that if Shanta did not exercise her rights or did not pay the
shares at a price fixed under Article 61 then the Executors could
sell the shares to any other person or persons for the price of Rs.
2250 per share. It was also resolved that any one of the Executors
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] l 087
was authorized to implement the resolution and also to take steps A
to execute the transfer forms and complete the transaction.
11.5. Notice was given on 29.11.1984 by the Executors to Shanta with.
the respondent No. 2 signing on behalf of all the Executors. The ·
contents of the notice are materially the same as the notice given ·
by the respondent Nos. 3 and 4 in respect of the 93 shares. The B
company similarly issued a notice to all share holders to indicate
whether they were willing to purchase the shares subject to
Shanta's right under Article 57-A.

II. 6. On 14.12.1984 the appellants wrote a letter accepting the offer to
sell the 3417 shares. The letter stated that Shanta was agreeable C
to buy the shares by herself/or her nominee and that her nominee
was her daughter, now the sole appellant. Shanta stated that she
was agreeable to pay such price as may be certified by the Auditors
of the company as stipulated in Article 57-A. A copy of the letter
was sent by Shanta to the Board of Directors and countersigned D
by her daughter signifying her assent.
II. 7. The Company's Chartered Accountant gave notice to Shanta on
20.1.1985 stating that he had received several documents from
the company pertaining to the valuation of the shares. A list of
such documents was given. Shanta was also called upon to submit E ..
any documents that she may desire in that connection within
seven days. Shanta asked for an extension of time to submit such
information. This was granted by the Auditors upto 20.2.1985.
By a letter dated 20.2.1985 Shanta called upon the Auditors to
submit a draft report and draft certificate within seven days in F
order to enable her to make her submissions in respect thereof.
By a letter written on the next date, Shanta asked for copies of
the documents submitted by the Company to the Auditors. There
was no response to either of these letters by the Auditors who
straightaway issued a certificate on 21.2.1985 certifying that the
price of the 93 shares was Rs. 2, 10,273 and of the 3417 shares G
Rs. 77,25,837.

11.8. The respondent Nos. 3 and 4 then wrote to Shanta on the same
date calling upon Shanta to pay the sum of Rs. 2, I 0,273 in respect
of 93 shares on or before 2.3.1985 "time being of the essence"
failing which they would dispose of the shares in such manner as H
1088 SUPREME COURT REPORTS [2005) 2 S.C.R.

A they thought fit.
11.9. In the meanwhile, the appellants had protested against the
certification to the Auditors both with regard to the procedure
followed as well as the value certified. The allegation against the
Auditors was that the valuation had been fixed collusively and
B was not just, fair or reasonable according to the recognized
principfos of valuation. The appellants called upon the Auditor to
fix a fair valuation after giving the appellants a proper opportunity
of being heard. They also wrote to the respondents Nos. 3 and 4
contending that there was no question of time being of the essence
c either under Article 57-A or under the offer letters. It was alleged
that the stipulation of time could not be imposed unilaterally.
They also stated that the time fixed was unreasonable and that in
any event the certificate issued by the Auditor could not be treated
as a final certificate. It was also stated that there was a final and
concluded contract between the parties ·for the purchase of the
D said shares. Without prejudice to all that was stated and also
without prejudice to their legal rights to take actions relating to
the Certificate dated 21.2.1985 issued by the Auditors, the
appellants wrote :
...
E
"We are willing to deposit with any stakeholders of our
mutual choice an amount of Rs. twenty lacs as an earnest of
- \

our bonafides and genuine desire to purchase the said shares.
The said amount will be paid to the stakeholders within
three days from the receipt of your confirmation that you are
ready and willing to accept this interim arrangement. The
F stakeholder shall hold these monies until such time, but not
later than one month within which we hope the Company's
Auditors will submit a just, fair and impartial Certificate and
it will be accepted by us. In case a just, fair and impartial
Certificate is not issued by the Company's Auditors, within
the said period, then the stakeholder shall return the said
G monies to us without any objection immediately on a written
demand by us".

The appellant also protested against the threat held out in the letter
dated 21.2.1985, to sell the shares to third parties.
H
- CLAUDE-LILA PARULEKAR "·SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] l 089

II. JO. In response to this letter a telegram was sent by respondent No.
3 stating "Will communicate action nothing in your letter deemed
as admitted".
A

II. I 1. On 2.3 .1985 and 1.4.1985 two suits were filed by the appellants
before the Civil Judge, Pune praying for a permanent injunction
to restrain the respondents Nos. 2, 3 and 4 from selling the shares B'
contrary to the concluded contract with the appellants. The suits
were rejected on 5.8. l 985 by the Civil Judge on the application
of the respondents Nos. 2, 3 and 4 on the ground that the subject
matter involved in the suit was outside the pecuniary jurisdiction
of the Court.
c
II. I 2. According to the respondents, the 3417 and 93 shares were then
sold to the respondent No. 5 and his group on 9.9.1985. There is
no record when the offer of the respondent No. 5 or his group
had been made either to respondent Nos. 3 or 4 or to the Executors
prior to the sale nor of any further notice being given in respect
DI
of the sale of the shares to the respondent No. 5 and his group to
the appellant.

II. 13. On 16.9.1985 a notice was issued by the Board of Directors of
the Company that a meeting would be held on 21.9.1985. The
appellants' claim that the notice was given by a telegram late in
the night on 16.9.1985. On the next date, the appellants sent a E
telegram to the Company protesting against holding the meeting
of the Board of Directors at such short notice and requesting for
postponement. This was followed by a letter dated 21.9.1985
written by the appellants. The day before the meeting was held,
on 20.9.1985, the respondent No. 5 and his group lodged transfer F
fonns in respect of the 3417 and 93 shares with the company.
The request of the appellant for adjournment of meeting was not
heeded to and the meeting was held on 21. 9 .1985 as scheduled.
At the meeting, despite there being no item in the agenda relating
to the registration of the shares sold, a resolution wq,s passed to
register the transfer of the 3417 equity shares standing in the G ,
name of the four Executors as well as the 93 shares to the
respondent No. 5 and his group which included the respondent
Nos. 11 to 16, all private limited companies. The respondent No.
5 himself was appointed as an Additional Director of the Company
together with another member of the respondent No. S's group. H
A
1090 SUPREME COURT REPORTS [2005) 2 S.C.R.

The respondent No. 2 was appointed as a Chairman upon the
retirement of the respondent No. 3.
-
11.14. On I. I 0.1985 the appellant wrote to the respondent Nos. 2, 3
and 4 stating that they were willing to purchase the shares at the C'
price fixed by the Company's Auditors and would pay the same
B immediately upon the modalities for such payment being intimated.
No reason was put forward for this volte face by the appellant in
response to this letter, two letters dated 2.10.1985 and 3.10.1985
were written by respondent No. 2 on behalf of the Executors and
by the respondent Nos. 3 and 4 as holders of 93 shares intimating
the appellant that the shares had already been sold. It was however
c not intimated as to whom the shares were sold.

11.15. On 13th October, 1985 a Board Meeting was held at which the
appellants were present. The appellants affirm that they came to
know of the transfers of the shares to the Pawar group only when
the Minutes of the earlier Meeting held on 21.9.1985 were put up
D for approval. Despite their protest the Minutes were approved.
,_
11./6. It was in these circumstances that the application under Section
155 of the Companies Act, 1956 was filed by the appellants.

E
II. I 7. Before we close this chapter of facts on the transfer of 3417 and
93 shares, it may be noted that the District Court at Pune recalled
its order rejecting the plaints in the two suits which had been filed
--
4-

by the appellants on a review application filed by them. The
respondents challenged the order before the High Court. The High
Court set aside the order of the District Court and remanded the
matter to the Trial Court for re-deciding the appellant's application
F for review afresh.

Ill. Submissions

111. l. According to the appellants once Shanta had exercised her rights
.under Article 57-A, there was a binding contract in respect of the
G 3417 and 93 shares. With the exercise of the right, notice to the
other shareholders as required under Article 58 being a conditional
one ceased to operate. It is submitted that there was no question
of the respondents Nos. 2, 3 and 4 fixing a time frame for the
implementation of the concluded contract unilaterally. It is the
case of the appellants that the contract had never been repudiated.
H The conduct of the appellants spoke to the contrary. Furthermore
l

CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, .I.) J 091

there was no acceptance of the repudiation by the respondent A
Nos. 2, 3 and 4. While denying the alleged repudiation of the
contract, the appellant contended that in any event in accordance
with Article 63, the Directors had to find a willing member or
desirable outsider to purchase the shares within 30 days. Only
after that could the transferor sell to any person within 30 days. B
The sale to the respondent No. 5 and his group was beyond that
date. As far as Shanta's right to purchase the shares offered,
de::.pite the fact that she was herself one of the Executors/Trustees
of the 3417 shares, it is the appellant's contention that Section
153 read with Article 29 showed that the Company was not bound
to recognize any interest in shares other than that of the registered C
shareholder. It is further averred that Dr. Parulekar did not by his
Will, seek to deprive Shanta of her right to preemption by
appointing her Executor/Trustee. In any event there was nothing
which deprived the present appellant of her right to purchase the
shares independently, not only as a nominee under Article 57_-A D
but also as a "willing member" under Article 58. According to
the appellants there was no bar either under the Bombay Public
Trust Act, 1950 or under the Indian Trusts Act, 1982 allowing
Shanta to exercise her right under Article 57-A. It is contended
that the three trustees could not by themselv~s make any offer of
sale of the 3417 shares to the Pawar group. The power ,of the E
Executor was not delegatable under the Will and the authorization,
if any, by Shanta to transfer the shares stood revoked once she
had exercised her option under Article 57-A. It was argued that
the transfer to the Pawar group by three of the four joint
shareholders of the 3417 shares was in any event contrary to
Section l 08 of the Companies Act which mandatorily required all F
the joint shareholders to execute the transfer forms. It is said that
the respondent No. 5 and group were not bona fide purchasers.
This had been so held by the Learned Single Judge which finding
was not challenged before the Division Bench.

Ill. 2. According to the respondents, as far as Article 57-A is concerned, G
it is said that the article could not be construed to provide for a
concluded contract merely upon the acceptance of the offer because
in such event it would be open to the transferee to file a suit
challenging the price and effectively subverting the transfer of
shares as a result of which the transferor would be deprived of H
1092 SUPREME COURT REPORTS [2005) 2 S.C.R.

A the immediate use of the funds. According to the respondents, the
<iOntract under Article 57-A would be concluded only after
payment of the price. It is conceded that this particular argument
had not been raised in the Courts below but being an argument
on the interpretation of Article 57-A, it is submitted that it should
not be excluded from consideration. According to the respondents
B the appellant's conduct clearly showed repudiation of the contract.
The appellants had failed to perform their obligation by challenging
the certificate of the Auditor. It was submitted that the respondent
Nos. 2, 3 and 4 were entitled to fix a time for the performance
of the contract not only under Section 32 of the Sales of Goods
c Act but also under Article 57-A. By not paying the certified price
for the shares, the contract came to an end. The respondents have
said that by the resolution of the executors dated 7.11.1984, the
three executors had been authorized to transfer the shares to a 3rd
party under Section 108 (I) of the Companies Act. The transfer
could be made by or on behalf of a shareholder. In fact the
D respondent Nos. 2, 3 and 4 need not have signed the transfer
forms and any one of them could have done so. The transfer was
in keeping with Article 63. The respondents then submitted that
Shanta was a trustee and she could not under any principle of law
applicable to trusts either herself or through a nominee purchase
E any trust property as this would invariably lead to a conflict of
duty and interest. In fact by challenging the price fixed in the
shares by the Auditor and contending that it was too high, the
conflict between the interest of the beneficiary and the interest of
the trustee was manifest.

F JV. Conclusion

JV. I. In our opinion the entire transaction of sale is riddled with
illegalities.
IV. 1. 1. The notices issued in respect of the 93 and 3417 shares were not
in keeping with the Articles as far as Articles 58 to 63 were
G concerned. As we have already observed, notices to willing
members or to selected persons under Article 58 must succeed
and not precede the actual operation of Article 57-A. The notices
issued by the respondent Nos. 2, 3 and 4 also did not constitute
the Directors as the transferor's agents for the purposes of selling
the shares in terms of Article 59. There was, in the circumstances,
H
CLAUDE-LILA PARULEKAR '" SAKAL PAPERS PVT. LTD. (RUMA PAL, J.) I 093
no question of the transferors selling their shares to any 3rd A
party under Article 63 unless proper notiCe had been issued to
the 2nd and 3rd category of persons if any. There was also no
question of the transferor invoking Article 61 bypassing the
right of a willing member or selectee, if any, to negotiate a fair
price.
B
IV.1.2. The Division Bench held that the notices dated 29 .11. 84 and
10.11.84 issued by the respondent Nos. 2, 3 and 4 in respect of
the 3417 shares, and the 93 shares respectively, were valid notices
under Articles 57-A and 58 to the other shareholders in the
company. But the Division Bench erred in holding that none of
the other shareholders showed any interest in purchasing the c
shares. In fact the conclusion of the Division Bench is
contradictory. If the notices could be combined notices under
Article 57-A and Article 58, then the appellants' acceptance of
the offer as made in the notices should also be construed as a
combined assent under both the Articles. The Division Bench I)
erred in holding that there was no material before the Court to
indicate that the second appellant had at any time informed the
company that she proposed to exercise her rights as a shareholder
to purchase the shares. The Division Bench should have
considered whether there was any offer to the second appellant
as a shareholder to purchase the shares. If there was not an offer E
to the shareholders, obviously, there was no question of the
second appellant accepting the offer. But whatever offer was
made whether under Article 57-A or under Article 58 by the
two notices, that offer was accepted by the appellant. And upon
such acceptance, there was a concluded contract between the
F
respondent Nos. 2, 3 and 4 on the one hand and the second
appellant on the other.

!V.1.3. The learned Single Judge correctly held that : -

"The offers being both under Article 57-A and Articles 58
to 64, the acceptance by the second petitioner must be deemed G,
to be not only as a nominee, but also as a member of the
first respondent-company entitled to take up the shares in
her own right. There is a concluded contract to sell the shares
to the second petitioner. The second petitioner was and is
not an executrix or a trustee. This contract cannot, therefore,
H
1094 SUPREME COURT REPORTS (2005] 2 S.C.R.

A be said to be void or unenforceable".

JV.2.1. Article 57-A does not by itself indicate when the contract is
concluded between the offeror and offeree. It was concurrently
held by the Single Judge and the Division Bench that with the
acceptance of the offers of the respondent Nos. 2, 3 and 4 by
B the appellants, the contract to purchase the shares under STA
was concluded. Having regard to Section 9(1) of the Sale of
Goods Act, 1930 we see no reason to differ from this conclusion.
Section I 0( I) of the Sale of Goods Act also speaks of avoidance
of an agreement if the third party valuer either cannot or does
not fix the price of the goods to be sold. Apart from the fact that
c the third party valuer in this case did in fact make the valuation,
the section proceeds on the basis that the agreement is already
concluded otherwise there would be no question of avoidance.
Section 32 of the Sale of Goods Act provides :

"32. Payment and delivery are concurrent conditions -
D Unless otherwise agreed, delivery of the goods and payment
of the price are concurrent conditions, that is to say, the
seller shall be ready and willing to give possession of the
goods to the buyer in exchange for the price, and the buyer
shall be ready and willing to pay the price in exchange for
E possession of the goods".

The section has no relevance to the question whether there was
a contract at all between the parties. It pertains to a condition
which is to be implied, unless there is a provision to the contrary,
in a contract. Indeed the section assumes the existence of a
F contract in respect of which such a term may or may not be read
in.
JV.2.2. The respondents' argument that a contract could not be said to be
concluded until the price was in fact paid because it would then
be open to an offeree like the appellants to stall the transfer of
G shares to a third party buyer and hold the offeror to ransom, is
ingenious but not an argument which is legally acceptable. The
legal consequence of a concluded CO!Jtract will remain
irrespective of how a particular party in a given situation might
abuse the rights flowing from it. It is platitudinous that the
possibility of abuse of a right cannot .determine whether the
H right exists as a matter of law. Such arguments are normally met
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, .I.] 1095

by the aphorism "hard cases make bad law". A
JV.2.3. In Sudbrook Trading Estate Ltd. v. Eggleton and Ors., (1982] 3
All ER I, 64 a clause in the lease gave the lessees an option to
purchase the reversion in fee simple at a price to be agreed by
two valuers, one to be nominated by the lessors and the other
by the lessees and, in default of agreement, by an umpire to be B
appointed by the valuers, a minimum purchase price being
specified in the clause. When the lessees sought to exercise the
I option in December 1979 the lessors claimed that the option
clauses were void for uncertainty and refused to appoint a valuer.
The lessors also contended that the options were unenforceable
as there was no contract of sale since the purchase price had not C
been fixed. It was held that since the contract between the parties
provided that the price was to be determined by valuers, it
necessarily followed that the contract was a contract for sale at
a fair and reasonable price assessed by applying objective
standards, and" on the exercise of the option clauses a complete D
· contract for the sale and purchase of the freehold reversion was
constituted".
JV.2.4. There was thus a concluded contract which was breached by the
respondent Nos. 2, 3 and 4 when they purported to sell their
shares to the Pawar group. E
JV.2:5. If the notices issued by the respondent Nos. 2, 3, and 4 were not
under Article 58, then it was not open to the respondent Nos. 2,
3 and 4 to have sold the shares to the Pawar Group without
issuing such notices. Hence irrespective of whether there was a
concluded contract between the appellants and the respondent F
Nos. 2, 3 and 4 in respect of the 3417 and 93 shares, the shares
could not have been sold to the Pawar Group. Apart from the
lack of notice under Article 58, as we have already noticed, the
right of a transferor in terms of the Articles of the company to
sell the shares to a person of the transferor's choice is required
to be exercised within the period specified in the Articles. This G
is clear from Article 63. According to the respondents the
appellants had repudiated the contract by challenging the
certification of the auditor in February, 1985. If that were so
then the Directors were required to give the notice to the
transferor or if no such notices were given, the transferors could H
1096. SUPREME COURT REPORTS [2005] 2 S.C.R.

A sell within the period of 30 days thereafter. Those 30 days had
long since expired much before the date on which the sale of
the shares is said to have taken place between the respondent
Nos. 2, 3 and 4 and the Pawar Group.

IV.3. We are of the view that there was also no repudiation of the
B contract by the appellants as contended by the respondents on
account of the appellants alleged failure to pay the price within -"'
the time fixed by the respondent Nos. 2, 3 and 4 by their notices
dated 2 l.2.1985. \
IV.3.1. Section 11 of the Sale of Goods Act, 1930 expressly says :
c "l l. Stipulation as to time. - Unless a different intention --.:·
appears from the tenns of the contract, stipulations as to
time of payment are not deemed to be of the essence of a
contract of sale. Whether any other stipulation as to time is
of the essence of the contract or not depends on the terms
D of the contract''.

JV.3.2. As there was no time fixed either under "Article 57-A or in the
offer letters, the question of time being of the essence did not
at all arise. As was held in S.C.Gomathinayagam Pillai v.
Palaniswami Nadar, (1967) AIR (1967) SC 868 "the stipulation
E must show that the intention was to make the rights of the
parties depend on the observation of the time limits prescribed
in afashion which is unmistakable". If there is no stipulation as
to time, it is not open to a party to unilaterally stipulate a time
and then cancel the contract because of an alleged failure of the
other pa;ty to act within the time stipulated. [See : National Co-
F operative Sugar Mills Ltd., Alanganallur v. Mis. Albert & Co.,
AIR (1981) MAD 172 (D.B.)]

JV3.3. Of course if time is fixed by the contract but it is not originally
of the essence, a party could by notice served upon the other
call upon him to complete the transaction within the time fixed
G and intimate that in default of compliance with the requisition
the contract will be treated as cancelled (ibid p.872). But where
no time is fixed for completion, it is not open to either the
vendor or purchaser to serve notice limiting a time at the
expiration of which he will treat the contract as at an end.

H IV.3.4. In the circumstances, the contract for sale of the shares to the
CLAUDE-LILA PARULEKAR '" SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] } 097

appellants could not be avoided by reason of any alleged failure A
on the part of the appellants to pay the price fixed by the Auditor.

JV-4. Furthermore for an act to constitute a repudiation of a contract
it must be " ....... such an act as indicated an intentfon to refuse
to perform the contract and to set the other party free from
performing his part... .... an act by which the party renounced all B
intention to perform his part of the contract, and thereby set free
the other party ........ or an intimation that it was no use for you
to go on, because I tell you that I do not mean to keep to the
contract" . [See: Freeth v. Burr (Lord Coleridge, CJ, 1874-80)
All ER. 753]. The question to be asked is " ....... .is the act to be
relied on as rescission, an act which on the part of the person c
doing it amounts to an abandonment, or refusal by him to perform
his part of the contract?" (ibid at pg. 754)
IV. 4.1. Repudiation of a contract is "a serious matter, not to be lightly
found or inferred''. From the facts as narrated earlier, it is clear
that there was no such repudiation on the part of the appellants. D
The lette;s exchanged, the suits filed do not show that the
appellants were renouncing the contract nor that they were
absolutely refusing to perform the contract. The question is not
whether the valuation by the company's auditors was correct.
The Division Bench held that it could not be said to be incorrect. E
But the question which should have been asked was, .was the
challenge permissible in law and if so was it made bonafide?
The Division Bench did not answer this question in the negative.
There was in fact no refusal to perform the contract, but a
questioning of the mode of performance. It may be that they
were mistaken in their challenge to the Auditors' certificate, but F
that is a long way from saying that they were unwilling to pay.
As was said in Sweet & Maxwell Ltd. v. Universal News Services
Ltd, (1964) QBD 699 (CA) 179 "their view might have been
a wrong one, but that does not justify it being treated as a
repudiation of the contract" . " ... .If A and B, parties to a contract,
G
form different views as to the construction and effect of their
contract, and A demands performance by B of some act which
B denies he is obliged to perform upon the true interpretation of
the contract, then, ifB says "I am ready and willing to "perform
the contract according to its true tenor, but I contend that what
you, A, require of me is not obligatory upon me "according to H
1098 SUPREME COURT REPORTS [2005] 2 S.C.R.

A the true construction of the contract, '' and if in so saying he is
acting in good faith, he does not manifest the intention to refuse
to perform the contract. On the contrary, he affirms his readiness
to perform the contract, but merely puts in issue the true effect
of the contract.'' (ibid pg. 73 7)

B /V.4.2. There would have been no point in the appellant challenging the
valuation of the shares by the auditors if they were not interested
in completing the transaction. There would have been also no
point in their offering to deposit Rs. 20 Jakhs as proof of their II
continued interest in purchasing the shares. The filing of the suit
in Pune is not conduct in keeping with an intention of not
c performing the contract. If the offers were in terms of Article
58, as is now contended by the respondents, then, as we have
said, the acceptance of that offer must also be understood to be
under Article 58. In that case it was for the parties to negotiate
the price for the shares and not for the auditors to determine.
D The challenge to the certification may be taken as a method of
negotiating a fair value under Articl~ 58. Be that as it may, the
appellants in fact accepted the price as certified by the auditors
on 1st October, 1985.
I
IV.5. The respondents have relied on the resolution at the Executor's
E meeting on 27.11.1984 at which it was determined that the sale
of the shares would be made. The resolution of the executors
was that one of the executors could implement the sale and
execute the transfer forms but did not name anyone. Before the
sale of the 3417 shares was made to the Pawars by the Executors,
it was abundantly clear from the conduct of Shanta (i) that she
F had revoked consent she may have given qua Executor and
Trustee to the sale of the 3417 shares to third parties and (ii)
that the appellants were desirous of purchasing the shares
themselves in whatever capacity.
/V.5.1. In any event the Executors' resolution dated 27 .11.84 authorizing
G one of them to effect the transfer of the shares could not override
the provisions of Section 108 of the Companies Act which
prohibits a company from registering or transferring of shares in
the company "unless a proper instrument of transfer duly
stamped and executed by and on behalf of the transferor and by
and on behalf of the transferee and specifying the name, address
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.) 1099

and occupation if any of the transferee, has been delivered to A
the company.
IV. 5.2. For the purposes of registration of the transfer under Section
I 08 the instrument of transfer must be executed by the transferor
or it must be executed on behalf of the transferor. But there
must be execution. The learned single Judge has found as a fact B
.ia- that the instrument of transfer had been signed by only three of
the joint shareholders. Shanta had not signed. There were three
' signatures on the transfer deed. Each transferor had therefore,
executed qua shareholders in respect of their own interest. There
.... was no 4th signature on behalf of the 4th joint shareholder. This
was also the finding of the Division Bench. But the Division c I

Bench held that it was a mere irregularity which did not vitiate
the registration. It was also held that the irregularity could be
cured by one of the Executors signing on his behalf.
IV.5.3. But compliance with the provisions of Section 108 was and is
mandatory. As held in Manna/al Khetan and Ors. v. Kedar D
Nath Khetan and Ors., [1977] 2 SCC 424 : -

"The words "shall not register" are mandatory in character.
The mandatory character is strengthened by the negative
form of the language. The prohibition against transfer without
complying with the provisions of the Act is emphasized by E
the negative language. Negative language is worded to
emphasise the insistence of compliance with the provisions
of the Act... .. The provisions contained in section 108 of the
Act are for the reasons indicated earlier mandatory. The
High Court erred in holding that the provisions are directory''. F
(See also: Halsbury's Law of England, 4th edn.Vol.7 para 1632;
Pa/mers Company Law, 24th Edn. Pg. 638; Jarnail Singh v.
Bakshi Singh, (1960) 30 C.C. 192. and L. Janakirama Iyer v.
P.M Nilkanta Iyer and Ors., [1962] Supp.I SCR 206.)

Iv.5.4. The power to act by majority qua executors and authorizing G
someone to act as a shareholder on another's behalf are distinct.
There is no question of transferring shares by signature of a
majority. Whatever the agreement between the executors was
inter-se, the agreement could not over-ride the provisions of the
Companies Act and under Section 108 the Company is bound
H
1100 SUPREME COURT REPORTS [2005] 2 S.C.R.

A to recognize only those transfers for the purpose of registration
which are executed in terms of that section. It is true that they
were in fact executors, and that, with regard to the beneficiaries
mentioned in the will, they would be trustees of the stock, but
the company does not take notice of any trust, and must act in
accordance with the Act of Parliament, under which it is
B constituted, with regard to placing pers6ns upon the register." .
[See: Barton v. London and North Western Railway Co., (1889) -'-
24 QBD 77 CA]. /

IV.5.5. Even if the four executors had wanted registration only in the
capacity of executors and the company also acquiesced in it, the ,.,
c four executors would continue to be ordinary share holders and
the limitation would be illegal and of no effect. Being on the
register as joint share holders, there is no escape from the
proposition that a transfer by one of them only would be an
invalid transfer. [See : Barton v. London and Northern Western
D Railway Co., (1889) 24 QBD 77]

Jv.5.6. As far as the company is concerned, the requirement of execution
of the transfer form by each of the joint share holders could not
be met by execution of the transfer form by one of the
shareholders even though between the share holders inter-se
E there was an agreement that one share holder could sign on
behalf of all the other share holders unless the executant signs
for himself and for on behalf of the other share holders/
transferors. It would be of no consequence as far as Section I 08
is concerned to exclude the reluctant share holder on the ground
that the share holder had refused to execute the form. The remedy
F of the other joint share holders to compel the reluctant share
holder to sign the transfer form would lie elsewhere and not in
a breach of the requirement of Section I 08 of the Companies
Act.
IV.5. 7. Here the instruments of transfer had admittedly been improperly
G executed. Both the Courts have so held. It was therefore not
, lawful for the company to register the transfer. The principle
that a Court will not interfere in the affairs of the company if
the defect complained of can be cured would apply if the defect
'
is a technicality and is curable. The non-compliance of Section
108 is not a technicality.
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1101

IV.6. Apart from the violation of Section 108 as far as the registration A
of shares is concerned, the meeting of the Board of Directors at
which the company recorded the transfer was invalidly held.

IV.6.1. According to the Article 93 of the Articles of the Association of
the Company : -

"Every notice of a meeting of the Company shall specify a B
place, date and hour of the meeting, and shall contain a
statement of the business to be transc:cted thereat. No General
Meeting, Annual or Extraordinary, shall be competent to
enter upon, discuss or transact any business which has not
been specifically mentioned in the notice or notices upon c
which it was convened. In every notice there shall appear
with reasonable prominence a statement that a member
entitled to attend and vote is entitled to appoint a proxy or,
where one or more proxies are allowed, to attend and vote
instead of himself and that the proxy need not be a member
of the Company". D
IV.6.2. In the notice for the meeting held on 21st September, 1985,
there was no mention whatsoever, let alone a statement, relating
to the transfer of the 3417 and 93 shares to the Pawars. At the
same meeting, the respondents Nos. 5 and 10, were appointed
as Additional Directors although their shares were not yet entered E
in the Company's register of members.
IV. 7. As we have found several legal infirmities in the sale of the
3417 and 93 shares to the Pawars, it is not necessary to consider
whether the respondent No. 5 and his group were purchasers of
the shares. F
IV. 8. The Division Bench erred in holding that the violation of Section
108 was ratified at the Board Meeting held on 13th October,
1985. Ratification is possible in respect of an act which is
incompetent, by a person who would have been competent to do
such act. The violation of Section 108 could not be ratified by G
the Board of Directors as the act was one which the Board was
incompetent to allow. The Board of Directors never had the
legal capacity to direct the registration of shares invalidly
transferred.

IV.9. It is the respondent's final submission that neither of the H·
1102 SUPREME COURT REPORTS [2005) 2 S.C.R.

A appellants could have purchased the shares under Article 57A
because Shanta was one of the named executors and trustees of
inter alia shares of Dr. Paruleker under his will.
IV.9.J. A trust is created under Section 6 of the Indian Trust Act, I 882
" .. when the author of the trust indicates with reasonable certainty
18 by any words or acts (a) an intention on his party to create
thereby a trust, (b) the purpose of the trust, (c) the beneficiary,
and (d) the trust-property, and (unless the trust is declared by
will or the author of the trust is himself to be the trustee) transfers
the trust-property to the trustee." According to the appellant no
,..., valid trust was created as the beneficiaries had not been named.
We do not propose to go into this question in these proceedings.

JV.9.2. Under Sections 51and52 of the 1882 Act a trustee may not use
or deal with tmst property for his own profit or any other purpose
in connection with the trust. And no trustee whose duty it is to
sell trust property may directly or indirectly buy the same or
) any interest therein, on his own account or through his agent or
third person.·

IV.9.3. Article 57-A does not envisage Shanta purchasing the shares
through her nominee. One of hers rights under Article 57-A was
no doubt to purchase the shares herself. But she could also
~
' .
nominate any other person to purchase the shares. The transferor
then would have to make an offer to such other' person who
would then, independently of Shanta, be entitled to a transfer of
the shares. In the latter case there is no question of any conflict
of interest between Shanta in her capacity as trustee under the
will of Dr. Paruleker and as a nominator under Article 57-A.
Here, Shanta was not purchasing the shares. It is true that she
could have done so in exercise· of her preemptive right under
Article 57-A, but she did not and only nominated her daughter
as the person to whom shares should be sold.

~ Jv.9.4. This was also how the parties understood the situation as the
J
correspondence exchanged between the parties evidences. As
we have noted the resolution relied upon by the respondents
authorizing one of them to sell the trust shares, was taken of a
meeting held on 27th November, 1984 which was attended only
by two of the four Executors. Shanta could not attend because
[ she was ill. Her prayer for adjournment was rejected by the two
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1103

executors on the ground that her interest would not be jeopardized A
since she would be given notice under Article 57-A. It was then
resolved that notice should be given under Article 57-A to Shanta.
If she exercised her right under that Article, the executor was to
sell the shares to her at Rs. 2,250 per share. If she did not agree
to purchase the shares at the price of Rs. 2,250 then the price
should be fixed in accordance with Article 61. The resolution B
- further records that only if Shanta did not buy the shares at such
fixed price then the executors "do sell the shares to any other
person or persons at or for the price of Rs. 2,250 per share".
Since the meeting was not adjourned because Article 57-A
protected Shanta, it follows that if Shanta's rights were not to C
be protected under Article 57-A, then the meeting should have
been postponed.
IV.9.5. Indeed the matter was referred to the company's auditors in
purported compliance with Article 57-A. Certification of the
price was made by the auditors also under that Article. The D
notice of the respondent Nos. 2, 3 and 4 calling upon the
appellants to pay the certified price was als0 under Article 57-
A. The present stand of the respondent Nos. 2, 3 and 4 with
regard to the disqualification of Shanta as a purchaser of the
shares under Article 57-A is thus wholly inconsistent with their
conduct ante !item. E
IV.9.6. The respondents now say that Article 57-A has no application. If
it does not then Article 58 would. In that event, the certification
by the auditors was entirely premature as the willing shareholder
(the appellant No. 2 in this case) would b!; at liberty to negotiate
the price with the respondent Nos. 2, 3 and 4 and it would only F
be in default of any agreement being reached that a "fair value"
would have to be fixed by the auditors. In the circumstances the
principle that the trustee not directly or indirectly buying the
trust property as contained in Section 57-A of the 1882 Act
would also not have any application because irrespective of her G
right as a nominee of Shanta, the present appellant could
undoubtedly have purchased the shares being in the second
category in the hierarchy of purchasers provided under Articles
57-A to 64.

V. This bring us to the second branch of the appellant's challenge H
1104 SUPREME COURT REPORTS [2005) 2 S.C.R.

A viz. the issuance of 17, 666 equity shares.
v. 1. The decision to raise the issued capital of the company and to
allot the shares at par was taken at an Annual General Meeting
held on 16.11.1985. It was resolved at that meeting to
immediately issue increased share capital of Rs. 17,66,600 of
B 17,666 equity shares of Rs. I 00 each to any person whether a
member of the company or not. It was further resolved that the ...-..
decision would be ratified by convening a general body meeting
preferably in the month of January/February, I9.86 after giving
proper notice and explanatory statement. ~
c V.2. The notice of the Annual General Meeting was given on
I3. l0. I 985. Although details of ordinary business and special
business were given, there was no indication whatsoever that
--
there would be any decision taken with regard to the increase in
the issued capital and allotment of shares in the notice. According
to the respondents, after the notice of the Annual General Meeting
D had been issued on 13.10.85, on 5. I l.85, the. Ministry of Finance
gave notice to the company extending the validity of a sanction
for foreign exchange loan to 30. I l .85 and stating.that no further
extension would be/ granted. On 9 .1 t'.1985 a letter dated
7. I I~ I 985 was sent to the company by Modular Finance and
E Consultancy Private Limited (the respondent No. 12 before us
and a member of Pawar Group) proposing that the share capital
of the company be increased and requesting the issue to be
decided at an ensuing AGM. On l l.l l.1985 a letter was also

F
received by the company from the United Western Bank advising
the company in view of its expansion programme, to increase
its share capital.
-
V.3. According to the respondents, the increase was by reason of the
urgent need of the Company to purchase machinery. We are
unable to agree. The purchase of the machinery was in
contemplation of the company from much prior to the date of
G the notice. The alleged letter from the Ministry of Finance was
not produced before the High Court and we are not prepared to
allow the same to be brought on record at this stage.

V.3. 1. The Division Bench affinned the finding of the learned Single
Judge that the need to increase the issued capital from Rs.
H 7,33,400 to Rs. 25 lakhs was not established. Indeed the Division
CLAUDE-LILA PARULEKAR "· SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1105

Bench went on to find that the action· of issuing the increased A
share capital clearly indicated that the respondent No. 5 and his
group who were in control of the company, had decided to
make a fresh issue of share capital to themselves at par so as to
strengthen their control over the company.

V.4. We have already noticed that Article 93 specifically provides B
inter alia that every notice of a meeting of the Company shall
contain a statement of the business to be transacted thereat and
no General Meeting, Annual or Extraordinary, shall be competent
to enter upon, discuss or transact any business which has not
been specifically mentioned in the notice or notices upon which
it was convened. c
V.4.1. Additionally, in terms of Article 94, the relevant extract whereof
is quoted hereunder :

"94 (a) In the case of an Annual General Meeting all business
to be transacted at the meeting shall be deemed special D
excepta ..

(b) xxx xxx xxx xxx

(c) Where any item or business to be transacted at the meeting
is deemed to be special as aforesaid, there shall be annexed
to the notice of the meeting a statement setting out all material E
facts concerning ach spechl item of business, including in
particular the nature and extent of the interest, if any, therein,
or every Director, Secretaries and Treasurers, if any, and the
manager, if any.

V.4.2. The increase in issuance of share capital does not fall within the
F
exceptions carved out in Article 94 as not being special business.
Article 94 reflects the substance of Section 173 of the Companies
Act, 1956 and it was therefore, incumbent for notice to be given
not only indicating the issuance of the share capital as a special
item of business but also giving a statement setting out all G
material facts relating thereto. The violation of this Article by
the company is patent and the Annual General Meeting is to the
extent of the violation vitiated thereby.

V.4.3. In Pacific Coast Coal Mines Ltd. v. Arbuthnot and Ors., (1917)
AC 607 PC, the Privy Council was of the opinion; H
I

l
1106 SUPREME COURT REPORTS (2005] 2 S.C.R. i
\
A "that to render the notice a compliance with the Act under \
which it was given it ought to have told the shareholders,
including those who gave proxies, more than it did. It ought
l
to have put them in position in which each of them could
have judged for himself whether he would consent, not only
to buying out the shares of directors, but to releasing possible
B claims against them. Now this is just what it did not do and
therefore, quite apart from the fact that the meeting was held

c
in half an hour from the time the Act passed and before the
shareholders could have had a proper opportunity of learning
the particulars of what the Legislature had authorized, their
Lordships are of opinion that the notice was bad, and that
"
what was done was consequently ultra vires". (pg.282)

V.4.4. Ag~in_ in Baillie v. Oriental Telephone and Electric Company
Ltd, (1915)1 Ch.D.503 (CA) it was.said by the Court of Appeal;

" ......J feel no difficulty in saying that special resolutions
D obtained by means of a notice which did not substantially
put the shareholders in the position to know what they were
voting about cannot be supported; and in so. far as these
special resolutions were passed on the faith and footing of
such a notice the defendants cannot act upon them."
E (See also LIC v. Escorts, [1986] 1 SCC 246 at pg. 343).

V.5.1. The respondents have relied on Article 94 (e) which says that"
the company shall also carry out the requirements of Section
188 of the Act" to contend that due notice was given under
Article 94 because the letter of Modular Finance had been
F forwarded to the shareholders.

V.5.2. Section 188 provides that a meeting could be requisitioned by
the prescribed number of members, after notice of any resolution
which may properly be moved ar;id is intended to be moved at
a meeting together with a statement with respect to the matter
G referred to in any proposed resolution. Assuming that Modular
Finance's letter was in fact circulated, this could hardly be termed
to be compliance with the requirement of Section 188 of the Act
which deals with meetings called at the instance ofrequisitionist
and circulation of a statement by the requisitionist of a proposed
H resolution and a statement in support thereof. Moreover, such a
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1107
notice in tenns of the proviso of Sub Section 3 of Section 188 A
is required to be given "in the same manner and, so far as
practicable, at the same time as notice of the meeting, and where
it is not practicable for it to be served or given at that time, it
shall be served or given as soon as practicable thereafter''. Further
it is clear from Article 94(e) that compliance with Section 188
was in addition to the requirements with the other parts of Article
B
94 which admittedly have not been complied with.

V.5.3. The Division Bench found that there was no explanatory
,.. statement annexed to the notice and held that the respondents
~ certainly committed an irregularity in not mentioning the proposal
to increase and allot the share capital on the agenda of the c
annual general meeting. However, it went on to hold that the
irregularity did not vitiate the decision because it could be cured
since the Pawar group already had majority control and also
because the decision had been taken at the annual general meeting
that an extraordinary general meeting would be called after proper D
notice to ratify the fresh issue of 17666 shares at Pawars.
V.5.4. We are unable to accept the reasoning of the Division Bench.
The two grounds which persuaded them not to interfere with the
fresh issue are questionable . For one, we have already come to
the. conclusion that the sale of 3417 and 93 share to the Pawar E
Group was bad. The Pawar group did not legally have the
majority to push through the decision to increase the share capital
or to allot the further shares to themselves. For another, the
majority cannot be permitted to ride rough shod over the
provisions of the Articles and the Companies Act merely because
they could if they so desired follow the proper procedure. The F
haste with which the Pawar Group sought to ensure their position
in the company is evident from the fact that a Board Meeting
was held immediately after the Annual General Meeting on
16.11.1985 at which the Board resolved to issue the additional
17, 666 shares at par to the Pawar Group. There was no notice
G·
given of the Board meeting at all.
V.6.1. The Respondent Company was bound to offer the further shares
on a fresh issue of capital to the existing equity share holders in
proportion to the capital paid up on the shares at that date. The
Division Bench noted that this was provided in Section 81 of
H
1108 SUPREME COURT REPORTS [2005] 2 S.C.R.

A the Companies Act. However, because Section 81(3) does not
apply to a private limited company (which the company was at
that stage) and since according to the Division Bench, the Articles
of Association did not require such further issue of shares to be
allotted in any particular manner to the existing share holders,
the allocation of the further issue to the respondent No. 5 and
B his group was not illegal or contrary to law.
V.6.2. As a matter of fact the finding as to the absence of such a
requirement in the Articles of Association of the Company was
erroneous. Increase of share capital is dealt with in Articles 14

c
and 15. Article 15 says :
~
"Subject to the directions that may be given by the meeting
that sanctions the increase of capital (i) such new shares
shall be offered to the persons who are at the date of the
offer members of the Company in proportion as nearly as
circumstances admit to the capital paid up on their shares at
D that date, (ii) the offer aforesaid shall be made by notice
specifying the number of shares to which the member is
entitled and limiting a time not less than fifteen days from
the date of the offer, within which the offer, if not accepted,
will be deemed to have been declined, (iii) after expiry of
E the time specified in the notice aforesaid or on the earlier
intimation from the member to whom such notice is given r
/
that he declines to accept the shares offered, the Directors I

may dispose of the same in such manner as they think most '
.-
beneficial to the Company." (emphasis added) v

F V.6.3. No offer was made by notice in writing in terms of this Article.
The fresh shares were, as we have seen, allotted on the day they
were issued before the expiry of 15 days without waiting for the
expiry of the period. The allocation of shares to the Pawars'
group contrary to this Article was invalid.
V.6.4. No court could possibly object to a decision on merits provided
G
it is taken in accordance with law. The decision to issue all the
additional shares to the Pawar Group at par may not by itself
have warranted interference were it not for the manner in which
the entire exercise was undertaken.

V.6.5. During the course of the hearing both before the Division Bench
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1109

and before this Court, the respondents offered to make an A
allotment of the issued capital to the appellants to participate
prorata in the additional issuance. The offer did no more than
what the company's articles required to have been undertaken.
VJ. Having effectively held in favour of the appellants, the question
finally to be determined is what reliefs can be granted to them. · B

Reliefs

VJ.l. The respondents contended that the relief of cancellation of 17,
666 shares cannot be granted in a petition under Section 155
petition as any reduction of capital must be made strictly in , C
accordance with Sections 100 to 104 or Section 402 of the
Companies Act.

VJ.2. The issue need not detain us as there was no such prayer made
by the _appellants. They have asked only for rectification of the
share register by deletion of the names of the Pawar Grpoup as
shareholders in the company. The learned Single Judge merely D
directed the Board of Directors to dispose of the fresh shares,
one can only assume, in accordance with the Articles of the
Company and the Act.
VJ.3. Having effectively held on all issues in favour of the appellant
the question remains as to whether we should, in exercise of our E
discretion under Section 155, grant the appellant the relief of
rectification of the shares as claimed. Although the logical
conclusion of our findings would be to set aside the transfers
and restore the status quo ante, the question is should the share
register of the company be directed to be rectified now in respect f
of shares, the impugned transfer of which took place more than
20 years ago? The respondents have submitted in the course of
the hearing that this Court should not in any event disturb the
status quo but should mould the relief by awarding compensation,
if necessary as prayed for by the appellant. They have referred
to the decision in Needle Industries (India) Ltd. v. Needle G
Industries (Newey) India Holding Ltd., [1981] 3 SCC 333 in
support of this submission. We agree. There has been a sea
change in the factual scenario. Shantha has died. The company
has become a public limited company. The respondents have
been at the helm of the company more than, two decades during H
1110 SUPREME COURT REPORTS [2005] 2 S.C.R.

A the legal struggle. Many decisions must of necessity have been
taken and implemented. The situation cannot now be
unscrambled. It is a course of action which would make the
company disfunctional harming the interests of the whole body
of share holders, affect company's employees, its creditors and
customers. It is not as if we are able to grant any relief directly
B to the appellant except to the extent of setting aside the transfer.
The appellant will still have to pursue her remedies for effective __,
relief in the two pending suits in the District Court of Pune in
which the appellant has prayed for specific performance of the
contracts for sale of the shares. The outcome of the suits is
c uncertain. What is certain is that whatever the outcome of the
litigation it will be another long round of litigation. Yet another
factor to be borne in mind is that the appellant had her own role
to play in contributing to the situation which she had to face
eventually. Admittedly, Shanta and the appellant ultimately
accepted the Chartered Accountant's report. As we have noted,
D no reason whatsoever was given for the sudden change of
attitude. If they could agree subsequently to pay the price they
could have done so earlier, paid the price and then challenged
the value. Further, the Single Judge also gave the appellant and

E
Shanta an opportunity of paying the share price into the Court
within a period of six weeks. Had the appellant and Shanta done
so, they might have been in a stronger position vis-a-vis the
Pawars in the appeal Court.
--
· VI.4. In these circumstances and weighing in the balance the
comparative advantages and disadvantages of granting the
F appellant the relief of rectification, we are of the view that it
would not be appropriate at this stage to exercise our discretion
to grant the relief of rectification. However, the fact remains
that· the appellant has been wronged and she is entitled to be
compensated. Section 155 of the Companies Act, allows the
giving of damages in addition to or in lieu of rectification. In
G the pending suits, the appellant has put forward alternative
prayers for payment of compensation of Rs. 3 crores on account
of the 3417 shares and Rs. I crore for the transfer of the 93 --'·

shares in the event specific performance of the contracts was
not grantable. It was pointed out by some of the respondents'
counsel, without prejudice to their contentions on merits, that
H
CLAUDE-LILA PARULEKAR v. SAKAL PAPERS PVT. LTD. [RUMA PAL, J.] 1111

the figure specified in the plaint, though on the higher side, A
couldform a rough and ready basis to quantify the compensation.
Having due regard to these submissions and in order to give a
quietus to the litigation we are of the view that the ends of
justice would be met by directing that the appellant should be
compensated with an amount of Rs. 3 crores to be paid by the
company to the appellant in full and final settlement of the B
appellant's claims in respect of the 3417 and 93 shares.
Additionally, the company will also allot shares to the appellant
out of the 17, 666 shares on par proportionate with the appellant's
present share holding. We are told that the appellant is at present
..- employed by the company and is also a Director of the company. C
The appellant shall continue in this capacity for the appellant's
life time.
VJ.5. The appeals are accordingly disposed of without any order as to
costs.

K.K.T. Appeal disposed of. D'