Case: Claude-Lila Parulekar Vs. M/S. Sakal Papers Pvt. Ltd.

issue of shares to be allotted in any particular manner to the existing share holders, the allocation of the further issue to the respondent No. 5 and his group was not illegal or contrary to law. V.6.2 As a matter of fact the finding as to the absence of such a requirement in the Articles of Association of the Company was erroneous. Increase of share capital is dealt with in Articles 14 and 15 . Article 15 says: Subject to the directions that may be given by the meeting that sanctions the increase of capital (i) such new shares shall be offered to the persons who are at the date of the offer members of the Company in proportion as nearly as circumstances admit to the capital paid up on their shares at that date, (ii) the offer aforesaid shall be made by notice specifying the number of shares to which the member is entitled and limiting a time not less than fifteen days from the date of the offer, within which the offer, if not accepted, will be deemed to have been declined, (iii) after expiry of the time specified in the notice aforesaid or on the earlier intimation from the member to whom such notice is given that he declines to accept the shares offered, the Directors may dispose of the same in such manner as they think most beneficial to the Company. (emphasis added) V.6.3 No offer was made by notice in writing in terms of this Article. The fresh shares were, as we have seen, allotted on the day they were issued before the expiry of 15 days without waiting for the expiry of the period. The allocation of shares to the Pawars group contrary to this Article was invalid. V.6.4 No court could possibly object to a decision on merits provided it is taken in accordance with law. The decision to issue all the additional shares to the Pawar Group at par may not by itself have warranted interference were it not for the manner in which the entire exercise was undertaken. V.6.5 During the course of the hearing both before the Division Bench and before this Court, the respondents offered to make an allotment of the issued capital to the appellants to participate prorata in the additional issuance. The offer did no more than what the companys articles required to have been undertaken. VI Having effectively held in favour of the appellants, the question finally to be determined is what reliefs can be granted to them. Reliefs VI.1 The respondents contended that the relief of cancellation of 17,666 shares cannot be granted in a petition under Section 155 petition as any reduction of capital must be made strictly in accordance with Sections 100 to 104 or Section 402 of the Companies Act. VI.2. The issue need not detain us as there was no such prayer made by the appellants. They have asked only for rectification of the share register by deletion of the names of the Pawar Grpoup as shareholders in the company. The learned Single Judge merely directed the Board of Directors to dispose of the fresh shares, one can only assume, in accordance with the Articles of the Company and the Act. VI.3. Having effectively held on all issues in favour of the appellant the question remains as to whether we should, in exercise of our discretion under Section 155, grant the appellant the relief of rectification of the shares as claimed. Although the logical conclusion of our findings would be to set aside the transfers and restore the status quo ante, the question is should the share register of the company be directed to be rectified now in respect of shares, the impugned transfer of which took place more than 20 years ago? The respondents have submitted in the course of the hearing that this Court should not in any event disturb the status quo but should mould the relief by awarding compensation, if necessary as prayed for by the appellant. They have referred to the decision in Needle Industries (India) Ltd. V. Needle Industries (Newey) India Holding Ltd. 1981 (3) SCC 333 in support of this submission. We agree. There has been a sea change in the factual scenario. Shantha has died. The company has become a public limited company. The respondents have been at the helm of the company more than, two decades during the legal struggle. Many decisions must of necessity have been taken and implemented. The situation cannot now be unscrambled. It is a course of action which would make the company disfunctional harming the interests of the whole body of share holders, affect companys employees, its creditors and customers. It is not as if we are able to grant any relief directly to the appellant except to the extent of setting aside the transfer. The appellant will still have to pursue her remedies for effective relief in the two pending suits in the District Court of Pune in which the appellant has prayed for specific performance of the contracts for sale of the shares. The outcome of the suits is uncertain. What is certain is that whatever the outcome of the litigation it will be another long round of litigation. Yet another factor to be borne in mind is that the appellant had her own role to play in contributing to the situation which she had to face eventually. Admittedly, Shanta and the appellant ultimately accepted the Chartered Accountants report. As we have noted, no reason whatsoever was given for the sudden change of attitude. If they could agree subsequently to pay the price they could have done so earlier, paid the price and then challenged the value. Further, the Single Judge also gave the appellant and Shanta an opportunity of paying the share price into the Court within a period of six weeks. Had the appellant and Shanta done so, they might have been in a stronger position vis-a-vis- the Pawars in the appeal Court.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. The Trial Court had rejected the preliminary objection and held that it was open to the parties to choose any one of the remedies available to such party and that the remedy under Section 155 of the Companies Act was equally efficacious, definitely more speedy and certainly appropriate. The Division Bench did not go into the issue having held in favour of the respondents on the merits.14. The power of the Court under Section 155 is limited to the rectification of the register of members of a Company in three situations (a) when the name of a person is wrongly entered in such register (b) when the name of a person, whose name having been entered in the register is omitted therefrom and (3) when default is made in entering the name of any person who has already become or who has ceased to be a member. None of the three situations envisaged under sub-section (1) of Section 155 would allow the person whose right as a member qua the disputed shares is yet to be established to apply for rectification by inclusion of such persons name. The appellants could not, therefore have applied for transfer of the disputed shares in their favour under Section 155 of the Companies Act. They would have to establish that right by way of a separate suit or otherwise. The appellants in paragraph 26 of the Company Petition correctly reserved their right to file appropriate action for transfer of the 3,417 shares to themselves.16. As had been noted by the learned Single Judge, there was no prayer for transfer of the disputed shares to the appellants. The only prayers related to the cancellation of the impugned transfers and the rectification of the Register of Members of the Company by removal of the names of the Respondent 5 and his group.18. Similar prayers were made in respect of the 93 shares. Clearly the reliefs prayed for in the Company Petition were different from for the reliefs claimed in the Civil Suits filed by the appellants. The Civil Suits arose out of and were consequent upon the findings of the learned single Judge on the petition under Section 155 that there was a concluded contract between the holders of the 3417 and 93 shares and the appellants for transfer of those shares to the appellants.19. The learned single Judge correctly held that :This suit was necessary as even if the Petitioners had managed to deposit the amount and got an order of rectification of the register in their favour, there was still no order of any Court which directed the respondents to deliver these shares to the petitioners.20. If there is any issue in the suit which was required to be and has been determined in the Company Petition, the effect of that determination would no doubt be the subject matter of consideration by the Civil Judge, Pune, before whom the suits are pending. But the possibility of overlapping of such issues does not preclude the filing of the suits by the appellants. The appellants advisedly did not pray for the transfer and registration of the disputed shares in their favour in the proceedings under Section 155. They could not have done so.21. That the Court exercising jurisdiction under Section 155 of the Companies Act was competent to entertain the applications filed by the appellants cannot be disputed. The only question is whether the discretion to do so was properly exercised. Despite the respondents submissions to the contrary, we do not consider this case as an appropriate one to decide whether this Courts decision in Ammonia Supplies Corporation (supra) was correct in so far as it has held that the jurisdiction to grant relief provided under Section 155 was exclusive. It may be noted that the view has been reiterated by a larger Bench in Canara Bank vs. Nuclear Power Corporation of India Ltd. & Ors. JT 1995 (3) SC 42 (para 31). But assuming that the decision is wrong and that jurisdiction of the Company Court under S. 155 of the Companies Act and the Civil Court under Section 9 of the Code of Civil Procedure is concurrent, there is no reason for us to refuse to entertain the application under Section 155 of the Companies Act. The questions raised in the petition for rectification were determined on the basis of the material available both by the Single and the Division Bench. Neither of the Courts were of the view that the materials were inadequate or that the disputes were such which could not be resolved under Section 155. Apart from any other circumstance, the fact that the matter has been awaiting disposal by the Courts at the different levels for almost 18 years would render it grossly inequitable and be an improper exercise of judicial discretion if we were to turn the appellants away at this stage to pursue an alternative remedy (if any) available under the general law. The preliminary objection raised by the respondents is accordingly rejected.22. Moving to the merits of the appeals the various issues raised relate to the appellants right to purchase the disputed shares; the transfer of 3417 and 93 shares and the issue and transfer of 17,666 sharesI.1 The preemptive right which is being claimed by the appellants arises from Article 57A of the Articles of Association of the Company. The right is admitted by the respondents, but as the extent of the right is in dispute, it is quoted verbatim.57-A. In the event of any member of Company desires to transfer his shares he shall be bound to offer the same either to Dr. N.B. Parulekar or to Madame Shanta Parulekar or such other person or persons as Dr. N. B. Parulekar or Madame Shanta Parulekar may direct or may nominate and in which event the transferee or transferees shall pay such price as may be certified by the Auditors of the Company.I. 4.1 The Articles give the hierarchy of the persons entitled to purchase shares upon transfer. The first right is given to the preemptors under Article 57-A. Next in the hierarchy is any member who is willing to purchase the shares at a fair value. This follows from a reading of Article 58 with Article 64. The third category is of any person or persons selected by the Directors as being desirable in the interest of the company to admit to membership. The last category is the person to whom the transferor may choose to sell the shares. As long as there is any person in a higher category, there is no question of sale or purchase by a person in a lower category. Thus for example the right of a member or a person in the 2nd category to purchase shares can arise only in the event there is a default or refusal on the part of the preemptor and so on. A person may fall within any one or more of these four categories and would, by virtue of these articles have distinct and separate rights to purchase the shares in each of the four categories. So even if a preemptor or a nominee of a preemptor does not exercise his/her right under Article 57-A to purchase the shares at a price certified by the companys Auditors, such person may choose to exercise the right as an ordinary member and purchase the share at a fair value or the transferor may choose to sell the shares to such person under Article 63.I. 4.2. In the case of a transfer to a person in the 2nd and 3rd categories of putative purchasers, the Directors are appointed agents of the transferor. The notice of transfer is required to constitute the Directors as the transferors agents. This notice is distinct from the other required to be given under Article 57-A. In respect of these two categories, the price of the shares is at first to be negotiated with the transferor. It is only in the case of a default in such agreement being reached that the companys Auditors step in and fix a fair price. The third distinctive feature of these two categories is that upon refusal/default of the preemptor , the transferor is required to give a notice in writing of his desire to transfer. Giving of this notice must necessarily be subsequent to the failure of Article 57-A for whatever reason, as the Directors are required to find a willing person either in the 2nd and if not the 3rd category within a period of 30 days. There is no time limit specified for the completion of the preemptive transfer under Article 57-A. Therefore unless the transferor gives a separate notice of the failure of Article 57-A how would a willing member know whether he/she has a right or when the period fixed for intimating their willingness to purchase was to lapse? Article 60 also requires the Directors to give a notice to the transferor after finding a willing purchasing member or selectee under Article 58. Giving of this notice is important because if 30 days expires without such notice by the Directors, Article 63 would come into play and the transferor would be at liberty to sell the shares to any person and at any price, albeit also within a period of 30 days from the expiry of the first period of 30 days. It follows that a notice issued prior to the preemptor exercising or failing to exercise the right under Article 57-A would not be in keeping with Articles 59 and 60 as this would make the period of 30 days uncertain if not illusory. Thus the notice by the transferor under Article 58 must succeed the factual failure of Article 57-A and notice, if any, under Article 60 must follow the failure of Article 58.I.4.3 Assuming there is a willing purchaser under Article 58, there is no time limit fixed either for the parties to arrive at a negotiated price or for the Auditor to fix a fair value. But Article 63 indicates that the entire transaction envisaged by Articles 59, 60, 61 and 62 would have to be completed within a period of 60 days after Article 57-A failed to operate.I.4.4. Section 36 of the Companies Act, 1956 makes the Memorandum and Articles of Company, when registered, binding not only on the company but also the members inter-se to the same extent as if they had been signed by the company and by each member and covenanted to by the company and each shareholder to observe all the provisions of the Memorandum and of the Articles. The Articles of Association constitute a contract not merely between the shareholders and the company but between the individual shareholders also. The Articles are a source of powers of the Directors who can as a result exercise only those powers conferred by the Articles in accordance therewith. Any action referable to the Articles and contrary thereto would be ultra vires.IV.1 In our opinion the entire transaction of sale is riddled with illegalities.IV.1.1 The notices issued in respect of the 93 and 3417 shares were not in keeping with the Articles as far as Articles 58 to 63 were concerned. As we have already observed, notices to willing members or to selected persons under Article 58 must succeed and not precede the actual operation of Article 57-A. The notices issued by the respondent Nos. 2, 3 and 4 also did not constitute the Directors as the transferors agents for the purposes of selling the shares in terms of Article 59. There was, in the circumstances, no question of the transferors selling their shares to any 3rd party under Article 63 unless proper notice had been issued to the 2nd and 3rd category of persons if any. There was also no question of the transferor invoking Article 61 bypassing the right of a willing member or selectee, if any, to negotiate a fair price.IV.1.2 The Division Bench held that the notices dated 29.11.84 and 10.11.84 issued by the respondent Nos. 2,3 and 4 in respect of the 3417 shares, and the 93 shares respectively, were valid notices under Articles 57-A and 58 to the other shareholders in the company. But the Division Bench erred in holding that none of the other shareholders showed any interest in purchasing the shares. In fact the conclusion of the Division Bench is contradictory. If the notices could be combined notices under Article 57-A and Article 58, then the appellants acceptance of the offer as made in the notices should also be construed as a combined assent under both the Articles. The Division Bench erred in holding that there was no material before the Court to indicate that the second appellant had at any time informed the company that she proposed to exercise her rights as a shareholder to purchase the shares. The Division Bench should have considered whether there was any offer to the second appellant as a shareholder to purchase the shares. If there was not an offer to the shareholders, obviously, there was no question of the second appellant accepting the offer. But whatever offer was made whether under Article 57-A or under Article 58 by the two notices, that offer was accepted by the appellant. And upon such acceptance, there was a concluded contract between the respondent Nos. 2,3 and 4 on the one hand and the second appellant on the other.IV.1.3 The learned Single Judge correctly held that:-The offers being both under Article 57-A and Articles 58 to 64, the acceptance by the second petitioner must be deemed to be not only as a nominee, but also as a member of the first respondent-company entitled to take up the shares in her own right. There is a concluded contract to sell the shares to the second petitioner. The second petitioner was and is not an executrix or a trustee. This contract cannot, therefore, be said to be void or unenforceable.IV.2.1 Article 57-A does not by itself indicate when the contract is concluded between the offeror and offeree. It was concurrently held by the Single Judge and the Division Bench that with the acceptance of the offers of the respondent Nos. 2, 3 and 4 by the appellants, the contract to purchase the shares under STA was concluded. Having regard to Section 9(1) of the Sale of Goods Act, 1930 we see no reason to differ from this conclusion. Section 10(1) of the Sale of Goods Act also speaks of avoidance of an agreement if the third party valuer either cannot or does not fix the price of the goods to be sold. Apart from the fact that the third party valuer in this case did in fact make the valuation, the section proceeds on the basis that the agreement is already concluded otherwise there would be no question of avoidance.The section has no relevance to the question whether there was a contract at all between the parties. It pertains to a condition which is to be implied, unless there is a provision to the contrary, in a contract. Indeed the section assumes the existence of a contract in respect of which such a term may or may not be read in.IV.2.2. The respondents argument that a contract could not be said to be concluded until the price was in fact paid because it would then be open to an offeree like the appellants to stall the transfer of shares to a third party buyer and hold the offeror to ransom, is ingenious but not an argument which is legally acceptable. The legal consequence of a concluded contract will remain irrespective of how a particular party in a given situation might abuse the rights flowing from it. It is platitudinous that the possibility of abuse of a right cannot determine whether the right exists as a matter of law. Such arguments are normally met by the aphorism hard cases make bad law.IV.2.5 If the notices issued by the respondent Nos. 2,3, and 4 were not under Article 58, then it was not open to the respondent Nos. 2,3 and 4 to have sold the shares to the Pawar Group without issuing such notices. Hence irrespective of whether there was a concluded contract between the appellants and the respondent Nos. 2,3 and 4 in respect of the 3417 and 93 shares, the shares could not have been sold to the Pawar Group. Apart from the lack of notice under Article 58, as we have already noticed, the right of a transferor in terms of the Articles of the company to sell the shares to a person of the transferors choice is required to be exercised within the period specified in the Articles. This is clear from Article 63.According to the respondents the appellants had repudiated the contract by challenging the certification of the auditor in February, 1985. If that were so then the Directors were required to give the notice to the transferor or if no such notices were given, the transferors could sell within the period of 30 days thereafter. Those 30 days had long since expired much before the date on which the sale of the shares is said to have taken place between the respondent Nos. 2,3 and 4 and the Pawar Group.IV.3 We are of the view that there was also no repudiation of the contract by the appellants as contended by the respondents on account of the appellants alleged failure to pay the price within the time fixed by the respondent Nos. 2, 3 and 4 by their notices dated 21.2.1985.IV.3.2. As there was no time fixed either under Article 57-A or in the offer letters, the question of time being of the essence did not at all arise. As was held in S.C.Gomathinayagam Pillai vs. Palaniswami Nadar 1967 AIR 1967 SC 868 the stipulation must show that the intention was to make the rights of the parties depend on the observation of the time limits prescribed in a fashion which is unmistakable. If there is no stipulation as to time, it is not open to a party to unilaterally stipulate a time and then cancel the contract because of an alleged failure of the other party to act within the time stipulated. [See: National Co-operative Sugar Mills Ltd., Alanganallur v. M/s. Albert & Co. AIR 1981 MAD 172 (D.B.)IV.3.3. Of course if time is fixed by the contract but it is not originally of the essence, a party could by notice served upon the other call upon him to complete the transaction within the time fixed and intimate that in default of compliance with the requisition the contract will be treated as cancelled (ibid p.872). But where no time is fixed for completion, it is not open to either the vendor or purchaser to serve notice limiting a time at the expiration of which he will treat the contract as at an endIV.3.4 In the circumstances, the contract for sale of the shares to the appellants could not be avoided by reason of any alleged failure on the part of the appellants to pay the price fixed by the Auditor.IV.4.2 There would have been no point in the appellant challenging the valuation of the shares by the auditors if they were not interested in completing the transaction. There would have been also no point in their offering to deposit Rs.20 lakhs as proof of their continued interest in purchasing the shares. The filing of the suit in Pune is not conduct in keeping with an intention of not performing the contract. If the offers were in terms of Article 58, as is now contended by the respondents, then, as we have said, the acceptance of that offer must also be understood to be under Article 58. In that case it was for the parties to negotiate the price for the shares and not for the auditors to determine. The challenge to the certification may be taken as a method of negotiating a fair value under Article 58. Be that as it may, the appellants in fact accepted the price as certified by the auditors on 1st October, 1985.The resolution of the executors was that one of the executors could implement the sale and execute the transfer forms but did not name anyone. Before the sale of the 3417 shares was made to the Pawars by the Executors, it was abundantly clear from the conduct of Shanta (i) that she had revoked consent she may have given qua Executor and Trustee to the sale of the 3417 shares to third parties and (ii) that the appellants were desirous of purchasing the shares themselves in whatever capacity.IV.5.1 In any event the Executors resolution dated 27.11.84 authorizing one of them to effect the transfer of the shares could not override the provisions of Section 108 of the Companies Act which prohibits a company from registering or transferring of shares in the company unless a proper instrument of transfer duly stamped and executed by and on behalf of the transferor and by and on behalf of the transferee and specifying the name, address and occupation if any of the transferee, has been delivered to the company.IV. 5.2 For the purposes of registration of the transfer under Section 108 the instrument of transfer must be executed by the transferor or it must be executed on behalf of the transferor. But there must be execution. The learned single Judge has found as a fact that the instrument of transfer had been signed by only three of the joint shareholders. Shanta had not signed. There were three signatures on the transfer deed. Each transferor had therefore, executed qua shareholders in respect of their own interest. There was no 4th signature on behalf of the 4th joint shareholder. This was also the finding of the Division Bench. But the Division Bench held that it was a mere irregularity which did not vitiate the registration. It was also held that the irregularity could be cured by one of the Executors signing on his behalf.IV.5.3 But compliance with the provisions of Section 108 was and is mandatory.IV.5.5 Even if the four executors had wanted registration only in the capacity of executors and the company also acquiesced in it, the four executors would continue to be ordinary share holders and the limitation would be illegal and of no effect. Being on the register as joint share holders, there is no escape from the proposition that a transfer by one of them only would be an invalid transfer. [See: Barton v. London and Northern Western Railway Co. (1889 24 QBD 77)]IV.5.6 As far as the company is concerned, the requirement of execution of the transfer form by each of the joint share holders could not be met by execution of the transfer form by one of the shareholders even though between the share holders inter-se there was an agreement that one share holder could sign on behalf of all the other share holders unless the executant signs for himself and for on behalf of the other share holders/transferors. It would be of no consequence as far as Section 108 is concerned to exclude the reluctant share holder on the ground that the share holder had refused to execute the form. The remedy of the other joint share holders to compel the reluctant share holder to sign the transfer form would lie elsewhere and not in a breach of the requirement of Section 108 of the Companies Act.IV.5.7 Here the instruments of transfer had admittedly been improperly executed. Both the Courts have so held. It was therefore not lawful for the company to register the transfer. The principle that a Court will not interfere in the affairs of the company if the defect complained of can be cured would apply if the defect is a technicality and is curable. The non-compliance of Section 108 is not a technicality.IV.6 Apart from the violation of Section 108 as far as the registration of shares is concerned, the meeting of the Board of Directors at which the company recorded the transfer was invalidly held.IV.6.2 In the notice for the meeting held on 21st September, 1985, there was no mention whatsoever, let alone a statement, relating to the transfer of the 3417 and 93 shares to the Pawars. At the same meeting, the respondents Nos.5 and 10, were appointed as Additional Directors although their shares were not yet entered in the Companys register of members.IV.7 As we have found several legal infirmities in the sale of the 3417 and 93 shares to the Pawars, it is not necessary to consider whether the respondent No.5 and his group were purchasers of the shares.IV.8. The Division Bench erred in holding that the violation of Section 108 was ratified at the Board Meeting held on 13th October, 1985. Ratification is possible in respect of an act which is incompetent, by a person who would have been competent to do such act. The violation of Section 108 could not be ratified by the Board of Directors as the act was one which the Board was incompetent to allow. The Board of Directors never had the legal capacity to direct the registration of shares invalidly transferred.We do not propose to go into this question in these proceedings.IV.9.2 Under Sections 51 and 52 of the 1882 Act a trustee may not use or deal with trust property for his own profit or any other purpose in connection with the trust. And no trustee whose duty it is to sell trust property may directly or indirectly buy the same or any interest therein, on his own account or through his agent or third person.IV.9.3 Article 57-A does not envisage Shanta purchasing the shares through her nominee. One of hers rights under Article 57-A was no doubt to purchase the shares herself. But she could also nominate any other person to purchase the shares. The transferor then would have to make an offer to such other person who would then, independently of Shanta, be entitled to a transfer of the shares. In the latter case there is no question of any conflict of interest between Shanta in her capacity as trustee under the will of Dr. Paruleker and as a nominator under Article 57-A. Here, Shanta was not purchasing the shares. It is true that she could have done so in exercise of her preemptive right under Article 57-A, but she did not and only nominated her daughter as the person to whom shares should be sold.IV.9.4. This was also how the parties understood the situation as the correspondence exchanged between the parties evidences. As we have noted the resolution relied upon by the respondents authorizing one of them to sell the trust shares, was taken of a meeting held on 27th November, 1984 which was attended only by two of the four Executors. Shanta could not attend because she was ill. Her prayer for adjournment was rejected by the two executors on the ground that her interest would not be jeopardized since she would be given notice under Article 57-A. It was then resolved that notice should be given under Article 57-A to Shanta. If she exercised her right under that Article, the executor was to sell the shares to her at Rs.2,250 per share. If she did not agree to purchase the shares at the price of Rs. 2,250 then the price should be fixed in accordance with Article 61. The resolution further records that only if Shanta did not buy the shares at such fixed price then the executors do sell the shares to any other person or persons at or for the price of Rs. 2,250 per share. Since the meeting was not adjourned because Article 57-A protected Shanta, it follows that if Shantas rights were not to be protected under Article 57-A, then the meeting should have been postponed.IV.9.5. Indeed the matter was referred to the companys auditors in purported compliance with Article 57-A. Certification of the price was made by the auditors also under that Article. The notice of the respondent Nos. 2,3 and 4 calling upon the appellants to pay the certified price was also under Article 57-A. The present stand of the respondent Nos. 2,3 and 4 with regard to the disqualification of Shanta as a purchaser of the shares under Article 57-A is thus wholly inconsistent with their conduct ante litem.IV.9.6. The respondents now say that Article 57-A has no application. If it does not then Article 58 would.In that event, the certification by the auditors was entirely premature as the willing shareholder (the appellant No.2 in this case) would be at liberty to negotiate the price with the respondent Nos. 2,3 and 4 and it would only be in default of any agreement being reached that a fair value would have to be fixed by the auditors. In the circumstances the principle that the trustee not directly or indirectly buying the trust property as contained in Section 57-A of the 1882 Act would also not have any application because irrespective of her right as a nominee of Shanta, the present appellant could undoubtedly have purchased the shares being in the second category in the hierarchy of purchasers provided under Articles 57-A to 64.V.1 The decision to raise the issued capital of the company and to allot the shares at par was taken at an Annual General Meeting held on 16.11.1985. It was resolved at that meeting to immediately issue increased share capital of Rs.17,66,600 of 17,666 equity shares of Rs.100/- each to any person whether a member of the company or not. It was further resolved that the decision would be ratified by convening a general body meeting preferably in the month of January/February, 1986 after giving proper notice and explanatory statementV.2 The notice of the Annual General Meeting was given on 13.10.1985. Although details of ordinary business and special business were given, there was no indication whatsoever that there would be any decision taken with regard to the increase in the issued capital and allotment of shares in the notice. According to the respondents, after the notice of the Annual General Meeting had been issued on 13.10.85, on 5.11.85, the Ministry of Finance gave notice to the company extending the validity of a sanction for foreign exchange loan to 30.11.85 and stating that no further extension would be granted. On 9.11.1985 a letter dated 7.11.1985 was sent to the company by Modular Finance and Consultancy Private Limited (the respondent No.12 before us and a member of Pawar Group) proposing that the share capital of the company be increased and requesting the issue to be decided at an ensuing AGM. On 11.11.1985 a letter was also received by the company from the United Western Bank advising the company in view of its expansion programme, to increase its share capital.We are unable to agree. The purchase of the machinery was in contemplation of the company from much prior to the date of the notice. The alleged letter from the Ministry of Finance was not produced before the High Court and we are not prepared to allow the same to be brought on record at this stageV.3.1 The Division Bench affirmed the finding of the learned Single Judge that the need to increase the issued capital from Rs.7,33,400 to Rs.25 lakhs was not established. Indeed the Division Bench went on to find that the action of issuing the increased share capital clearly indicated that the respondent No. 5 and his group who were in control of the company, had decided to make a fresh issue of share capital to themselves at par so as to strengthen their control over the companyV.4. We have already noticed that Article 93 specifically provides inter alia that every notice of a meeting of the Company shall contain a statement of the business to be transacted thereat and no General Meeting, Annual or Extraordinary, shall be competent to enter upon, discuss or transact any business which has not been specifically mentioned in the notice or notices upon which it was convened.V.4.2 The increase in issuance of share capital does not fall within the exceptions carved out in Article 94 as not being special business. Article 94 reflects the substance of Section 173 of the Companies Act, 1956 and it was therefore, incumbent for notice to be given not only indicating the issuance of the share capital as a special item of business but also giving a statement setting out all material facts relating thereto. The violation of this Article by the company is patent and the Annual General Meeting is to the extent of the violation vitiated thereby.V.5.2. Section 188 provides that a meeting could be requisitioned by the prescribed number of members, after notice of any resolution which may properly be moved and is intended to be moved at a meeting together with a statement with respect to the matter referred to in any proposed resolution. Assuming that Modular Finances letter was in fact circulated, this could hardly be termed to be compliance with the requirement of Section 188 of the Act which deals with meetings called at the instance of requisitionist and circulation of a statement by the requisitionist of a proposed resolution and a statement in support thereof. Moreover, such a notice in terms of the proviso of Sub Section 3 of Section 188 is required to be given in the same manner and, so far as practicable, at the same time as notice of the meeting, and where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter. Further it is clear from Article 94(e) that compliance with Section 188 was in addition to the requirements with the other parts of Article 94 which admittedly have not been complied with.V.5.3 The Division Bench found that there was no explanatory statement annexed to the notice and held that the respondents certainly committed an irregularity in not mentioning the proposal to increase and allot the share capital on the agenda of the annual general meeting. However, it went on to hold that the irregularity did not vitiate the decision because it could be cured since the Pawar group already had majority control and also because the decision had been taken at the annual general meeting that an extraordinary general meeting would be called after proper notice to ratify the fresh issue of 17666 shares at PawarsV.5.4 We are unable to accept the reasoning of the Division Bench. The two grounds which persuaded them not to interfere with the fresh issue are questionable . For one, we have already come to the conclusion that the sale of 3417 and 93 share to the Pawar Group was bad. The Pawar group did not legally have the majority to push through the decision to increase the share capital or to allot the further shares to themselves. For another, the majority cannot be permitted to ride rough shod over the provisions of the Articles and the Companies Act merely because they could if they so desired follow the proper procedure. The haste with which the Pawar Group sought to ensure their position in the company is evident from the fact that a Board Meeting was held immediately after the Annual General Meeting on 16.11.1985 at which the Board resolved to issue the additional 17,666 shares at par to the Pawar Group. There was no notice given of the Board meeting at allV.6.1 The Respondent Company was bound to offer the further shares on a fresh issue of capital to the existing equity share holders in proportion to the capital paid up on the shares at that date. The Division Bench noted that this was provided in Section 81 of the Companies Act. However, because Section 81(3) does not apply to a private limited company (which the company was at that stage) and since according to the Division Bench, the Articles of Association did not require such further issue of shares to be allotted in any particular manner to the existing share holders, the allocation of the further issue to the respondent No. 5 and his group was not illegal or contrary to lawV.6.2 As a matter of fact the finding as to the absence of such a requirement in the Articles of Association of the Company was erroneous.V.6.3 No offer was made by notice in writing in terms of this Article. The fresh shares were, as we have seen, allotted on the day they were issued before the expiry of 15 days without waiting for the expiry of the period. The allocation of shares to the Pawars group contrary to this Article was invalidV.6.4 No court could possibly object to a decision on merits provided it is taken in accordance with law. The decision to issue all the additional shares to the Pawar Group at par may not by itself have warranted interference were it not for the manner in which the entire exercise was undertaken.V.6.5 During the course of the hearing both before the Division Bench and before this Court, the respondents offered to make an allotment of the issued capital to the appellants to participate prorata in the additional issuance. The offer did no more than what the companys articles required to have been undertaken.VI.2. The issue need not detain us as there was no such prayer made by the appellants. They have asked only for rectification of the share register by deletion of the names of the Pawar Grpoup as shareholders in the company. The learned Single Judge merely directed the Board of Directors to dispose of the fresh shares, one can only assume, in accordance with the Articles of the Company and the Act.Although the logical conclusion of our findings would be to set aside the transfers and restore the status quo ante, the question is should the share register of the company be directed to be rectified now in respect of shares, the impugned transfer of which took place more than 20 years ago? The respondents have submitted in the course of the hearing that this Court should not in any event disturb the status quo but should mould the relief by awarding compensation, if necessary as prayed for by the appellant. They have referred to the decision in Needle Industries (India) Ltd. V. Needle Industries (Newey) India Holding Ltd. 1981 (3) SCC 333  in support of this submission. We agree. There has been a sea change in the factual scenario. Shantha has died. The company has become a public limited company. The respondents have been at the helm of the company more than, two decades during the legal struggle. Many decisions must of necessity have been taken and implemented. The situation cannot now be unscrambled. It is a course of action which would make the company disfunctional harming the interests of the whole body of share holders, affect companys employees, its creditors and customers. It is not as if we are able to grant any relief directly to the appellant except to the extent of setting aside the transfer. The appellant will still have to pursue her remedies for effective relief in the two pending suits in the District Court of Pune in which the appellant has prayed for specific performance of the contracts for sale of the shares. The outcome of the suits is uncertain. What is certain is that whatever the outcome of the litigation it will be another long round of litigation. Yet another factor to be borne in mind is that the appellant had her own role to play in contributing to the situation which she had to face eventually. Admittedly, Shanta and the appellant ultimately accepted the Chartered Accountants report. As we have noted, no reason whatsoever was given for the sudden change of attitude. If they could agree subsequently to pay the price they could have done so earlier, paid the price and then challenged the value. Further, the Single Judge also gave the appellant and Shanta an opportunity of paying the share price into the Court within a period of six weeks. Had the appellant and Shanta done so, they might have been in a stronger position vis-a-vis- the Pawars in the appeal Court.