Sha Mulchand & Co. Ltd. (in Liquidation) v. Jawahar Mills Ltd.
1952. December 9. The Judgment of Mehr Chand
Mahajan, Das and Ghulam Hasan JJ. was delivered
by Das J. Vivian Bose .J. delivered a separate
Judgment.
DAS J.-Thi8 appeal arises out of an application
made by the Official Receiver representing Sha Mul
chand & Company Ltd. (in liquidation) under section
38 of the Indian Companies Act for rectification of
the register of the J awahar Mills Ltd.
Sha Mulchand & Company Ltd. (hereinafter re
ferred to-as "the Company'') was incorporated in
1952
Sha Mul~hand
and Go., Ltd.
v.
J awahar Mills
Ltd.
Das J.
1952
Sha Mulchand
and Go., Ltd.
v.
Jawahar Mills
Ltd.
Das J.
354 SUPREME COURT REPORTS (1953)
1937 as a private limited company. At all material.
times it consisted of two members, T. V. ~. Govinda
rajn Chettiar and K. N. Sundara Ayyar. The Jawahar
Mills' Ltd. (hereinafter called "the Mills") was also
incorporated in 1937 with an authorised capital of
Rs. 10,00,000 divided into one lac shares of Rs. 10
each. The Company was the managing agent of the
Mills from its inception and applied for and was
allotted 5,000 ten-rupee shares Nos. 15048 to 20047
on which Rs. 5 per share had been paid. The Com
pany continued to act as the managing agent of the
Mills till the 30th June, 1939, on which date it re
signed the managing agency. Prior to the Company's
resignation the two members of the Company had
entered into an agreement with one M.A. Palaniappa
Chettiar, a partner of the incoming managing agency
firm, upon certain terms which need not be referred
to in greater detail.
Within two months after the change of managing
agents, the Mills made two calls, namely, one on the
22nd August, 1939, -Jor Rs. 2 per share payable on
"the 1st October, 1939, and the other on the 1st
October, 1939, for Rs. 3 payable on the 1st
December, 1939. The Company did not pay. either
'of the calls. On the 23rd January, 1940, Govinda
raju Chettiar was adjudged insolvent on the applica
tion of Sundara Ayyar. This insolvency of Govinda-
. raju Cbettiar was eventually annulled in 1944. During
this period Goviudaraju Chettiar, in law, ceased to be
a director of the Company, although it is alleged that
be nevertheless continued to take part in the manage
ment of the Company.
By a resolution of the Board of Directors of the
Mills passed on the 12th August, 1940, the new
managing agents were empowered to give notices to
such persons as had not paid the allotment money
and the call money within the date fixed and to inti
mate them that in default their shares would be for
feited. A notice was issued on the 16th September,
1940, and two copies thereof are said to have been
sent to Sundara Ayyar and Govindaraju Chettiar .
...
S.C.R. SUPREME COURT REPORTS 355
No payment having been made, the 5,000 shares held
by the Company were forfeited by a resolution of the
Board of Directors of the Mills. The auditor of the
Mills having pointed out that the purported forfeiture
was irregular and illegal, this forfeiture was can
celled.
By a resolution passed by circulation on the 25th
February, 1941, the Board of Directors of the Mills
resolved that a notic·e be sent to the Company inform
ing it that it was in arrears with calls to the extent
of Rs. 25,000, that the amount must be paid on
or before the 31st March, 1941, and that, in default,
its shares would be forfeited. A notice dated the 15th
March, 1941, was accordingly addressed to the Com
pany and sent by registered post with acknow
ledgment due. It appears that the notice was actually
posted on the 17th March, 1941, and was received'by
Govindaraju Chettiar on the 20th March, 1941. The
Company did not pay the arrears of calls. On the 5th
September, 1941, the Board of Directors of the Mills
resolved that "the 5,000 shares Nos. 15048-20047
standing in the name of the Company have been for
feited." On the 10th September, 1941, the Mills
wrote a letter to the Company informing the latter
that the Directors of the Mills bad at their meeting
held on the 5th September, 1941, forfeited the 5,000
shares. There is no dispute that this letter which was
sent by registered post was returned undelivered. On
the 1st October, 1941, an entry was made in the share
ledger of the Mills recording that the 5,000 shares of
the Company bad been forfeited. On the 16th Novem
ber, 1941, these 5,000 shares were reallotted to 14
different persons and on the 17th November, 1941, a
letter wi~s sent to the Company intimating that the
forfeiteat shares had been reallotted and calling upon
the Company to send back to the Mills all the docu
ments relating to the original allotment of the 5,000
shares to the Company. In the meantime on the
26th August, 1941, by an order ma.de by the Registrar
of J oin1; Stock Companies the Company was struck
off the register of companies under section '247
1962
Sha Mulchand
and Co., Ltd.
v.
Jawahar Mills
Ltd.
Das J.
356 SUPREME COURT REPORTS [1953j
1952 of the Indian Companies Act. 'l'his ·order of the
Sh M- 1 h d Registrar was published in the Official Gazette on the a u c an . -
and co., Ltd. 9th September, 1941, i.e., four days after the shares
v. we'l'e forfeited and one day before the notice intimat
Jawahar Mills ing the fact of forfeiture was sent in a registered
Ltd. cover which was, however, returned undelivered.
DasJ.
Under section 247 (5) of the Indian Companies Act
the Company stood dissolved on and from the date of
such publication.
The Mills having come to kuow of the dissolution
of the Company applied to the High Court (O.P.
No. 10 of 1942) praying that the name of the Com
pany be restored to the register of companies and
that after such restoration was duly advertised the
Company be wound up by the Court. A similar appli
cation was made on the 11th December, 1941, by the
Income-tax authorities (O.P. No. 11 of 1942). On
the 23rd February, 194:3, Snndara Ayyar filed an affi
davit contending, amongst other things that the
Directors of the 1Mills had no power to forfeit the
shares. On the 2nd April, 1942, however, 0.P.
No. 10 of 1942 was compromised, and the Mills receiv
ed Rs. 11,000 from Snndara Ayyar in full satisfac
tion of their claim against the Company. On the
25th June, 194:3, O.P. No. 11 of 1942 was also com
promised and Sundara Ayyar paid up the claim of the
Income-tax authorities. 'rhe two petitions for resto
ration of th_e Company were accordingly dropped.
On the 27th June, 1942, Sundara Ayyar filed a suit
against the Mills and others including Palaniappa
Chettiar claiming a declaration that the forfeiture by
the Mills of the 5,000 shares was illegal and inopera
tive and directing the Mills to pay to the plaintiff
and the third defendant representing the estate of
· Govindaraju Ohettiar the value of th.e forfeited shares
with dividend or interest thereon and directing Palaui
appa Chettiar to pay the plaintiff and the third
defendant the sum of Rs. 25,000. This suit was dis-
missed on the 17th November, 1943, on the ground
that Sundara Ayyar, who was only a member of the
dissolved Company, had no locus standi and could
'
..
S.C.R. S:UPREME COURT REPORTS 357
have no relief personally. Sundara Ayyar filed
an appeal therefrom which was dismissed as
against the Mills but the case was remandrd to ~he
trial Court for the trial of his claim as against the
fourth defendant, Palaniappa Chettiar.
During the pendency of Sundara Ayyar's appeal he
on the 12th August, 1944, filed O.P. No. 199 of 1944
for the restoration of the Company. On that applica
tion an order was made on the 16th February, 1945,
that the name of the Company be restored to the
register of companies, that the Company be deemed
to have continued in exi~tence as if its name had
never been struck off, that such restoration be
advertised and that the Company be wound up by the
Court and the Official Receiver do forthwith take
charge of the assets and liabilities of the Company.
It was fnrtl1er ordered that the Official Receiver do
recognise that as between the Mills and the Company,
the Milh; should be regarded as having been duly
paid only Rs. 11,000 out of the total debt of
Rs. 25,550 due to the Mills. By an order made on
the 21st January, 1946, leave was given to the Official
Receiver t;o take appropriate steps regarding the 5,000
shares purported to have been forfeited by the Mills.
Accordingly on the 5th March, 1946, the Official
Receiver, in the name of the Company, took out the
present summons calling upon all parties concerned
to show cause why the share register of the Mills
should not; be rectified by restoring the name of the
Company to the said register in respect of 5,000
shares numbering 15048-20047 and why such other
alternative or consequential i·elief should not be
granted to the applicant as might be just and neces·
sary in the circumstances of the case.
The Mil.ls contended, in opposition to that appli
cation, that the shares had been properly forfeited,
that the Company was, on the principles of estoppal,
acquiescence and !aches, precluded from challenging
the forfeiture, that the application was barred by
limitation ~md that the shares having already been
[l.llotted to other persons, who h!!.d riot been lll!!.Cle
1952
Sha Mulahand
and Co. Ltd.
v.
Jawahar Mills
Ltd.
Das J,
358 SUPREME COURT REPORTS (1953)
195S
Sha. Mulchand
parties to the application, no order for rectification
of the register in respect of those shares could
be made. and Co., Ltd. •
v. The summons came up for hearing before Mr.
Jawaha• Mills Justice Clark. The learned Judge. by his judgment
Ltd. dated the 15th November, 1946, held that the notice
Dai J. dated the 15th March, 1941, which was posted on the
17th March, 1941, aud delivered on the 20th March,
1941, and on which the resolution of forfeiture passed
on the 5th September, 1941, was founded, was not in
.conformity with the provisions of articles 29 and 30
of the articles of associaticm of the Company which
required 14 clear days' notice. The learned Judge
further held that the plea of estoppel, acquiescence
and !aches was untenable, that article 49 of the
Limitation Act did not apply either expresslY.or by
way of analogy to the preoent application and that
article 120, which prescribed a period of six years
from the date when the right to sue accrued, would,
by analogy, apply to the present proceedings and
that so applied the present proceedings must be held
to be within time. Having disposed of the controversy
on the above points it remained to consider the form
of the order which could properly be made on the
application. It is quite clear that the specific shares
having already been allotted to 14 different persons
and those p)lrsons not being then before the Court,
the Court could not then and there direct rectification
of the register by restoring the name of the Company
to the share register of the Mills in respect of those
identical shares. 'rhere was nevertheless nothing bo
prevent the Court eve·n at that stage to give notice of
the application to the persons to whom the shares
·had been reallotted and/or those who were holding
the shares at the time and alter thus adding them as
parties thereto to make the appropriate order of
rectification and, if thought fit, to also award damages
to the Company. There were, however, 16,000 shares
of Rs. 10 each yet unissued. After discussing the
matter with learned advocates on both sides to which
qisQqssion a reference will be made herea,lter t4e
j
·'
• • ·,
I
"
S.C.R. SUPREME COURT REPORTS 359
learned Judge, in the belief that the advocates for
the parties had agreed as to the form of the order,
directed that the Mills do rectify their register l:>y
inserting the name of the applicant Company as
owner of 5,000 shares out of the unissued shares of
Rs. 10 each and that on such insertion the Company
do on or before the 15th January, 1947, pay to the
Mills Rs. 25,000, being the amount of calls in
arrears.
Pursuant to further directions given by the learned
Judge on the 7th January, 1947, the Mills on the
10th Janua.ry, 1947, received Rs. 25,000 and allotted
5,000 shares. Although the Mills thus acted upon
the order they, nevertheless, on the 6th February,
1947, filed au appeal against the order. That appeal
came up for hearing before a Bench consisting of
Satyanarayana Rao and Viswanatha Sastri JJ. It
was not disputed before the appeal Court that the
forfeiture wa,s invalid, but the contentions urged were
that by reason of the irregularity the forfeiture was
only voidable and not void and that as the forfeiture
was only voidable it was open to the Company to waive
or abandon its right to dispute the validity of the
forfeiture and that in fact, by its conduct, it bad done
so, that the claim to rectify the register was barred by
limitation and that in any event rectification was
impossible b13cause the shares were not a.vailable in
specie, the same having been reallotted to other per
sons. The learned Judges by their judgment dated
the 11th March, 1949, held that the forfeiture was
invalid, that the application was not barred by
limitation, for it was covered by article 120 of the
Limitation Act. The learned Judges recognised that
where a period of limitation was prescribed for a suit
or a proceeding mere delay was no bar unless it was
of such a character as would lead to an inference of
abandonment of the right or unless it was e.stablished
that the peraon against whom the action or proceed
ing wai; instituted was actually prejudiced by reason
of such delay. The learned Judges agreed with ~he
Slla Mulcha14d
and Go., Ltd.
v.
Jawahar Mill&
Ltd.
DasJ.
/
1952
Sha Mulchanil
and Co., Ltd.
v.
Jawahar llfills
Ltd,
DasJ.
360 SUPREME COURT REPORTS (1953]
trial Court that no plea of acquiescence, waiver or
estoppel had been established in the present case.
The learned Judges, nevertheless, thought that the
question of abandonment of the right and prejudice
to the appellant by reason of the delay stood on a
different footing. 'l'hen after referring to certain
conduct on the part of Govindaraju Chettiar and
Sundara Ayyar the learned Judges concluded that
by reason of the long delay in reviving the Company
and in taking proceedings under section 38 of the
Indian Companies Act the Mills had been induced
to put themselves in a situation in which it became
impossible for them to restore the Company to the
register in respect of those 5,000 shares and that in
view of this conduct, if the applicants were Govinda-
·raju Chettiar and Sundara Ayyar, it would have been
a case in which relief would have been refused in the
light of the principles which the learned Judges
deduced from the judicial decisions referred to by
them. Then referring to the decision in Smith,
Stone & Knight v. Birmingham Corporation(') and
certain text books the learned Judges took the view
that it was too late in the day to adhere to the strict
formalism laid down in Salomon's case (•) and that
as the tendency of modern decisions was to lift the
veil of corporate personality and disregard the
corporate form, the conduct of its only two members
had disentitled the company from claiming the relief
of rectification. The learned Judges further held
that there was no legal basis on which the form of
the order could be supported. On reading the judg
ment of the trial Judge and after hearing the senior
advocate appearing for the Mills the learned Judges
felt unable to agree that the learned advocate had
agreed to the substitution of the 5,000 out of the
unissued shares for the 5,000 forfeited shares. The
result was that the appeal was allowed and the order
of the trial Judge was set aside. The Company by
its Official Receiver has now come up before this
Court with leave granted by the High Court
(I) (I9;J9) 4 All E. R. u6,
s.a.:R:· suPREME couRT REPORTS .36i
under sections 109 and 110 of the Code of Civil ip61
Proced.ure. . , . · Sha Mu!chand
The appeal Court, 1t will be observed, reversed and co., Ltd.
the decision of ~he trial·Judge and decided the appeal ·v. •
against the Company on two. grounds only, namely, Jawahar Mills
(1) that the Company had by the conduct of its two Ltd.
members abandoned• its right· to challenge the for· D~iJ.··
feiture, and (2) that the forni of the order could not
be supported as one validly made under section. 38 of
the Indian Companies Act. · The learned Attorney-
General, appearing in support. of this appeal; has
assailed the soundness of both these grounds. · The
learned Attorney-General contends, not without ·con·•
siderable force, that having, in agreement with the
trial Court, held that ·no plea of.: acquie~cence,
w-aiver or estoppel had been established in this case,
the appeal Court should not have allowed the Mills
to raise the question· of abandonment· of right by
J;he Company, inasmuch as no such plea of abandon-
ment had been raised either in the Mills' affidavit·
in opposition to the Company's application ,or in the
Mills' grounds of appeal before the High Court. Apart .
from this, the appeal Court permitted the Mills to make
out a plea of. abandonment of right by the Company ·
as distinct from the,pleas of waiver, acquiescence and
estoppel and sought to derive support for this new
plea from: the' well known cases· of Prendergast v.
Turton('), Clark d· Chapman v. Hart(') and Jones v:
North Vancouver. Land and· Improvement Co.(3) •. A
perusal of . the relevant facts ·sef out. in. the' several
reports arid the respective judgments· in· the ·above
cases will clearly indicate. that apart from the -fact
that some of them related· to collieries· which were
treated on a special footing, those cases were really
cases relating to· waiver or acquiescence or estop- ·
pel. Indeed in Clarke's case (') while Lord Chelms-
ford. referred· to the de.cision.•. in- Prendergast's
case (') as a case of abandonment, of right, . Lord
Wensleydale read it as an instance . of· acquiescence
and estoppal. Unilateral act or conduct of a ··person,
(I) 62 E.R. 807. • (3)(191o]A.C. 317., ·.
(2) 6 H.L.C. 632; 10 E,R. IHJ·.
' .
,
1952
Sha Mu,lchand
and Co., Ltd.
v.
Jawahar ]fill~
Ltd.
Dai J.
362 SUPREME COUR'l.
1
REPORTS [1953]
that is to say act or conduct of one person which is
not re lied upon by another person to his detriment, is
no~hing more than mere waiver, acquiescence or !aches,
while act or conduct of a person amounting to an
abandonment of his right and inducing another per
son to change his position to his detriment certainly
raises the bar of estoppel. Therefore, it is not intelli
gible how, having held that no plea of waiver, acquies
cence or estoppel had been established in this J)ase,
the appeal Court could, nevertheless, proceed ~o give
relief to the Mills on the plea of abandonment by the
Company of its rights. If the facts on record were
not sufficient to sustain the plea of waiver, acquies
cence or estoppel, as held by both the Courts, we are
unable to see how a plea of abandonment of right
which is an aggravated form of waiver, acquiescence
or !aches and akin to estoppal could be sustained on
the self-same facts. Further, whatever be the effect
of mere waiver, acquiescence or !aches on the part of
a person on his claim to equitable remedy to enforce
his rights under an executory contract, it is quite
clear, on the authorities, that mere waiver, acquies
cence or !aches which does not amount to an abandon
ment of his right or to an estoppel against him can
not disentitle that person from claiming relief in
. equity in respect of his executed and not merely
executory interest. See per Lord Chelmsford in
Clarke's case (1) at page 657. Indeed, it has been
held in The Garden Gully United Qzwrtz Mining Com
pany v. Bugh McLister(') that mere !aches does not
disentitle the holder of shares to equitable relief
against an invalid declaration of forfeiture. Sir
Barnes Peacock in delivering the judgment of the
Privy Council observed at pages 56-57 as follows:-
" There is no evidence sufficient to induce their
Lordships to hold that the conduct of the plaintiff
did amount to an abandonment of his shares. or of
his interest therein, or estop him from averring that
he continued to be the proprietor of them. There
certainly is no evidence to justify such a conclusion
(1) 6 H.L.C, 632: JO E.R. •40· (21 L.R. 1 App. Cas. 39.
..
..
S.O.R. SUPREME COURT REPORTS 363
with regard to his conduct subsequent to the ad vel'tise
ment of the 30th of May, 1869. In this case, as in
that of Prendergast v. Turton( 1), the plaintiff's interest
was executed. In other words, he had a legal interest
in his shares and did not require a declaration of trust
or the assistance of a Court of Equity to create in
him an interest in them. Mere !aches would not, there
£ ore,._disentitle him to equitable relief: Clarke and
Chapman v. Hart( 2 ). It was upon the ground of aban
donment, and not upon that of mere !aches, that
Prendergast v. Turton(1) was decided."
Two things are thus clear, namely, (1) that
abandonment of right is much more than mere waiver,
acquiescence or !aches and is something akin to estop
pel if not estoppal itself, and (2) that mere waiver,
acquiescence or laches•which is short of abandonment
of right or estoppel does not disentitle the holder Gf
shares who has a vested interest in the shares from
challenging the validity of the purported forfeiture of
those shares. In view of the decision of the Courts
below that no case of waiver, acquiescence, !aches or
, estoppal has been established in this case it is impos
sible to hold that the principles deducible from the
judicial decisions relied upon by the appeal Court
have disentitled the Company to relief in this case.
The matter does not rest even here. Assuming, but
:uot conceding, that the principle of piercing the veil
of corporate personality referred to in Smith, Stone &
Knight v. The Birmingham Corporation (3) can at
all be applied to the facts of the present case so as to
enable the Court to impute the acts or conduct of
Govindaraju Chettiar and Sundara Ayyar to the
Company, we have yet to inquire whether those acts
or conduct do establish such abandonment of rights
as would, according to the decisions, disentitle the
plaintiff from questioning the validity of the purport
ed declaration of forfeiture. There can be no ques
tion that the abandonment, if any, must be inferred
from acts or conduct of the Company as such or on
the above principles, of its two members subseque~t to
(1) 62 E.R. 807. (3) (1939) 4 All E.R. u6.
(2) o H.L.C. 632: 10 E.R. 1443.
1952
Sha Mulchana
and Go., Ltd.
v.
J awahar Milla
Ltd.
Das J,
S64 SUPREME COURT REPo:R;rs [1953j
the date of the forfeiture, for it is the right to
challenge the forfeiture that is said t.o have been Sha Mulohand
d aba.ndoned. In order to give rise to an estoppel against and Co .• Lt •
1951
v. the Company, such acts or conduct amounting to
Jawahar Mills abandonment must be anterior to the Mills' changing
Ltd. its. position to its detriment. The resolution for forfei
ture was passed on the 5th September, 1941. The
five thousand forfeited shares were allotted to 14 Da& J,
persons on the 16th November, 1941, and it is "tuch
allotment that made it impossible for the Mills to
give them back to the Company. In order, therefore,
to sustain a plea of abandonment of right or estoppel,
it must be shown that the Company or either of. its
, two members had done some act and/or had been
guilty of some conduct between the 5th September,
1941, and the 16th November, J941. No such act or
conduct during such period has been or can be point
ed out. On being pressed adv"ocate for the Mills refers
us to the conduct of Sundara Ayyar in opposing O.P.
No. 10 of 1942 filed by the Mills and O.P. No. 11 of
1942 by the Income-tax authorities for restoring the
Company to the register of companies and it is sub
mitted that such conduct indicates that Sundara Ayyar
had accepted the validity of the forfeiture. 'l'his was
long after the Mills had reallotted the forfeited shares.
Further, a perusal of paragraph 9 of the affidavit in
opposition filed by Sundara Ayyar in O.P. No. 10 of
1942 will clearly show that he not only did not accept
the forfeiture as valid but actually repudiated such
forfeiture as wholly beyond the competence of the
Board of Directors of the Mills. 'l'he reason for
opposing the restoration of the Company may well
have been that Sundara Ayyar desired, at all cost, to
avoid his eventual personal liability as a shareholder
and director of the Company. In any case, Sundara.
Ayyar did make it clear that he challenged the valid
ity of the purported forfeiture of shares by the Mills
and in this respect this case falls clearly within the
decision in Clarke's case (') relied upon by the
appeal Court. The only other conduct of Sundara
Ayyar relied on by learned advocate for the Mills in
(I) 6 H.L.C. 632; IO E.R. 1443.
-
• b
S.C.R. SUPREME COURT REPORTS 365
support of the appeal Court's decision on this point 1952
is that Sundara Ayyar proceeded witl). his suit against Sha Mulchand
Palaniappa Chettiar even after his -suit as well as .his '"'d co., Ltd.
appeal had been dismissed as against the Mills. In v.
that suit Sundara Ayyar sued the Mills as well as Jawahar Mills
Govindaraju Chettiar and the Official Receiver of Ltd.
81].,!am representing the latter's estate and Palaniappa Das J.
Cnettisr. In the plaint itself the validity of the
forf eiturt3\.was challenged. The claim against Palani-
appa Chettiar was in the alternative and it was found-
ed on the agreement of the 30th June, 1939. The
suit was dismissed as against the Mills only on the
technical ground that Sundara Ayyar had no locus
standi to maintain the suit. The contention of the
Company that the forfeiture was invalid and the claim
for rectification of the share register of the Mills
by restoring the name of the Company cannot·
possibly have been affected by this decision. Sundara
Ayyar's claim against Palaniappa Chettiar was based
on the agreement of 1939 and it was formulated as
an alternative personal claim. In view of the clear
allegation in the plaint that the forfeiture was invalid
and not binding on the Company, the continuation
of the suit by Sundara Ayyar to enforce his personal
claim against Palaniappa Chettiar cannot be regarded
as an abandonment by Sundara Ayyar of the right of
the Company. It must not be overlooked that the
Company stood dissolved on that date and Sundara
Ayyar had no authority to do anything on behalf of
the Company. In our opinion there is no evidence
of abandonment of the Company's right to challenge
the validity of the purported forfeiture.
The second point on which the appeal Court decid
ed the appeal against the Company was that the
form of the order made by the trial Court could not
be supported as one validly made under section 38
of the Indian Companies Act. It will be recalled
that having disposed of all the points of controversy
against the Mills and in favour of the Company the
trial Judge had to consider the form of the order
which poµld properly l:Je rp.ad~ in favour of t4i:J
S.C.R. SUPREME COURT . REPORTS 365 ·
. . 1952 support of.the appeal Court's decision on this point
is that Sundara Ayyar proceeded with his suit against Sha Mulchand
Palaniappa Chettiar even after his suit as well as his and Co., Ltd.
appeal had been dismissed as against the Mills. · In .v. ,
that suifSundara Ayyar sued the Mills as well as Jawaka• Mi!Z.
Govindaraju Chettiar. and the Official Receiver of Ltd.
Salem representing the latter's estate and Palaniappa. Da• J.
Chettiar. '.In the 1 plaint ·itself the validity of' the
forfeiture was challenged. The claim against Palani-
appa Chettiar was in the alternative and it was found-
ed on the agreement of the 30th June; 1939. The
suit was dismissed as against the Mills. only on the
technical ground that Sundara · Ayyar had -no locus
itandi to maintain the suit. The contention of the
Company that the forfeiture was invalid and the claim
for rectification of the -share register of· .the Mills
by restoring the name of the Company cannot
possibly have been affected by this decision. Sundara
Ayyar's claim against Palaniappa Chettiar was based
on the agreement of 1939 and it was formulated 'as
an alternative personal claim. · In view of· the •clear
allegation in the plaint that the forfeiture was invalid
·and not binding on the Company,. the continuation
of the suit by Sundara Ayyar ·to enforce his :personal
claim against Palaniappa Chettiar cannot be regarded
as an abandonment by Sundara Ayyar of the right of
the Company. It must not. be overlooked that· the.
Company stood dissolved on that date and· Sundara
· Ayyar had no authority to do anything on behalf of
· the Company.· In our. opinion there is no . evidence
.of abandonment of the Company's right to challenge
the validity of the purported forfeiture. ' . . ..
The second point on which the appeal Court decid-/
ed the appeal against the Company was that the
form of the order made by the trial Court could not
be supported as one validly made under section 38
of the ·Indian· Companies Act.• It will be recalled
that having disposed of all the points of· controversy
against the Mills arid in favour of the Company ·the
trial Judge had to consider the form· of the.: order
which could properly- be made • 1n · favour''Of. the
........ -
S.C.R. SUPREME COURT REPOR'rS 367
reasonable suggestion . I direct
accordingly that on insertion of the name of the
applicant Company as owner of 5,000 of the unissued
shares the applicant Company shall pay to the res
pondent company only Rs. 25,000 being the amount
of calls in arrears."
, Tile appeal Court, however, went behind this record
of the proceedings that took place before the trial
Court and heard the learned senior advocate as to
what had happened in Court and after hearing the
senior advocate for the Mills found itself unable to
agree .with the contention that the learned advocate
for the Mills had agreed to the substitution of 5,000
unissued shares for the shares forfeited. No affidavit
of the learned senior advocate was filed before the
trial Court for the rectification of what is now alleged
to have been wrongly recorded by the trial Judge, as
suggested by the Privy Council in Madhu Sudan
Ohowdhri v.' Musammat Ohandrabati Ohowdhrain (1)
and other cases referred to in Timmalapalli Vira
bhadra Rao v. &okalchand Ohunilal & Others (2).
While we do not consider it necessary or desirable to
lay down any hard. and fast rule, we certainly take the
view that the course suggested by the Privy Council
should ordinarily be taken. It appears that at the
time when the application was made for leave to
appeal to the Federal Court an affidavit swom by
G. Vasantha Pai, the junior advocate for the Mills,
was filed before the Court dealing with that appli
cation. Paragraph 5 of that ·a.ffidavit runs ·as
follows:-
"During the trial every question was argued on
behalf of the respondent company and no point was
given up. This will be clear from the fact that till
we reached the penultimate paragraph of the judg
ment beginning 'It now rema,ins to consider, etc.' all
the issues·are dealt with by the learned Judge. The
agreement was on the specific form of the order on
the basis of his Lordship's judgment and without
prejudice to the respondent company's rights. What
, (r) (1917) 21 C. W. N. 897.
ta
(2) (1951) I M. L. J. 241.
1952
Sha Mulohand
and Go., Ltd.
v.
J awahar Mill&
Ltd.
Das J.
• 368 SUPREME COURT REPORTS [1953]
1963 was agreed to was " proper order" on the basis of
Sha Mulchand h~s Lordship's judgment which by then had been
and co., Ltd. d~ctated. The respondent company no more con-
v. sented to the order than the appellant consented to
Jaivahar Mills have his application dismissed when its counsel
Ltd. agreed that it was impossible to make an order in
terms of the Judge's summons." , Das J.
The appeal Court understood the stand taken by
the learned senior advocate as follows:-
" He seems to have agreed only as an alternative
that if all his contentions were overruled and the
learned Judge thought that notwithstanding the
difficulty in the way of granting the relief for recti
fication the applicant company should be restored to
the register, the only ·shares available being the
16,000 shares of Rs. 10 each unissued, the applicant
company could be recognised as a shareholder in res-
pect of 5,000 out of those shares .................. "
It is quite clear from the judgment of the trial
Court, paragraph 5 of the junior advocate's affidavit
and the statement of the learned senior advocate as
recorded by the appeal Court that the agreement was
solely-and simply as to the specific form of the order,
without prejudice to the Mills' right to challenge the
correctness of the findings of the trial Court on the
material issues. In other words, all that learned
advocate for tke Mills desired to guard himself against
was that the agreement should not preclude the Mills
from preferring an appeal against the decision of the
learned Judge on the merits. The reservation was as
to the right of appeal challenging the findings on
the merits and the agreement was only as to the
. form of the order. 'fhis limited agreement certainly
implied that the Mills agreed to be bound by the
order only if the Mills failed in their appeal on the
merits. In short, the consent covered only the form
of th.e order and nothing else so that if the Mills
succeeded in their appeal the order would go, al
though advoca,te had agreed to its form but that if
the Mills failed in their contention as to the correct
ness of the findings of the learned trial Court on the
I
-
..
. .
S.C.R. SUPREME COURT REPORTS 369
different questions on merits it would no longer be 1vs2
open to them to challenge the order only on the Sh M le' -d
. d a " ,;an ground of the form of the order. In our JU gment and 00 .. L~d.
the Mills cannot attack the form of the order to whi<Jh v.
their counsel consented. · Jo,wahar Mill•
Learned advocate for the Mills has raised the Ltd.
question of limitation. Re referred us to articles 48
and 49 of the Limitation Act but did not strongly
press his objection founded on those articles. We
agree with the trial Court and the Court of appeal
that those two' articles have no application to this
case. A claim for the rectification of the register
simpliciter does not necessarily involve a claim for
the return of the share scrips and in this case there
was, in fact, no prayer for the return of shares or the
scrips and, therefore, these two articles can have no
application. Learned advocate, however, strongly
relies on article 181 of the Limitation Act. That
article has, in a _long s~ries of decisions of most, if
not all, of the High Courts, been held to govern only
applications under the.Code of Civil Procedure. It
may be that there may be divergence of opinion even
within the same High Court but the preponderating
view undoubtedly is that the article applies only to
applications under the Code. The following extract
from the judgment of the Judicial Committee in
Hansraj Gupta v. Official Liquidators, Dehra Dun
Mussoorie Electric Tramway Oompamy Limited (1) is
apposite:-
" It is common ground that the only article in that
schedule which could apply to such an application is
article 181 : but a series of authorities commencing
withRaiManekbai v. Manekji Kavasji (2) have taken
the view that article 181 only relates to applications
under the Code of Civil Procedure, in which case no
period of limitation has been prescribed for the
application. But even if article 181 does apply to
it, the period of limitation prescribed by that article
is three years from the time when the right to apply
accrued, which time would be not earlier than the
(1) (1933) 60 I.A. 13 at p. 20. (2) (1883) 7 Bom. 213.
f!as J.
1952
Sha Mulchand
and Co., Ltd.
v.
Jawahar Mills
Ltd.
Dat1 J.
' 370 SUPREME COURT REPOR'rS (1953)
date of the winding up order, March 26, 1926. The
application of the liquidators was made on March
26, 1928, well within the three years. The result is
th'!lt from either point of view the application by the
liquidators, if otherwise properly made uuder and
within the provisions of section 186 of the Indian
Companies· Act, is not one which must be dismissed
by reason of section 3 of the Indian Limitation Act.
It is either an application made within time, or it is
an application made for which no period of limitation
is prescribed. The case may be a casus omissits. If
it be so, then it is for others than their T.Jordships to
remedy the defect."
Learned advocate for the Mills, however, points out
that the reason for holding that article 181 was con
fined to applications under the Code was that the
article should be construed eju,sdem generis and that,
as all the articles iu the third" division of the schedule
to the Limitation Act related to applications under
the Code, article 181, which was the residuary .article,
must be limited to applications under the Code. That
reasoning, it is pointed out, is no longer applicable
because of the amendment of the Limitation Act by
the introduction of the present articles 158 and 178.
These articles are in the third division which governs
applications but they do not relate to applications
under the Code but to one under the Arbitration
Act and, therefore, the old reasoning can no longer
hold good. It is urged that it was precisely in view
of this altered circumstance that in Asmatali Sharif
v. Mu.jahar Ali Sardar(') a Special Bench of the
Calcutta High Court expressed the opinion that an
application for pre-emption by a non-notified co-sharer
should be governed by article 181 of the Limitation
Act. A perusal of that case, however, will show that
the Special Bench did not finally decide that ques
tion in that case. In Hurdutrai Jagadish Prasad v.
Official Assignee of Calcutta(') a Division Bench of
the Calcutta High Court consisting of Chief Justice
Harries and Mr. Justice Mukherjea who had delivered
(1) (1948) 52 C.W.N. 64. (>) (1948) 52 C.W.N. 34~.
-
' -.~
:r
-
-
S.C.R. SUPREME COURT REPORTS 371
the judgment of the Special Bench clearly expressed
the view that article 181 of the Limitation Act
applied only to applications under the Civil Procedure
Code and did not apply to an application under sf!c
tion 56 of the Presidency Towns Insolvency Act.
Mukberjea J. who also delivered the judgment of the
Division Bench explained the observations made by
him in the Special Bench case by pointing out that
the entire procedure for an application under section
26 (F) of the Bengal Tenancy Act was regulated by
the Civil Procedure Code and, therefore, an applica
tion for pre-emption was, as it were, an application
made under the Civil Procedure Code. Subsequently
in Sarvamangala Dasi v. Paritosh Kumar Das(1) G. N.
Das J. who was also a member of the Special Bench
in the first mentioned case expressed the opinion,
while sitting singly, that article 181 was not confined
to applications under the Code. His Lordship's atten
tion dqes not appear to have been drawn to the case
of ·· 1furdutrai Jagadish Prasad e). It does not
appear to us quite convincing, without further argu
ment, that the mere amendment of articles 158 and
178 can ipso facto alter the meaning which, as a result
of a long series of judicial decisions of the different
High Courts in India, came to be attached to the
language used in article 181. This long catena of
decisions may well be said to have, as it were, added
the words " under the Code" in the first column of
that article. If those words had actually been used
in that column then a subsequent amendment of
articles 158 and 178 certainly would not have affected
the meaning of that article. If, however, as a result
of judicial construction, those words have come to be
read into the first column as if those words actually
occurred therein, we are not of opinion, as at present
advised, that the subsequent amendment of articles
158 and 178 must necessarily and automatically have
the effect of altering the long acquired meaning of
article 181 on the sole and simple ground !that after
the amendment the reason on which the old construe~
tion was founded is no longer available. We need
!J) A.I.R. 1952 Cal. 689. (2) (1948) 52 C.W.N, 343,
l9ti3
Sha Mulohand
and Go, Ltd.
v.
J awahaY Mills
Ltd.
Daa J.
372 SUPREME COURT REPORTS
.
[1953]
1.s2 not, however, on this occasion, pursue the matter fur-
s M I.ch a ther, for we are of the opinion that eveu if article 181
ahn~ 0 : L~;. does apply to the present application it may still be
v.' said to be within time. The period of limitation pre·
Jawahar Mill• scribed by that article is three ·years from the time
·Ltd. "when the right to apply accrues." It is true that a
Da.$ J. further notice after the shares are forfeited, is not
necessary to complete the forfeiture of the shares
[See Knight's case(')], but it is difficult to see how a
person whose share is forfeited and whose name is
struck out from the register can apply for rectification
of the register until he comes to know of the forfei·
ture. The same terminus a quo is also prescribed in
article 120 of the Limitation Act. In O.RM.O.M.SP.
(Firm) v. Nagappa Chettiar(') which was a suit to
r€cover trust property from a person who had taken
it, with notice of the trust, by a transaction which
was a breach of trust, . the Privy Council approved
and applied the principles of the earlier Indian deci
sions referred to therein to the case before .them and
held that the time began to run under ai·ticle · 120
after the plain tiff came to know of the transaction
which gave him the right to sue. On the same rea.son
ing we are prepared to extend that priuciple to the
present application under article 181. If article 181
applies then time began to ruu after the Company
·came to know of its right to sue. It is not alleged
that the Company had any knowledge of the forfei
ture between the 5th September, 1941, when the
resolution of forfeiture was passed and the 9th Sep
tember, 1941, when the Company became defunct.
After the last mentioned date and up to the 16th
February, l 945, the Company stood dissolved and no
knowledge or notice can be imputed to the Company
during this period. Therefore, the Company must be
deemed to have come to know of its cause of action
after it came to life again and the present application
was certainly made well within three years after that
event happened on the 16th February, 1945. If arti
·cle 181 does not apply then the only article that can
, · (r)(r867) L.R. 2 Ch. App. J2t. (2) T,L.R. [r94rJ Mad. r75.
~.C.R. SUPREME COURT REPORTS 373
apply by analogy is article 120 and the application
is also within time. In eithe1' view this application
,cannot be thrown out as barred by limitation.
The result, therefore, is that this appeal must suc
ceed. We set aside the judgment and decree of the
High Court in appeal and restore the order of the
trial Court. The appellant will be entitled to the
costs of the appeal in the High Court as well as in
this Court.
' BosE J.-I agree with the conclusions of my learn-
ed brothers and also with their reasoning generally
but lest it be inferred that I am assenting to a far
wider proposition than is actually the case, I deem it
advisable to clarify my position about abandonment
and waiver. 'rhough the usage of these words in
cases of the present kin.d has the sanction of high
authority, they are, in my opinion, inapt and mislead
ing in this class of case. In order to appreciate this
it will be necessary to hark back to first principles.
In the first place, waiver and abandonment are in
their primary context unilateral acts. Waiver is the
intentional relinquishment of a right or privilege.
Abandonment is the voluntary giving up of one's rights
and privileges or interest in property with the inten
tion of never claiming them again. But except where
statutory or other limitations intervene, unilateral acts
never in themselves effect ·a change in legal status
because it is fundamental that a man cannot by his
unilateral action affect the rights and interests of
another except on the basis of statutory or other
authority. Rights and obligations are normally inter
twined and a man cannot by abandonment per se of
bis rights and interests thereby rid himself of his own
obligations or impose them on another. Thus, there
can he no abandonment of a tenancy except on statu
tory grounds (as, for example, in the 9entral Pro
vinces Tenancy Act, 1920) unless there 1s acceptimce,
express or implied, by the other side. It may', f~r ex
ample in a case of tenancy, be to the 111.udlord s mter
est to keep· the tenancy alive; and so also in the cas~
1959
Sha Mulchand
and Co., Ltd.
v.
Jawahar Mills
Ltd.
Bose J.
1952
Sha Mulchand
and Co,, Ltd.
v.
J awahar Mills
Ltd.
Bose J,
374 SUPREME COURT REPOR'rS [195~]
of shares of a company. It may be to the interests of
the company and the general body of shareholders to
refrain from forfeiture if, for example, the value of
unpaid calls exceeds the market value of the shares.
Such a position was envisaged in Garden Gully United
Quartz Mining Co. v. Hugh McLister('). So also with
waiver. A long catena of illustrative cases will be
found collected in B. B. Mitra's Indian Limitation
Act, Thirteenth Edition, pages 447 and 448.
Thi.s fundamental concept brings about another
repercussion. Unless other circumstances intervene,
there is a locus paenitentiae in which a unilateral
abandonment or waiver ctm be recalled. It would be
otherwise if the unilateral act of abandonment in
itself, and without the supervention of other matters,
effected a change in legal status. In point of fact, it
is otherwise when, as in the statutory example I have
quoted, the law intervenes and determines the
tenancy. It is, therefore, in my opinion, fundamental
that abandonment and waiver do not in themselves
unilaterally bring· about a change in legal status.
Something else must intervene, either a statutory
mandate or an act of acceptance, express or implied,
by another person, or, as r~ord ·Chelmsford put it
in Clarke & Chapman v. Hart (2), acts which are
equivalent to an agreement or a licence, or an estoppal
in cases where an estoppel can be raised.
Next, there is, in my view, a fundamental difference
between an executory interest and an executed
one. In the former, it is necessary to resort to
equitable reliefs to get enforced a right which is
not at the date a vested right: cases of specific
performance and declaration of a trust are examples,
so also a prayer for relief from forfeiture. In
cases of this kind, conduct which would disentitle
a person to equitable relief is relevant. No hard and
fast rule can or should be laid down as to what such
conduct should consist of but among the varieties of
conduct which Courts have considered sufficient in
this clau of case is conduct which amounts to !aches
(t) ~1875-76) I App. Cas. ~g. at 57· (2) (1·858) to E.R. 141~ at 1452 and 145~,
S.C.R. SUPREME COURT REPORTS 375
or where there has been a standing by or acquies
cence or waiver or abandonment of a right, parti
cularly wheu this would prejudicially affect third
parties. This sort of distinction is brought out by
Lord Chelmsford in Clarke di: Chapman v. Hart(').
The position is different when the interest is
executed and the man has a vested interest in the
right, that is to say, when he is the.legal owner of
the shares with the legal title to them residing in him.
This legal title can only be destroyed in certain
specified ways. It is in my view fundamental that the
legal title to property, whether moveable or immove
able, cannot pass from one person to another except
in legally recognised ways, and normally by the
observance of certain recognised forms. Confining
myself to the present ©ase, one of the ways in which
the title to shares can pass is by forfeiture; but in that
case an exact procedure has to be followed. A second
way is by transfer which imports agreement. There
again there is a regular form of procedure which must
be gone through. A third is by estoppal, though,
when the position is analysed, it will be found that it
is not the estoppel as such which brings about the
change. The expressions abandonment, waiver and
so forth, when used in a case like the present, are
only synonyms for estoppel and despite hallowed
usage to the contrary, I prefer to call a spade a spade
and put the matter in its proper lege,l pigeon hole
and call it by its proper legal name. These other
terms are, in my view, loose·and inaccurate and tend
to confuse, when applied to cases of the present
nature. A man who has a vested interest and in
whom the legal title lies does not, and cannot, lose
that title by mere !aches, or mere standing by or even
by saying that he has abandoned_ his r_ight, unless
there is something more, namely mducmg another
party by his words or conduct to believe the truth of
that statement and to act upon it to his detriment,
that is to say, unless there is an estoppal, pure and
simple. It is only in such a case that the right can
(I) IO E.R. 1443 at 1452 and 1'4-5~.
1?
1952
Sha 1lfulchand
and Co., Ltd.
v.
J awahar Milli
Ltd,
Bose J.
376 SUPREME COURT REPORTS (1953]
1962 be Jost by what. is loosely called abandonment or
- a waiver, but even then it is not the abandonment or
·Sh• lfolchan . h h' h d . h' f h' t'tl b t h d 0 Ltd waiver as sue w 1c epnves 1m o is i e u t e
"" ~:· ' estoppel which prevents him from asserting that his
Jawahar Mills interest .in the shares has not been legally extinguish-
Ltd. ed, that is to say, which prevents him from asserting
Bose J. that the legal forms which in law bring about the
extinguishment of his interest and pass the title
which resides in him to another, were not duly
observed.
Faz! Ali J. and I endeavoured to explain this in
Dhiyan Singh v. Jugal Kishore ('). ·what happens is
this. The person estopped is not allowed to deny
the existence of facts, namely the actings of the
parties and so forth which would in law bring about
the change in legal status, namely the extinguish
ment of his own title and the transfer of it to another,
for estoppel is no more th au a rule of evidence which
prevents a man from challenging the existence or
non-existence of a fact. Once the facts are ascertain
ed, or by a fiction of law are deemed to exist, then it
is those facts which bring about the alteration in legal
status; it is not the estoppal as such nor is it the
abandonment or waiver per se. I prefer therefore
to adhere to what I conceive is the proper legal
nomenclature. As I understand it, estoppel was the
basis of the decision in Clarke ti: Chapman v. Hart (2).
See Lord Wensleydale's judgment at page 1458 and
the Lord Chancellor's at page 1453; so also in
Garden Gully United Quartz Afining Company v. Hugh
McLister (3),
That there is no sufficient ground for estoppal in
this case is shown by the facts set out in the judg
ment of my learned brothers. I agree that the appeal
must succeed.
Appeal allowed.
Agent for the appellant: S. Subramaniam.
Agent for the respondent: M. S. K. Aiyangar.
(1) [1952] S.C.R, 478 at 485.
(2) 10 E.R. I.-13·
(3) I App. Cas. 39 at 56 and 57,