judgement:
Appeal No.230 of 1954.
Petition No. 276 of 1953.
Appeal from the judgment and order dated June 7, 1954, of the former Pepsu High Court in Civil Misc.
No. 97 of 1953.
Petition under Article 32 of the Constitution of India for the enforcement of fundamental rights.
731 G.S. Pathak, Veda Vyasa, section K. Kapur and J. B. Dadachanji, for the appellants petitioners.
H. N. Sanyal, Additional Solicitor General of India,R.Ganapathi Iyer, Raj Gopal Sastri and R. H. Dhebar, for the respondents.
April 28.
The judgment of section R. Das C. J., Venkatarama Aiyar, section K. Das and Gajendragadkar JJ.
was delivered by Venkatarama Aiyar J. Bose J. delivered a separate judgment.
VENKATARAMA AIYAR J. Messrs.
Dalmia Dadri Cement Co. Ltd. which is the appellant in Civil Appeal No. 230 of 1954 and the petitioner in Petition No. 276 of 1953, is a public company engaged in the manufacture and sale of cement at a place called Dadri situate in what was once the independent State of Jind.
On April 1, 1938, one Shanti Prasad Jain, a promoter of the above company, obtained certain concessions from the Ruler of Jind under an agreement, exhibit A, and as it is this document that forms the basis of the present claim of the appellant, it is necessary to refer to the, material terms thereof.
Clause (1) of the agreement grants to the licensee, Shanti Prasad Jain, the sole and exclusive monopoly right of manufacturing cement in the Jind State and for that purpose he is authorised in Cl.
(2) to win and work all quarries, strata, seams and beds of kankar, rorey, limestone or other like materials ".
Under Cl.
(7), the licence is to last for a period of 25 years with option for successive renewals.
Clause (10) requires that a public limited company should be formed before July 21, 1936, to work the concessions, and that it should be registered in the Jind State.
Under Cl.
(11), the State is to be allotted 6 per cent.
cumulative preference shares fully paid up of the face value of rupees one lack and ordinary shares fully paid up of the total face value of Rs. 50,000 without any payment whatsoever.
Then there are provisions for the payment of royalty to the State and sale of cement at concession rates to local consumers.
Clause (23) is very material for the present dispute, and is as follows: 93 732 " The Company shall be assessed to income tax in accordance with the State procedure but the rate of income tax shall always be four per cent.
up to a limit of the income of rupees five lacs and five per cent.
on such income as is in excess of rupees five lacs. . .
Clause (24) grants exemption from export, import and other duties excepting consmers.
Clause (37) provides for settlement of all disputes between the parties by arbitration.
In accordance with the terms set out above, the appellant company was duly incorporated in the Jind State, and on May 27, 1938, Shanti Prasad Jain executed in its favour a deed agreeing to transfer all " his rights, privileges and obligations " under exhibit A.
The appellant claims that it has become in this wise entitled as assignee of the licensee to all the benefits granted under exhibit A.
The contention was raised by the respondent that the deed dated May 27, 1938, does not itself purport to assign the rights under the license, exhibit A but merely agrees to do so, and that in the absence of a further deed transferring those rights, the appellant could not claim the rights of assignee.
But Cl.
(35) expressly provides that " the licensee shall transfer his rights to the proposed Company on its formation ", and after the appellant was incorporated, the State had throughout recognised it as the person entitled to the rights and subject to the obligations under the license and realised royalty and levied income tax in accordance with the provisions of exhibit A.
This objection was taken for the first time only in the Writ Petition No. 276 of 1953 in this Court.
It is stated for the appellant and that is not controverted for the respondent that under the law of Jind State an assignment need not be in writing, and that being so, it is open to us to infer such assignment from the conduct of the parties.
We must accordingly decide these cases on the footing that the rights under the license, exhibit A, dated April 1, 1938, had become vested in the appellant by assignment.
On August 15, 1947, India became independent, and on the same date, the Ruler of Jind signed an Instrument of Accession ceding to the Government of India 733 power to legislate with respect to Defence, External Affairs and Communications.
On May 5, 1948, eight of the Rulers of States in East Punjab including Jind entered into a Covenant for the merger of their territories into one State, called the Patiala and East Punjab States Union.
For brevity, this State will hereafter be referred to as the Patiala Union.
Article VI of the Covenant on which the appellant relies in support of its claim is as follows: " The Ruler of each Covenanting State shall, as soon as may be practicable, and in any event not later than the 20th August, 1948, make over the administration of his State to the Raj Pramukh; and thereupon, (a)all rights, authority and jurisdiction belonging to the Ruler which appertain, or are incidental to the Government of the Covenanting State shall vest in the Union and shall hereafter be exercisable only as provided by this Covenant or by the Constitution to be framed thereunder; (b)all duties and obligations of the Ruler pertaining or incidental to the Government of the Covenanting State shall devolve on the Union and shall be discharged by it; (c)all the assets and liabilities of the Covenanting State " shall be the assets and liabilities of the Union; and (d)the military forces, if any, of the Covenanting State shall become the military forces of the Union.
" Article X provides that a Constituent Assembly should be formed as early as practicable, and that it should frame a Constitution for the State, and that until the Constitution is so framed, the Rajpramukh is to have power to make and promulgate Ordinances for the peace and good government of the Union.
Under article XVI, the Union " guarantees either the continuance in service of the permanent members of the public services of each of the Covenanting States on conditions which will be not less advantageous than those on which they were serving on the 1st February, 1948, or the payment of reasonable compensation or retirement or proportionate pension." 734 In accordance with article VI of the Covenant, the Rajpramukh of the Patiala Union took over the administration of Jind on August 20, 1948, and immediately after assumption of office, he promulgated the Patiala and East Punjab States Union Administration Ordinance No. 1 of section 2005.
Section 3 of the Ordinance, which is material for the present discussion, is as follows: " As soon as the administration of any covenanting State has been taken over by the Raj Pramukh as aforesaid all Laws, Ordinances, Acts, Rules, Regulations, Notifications, Hidayate Firman i Shahi, having force of law in Patiala State on the date of commencement of this Ordinance shall apply mutatis mutandis to the territories of the said State and with effect from that date all laws in force in such Covenanting State immediately before that date shall be repealed: Provided that proceedings of any nature whatsoever pending on such date in the courts or offices of any such Covenanting State shall, notwithstanding anything contained in this Ordinance or any other Ordinance be disposed of in accordance with the laws governing such proceedings in force for the time being in any such Covenanting State." This Ordinance came into force on August 20, 1948.
On February 5, 1949, it was repealed and replaced by Ordinance No. XVI of section 2006, section 3(a) whereof being in the same terms as section 3 of Ordinance No. 1 of 8. 2005.
Article X(1) of the Covenant provided, as has been mentioned, for the framing of a Constitution for the Union in the manner provided therein.
That, however did not materialise, and on November 24, 1949, the Rajpramukh issued a proclamation accepting the Indian Constitution as that of the Patiala Union, and thus, the Union became a Part B State under the Constitution.
On April 13, 1950, the Patiala Union accepted the Federal Financial Integration Scheme, and became a taxable territory of the Union of India and the Indian Finance Act, 1950, became applicable to it from April 13, 1950.
The position, therefore, is that as regards liability to be assessed to income tax 735 which is what we are concerned with in these proceedings, the law applicable to the appellant for the period prior to August 20, 1948, was the income tax law of ' Jind, for the period August 20, 1948, to April 13, 1950, the Patiala Income tax Act, section 2001, which came into force under Ordinance No. 1 of section 2005 and after April 13, 1950, the Indian Income tax Act.
Civil Appeal No. 230 of 1954 arises out of proceedings for assessment of income tax for the year 1949 1950.
By its order dated November 11, 1952, the Appellate Tribunal has found that the taxable profits of the appellant for the year of account which is the calendar year 1948 was Rs. 1,94,265, and that finding is not now in dispute.
The substantial point now in controversy is as to the rate at which tax should be levied on that amount, whether it should be what is enacted in the Patiala Income tax Act as contended for the respondent, or what is provided in Cl.
(23) of the agreement, exhibit A, as claimed by the appellant.
On this question, the Appellate Tribunal held that the Patiala Union which was a new State that had come into existence as a result of the Covenant was not bound by the agreements entered into previously by the rulers of the Covenanting States, that the appellant could claim the benefit of that agreement only if the new State chose to recognise it, " that there had been, in fact, no such recognition, and that, in consequence, the tax was leviable as prescribed in the Patiala Income tax Act, section 2001.
On the application of the appellant, the Tribunal referred under section 66(1) of the Indian Income tax Act, the following question for the opinion of the High Court: " Whether the asseessee 's profits and gains earned in the calendar year 1948 were assessable for section 2006 (1949 50) at the rates in force according to the Patiala Income Tax Act of section 2001 read with section 3 of the Patiala & East Punjab States Union Administration Ordinance (No. 1 of section 2005), as repealed and re enacted in section 3 of the Patiala & East Punjab States Union General Provisions (Administration) Ordinance (No. XVI of 2006), or in accordance with clause (23) of the agreement of April, 1938 above referred to," 736 By their judgment dated June 7, 1954, the learned ,Judges of the High Court answered the question against the appellant, but granted a certificate under section 66(A)(2) of the Indian Income tax Act, and that is how Civil Appeal No. 230 of 1954 comes before us.
Meantime, proceedings were taken by the Income tax authorities for assessment of tax for years subsequent to 1949 1950, and the dispute again related to the question whether the amount of tax should be determined in accordance with Cl.
(23) of exhibit A or the provisions of the Indian Income tax Act, 1922.
The Income tax Officer, Rohtak, rejected the contention of the appellant that it was liable to pay tax only in accordance with.
exhibit A and passed orders determining the tax under the provisions of the Indian Incometax Act for the year 1950 1951 on April 28, 1952, for 1951 1952 on May 12, 1952, and for 1952 1953 on March 17, 1953.
Appeals against these orders have been preferred by the appellant, and they are stated to be pending before the Appellate Assistant Commissioner.
On the allegation that the tax as imposed in the orders aforesaid is unauthorised, and that it constitutes an unlawful interference with its rights to carry on business guaranteed under article 19(1)(g), the appellant has filed Petition No. 276 of 1953 for an appropriate writ directing the respondents to levy tax in accordance with the agreement, exhibit A, dated April 1, 1938.
In support of this petition, in addition to the contentions raised in Civil Appeal No. 230 of 1954 the petitioner also urges that even if the Union of India is entitled to repudiate the agreement dated April 1, 1938, it has not, in fact, done so, and that it has, on the other hand, recognised it as good and is therefore not entitled now to go back upon it, and that the levy of tax in accordance with the provisions of the Indian Income tax Act is accordingly illegal.
As the contentions raised in the appeal and in the petition are substantially identical, they were heard together.
Before us, the validity of the assessment of incometax for the year 1949 1950 was challenged by Mr. Pathak on the following grounds: 737 (1)Ordinance No. 1 of section 2005 under which the Patiala Income tax Act Act is sought to be applied to the appellant does not, on its true construction, annul ' the rights granted under exhibit A. (2)If the Ordinance in question is to be construed as having that effect, then it is in contravention of article VI of the Covenant, and is therefore unconstitutional and void.
(3)Even apart from the Covenant, the agreement, exhibit A, is binding on the Patiala Union and the impugned Ordinance is bad as infringing it; and (4)the Patiala Union had, in fact, recognised the rights granted under exhibit A and it is therefore binding on it, as if it were a contract entered into by itself.
(1)On the first question, the argument of Mr. Pathak is this: The Ruler of Jind was an absolute monarch, and his word was law.
The agreement, exhibit A, must therefore be held to be a special law conferring rights on the licensee.
Section 3 of Ordinance No. 1 of section 2005 is a general provision extending all laws of the State of Patiala to the territories of the Covenanting States.
The rule of construction is well established that general statutes should be interpreted so as not to interfere with rights created tinder special laws.
Section 3 of the Ordinance should therefore be construed as not intended to affect the rights conferred under exhibit A. Reliance is placed on the statement of the law in Maxwell 's Interpretation of Statutes, 10th Edn., pp. 176 and 180, and on the observations in Blackpool Corporation vs Starr Estate Co. (1).
Now the rule of construction expressed in the maxim generalia specialibus non derogant is well settled and we shall also assume in favour of the appellant that the agreement, exhibit A, is a special law in the nature of a private Act passed by the British Parliament, and that accordingly section 3 of the Ordinance should not be construed, unless the contrary appears expressly or by necessary implication, as repealing the provisions of exhibit A.
But ultimately, the question is what does the language of the enactment mean ? Section 3 is quite explicit, and (1)[1922] 1 A. C. 27, 34. 738 it provides that from the date of the commencement of the Ordinance " all laws in force in such Covenanting States immediately before that date shall be repealed ", and the proviso further enacts that pending proceedings are to be disposed of in accordance with laws in force for the time being, in the Covenanting States.
In the face of this language which is clear and unqualified, it is idle to contend that Ordinance No. 1 of section 2005 saves the rights of the appellant to the tax concessions under Cl.
(23) of exhibit A. (2)It is next contended by Mr. Pathak that if Ordinance No. 1 of section 2005 is to be construed as extinguishing the right to concessions conferred under exhibit A, then it must be held to be unconstitutional and void.
This contention is based on article VI (b) of the Covenant, which provides that the obligations of the rulers pertaining to or incidental to government of the Covenanting State shall devolve on the Union and be discharged by it.
It is argued that the Ruler of Jind had for good and valuable consideration undertaken certain obligations under Cl.
(23) of exhibit A with reference to taxation which is a governmental function, that he had himself scrupulously honoured them so long as he was a Ruler, and then passed them on under article VI (b) to the new State created under the Covenant, that the Rajpramukh who was a party to the Covenant and claimed under it was bound by that obligation, that his power to enact laws is subject under article VI (a) to the obligations mentioned in article VI (b), and that the impugned law is, if it is to be construed as having the effect of abrogating those obligations, ultra vires his powers under the Covenant and is, in consequence, void.
In answer to this, the respondent contends that the Covenant entered into by the rulers is an act of State and that any violation of its terms cannot form the subject of any action in the municipal courts, that the obligations mentioned in article VI (b) refer not to liabilities under agreements for which there was special provision in article VI (c) but to obligations of the character contemplated by the Instrument of Accession, and that, in any event, the rights granted to the licensee under exhibit A were 739 terminable by the Ruler of Jind at will, and that, in consequence, if the obligation under Cl.
(23) devolved on the Raj Pramukh under article VI (b) it did so subject ' to his rights under article VI (a) to terminate it if he so willed, and that, therefore, the impugned law did not violate article VI (b).
The question that arises for our decision is whether the Covenant was an act of State.
On that, there can be no two opinions.
It was a treaty entered into by rulers of independent States, by which they gave up their sovereignty over their respective territories, and vested it in the ruler of a new State.
The expression " act of State " is, it is scarcely necessary to say, not limited to hostile action between rulers resulting in the occupation of territories.
It includes all acquisitions of territory by a sovereign State for the first time, whether it be by conquest or cession.
Vide Vajesingji Joravar Singji and others vs Secretary of State (1) and Thakur Amar Singji vs State of Rajasthan (2).
And on principle, it makes no difference as to the nature of the act, whether it is acquisition of new territory by an existing State or as in the present case, formation of a new State out of territories belonging to quondam States.
In either case, there is establishment of new sovereignty over the territory in question, and that is an act of State.
Mr. Pathak did not contest the position that the Covenant in so far as it provided for the extinction of the sovereignty of the rulers of the Covenanting States and the establishment of a new State is an act of State.
But he contended that it was much more than that, that it was also in the nature of a Constitution for the new State in the sense that it is a law under which all the authorities of the new State including the Raj Pramukh had to act.
In support of this contention he referred to article X, which provided for the convening of a Constituent Assembly for the framing of the Constitution, and argued that the Articles of the Covenant which provided for the administration of the State by the Rajpramukh were in the nature of an interin (1)(1924) L. R. 51 I. A. 357, 360.
94 (2) ; , 335.
740 Constitution.
He also relied on article XVI, which guaranteed the rights of the permanent members of the public services in the Covenanting States to continuance in service, and contended that this could not be regarded as an act of State but only as a law relating to the administration of the new State.
In this view of the Covenant, he argued, article VI must be held to be a constitutional provision enacted for the protection of private rights, that it was, in conse quence, binding on the ruler of the new State, and that the municipal courts were competent to grant appropriate reliefs for the breach thereof.
This argument proceeds, in our view, on a misconception as to what is an act of state and what is a law of the State conferring rights on the subject, or, as the learned counsel for the appellant termed it, Constitution of the State.
When the sovereign of a Statemeaning by that expression, the authority in which the sovereignty of the State is vested, enacts a law which creates, declares or recognises rights in the subjects, any infraction of those rights would be action able in the courts of that State even when that infraction is by the State acting through its officers.
It would be no defence to that action that the act complained of is an act of state, because as between the sovereign and his subjects there is no such thing as an act of state, and it is incumbent on his officers to show that their action which is under challenge is within the authority conferred on them by law.
Altogether different considerations arise when the act of the sovereign has reference not to the rights of his subjects but to acquisition of territories belonging to another sovereign.
That is a matter between independent sovereigns,and any dispute arising therefrom must be settled byrecourse not to municipal law of either States but to diplomatic action, and that failing, to force.
That is an act of state pure and simple, and that is its character until the process of acquisition is completed by conquest or cession.
Now, the status of the residents of the territories which are thus acquired is that until acquisition is completed as aforesaid they are the subjects of the ex sovereign of those territories 741 and thereafter they become the subjects of the new sovereign.
It is also well established that in the new set up these residents do not carry with them the, rights which they possessed as subjects of the ex sovereign, and that as subjects of the new sovereign, they: have only such rights as are granted or recognised by him.
Vide Secretary of State for India vs Bai Rajbai (1), Vajesingji Joravar Singji and others vs Secretary of State (2), Secretary of State vs Sardar Rustam Khan (3) and Asrar Ahmed vs Durgah Committee, Ajmer (4).
In law, therefore, the process of acquisition of new territories is one continuous act of state terminating on the assumption of sovereign powers de jure over them by the new sovereign and it is only thereafter that rights accrue to the residents of those territories as subjects of that sovereign.
In other words, as regards the residents of territories which come under the dominion of a new sovereign, the right of citizenship commences when the act of state terminates and the two therefore cannot co exist.
It follows from this that no act done or declaration made by the new sovereign prior to his assumption of sovereign powers over acquired territories can quoad the residents of those territories be regarded as having the character of a law conferring on them rights such as could be agitated in his courts.
In accordance with this principle, it has been held over and over again that clauses in a treaty entered into by independent rulers providing for the recognition of the rights of the subjects of the ex sovereign are incapable of enforcement in the courts of the new sovereign.
In Cook vs Sprigg (5), the facts were that the ruler of Pondoland in Africa had granted certain concessions in favour of the appellants and subsequently ceded those territories to the British Government.
The latter having declined to recognise those concessions, the appellants sued for a declaration of their rights thereunder, and the question was whether they had a right of action in respect of what was an act of State.
One of the contentions (1) (1015) L.R. 42 I.A. 229.
(3) (1941) L.R. 68 I.A. 109.
(2) (1924) L. R. 51 T.A. 357, 360.
(4) A.I.R. 1947 P.C. 1.
(5) ,578.
742 urged on their behalf was that the ruler of Pondoland had at the time of cession of his territories expressed his desire to the British Government that the concessions in favour of the appellants should be recognised and that, in consequence, the appellants had the right to enforce them against the new Government.
In rejecting this contention, the Lord Chancellor observed: " The taking possession by Her Majesty, whether by cession or by any other means by which sovereignty can be acquired, was an act of state and treating Sigcau as an independent sovereign which the appellants are compelled to do in deriving title from him.
It is a well established principle of law that the transactions of independent States between each other are governed by other laws than those which municipal courts administer.
" "It is no answer to say that by the ordinary principles of international law private property is respected by the sovereign which accepts the cession and assumes the duties and legal obligations of the former sovereign with respect to such private property within the ceded territory.
All that can be properly meant by such a proposition is that according to the well understood rules of international law a change of sovereignty by cession ought not to affect private property, but no municipal tribunal has authority to enforce such an obligation.
And if there is either an express or a well understood bargain between the ceding potentate and the Government to which the cession is made that private property shall be respected, that is only a bargain which can be enforced by sovereign against the sovereign in the ordinary course of diplomatic pressure." In Vajesingji Joravar Singji and others vs Secretary Of State for India (1), the dispute related to the title of the appellants to certain lands situated in the Panch Mahals.
This area formed at one time part of the dominion of the Scindias of Gwalior, and it was ceded to the British Government by treaty on December 12, 1860.
Clauses (2) and (3) of the treaty provided for (1)(1924) L.R. 51 I.A. 357, 360.
743 the recognition by the new sovereign of rights of the residents under existing leases, jagirs and the like.
The complaint of the appellants was that in 1907 the British Government had proposed to lease the lands to them on terms which infringed their proprietary rights, and that this was in violation of the rights which had been guaranteed under Cls.
(2) and (3) of the treaty, and was, in consequence, bad.
The answer of the Government was that the treaty in question was an act of state and conferred no rights on the appellants.
In upholding this contention, Lord Dunedin observed: " When a territory is acquired by a sovereign state for the first time that is an act of state.
It matters not how the acquisition has been brought about.
It may be by conquest, it may be by cession following on treaty, it may be by occupation of territory hitherto unoccupied by a recognised ruler.
In all cases the result is the same.
Any inhabitant of the territory can make good in the municipal courts established by the new sovereign only such rights as that sovereign has, through his officers, recognized.
Such rights as he had under the rule of predecessors avail him nothing.
Nay more, even if in a treaty of cession it is ,stipulated that certain inhabitants should enjoy certain rights, that does not give a title to those inhabitants to enforce these stipulations in the municipal courts.
The right to enforce remains only with the high contracting parties.
" In Hoani Te Heuheu Tukino vs Aotea District Maori Land Board (1), the question arose with reference to the Treaty of Waitangi entered into by the British Government with the native chiefs of New Zealand in 1840.
Under cl.
(1) of the Treaty, there was a complete cession by the chiefs of all their rights and powers of sovereignty.
Clause (2) guaranteed to the chiefs, the tribes and the respective families and individuals certain rights in lands, forests and fisheries.
In 1935, the Legislature of New Zealand enacted a law, the provisions of which were impugned as ultra vires on the ground that they infrigned the rights (1) 744 protected by cl.
(2) of the Treaty of Waitangi.
In holding that the rights under the Treaty furnished no ground for action in the civil courts, Viscount Simon L. C. referred to the decision in Vajesingji Joravar Singji and others vs Secretary of State (1) and observed : " So far as the appellant invokes the assistance of the court, it is clear that he cannot rest his claim on the Treaty of Waitangi, and that he must refer the court to some statutory recognition of the right claimed by him." The result of the authorities then is that when a treaty is entered into by sovereigns of independent States whereunder sovereignty in territories passes from one to the other, clauses therein providing for the recognition by the new sovereign of the existing rights of the residents of those territories must be regarded as invested with the character of an act of state and no claim based thereon could be enforced in a court of law.
It must follow from this that the Covenant in question entered into by the rulers of the Covenanting States is in its entirety an act of state, and that article VI therein cannot operate to confer on the appellant any right as against the Patiala Union.
This conclusion becomes all the more impregnable when it is remembered that the Covenant was signed by the rulers on May 5, 1948, whereas the new state came into being only on August 20, 1948.
In the decisions cited above, the sovereign against whom the obligations created by the treaty were sought to be enforced was the very sovereign who entered into that treaty or his successor.
But here, the ruler of the Patiala Union against whom article VI is sought to be enforced was not a party to the Covenant at all, because that State had not come into existence on that date.
The person who signed the Covenant was the ruler of the State of Patiala which was one of the Covenanting States, but that State as well as the seven other States which entered into the Covenant stood all of them dissolved on August 20, 1948, when the new Patiala Union came into being.
The new State could not and did not enter into any covenant before August 20, 1948, and therefore, in strictness, it cannot be (1) (1924) L.R. 511.
A. 357, 360.
745 held to be bound by article VI, to which it was not a party.
Considerable emphasis was laid for the appellant on article XVI of the Covenant under which the Union guaranteed the continuance of the service of permanent members of public services, and this 'was relied on as showing that the rights of the subjects of the quondam States were intended to be protected.
This argument is sufficiently answered by what we have already observed, namely, that a clause in a treaty between high contracting parties does not confer any right on the subjects which could be made the subject matter of action in the courts, and that the Patiala Union is not bound by it, because it was not a party to the Covenant.
It should, however, be mentioned that after the formation of the new State oil August 20, 1948, the first legislative act of the sovereign was the promulgation of Ordinance No. 1 of section 2005, and section 4 thereof expressly recognises the rights of the permanent members of public services.
That undoubtedly is a law enacted by the sovereign conferring rights on his subjects and enforceable in a court of law, but at the same time the enactment of such a law serves to emphasise that the Articles have not in themselves the force of law and were not intended to create or recognise rights.
In this connection, reference should also be made to cl.
XVI of the Ordinance which enacts that " the provisions of articles XV and XVII of the Covenant relating to the bar of certain suits and proceedings shall have the force of law.
" In support of his contention that article VI of the Covenant is to be regarded as a Constitutional provision, counsel for the appellant relied on certain passages in the judgment of this Court in Thakur Amar Singji vs State of Rajasthan (1) at pp. 313 and 315 wherein a similar covenant entered into by the rulers of Rajasthan was described as a Constitution.
Apart from the use of the word " Constitution ", we find nothing in these passages which has any bearing on the point now under consideration.
There, the question was as regards the vires of a law enacted by (1)[1955] 2 S.C.R. 303.
746 the Rajpramukh of Rajasthan, and that depended on whether he was the authority in whom the legislative authority of the State was vested within article 385.
This Court held that under the Covenant it was the Rajpramukh who had the power to enact laws, and that the Ordinance issued by him was therefore valid, and it was in that context that the covenant was referred to as a Constitution.
We had not to consider there the question whether the Covenant was an act of state, or whether it was a law conferring on the citizens of the defunct States rights which were enforceable in a court of law.
No such question arose for decision, and therefore the description of the Covenant as a Constitution cannot be read as importing a decision that it is a law conferring rights and not an act of state.
In the result, we hold that the Covenant is in whole and in parts an act of state, that article VI therein does not operate to confer any rights on the subjects of the Covenanting States as against the sovereign of the new State constituted thereunder, and that Ordinance No. 1 of section 2005 is, in consequence, not open to attack as being a violation of article VI.
(3)We shall now consider the contention of the appellant that even apart from article VI of the Covenant, the impugned Ordinance No. 1 of section 2005 is bad in so far as it annuls rights granted by the Ruler of Jind under the agreement dated April 1, 1938.
It was argued that exhibit A was not a mere concession which could be withdrawn by the sovereign at his will and pleasure, but that it was an agreement entered into for valuable consideration and creating mutual rights and obligations, that the appellant had, acting on the agreement, allotted to the State shares of the value of Rs. 1,50,000 without payment and had incurred considerable expense in working the concessions, and that, therefore, it was not open to the Patiala Union to go back upon it.
The decisions in The Piqua Branch of the State Bank of Ohio vs Knoop (1) and Home of the Friendless vs Rouse (2) were relied on as authorities for the proposition that a State is not competent to revoke a grant made by it for consideration.
(1) ; , (2) (1869) 19 L. Ed 495.
747 In The Piqua Branch of the State Bank of Ohio vs Knoop (1), a law of the State of Ohio of the year 1845 had provided for the incorporation of Banks and it contained provisions as to the taxes payable by them to the State and the mode of payment.
In 1851 another Act was passed, the effect of which was to increase the tax payable and the validity of this Act was questioned by a Bank incorporated under the Act of 1845.
It was held by the majority of the Court that the Act of 1845 was a legislative contract, and that the State Legislature was not competent to impair the rights which had been acquired under that contract.
In Home of the Friendless V. Rouse (2), a Society called the Home of the Friendless was established under a charter granted by the State of Missouri.
The charter had provided that the properties of the Society shall be exempt from taxation.
Subsequently, the State proposed to withdraw the concession and impose tax.
It was held by the Supreme Court of the United States that the charter was a contract entered into between the State and the Society, and that there was no power in the State to go behind it.
Now, it should be observed that the decisions cited above were given on section 10 of article 1 of the American Constitution that " no State shall pass a law impairing the obligations of contracts ".
There is, in our Constitution, no similar provision protecting contractual rights, and it would therefore be unsafe to rely on American authorities in deciding on the validity of legislation which interferes with rights under contracts.
And moreover, we are dealing with a contract entered into by a sovereign, whose powers were not subject to any constitutional limitation, and whose word was, as contended for the appellant, law.
But apart from this, there is an obvious reason why the above decisions have no application to the present controversy.
The point for decision there was whether a State which had entered into a contract with its subjects conferring rights on them was entitled to enact a law abridging or abrogating those rights, (1) ; (2) ; 95 748 and the answer was in the negative.
But here, the ,impugned law is that of the Patiala Union and the contract which it affects is not a contract entered into by it but by the Ruler of Jind and unless it can be established that the obligations of the Ruler have devolved on the sovereign of the Patiala Union, the question whether he could repudiate obligations undertaken by him cannot arise.
That would have arisen for consideration if article VI had the effect of imposing obligations on him.
But on our finding that that is not its effect, there is no scope for the contention that the impugned Ordinance is bad as involving breach of contractual obligations, which were entered into by the Patiala Union, or which devolved on it.
(4)Lastly, we have to deal with the contention of Mr. Pathak that the Patiala Union had affirmed the agreement, exhibit A, that, in consequence, it was bound by it as if it had itself entered into it, and that the liability of the appellant to income tax should therefore be determined in accordance with Cl.
(23) thereof.
This contention would be irrefragable if the Patiala Union had, as a fact, affirmed the agreement.
But has that been established ? It has been already observed that the rights of the appellant under exhibit A would become enforceable only if the new State had accorded recognition to them, and what is requisite, therefore, is a declaration or conduct of the Patiala Union subsequent to its formation which could be regarded as amounting to affirmation of exhibit A. Of that, there is no evidence whatsoever.
On the other hand, the first act of the Rajpramukh after assumption of office by him was the promulgation of Ordinance No. 1 of section 2005, the effect of which was to sweep away the rights of the appellant under Cl.
(23) of exhibit A.
It was argued that article VI of the Covenant would at least be valuable evidence from which affirmance of those rights could be inferred.
That is so ; but that inference must relate to act or conduct of the new State, and that can only be after its formation on August 20, 1948.
If there were any acts of the new State which were equivocal in character, it would have been possible to hold in the light of article VI of the 749 Covenant that its intention was to affirm the concessions in Cl.
(23) of exhibit A.
But the act of the new.
sovereign immediately after he became in titulo was the application of the Patiala State laws including the Patiala Income tax Act to the territories of Jind involving negation of those rights.
It was said that the levy of income tax for 1948 1949 was made in accordance with exhibit A, but that relates to a period anterior to the formation of the new State and is within the saving enacted in the proviso to section 3 of the Ordinance.
The appellant has failed to substantiate his plea that there has been affirmance of Cl.
(23) of exhibit A by the Patiala State Union, and this point also must be found against it.
All the contentions urged in support of the appeal fail, and it must therefore be dismissed with costs.
Coming next to Petition No. 276 of 1953, in addition to the contentions already dealt with, the petitioner urged that whatever its rights under the law prior to the Constitution, when once it came into force it conferred on the citizens certain fundamental rights, that the tax concessions which the petitioner had under the agreement, exhibit A, were rights to property and they were protected by article 19(1)(f), and that it was entitled to seek redress under article 32 of the Constitution when those rights were violated.
The decision in Virendra Singh and others vs The State of Uttar Pradesh (1) is relied on in support of this position.
This argument assumes that there were in existence at the date when the Constitution came into force, some rights in the petitioner which are capable of being protected by article 19(1)(f).
But in the view which we have taken that the concessions under Cl.
(23) of exhibit A came to an end when Ordinance No. 1 of section 2005 was promulgated, the petitioner had no rights sub sisting on the date of the Constitution and therefore there was nothing on which the guarantees enacted in article 19(1)(f) could operate.
The petition must therefore be dismissed on this short ground.
In this view, it is unnecessary to express any opinion on the soundness of the contention based on article 295 which was (1) [1955] I S.C.R. 415.
750 urged in support of the petition, or on the scope of article 363.
The petitioner will pay the costs of the respondents.
BOSE J. I agree, but want to reserve my opinion on a point that does not arise here but which the ratio of my learned brother 's judgment will cover unless the reservation that I make is set out.
If I judge aright, international opinion is divided about the effect that a change of sovereignty has on rights to immoveable property.
The English authorities hold that all rights to property, including those in real estate, are lost when a new sovereign takes over except in so far as the new sovereign chooses to recognise them or confer new rights in them.
But that, I gather, is not the view of the International Court of Justice.
According to one of its opinions, which I have quoted at p. 426 of Virendra Singh vs State of Uttar Pradesh private rights acquired under existing law do not cease on a change of sovereignty." Certain American cases take the same view though they can be distinguished on the facts.
But this view, as I understand it, does not extend to personal rights, such as those based on contract, nor, in any event, does the new sovereign assume any obligations of the old State in the absence of express agreement.
I have referred to this at p. 427.
In any event, whether I am right in thinking that that is what I might call the international view, I would agree that for our ,country that is, and should be, the law so far as per sonal rights are concerned.
In the present case, in so far as the right is claimed on the basis of contract, it would fall to the ground on any view; and in so far as it is not founded on contract, it is an obligation that is sought to be fastened on the new State.
There is no contract between the new State and the appellant, so there also he is out of court; and even if there was some agreement or understanding between the high contracting parties, it cannot be enquired into, or enforced, by the municipal (1)[1955] 1 section C. R. 415.
751 courts of the new State.
So I agree that, so far as this case is concerned, the appellant must fail.
But my, learned brother 's judgment is grounded to ' a large extent on the views of the English courts which do not draw the distinction that I am drawing here.
I therefore want to make it clear that this decision must not be used as a precedent in a case in which rights to immoveable property are concerned.
Without in any way committing myself to one view or the other, as at present advised, I feel it may be a pity for us to disregard the trend of modern international thought and continue to follow a line of decisions based on the views of an older Imperialism, when we are not bound by them and are free to mould our own laws in the light of modern thought and conceptions about rights to and in immoveable property.
But in so far as the present case is concerned, I agree that the appeal and the petition under article 32 should both be dismissed.
Appeal and petition dismissed.

summary/full:
The appellant company which was incorporated in 1938 in the erstwhile State of Jind obtained certain concessions from the Ruler of the State under an agreement dated April 1, 1938, which, inter alia, provided that the State was to be allotted certain shares in the company without any payment and as regards income tax the company was to be assessed at concessional rates.
On May 5, 1948, the Ruler of jind along with the Rulers of seven other States entered into a Covenant for the merger of their territories into one State, Article VI of the Covenant provided, inter alia, that the Ruler of the Covenanting State shall make over the administration of his State to the Rajpramukh of the new State and that all duties and obligations of the Ruler of the Covenanting State shall devolve on the New State and shall be discharged by it.
In accordance with that Article the Rajpramukh took over the administration of jind on August 20, 1948, and immediately after assumption of office promulgated Ordinance No. , by section 3 of which all laws in force in the State of Patiala were made applicable mutatis mutandis to the territories of the New State and that all laws in force in the Covenanting States stood repealed.
On November 24, 1949, the Rajpramukh issued a proclamation accepting the Constitution of India and on April 13, 1950, the New State became a taxable territory of the Union of India.
730 The result of the constitutional changes was that the law relating to income tax applicable to the appellant, for the period prior to August 20, 1948, was that of Jind, for the period August 20, 1948, to April 13, 1950, that of the Patiala Income tax Act and after April 13, 1950, the Indian Income tax Act ; but the appellant contended that the income tax should be levied on him as provided in the agreement entered into with the Ruler of jind, dated April 1, 1938: Held, (1) that section 3 Of the Ordinance No. on its true construction extinguished the right to tax concessions conferred on the appellant under the agreement dated April 1, 1938, and that the appellant cannot rely on that agreement after August 20, 1948.
(2)The Covenant dated May 5, 1948, entered into by the Rulers of the States, is in whole and in parts an act of State and Article VI cannot be relied on by the appellant for the enforcement of the rights conferred on him under the agreement with the Ruler of jind as against the Rajpramukh of the new State, Per section R. Das C. J., Venkatarama Aiyar, section K. Das and Gajendragadkar JJ.
When a treaty is entered into by sovereigns of independent States whereunder sovereignty in territories passes from one to the other, clauses therein providing for the recognition by the new sovereign of the existing rights of the residents of those territories must be regarded as invested with the character of an act of State and no claim based thereon could be enforced in the municipal courts established by the new sovereign unless those rights have been recognised by him.
Secretary of State for India vs Bai Ralbai, (1915) L. R. 42 I. A. 229, Vajasingji Joravarsingji and others vs Secretary of State, (1924) L. R. 51 1.
A. 357, Sccretary of State vs Sardar Rustam Khan, (1941) L. R. 68 1.
A. 109, Cook vs Sprigg, and Hoani Te Heuheu Tukino vs Aotea District Maori Land Board , relied on.
Per Bose J. International opinion is divided about the effect that a change of sovereignty has on rights to immoveable property and this decision must not be used as a precedent in a case in which rights to immoveable property are concerned.


judgement:
t Petition Nos. 100 and 1078 of 1988.
(Under Article 32 of Constitution of India).
R.D. Upadhyaya, H.N. Salve and Rajiv K. Garg for the petitioners.
R.K. Jain, Ashok Grover and S.C. Paul for the Respondent.
The Judgment of the Court was delivered by K. RAMASWAMY, J.
1.
The two writ petitions raise common questions of fact and law and accordingly they are disposed of by a common judgement.
The petitioners in both the writ petitions are daily rated workers working in the respondent Corporation and they are seeking relief under article 32 of the Constitution for a Writ of Mandamus or other directions to regularise their services in the respective units and to pay them equal wages with initial basic pay, D.A. and other admissible allowances at par with regularly appointed employees of the respondent performing the same or similar duties.
Admittedly, they have been appointed on daily wages between 1983 and 1986 and they have been working eversince.
It is contended by them that despite their continuous service respondent has resorted to unfair labour practice in creating artificial break in service to deprive them of the benefit of continuous serv ice.
As they are not being paid equal wages at par with regular employees, this offends their right to equality of pay under article 14 and such action is contrary to the provi sions of article 39.
The respondent had raised several disputed questions of fact which needed elaborate investigation.
This Court by its order dated January 27, 1989, after heating the counsel on either side, directed the Industrial Tribunal at Delhi to examine the contentions of the petitioners and the stand taken by the respondent, on all issues after providing full opportunity to the parties of hearing including leading of evidence, oral and documentary, and to make a report to the Registry of this Court within six months.
Pursuant to the above direction, the Industrial Tribunal afforded reasonable opportunity to both parties.
It would appear that both parties agreed that oral evidence need not be 516 adduced (though respondent is now disputing that fact), and both the parties filed documentary evidence.
The Tribunal held 12 sittings, heard the counsel, considered the record and submitted its report dated September 15, 1989.
The respondent has filed its objections to the report.
We have heard learned counsel for the petitioners and Shri R.K. Jain, learned counsel for the respondent.
The Tribunal found thus: "After taking into consideration all the facts and circumstances I come to the conclusion that all the petitioners/workmen are performing same or similar duties as are performed by the incumbents of group 'D ' posts of the DSMDC and consequently on the principle of 'equal pay for equal work ' enshrined in article 39(d) read with articles 14 and 16 of the Constitution, all these workmen petitioners are entitled to equal pay for equal work in relation to the regular employees.
" On the question of the nature of the work being discharged by the petitioners, it found that some of the workmen are shown to have been working with designa tions such as Wages Slip, Truck Loading Clerk, Attendance Keeper Clerk, Drill Man, Office Work, Stone Bricks Clerk Fitter Survey Section, Pipe Fitter, Operator, Pump Operator, Creched Check Post Clerk, Permit Clerk etc., which go to suggest that those workmen were performing skilled or semi skilled jobs or work of clerical nature.
1t, therefore, suggested that the workmen with these designations may also be equated with incumbents of group 'D ' posts However, it held that their scale of pay and the entitlement to the wages should be worked out in an inquiry under section 33 C(2) of the Industrial Disputes Act.
It also further found that since the petitioners have been appointed way back between 1983 and 1986, they are to be regularised; first 1/3rd of them immediately in the pay scale of Rs. 196232 or the corresponding revised scale with allowances; another onethird of the petitioners workmen to be regularised by April 1, 1990 and the remaining one third to be regularised by April 1, 1991.
The workmen are entitled to one increment for every two completed years of their service counted from the date of commencement of service under the Management and by ignoring the artificial breaks created by the respondent.
It also held that the dismissal of the workmen without following the rule of last come first go is an unfair labour practice, arbitrary and discriminatory.
It also held that the justification for not regularising the service of the petitioners, namely, unlikelihood of the extension of the mining lease after its expiry was believed by the subsequent advertisement calling applications for filling up the vacan cies.
Accordingly, it held that non regularisation due to uncertainly of the contract is only a pretence and is not valid in law.
It also held that 517 though some of the persons like S/Shri Chander Pal Pawar, Lok Nath Rai and Dinesh Kumar are eligible to hold the post of Assistant Gr.
III and their reversion for lack of requi site educational qualification is discriminatory, arbitrary and is an abuse of power by the Management.
Accordingly, it suggested the framing of a scheme for regularising the services of all the petitioners.
Shri R.K. Jain, learned counsel for the respondent, has vehemently assailed the tenability of all the recommen dations.
It is his further contention that the respondent did not agree to dispense with adducing oral evidence and despite the direction of this Court to submit a preliminary report the Tribunal is wrong in stating that the respondent agreed that the Tribunal would send the final report.
He disputed the findings on merits pointing out various conten tions raised by the respondent in its pleading, objections and the documents filed before the Tribunal.
It is now settled law that the statement of facts recorded by a Court or Quasi Judicial Tribunal in its proceedings as 'regards the matters which transpired during the hearing before it would not be permitted to be assailed as incorrect unless steps are taken before the same forum.
It may be open to a party to bring such statement to the notice of the Court/Tribunal and to have it deleted or amended.
It is not, therefore, open to the parties or the counsel to say that the proceedings recorded by the Tribunal are incorrect.
The further contention that the respondent did not agree to dispense with the adduction of oral evidence and that the report should be the preliminary report cannot be counte nanced.
Accordingly, we hold that it is no longer open to the respondent to say that it has not consented to dispense with adducing oral evidence and to the Tribunal submitting its final report instead of a preliminary one as directed by this Court.
During the pendency of these writ petitions, 16 workmen were retrenched.
Shri R.K. Jain, learned counsel appearing for the respondent, has agreed that if there.is work and any of these sixteen persons reports for duty, work shall be provided.
This Court further directed to pay the petitioners at the rate of Rs.25 per day.
The main controversy centres round the question whether some petitioners are possessed of the requisite qualifications to hold the posts so as to entitle them to be confirmed in the respective posts held by them.
The indis putable facts are that the petitioners were appointed be tween the period 1983 and 1986 and eversince, they have been working and have gained sufficient experience in the actual discharge of duties attached to the posts held by them.
Practical experience would always aid the person to effec tively discharge the 518 duties and is a sure guide to assess the suitability.
The initial minimum educational qualification prescribed for the different posts is undoubtedly a factor to be reckoned with, but it is so at the time of the initial entry into the service.
Once the appointments were made as daily rated workers and they were allowed to work for a considerable length of time, it would be hard and harsh to deny them the confirmation in the respective posts on the ground that they lack the prescribed educational qualifications.
In our view, three years ' experience, ignoring artificial break in serv ice for short period/periods created by the respondent, in the circumstances, would be sufficient for confirmation.
If there is a gap of more than three months between the period of termination and re appointment that period may be exclud ed in the computation of the three years period.
Since the petitioners before us satisfy the requirement of three years ' service as calculated above, we direct that 40 of the senior most workmen should be regularised with immediate effect and the remaining 118 petitioners should be regula rised in a phased manner, before April 1, 1991 and promoted to the next higher post according to the standing orders.
All the petitioners are entitled to equal pay at par with the persons appointed on regular basis to the similar post or discharge similar duties, and are entitled to the scale of pay and all allowances revised from time to time for the said posts.
We further direct that 16 of the petitioners who are ousted from the service pending the writ petition should be reinstated immediately.
Suitable promotional avenues should be created and the respondent should consider the eligible candidates for being promoted to such posts.
The respondent is directed to deposit a sum of Rs. 10,000 in the Registry of this Court within four weeks to meet the remu neration of the Industrial Tribunal.
The writ petitions are accordingly allowed, but without costs.
P.S.S. Petitions allowed.

dataset_name: IN-Abs

summary/full:
The petitioners, daily rated workers of the respondent Corporation appointed between 1983 and 1986, sought a writ of mandamus to regularise their services in the respective units and payment of wages at par with regularly appointed employees of the respondent performing the same or similar duties.
The Industrial Tribunal, which was directed by the Court to examine the matter, found that all the petitioners/work men were performing same or similar duties as were performed by the incumbents of Group 'D ' posts of the respondent Corporation and concluded that on the principle of 'equal pay for equal work ' enshrined in Article 39(d) read with Articles 14 and 16 of the Constitution they were entitled to equal pay for equal work in relation to the regular employ ees.
It further held that non regularisation due to uncer tainty of the contract was only a pretence which was not valid in law, and that reversion of some of the petitioners for lack of requisite educational qualification was discrim inatory, arbitrary and an abuse of power by the management.
The respondent assailed the findings on merits pointing out various contentions raised in its pleading, objections and the documents filed before the Tribunal.
It also con tended that it had not consented to dispense with adducing oral evidence, and that despite the direction of the Court to submit a preliminary report the Tribunal was wrong in 514 stating that the respondent had agreed that the Tribunal would send the final report.
Allowing the writ petitions, the Court, Head l.
The petitioners are entitled to equal pay at par with the persons appointed on regular basis to the similar post or discharge similar duties in the respondent Corpora tion, and are entitled to the scale of pay and allowances revised from time to time for the said posts.
[518D] 2.
The statement of facts recorded by a Court or Quasi judicial Tribunal in its proceedings as regards the matters which transpired during the hearing before it would not be permitted to be assailed as incorrect unless steps are taken before the same forum.
It may be open to a party to bring such statement to the notice of the Court/Tribunal and to have it deleted or amended, It was not, therefore, open to the respondent in the instant case to say that the proceed ings recorded by the Tribunal were incorrect.
[517C D] 3.
Practical experience would always aid a person to effectively discharge the duties and is a sure guide to assess his suitability.
The initial minimum educational qualification prescribed for the different posts is undoubt edly a factor to be reckoned with, but it is so at the time of the initial entry into service.
[517H;518A] In the instant case, the petitioners were appointed between the period 1983 and 1986 and eversince, they have been working and had gained sufficient experience in the actual discharge of duties attached to the posts held by them.
Once the appointments were made and they were allowed to work for a considerable length of time as such, it would be hard and harsh to deny them confirmation in the respec tive posts on the ground that they lack the prescribed educational qualifications.
Three years ' experience ignoring artificial break in service for short period/periods created by the respondent in the circumstances, would be sufficient for confirmation.
Since the petitioners satisfy the require ment of three years ' service so calculated, 40 of the sen ior most of them should be regularised with immediate effect and the remaining 118 should be regularised in a phased manner before April 1, 1991 and promoted to the next higher post according to the standing orders, [517G:518B D] 4.
Those of the petitioners who were ousted from service pending 515 the writ petitions to be reinstated immediately.
[518D E]


judgement:
vil Appeal No. 5 186 of 1989.
From the Judgment and Order dated 31.8.1989 of the Delhi High Court in Company Appeal No. 35 of 1988.
F.S. Nariman, Ashok K. Mahajan and Subhash Sharma for the Appellants.
Anil B. Devan and Vinoo Bhagat for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, CJ.
Leave granted.
This is an appeal from the judgment and order of the Division Bench of the High Court of Delhi, dated 31st Au gust, 1989.
The appellant No. 1 M/s World Wide Agencies (P) Ltd. is a private limited company incorporated under the provisions of the Indian (hereinafter referred to as 'the Act ') to which Table 'A ' of Schedule 1 to the Act applies, as stipulated under the Articles of Association of the company.
As per the memorandum of associ ation the appellant company was carrying on the business of travel agents at G 40, Connaught Circus, New Delhi.
The authorised Share capital of the company was to the tune of Rs.5 lakhs divided into 5000 equity shares of Rs. 100 each.
The paid up capital as per the last annual return filed by the company with the Registrar of Companies, was Rs.2,01,000.
The company had at all relevant times 7 share holders and the total number of shares subscribed and paid up was 2010 shares.
The appellant No. 2 Mrs. Amrit Kaur Singh, at all rele vant times, was a shareholder holding 545 fully paid up shares in the share capital of the company, and was also the whole time working Director of the company, holding the office from 1974 onwards.
Late Mr. S.K. Desor was a British national.
He held 600 shares in the said company, acquired by him from the Ex Managing Director Mr. Amrik Singh Saluja and his family.
The respondents Nos. 2 & 3 to this appeal are children of late Mr. S.K. Desor who died on 5th March, 1985.
As per the certified copy of the annual return made up to 15th February, 1984 548 the shareholders of appellant No. 1 (company) were as fol lows: Mr. S.K. Desor 600 shares Mrs. Amrit Kaur Singh 545 shares Mr. Yash Pal Malhotra 250 shares Mrs. Amrit Gupta 200 shares Mrs. Savitri Devi Kohli 5 shares Mr. A.S. Saluja 5 shares Mr. Balwant Singh 405 shares 2010 shares A petition under sections 397 & 398 of the Act and in the alternative for winding up of the company was filed by the respondents on 25th March, 1985, wherein it was alleged that on 12th March, 1985 respondent No. 1, being the widow of late Mr. S.K. Desor, applied as a legal heir of late S.K. Desor to the Board of Directors of the appellantcompany for transmission of 850 shares held by her late husband.
It is stated that the shares of Yash Pal Malhotra had been ac quired by late Mr. S.K. Desor; and that respondent No. 1 filed an affidavit of her daughter Ms. Kim Paul, relinquish ing her claim to the shares of her late father.
The Board of Directors resolved that they had no objection to transmis sion of the shares held by Mr. S.K. Desor but the actual transmission would take place on respondent No. 1 's obtain ing Reserve Bank of India 's permission and the succession certificate.
The respondent No. 1 's application for allot ment of 5 shares as per her letter of the same date was allowed by the Board of Directors, and it was resolved that in view of allotment of these shares, her interest in the shares of her late husband, she be appointed as a Director of the company, subject to Reserve Bank of India 's permis sion.
It is stated in the judgment under appeal that at the said meeting of the Board of Directors, they recorded their deep appreciation for the services rendered by late Mr. S.K. Desor as Managing Directorcum Chairman of the company, and.
mourned his passing away.
The quorum of the said meeting was two Mrs.
Amrit Gupta and Mrs. Savitri Devi Kohli.
It is recorded in the judgment under appeal that on 23rd March, 1985 the Board of Directors held another meeting.
The minutes of the meeting of 12th March, 1985 were confirmed by the two above mentioned Directors.
The third Director, Mrs. Amrit K. Singh, however, objected as she stated that she had not been informed of the last meeting.
Various averments had been made in the petition with 549 regard to oppression and removal of certain valuables of Mrs. Amrit K. Singh and illegal operation of the bank ac count etc.
It was also asserted that Mrs. Singh was holding 545 shares benami and these in fact belonged to Mr. S.K. Desor.
A preliminary objection was raised on behalf of Mrs. Amrit K. Singh regarding the maintainability of the petition on the ground that the appellants were not members of the company as their names had not been recorded in the register of members.
A further objection was taken that a composite petition under sections 397 & 398 of the Act with an alternative prayer for winding up of the company was not maintainable.
The learned single Judge of the High Court sitting as a Company Judge dealt with the application and held that the appellants who were the wife and children of late Mr. S.K. Desor and had obtained letters of administration.
u/s 290 of the Indian Succession Act read with section 273 of the Act, as also the permission of the Reserve Bank of India, should be treated as members for the purpose of maintaining a petition sections 397 & 398 of the Act.
The learned single Judge also held that a composite petition was maintainable.
The appellant Mrs. Amrit K. Singh filed an appeal for herself and, as she alleged, as "Working Director" from the judgment and order dated 21st September, 1988 of the learned single Judge.
It appears that the appellants, aggrieved thereby, had also moved this Court under article 136 of the Constitution.
This Court by its order dated 18th January, 1989 stayed the further proceedings before the learned single Judge and directed expeditious disposal of the appeal pending before the division bench or the High Court, from the said order of 21st September, 1988 which had been admit ted on 13th October, 1988, for consideration by the Division Bench of the High Court of the application for.
directions.
By a judgment and order delivered on 31st August 1989 the Division Bench dismissed the said appeal and held that the petition section 397 & 398 was maintainable by the respondents in the facts and circumstances of the case, and that a composite petition sections 397,398 & 433(f) of the Act was maintainable.
Aggrieved thereby, the appellants preferred this appeal to this Court.
We are concerned with two questions of law, namely, whether the legal heirs of a deceased shareholder can be treated as members of the company for the purpose of main taining a petition sections 397 & 398 of the Act, and whether a composite petition under sections 397, 398 & 550 433(f) of the Act is maintainable.
We had the advantage of hearing Mr. F.S. Nariman, counsel for the appellants and Mr. Anil Diwan for the respondents.
It may be mentioned that during the pendency of the appeal before the High Court, without prejudice to the rights and contentions of the parties, an emergent meeting of the Board of Directors was directed by the High Court to be held on 28th January, 1989 to consider the question of registration of 450 shares belonging to the deceased Mr. S.K. Desor in the name of Mrs. Margarat T. Desor and her son Sameer K. Desor, being re spondents Nos. 1 & 3 respectively.
It further appears that as per the directions of the Division Bench, dated 27th January, 1989 the court had appointed Chairman Mr. C.K. Mahajan and Mrs. Margarat T. Desor were not permitted to vote at the said meeting.
At a meeting held subsequent thereto, by a majority, it was resolved not to register the respondents Nos. 1 & 3 as members.
It must, however, be noted that the Division Bench vide its order dated 27th January, 1989 had directed that no effect would be given to the said Resolution.
The question, therefore, which is material to be consid ered, is, whether the legal heirs of a deceased shareholder whose names are not entered in the register of members, are entitled to maintain petition sections 397 & 398 of the Act.
It was contended on behalf of the appellants that sections 397 & 398 of the Act must be strictly construed.
Section 397 of the Act which is in chapter VI of the Act under the heading "Prevention of Oppression and Mismanage ment", provides as follows: "Application to Court for relief in cases of oppression.(1) Any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members including any one or more of themselves may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub section (1), the Court is of the opinion (a) that the company 's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, and 551 (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the fact would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
" On behalf of the appellants it was contended that the right which is a specific statutory right, is given only to a member of the company and until and unless one is a member of the company, there is no right to maintain application u/s 397 of the Act.
Mr. Nariman contended that there was no automatic transmission of shares in the case of death of a shareholder to his legal heir and representatives, and the Board has a discretion and can refuse to register the shares.
Hence, the legal representatives had no locus standi to maintain an application sections 387 & 398 of the Act.
Mr. Nariman submitted that the rights under sections 397 & 398 of the Act are statutory rights and must be strictly construed in the terms of the Statute.
The right, it was submitted, was given to "any member" of a company and it should not be enlarged to include "any one who may be entitled to become a member".
In order to decide the question involved, it would be necessary to examine certain provisions of the Act.
Section 2(27) of the Act states that "member" in relation to company does not include a bearer of a share warrant of the company issued in pursuance of section 114 of the Act.
Section 41 of the Act provides as follows: "(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.
(2) Every other person who agreed in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company.
" Section 26 of the English Companies Act, 1948 in sub stantially the same.
Section 109 of the Act states as follows: "A transfer of the share or other interest in a company of a 552 deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of trans fer.
" In this connection, it would be relevant to refer to Articles 25 to 28 of Table A of the Act, which deal with the transmission of shares and which are in the following terms: "25.(1) On the death of a member the survivor where the member was a joint ,holder, and his legal representatives where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares.
(2) Nothing in clause (1) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.
26.(1) Any person becoming entitled to a share in consequence of the death or insolvency of a member may, upon such evidence being produced as may from time to time properly be required by the Board and subject as hereinafter pro vided, elect, either (a) to be registered himself as holder of the share; or (b) to make such transfer of the share as the deceased or insolvent member could have made.
(2) The Board shall, in either case, have the same right to decline or suspend registration as it would have had, if the deceased or insolvent member had transferred the share before his death of insolvency.
(1) If the person so becoming entitled shall elect to be registered as holder of the share himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects.
(2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing a transfer of the share.
553 (3) All the limitations, restrictions and provisions of these regulations resulting to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or insolvency of the member had not occurred and the notice or transfer were a transfer signed by that member.
A person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to the same dividends or other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, become being registered as a member in respect of the share, be entitled in respect of it to exer cise any right conferred by membership in relation to meetings of the company: Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all divi dends, bonuses or other moneys payable in respect of the share, until the requirements of the notice have been complied with.
" Article 28 is more or less in para materia to articles 32 of Table A to the English Companies Act.
It may also be mentioned, as it ' has been mentioned by the High Court, that section 210 of the English Companies Act, before its amendment in 1990, was substantially the same as section 397 of the Act.
As mentioned hereinbefore, it is the admitted case of the parties that the regulation for management of the compa ny as contained in Table A to the Act apply to appellant No. 1 and the said relevant provision in the articles of associ ation of the company regarding transfer of shares is Article 17, which is as follows: "No share shall be transferred to any person other than a shareholder of the company so long as any member of the company is willing to purchase the same at fair value.
This clause shall not apply to the executor of administrator of a deceased shareholder, if there is will or to the heir or lineal decend ents where no letter of administration has been taken." 554 Mr. Nariman submits that in view of the specific provi sions of section 397 of the Act only a member is entitled to move a petition under sections 397 and 398 of the Act and that member is one whose name is in the register of members in view of section 41 of the Act, as mentioned hereinbefore.
In this connec tion, it is was emphasised that not only must the applicant be a member but in terms of section 399 of the Act, he has to fulfil the conditions laid down under clauses (a) and (b) of section 399 of the Act.
These should be construed so as to mean what the words say.
According to Mr. Nariman, a member is not, in view of the scheme of the Act, the representative of a deceased member.
It is true that it must be a member and section 41 of the Act provides that a member of a company is a person who has applied in writing and "whose name is entered in the regis ter of members" is entitled to move the petition.
It appears in this case that names of respondent Nos. 2 and 3 had not then been entered in the register of members at the relevant time when the application was made.
But the name of Late Shri S.K. Desor was still on the register of members and the requisite shareholding for moving a petition under sections 397 and 398 of the Act was held by him.
This question, though res integra so far as this country is concerned, has been considered in England, where Pennycuick, J. had occasion to consider this in Re Jermyn Street Turkish Baths Ltd., The Company there was incorporated in 1946 and represented a joint venture by L and section In 1952, S transferred his shareholding to Mrs. P who became a director of the company.
L died in 1953 and thereafter Mrs. P was mainly responsible for the company 's affairs.
The petition ers therein were appointed administrators in L 's estate in 1960, and in 1961, at their request, the names of the peti tioners therein were entered in the register of members of the company against the name of L as administrators of L.
On the questions whether the entry constituted merely a note of the grant of administration or the registration of the petitioners as members, and whether the petitioners were members of the company for the purposes of presenting a petition under section 210 of the English Companies Act at p. 65 of the report, Pennycuick, J. noted that it was contended before him that the petitioners therein were not members of the company and hence had no locus standi to present the petition bearing in mind that petition under section 210 of the English Companies Act could only be presented by a member of the company.
In the facts of that case, Pennycuick, J. held that the petitioners were duly registered as members of the company but he proceeded to hold that even if it were so, the personal representatives of a deceased member must be regarded as members of the company for the purposes of 555 section 210 Of the English Companies Act.
In this connection, reference was made to the decision of Buckley, J. in Re Bayswater Trading Co. Ltd., , where at p. 609 of the report, it was held that 'member ' would in clude representative of a deceased member for the purpose of section 353 of the English Companies Act.
This judgment of Penny cuick, J. went up in appeal to the Court of Appeal and it was reversed.
See Re Jermyn Street Turkish Baths Ltd., But on the point whether the repre sentative of a deceased member can maintain an action under section 210 of the English Companies Act, the views of Penny cuick, J. were not reversed or modified.
Mr. Nariman submit ted that the observations of Pennycuick, J. were obiter for the decision of the case.
We are unable to agree.
Indeed, this was a point specifically referred to by Pennycuick, J. as being raised and specifically decided.
But we need not detain ourselves with this controversy because the decision of the English Courts are not binding in the courts of India.
But the observations or the reasoning are of persua sive value.
We are clearly of the opinion that having regard to the scheme and the purpose of sections 397 and 398 of the Act, the reasoning on a para materia provision of the English Act would be a valuable guide.
The said construction, appears to us, to further the purpose intended to be fulfilled by petitions under sections 397 and 398 of the Act.
It facilitates solution of problems in case of oppression of the minorities when the member is dead and his heirs or legal representa tives are yet to be substituted.
This is an equitable and just construction.
This construction, as suggested by Penny cuick, J. does not militate against either equity or justice of the such situation.
We would, therefore, adhere to that construction.
In this connection, it may be mentioned that in the 1972 Edition of Gore Browne on Companies, it has been stated as follows: "It has recently been settled that the person al representatives of a deceased member, even though they are not registered as members, are entitled to present a petition under section 210.
In Re. Jermyn Street Turkish Baths Ltd., Pennycuick, J. held that on its true construc tion section 210 required that the word 'member ' should include the personal represen tatives of a deceased member, on whom title of his shares devolved by operation of law.
" In 1st Supplement January 1978 of Gore Browne on Compa nies, at para 16, it is stated that "while the shares remain in the name of the deceased holder, his estate is prima facie entitled to any subsequent benefits deriving from the shares".
At p. 491 of Buckley on Companies , the decision of Re Jermyn Street Turkish Baths Ltd. 's case (supra) has also been referred to and it was observed that for the purpose of the petition under section 210 of the English Companies Act, 'member ' includes the personal representatives of a deceased member.
Buckley also notes that this decision referred herein was reversed without affecting this point by the Court of Appeal.
In Halsbury 's Laws of England, 4th Edition, Vol. 7, para 1010, at p. 604, same view has been expressed.
The division bench of the Delhi High Court also noticed that the view expressed in Re Jermyn Street Turkish Baths (supra) also finds indirect support from various other decisions of the English Courts.
Reference was made to the decision in James vs Buena Venture Nitrate Grounds Syndicate Ltd., [1896] 1 Chancery Division 456; Re Dlewellyn vs Kasintoe Rubber Estate Ltd., and New Zealand Gold Extraction Company (Newbe ryyautin Proces) Ltd. vs Peacock, These decisions do indicate that the right of members in similar, though not identical situations, should be construed as being belonging to the legal representative or heirs of deceased members.
Our attention, however, was drawn to the decision of Supreme Court of Victoria in Re Meyer Dougals Pty. Ltd., ; by Gowans, J. Article 22 of Table A to the Victorian Companies Act, 1938 (4602) provides as follows that: "22.
A person becoming entitled to a share by reason of the death, bankruptcy or insolvency of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not before being registered as a member in respect of the share be entitled in respect of it to exercise any right conferred by membership in relation to meeting of the company.
" Gowans, J. in that case found that there was a "careful distinction between members and persons entitled to share by reason of the death of a member but who are not registered appear to deny the status of a member to a legal personal representative who is not a member".
On an analysis of various decisions, Gowans, J. was of the view that a de ceased 's estate and its representative may in a particular context have to be treated as not a member and in view of the provisions of section 186(1) of the Victorian Companies Act, 1961 which provides "any member of a company who complains that the affairs of the company are being conducted in manner oppressive to one or more of 557 the members (including himself) may . apply to the court for an order under that section", Gowans, J. came to the conclusion that there was no reason for treating the word "members" in that section as not applying to a legal repre sentative who is not entitled to be accorded the right which registration would give him to vote in regulating the con duct of the company 's affairs.
The object of the section, which is in para materia to section 399 of the Act, was to pro vide a remedy for the case where, notwithstanding the fact that a person possesses the right of a member enabling him to participate in the conduct of the affairs of the company, he can claim that he as a member or as one of a number of members, is or are being oppressed by those who conduct the affairs of the company.
According to Gowans, J., it should not be treated as applying to someone who is not so entitled and cannot so claim.
With respect, we are unable to accept this view.
Having regard to the purpose of the section as we conceive it, it would not be just construction to deny the legal representatives of the deceased member the right of maintain a petition under sections 397 and 398.
We would prefer to accept the view of Pennycuick, J. in Re Jermyn Street Turkish Baths Ltd. 's case (supra).
It appears to us that this will be in consonance with the equity of the sections.
In Gower 's Principles of Modern Company Law, at p. 68, reference has been made to Re Jermyn Street Turkish Baths Ltd. 's, case (supra) and also to Re Meyer Douglas Pry Ltd. 's, case (supra), which, according to the learned author, seems to be more convincing.
Mr. Nariman also referred us to the comments in Hahlo 's Casebook on Company Law, 2nd Edi tion, p. 35 1, where in footnote, reference was made to Re Jermyn Street Turkish Baths Ltd. 's, case (supra), which have been followed in some decisions.
It was noted as fol lows: "It appears doubtful whether personal repre sentatives of deceased shareholders, who themselves are not, or cannot become, registered as shareholders, can be regarded as "members" for the purposes of section 210 of the 1948 Act: Re Cuthburt Cooper & Sons Ltd., [1937] Ch.
392 and Re Meyer Douglas Ltd., at 655.
" We do not agree for the reason mentioned before.
It further appears to us the Australian judgment does not reconcile to logic in accepting that legal representative can petition for winding up, which is called the "sledge hammer remedy", but would refuse the lesser and alternative remedy of seeking relief against oppression and mismanage ment though the latter remedy requires establishment of winding up on just and equitable grounds as a precondition for its 558 invocation.
It would be rather incongruous to hold that the case for winding up on just and equitable grounds can be made out by the legal representatives under section 439(4)(b) of the Act but not the other.
This does not appear to be logi cal.
It appears to us that to hold that the legal represen tatives of a deceased shareholder could not be given the same right of a member under sections 397 and 398 of the Act would be taking a hyper technical view which does not ad vance the cause of equity or justice.
The High Court in its judgment under appeal proceeded on the basis that legal representatives of a deceased member represent the estate of that member whose name is on the register of members.
When the member dies, his estate is entrusted in the legal repre sentatives.
When, therefore, these vestings are illegally or wrongfully affected, the estate through the legal represen tatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member.
We are of the opinion that this view is a correct view.
It may be mentioned in this connection that succession is not kept in abeyance and the property of the deceased member vests in the legal represen tatives on the death of the deceased and they should be permitted to act for the deceased member for the purpose of transfer of shares under section 109 of the Act.
In some situations and contingencies, the "member" may be different from a "holder".
A "member" may be a "holder" of shares but a "holder" may not be a "member".
In that view of the matter, it is not necessary for the present purpose to examine this question from the angle in which the learned Single Judge of the Calcutta High Court analysed the posi tion in the case of Kedar Nath Agarwal vs Jay Engineering Works Ltd. and Ors., , to which our attention was drawn.
Admittedly in the present case, the legal representa tives have been more than anxious to get theft names put on the register of members in place of deceased member, who was the Managing Director and Chairman of the company and had the controlling interest.
It would, therefore, be wrong to insist their names must be first put on the register before they can move an application under sections 397 and 398 of the Act.
This would frustrate the very purpose of the necessity of action.
It was contended on behalf of the appellant before the High Court that if legal representatives who were only potential members or persons likely to come on the register of members, are permitted to file an application under sections 397 and 398 of the Act, it would create havoc, as then persons having blank transfer forms 559 signed by members, and as such having a financial interest, could also claim to move an application under sections 397 and 398 of the Act.
The High Court held that this is a fallacy, that in the case of persons having blank transfer forms, signed by members, it is the members themselves who are shown on the register of members and they are different from the persons with the blank transfer forms whereas in the case of legal representatives it is the deceased member who is shown on the register and the legal representatives are in effect exercising his right.
A right has devolved on them though the death of the member whose name is still on the register.
In our opinion, therefore, the High Court was pre eminently right in holding that the legal representa tives of deceased member whose name is still on the register of members are entitled to petition under sections 397 and 398 of the Act.
In the view we have taken, it is not necessary to consider the contention whether as on the date of petition, they were not members.
In that view of the matter, it is not necessary for us to consider the decision of this Court in Rajahmundry Electric Supply Corpn.
Ltd. vs A. Mageshwara Rao & Ors., 13.
In view of the observations of this Court in Life Insurance Corporation of India vs Escorts Limited & Ors., ; at p. 1412, it is not necessary, in our opinion, to consider the contention as made on behalf of the appellant before the High Court that the permission of the Reserve Bank of India had been errone ously obtained and consequently amounts to no permission.
In the present context, we are of the opinion that the High Court was right in the view it took on the first aspect of the matter.
The second question was whether a combined petition under sections 397, 398 and 433(f) of the Act was maintainable.
In view of the observations of this Court in Shanti Prasad Jain vs Kalinga Tubes, and the reasoning of the Bombay High Court in Bilasrai Joharmal & Ors.
vs Akola Electric Supply Co. Pvt. Ltd., , we are of the opinion that the averments which a petitioner would have to make to invoke the jurisdiction under sections 397 and 398 are not destructive of the averments which are required to be made in a case for winding up under section 433(f) of the Act on the just and equitable ground, though they may appear to be contradictory.
As Halsbury 's Laws of England, 4th Edition, Volume 7, at p. 604 605, discusses that the prayer must be made stating that the affairs are such which fulfil the requirement of winding up but to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up, the Court may, with a view to bringing to an end the 560 matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company 's affairs in future or otherwise.
We are of the opinion that averments which a petitioner would have to make to invoke the juris diction of sections 397 and 398 of the Act are not destructive of the averments which are required to be made in a case for winding up under section 433(f) on the just and equitable ground, though they may appear to be rather conflicting if not contradictory.
We are in agreement with the High Court that the petition must proceed upto certain stage which is common to both winding up and though there may be some difference in procedure to be adopted, it is not such which is irrecon cilable and cannot simultaneously be gone into.
Indeed these are made in the manner indicated before.
It has to be borne in mind that a discretion is conferred on the court and it is only when the Court is satisfied that the facts justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up, but if the Court is further of the opinion that it would be a remedy worse than the disease, then the Court can examine whether the alternative relief by way of a direction under ' section 397 can be granted.
This is a well accepted remedy exercised by the Courts.
We are, therefore, of the opinion that the High Court.was right in the view that a composite petition under sections 397,398 and 433(f) of the Act is main tainable.
The appeal, therefore, must fail and is accordingly dismissed.
We dismiss the appeal with costs, which is as sessed at Rs.5,000.
Y. Lal Appeal dis missed.

summary/full:
The appellant No. 1 is a private limited Company incor porated under the Indian Companies Act.
The Company had at all relevant times 7 share holders and the total number of shares subscribed and paid up was 2010 shares.
The appellant No. 2 is a shareholder and a whole time Director of the Company.
Consequent upon the death of one share holder, Mr. S.K. Desor, who had controlling interest in the Company, his legal representatives, wife and children respondents herein.
filed a petition under Section 397 and 398 of the Act and in the alternative prayed for winding up of the company.
A preliminary objection was raised on behalf of Mrs. Amrit K. Singh, appellant No. 2 regarding the maintainability of the petition on the ground that the respondents were not members of the company as their names had not been recorded in the register of members and as such they had no locus standi to file the petition in question.
A further objection was also taken that a composite petition under Sections 397 and 398 of the Act with an alternative prayer for winding up of the company was not maintainable.
A company Judge of the High Court before whom the peti tion came up for hearing held that the respondents who were the wife and children of the deceased share holder and who having obtained Reserve Bank 's permission and letters of administration according to law should be treated as members for the purpose of maintaining a petition under Sections 397 and 398 of the Act.
The company Judge also held that a composite petition was maintainable.
Appellant No. 2 preferred an appeal against the order of the Company Judge.
The appellants also moved this Court under Article 136 of the Constitution against the order of the Company Judge.
This court by its order dated 18th Janu ary 1989 stayed the further proceedings before the Single Judge and directed expeditious disposal of the appeal.
The Division Bench dismissed the appeal holding that the peti tion under 546 Sections 397 and 398 was maintainable.
Hence this appeal.
The same two questions as stated above arose for deter mination by this Court, Dismissing the appeal, this Court, HELD: Succession is not kept in abeyance and the proper ty of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to act for the deceased member for the purpose of transfer of shares under Section 109 of the Act.
[558D] In some situations and contingencies, the 'member ' may be different from a 'holder '.
A 'member ' may be a 'holder ' of shares but a 'holder ' may not be a 'member '.
[558E] To hold that the legal representatives of a deceased shareholder could not be given the same right of a member under Sections 397 and 398 of the Act would be taking a hyper technical view which does not advance the cause of enquiry or justice.
[558B] In the instant case, the legal representatives have been more than anxious to get their names put on the register of members in place of deceased member, who was the Managing Director and Chairman of the company and had the controlling interest.
It would.
therefore, be wrong to insist that their names must be first put on the register before they can move an application under Sections 397 and 398 of the Act.
This would frustrate the very purpose of the necessity of action.
[558F G] The decision of the English courts are not binding on the courts in India.
But the observations or the reasoning are of persuasive value.
[555C] Re Jermyn Street Turkish Baths Ltd., [1970] 3 All E.R. 37; Re Bayswater Trading Co. Ltd. ; James vs Quena Venture Nitrate Grounds Syndicate Ltd., [1896] 1 Chancery Division 456; Re Dlewellyn vs Kasintoe Rubber Estate Ltd., ; New Zealand Gold Extraction Company, (Newberyvautin Process) Ltd. vs Peocock, ; Re Meyer Dougals Pty Ltd., [1965] V.R. 638; Kedar Nath Agarwal vs Jay Engg.
Works Ltd. and Ors.
, ; Rajahmundry Electric Supply Corpn.
Ltd. vs A. Nageshwara Rao and Ors.
, ; ; Life Insurance Corporation of India vs
Escorts Ltd. and Ors., AIR 1986 SC 547 1370 at p. 1412; Shanti Prasad Jain vs Kalinga Tubes, and Bilasrai Joharmal and Ors.
vs Akola Electric Supply Co. Pvt. Ltd., , re ferred to.