Case: Madhusoodhanan &amp; Another Vs. Kerala Kaumudi Pvt. Ltd. &amp; Others

The main protagonists in all the litigations are Madhusoodhanan, Srinivasen, Ravi and Mani who are brothers with Madhusoodhan on one side and Srinivasan, Ravi and Mani on the other. The parents of the four were on K. Sukumaran and Madhavi both of whom are deceased. K. Sukumaran died before the litigations between the parties erupted and Madhavi died during the pendency of the litigation. While she was alive she supported Srinivasan, Ravi and Mani. The four brothers are married and have children. It is unnecessary at this stage to clutter the narration of facts with the names of the wives and children, who will be referred to by name when the particular litigation in which they are involved is considered. The dispute began with a struggle over the controlling interest in a company by the name of Kerala Kaumudi Pvt. Ltd. (hereinafter referred to as Kerala Kaumudi).3. Kerala Kaumudi is a private company incorporated under the Indian Companies Act, 1913 which was promoted in 1955 by the parents of the four brothers. Besides Kerala Kaumudi other "family" concerns were incorporated including Kaumudi Investments Pvt. Ltd., Kerala Exports (P) Ltd., Kaumudi News Pvt. Ltd., Laisas Publications Pvt. Ltd., Shiv Printers & Publishers, Ravi Printers & Publishers Pvt. Ltd., Kaumudi Films Outdoor Unit, Electronic & Equipment Corporation and Ravi Transports. However, the core of the controversy is the control of Kerala Kaumudi.4. The business of Kerala Kaumudi, (which was the flagship company) is to own and publish newspapers, journals and other literary works and undertakings. Its authorised share capital is 20 lakhs divided into 2000 shares of Rs. 1000/- each. The total number of issued and paid up equity shares in Kerala Kaumudi was 1575. During the life time of K. Sukumaran each of the brothers along with their parents had shares in Kerala Kaumudi and the shareholding was a follows:5. Sukumaran died on 18th December, 1981. He was the Managing Director of Kerala Kaumudi from 1955 to 1973 and its Chairman from 1973 till his death. He was succeeded as Chairman by his widow Madhavi. Madhusoodhan was appointed as Managing Director of Kerala Kaumudi in 1973 immediately after Sukumaran died. On 25th January 1985. Madhusoodhanan was appointed as Managing Director and Editor of Kerala Kaumudi for life. He was also empowered to exercise the powers given to the Director under Article 79 of the Articles of Association. At the same time Srinivasan was appointed as General Manager of Kerala Kaumudi for life and Ravi was appointed as Director and Executive for life. To give effect to these appointments. Article 69A and Article 74 of the Articles of Association of Kerala Kaumudi were amended.6. The dispute between the parties started soon after the death of Sukumaran in September 1981. When these reached a head, on 29th November, 1984 a resolution was taken at a meeting (Ex. P-190) of the company which was signed by the four brothers and Madhavi by which the controlling interests in the different family companies were agreed to be given to the four brothers on the basis of their active interest in a particular concern. Keralacontrol was to be with Madhusoodhanan. In implementation, Transfer of shares in these companies were effected between the brothers and their respective families. The dispute however did not abate. On 24th October, 1985 an agreement was entered into between the parties in an attempt to resolve their differences. This agreement has been exhibited in the proceedings as Ext. P1. On 28th December, 1985, a second agreement (Ext. P-2) was entered into by which it was, inter alia, agreed that all the various family controlled companies and firms would be divided among the four brothers.7. On 16th January, 1986 a third agreement was entered into which has been marked as Ext. P.3. The parties to the third agreement were Madhavi, Mani, Madhusoodhanan, Srinivasan, and Ravi. Briefly speaking. Ext. P3. is about the division of effective control of the "family" concerns amongst the four brothers. It relates to the transfer ofshares in Keralato Madhusoodhanan. In addition, the parties agreement that Madhusoodhanan would have the major share holding in Kaumudi Investments Pvt. Ltd., Kerala Exports (P) Ltd. and Kaumudi News Pvt. Ltd. Mani the majority share holding of 52 per cent in Laisa Publications Pvt. Ltd. (which has subsequently changed its name to Kala Kaumudi Pvt. Ltd.), Srinivasan 52 per cent in Shiv Printers and Publishers, and Ravi, the majority holding in Ravi Printers and Publisers (P) Ltd., Kaumudi Films Outdoor Unit. Electronic and Equipment Corporation and Ravi Transports, is also recorded.8. According to Madhusoodhanan, Mani and his children had already transferred their entire holding of of 390shares in KeralaKaumudi to Madhusoodhanan in May 1985, prior to the third agreement. As a result, Mani and his children had noshares in KeralaKaumudi, Madhusoodhanan had 612 shares, and Sreenivasan and Rai had 222 shares each Nine shares continued to stand in the name of the late K. Sukumaran, and three shares in the name of Madhavi. In addition, the two children of Madhusoodhanan had 84 shares each.daughter, Anju had 168 shares,son, Deepu, had 168 shares and KIPL continued to hold 3 shares.9. On 23rd July 1986, a Board meeting of Kerala Kaumudi was held at which Madhavi assumed the powers of the Managing Director in purported ouster of Madhusoodhanan. The meeting is disputed by Madhusoodhanan. He says that no such meeting was in fact held and that the minutes were subsequently drawn up. A second Board meeting, which is also disputed by Madhusoodhanan, was held on 1st August 1986 in which a decision was taken to increase the paid-up share capital of Kerala Kaumudi by issuing 425 additional sharee of Rs. 1000/- each. At a Board meeting held on 8th August 1986 these additional shares were issued to Ravi and Shreenivasan and one share was transferred by Ravi to Mani. This meeting as well as the allotment of the additional shares is not accepted by Madhusoodhanan. On 16th August, 1986 at an Extraordinary General Meeting Madhusoodhanan was removed as Managing Director of Kerala Kaumudi and Article 74 of the Articles of the company deleted .10. In this background, several proceedings were filed by the parties against each other some of which may be taken up for consideration. Together. The first lot consists of six months relating directly to Kerala Kaumudi and the share holding in Kerala Kaumudi. The sixC.P. No. 14 of 1986 filed by Madhusoodhanan for rectification of theshare register under section 155 of the Companies Act, 1956 by cancellation of the allotment of 425 shares to Ravi and Sreenivasan and for removal of the name of Mani from theshare register.(ii) Company petition, C.P. No. 31 of 1988 filed by KIPL for similar reliefs.(iii) A suit filed by Madhusoodhanan in theCourt, Trivandrum being O.S. No. 1329 of 1986 (subsequently re-numbered as C.S. No. 3/89, when withdrawn to the High Court) for a decree declaring that he continued to be the Managing Director of Kerala Kaumudi and for a declaration that the Board meetings held on 23.7.86, 1.8.86 and the meetings subsequent thereto were illegal and ultra vires the Articles of Association of the company.(iv) A suit being O.S. No. 482/88 (subsequently re-numbered as C.S. No. 5/89, when withdrawn to the High Court) filed by KIPL against Kerala Kaumudi for similar reliefs.(v) A suit filed by Madhusoodhanan for specific performance of the third agreement, Ex. P.3. (O.S. No. 483/88, subsequently re-numbered as C.S. 6/89 when withdrawn to the High Court).(vi) C.P. N. 26 of 1987 filed in 1987 by Mani and his children for a declaration that the transfer of 390 shares by them to Madhusoodhanan pursuant to thedecision dated 21.5.85 was illegal and void and for rectification of the share register by recording them as the owners of 222, 84 and 84 shares respectively.These six matters are now numbered as CA Nos. 3253-3256 of 1991 before us.12. The second set of litigation being Company Petition No. 15 of 1986 was filed in 1986 bywife Kastoori Bai, daughter Valsa,wife Shyiaja, andwife Laisa as well a Madhavi for rectification of the share register of KIPL. This is now numbered as CA 3260 of 1991.13. The third set consists of CP No. 11 of 1987 (now CA 3261 of 1991) filed by Vaishak, the minor son of Madhusoodhanan, for rectification of the share register of Kerala Kaumudi.14. The fourth set of proceedings originally consisted of two suits filed before theCourt, Trivandrum relating to the office premises of Kerala Exports and KIPL. The suit filed by Kerala Exports, (numbered on transfer as CS No. 2 of 1999) was for a mandatory injunction to restrain Kerala Kaumudi, Sreenivasan, Ravi and Madhavi from disturbing its functioning in Kaumudi Buildings. O.S. No. 1569 of 1988 (subsequently numbered as CS 4 of 1989) was a similar suit filed by KIPL before theCourt for restraining the defendants from preventing the peaceful functioning ofadministrative office in Kaumudi Buildings.15. All the original suits were transferred to the High Court under the provisions of Section 446 of the Companies Act and were heard along with the several company petitions noted earlier. About 296 documents were tendered in evidence by the parties. Seven witnesses were examined. The four witnesses who deposed in support of Madhusoodhanan were P.K. Kurien, Advocate (PW1), Mohan Raj, former Personal Assistant to Madhusoodhanan (PW2) Vasudevan, former Company Secretary (PW3) and Madhusoodhanan himself (PW4). As far as the opponents were concerned, Mani (RW1), Srinivasan (RW2) and Laisa Srinivasan (RW3) gave evidence in support of their stand.16. The Single Judge decided CP No. 14 of 1986 infavour. The application for rectification was allowed and the allotments of shares made in the meeting held on 8.8.86 were set aside and rectification of the share register of Kerala Kaumudi by deleting the further allotment of 425 shares each to Sreenivasan and Ravi was directed. The prayer for cancellation of the transfer of one share in favour of Mani was, however, disallowed. However, the petition filed by KIPL (CP No. 31 of 1986) which had virtually asked for the same reliefs as in CP No. 14 of 1986 was dismissed by the learned Single Judge on the ground of delay.suit (C.S. No. 3 of 1989) andsuit (CS No. 5 of 1989), were decreed by holding inter alia that the meetings held on 23.7.86, 1.8.86, and 17.8.86 in so far as they affected Madhusoodhanan and by which Madhusoodhanan had been removed as Managing Director and Article 74 of the Articles of Association of the company was deleted, were illegal and invalid. Madhusoodhnan was declared to be the Managing Director of the Company. The suit filed by Madhusoodhanan for specific performance of Ext. P3 (CS No. 6 of 1989) was also decreed. Mani and hisapplication for setting aside the transfer of 390 shares (CP No. 26/87) was dismissed. An arbitrator was appointed for determining what amount was payable by Madhusoodhanan to Mani for the shares transferred by Mani Madhusoodhanan.17. The second set of proceedings initiated bywife and others viz. CP No. 15 of 1986, for rectification of the share register of KIPL and the third set filed byminor son, Vaishak for rectification of the share register of Kala Kaumudi (CP No. 11 of 1987) were dismissed.18. The two suits filed by Kerala Exports and KIPL (CS 2 of 1989 and CS 4 of 1989 respectively) relating to their continued possession in Kaumudi Buildings were decreed.19. The aggrieved parties preferred appeals in each of the matters. By a common judgment, the Division Bench reversed the findings of the learned Single Judge in all of the appeals except in the appeal from CS 2 of 1989. Nine Special Leave Petitions were filed in this Court in the separate proceedings on which leave was granted on 27th August, 1991.

Reasoning:
27. The Division Bench, therefore, erred in holding that the agreement for transfer of shares was conditional on the determination of the price of the shares and in concluding that as there had been no such determination, no transfer could have taken place. The express intention was to effect an immediate transfer of the shares and to agree upon the consideration later. Section 9 of the Sale of Goods Act, 1930 permits this. [Ascertainment of Price :(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner, thereby agreed or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular cases.In this case, there can be no doubt that the first stage of the agreement for the immediate transfer of shares was executed and the Division Bench erred when it held to the contrary.We have been unable to understand the logic of the Division Bench by which it sidestepped this inevitable conclusion, when it said "It is open to a party to take an extra precaution to ward off possible disconcerting experiences while planning for the future." Ignoring- or at least not giving sufficient weight - to the wealth of evidence in favour of the submissions of Madhu or at least not giving sufficient weight - to the wealth of evidence in favour of the submissions of Madhusoodhan, the learned judges of the Appellate Court sought to base their assessment of the evidence on the absence of documents, such as income tax returns of Madhusoodhan, which according to them would have shown the acquisition of the additional shares by Madhusoodhanan from Mani, an exercise which was entirely uncalled for in the face of the positive evidence already on record and the repeated admissions of Mani and his group before theany event, our conclusion that the transfer of shares by Mani and his children to Madhusoodhanan would stand without the support of the statutory presumption under Section 195 of the 1956 Act.As far as the shares of Sukumaran Mani are concened in our opinion, the learned Single Judge was right when he said thatgroup could not question the transfer of the shares of Sukumaran Mani on account of his minority, as Sukumar Mani hasd not effected any transfer directly in favour of Madhusoodhanan. As Sukumaran Mani was at the relevant point of time a minor, his shares were transferred by his mother as guardian to his father, Mani, who had in turn transferred the shares to Madhusoodhanan. The Apepllate Court was wrong when it held that the transfer of the shares of Sukumaran Mani was "an absolute nullity in the eye of law" on the ground that the initial transfer by Sukumaran Mani was invalid because it was sought to be effected by Sukumaranmother who was not his legal guardian and who ‘figured as a guardian only as a ruse for getting over the statutory provision". The transfer of Sukumaranshare through his mother to Mani has not been challenged. Therefore the issue of Sukumaranminority and hiscompetence to act as his legal guardian, were not issues which could be relevantly raised before, or decided by the appellate court.There is no dispute that the machines were in fact lifted by Mani, pursuant to Ex. P.1324. Exhibit R-14 evidences payment by Kerala Kaumudi of Rs. 3 lakhs to Madhusoodhanan for, ostensibly purchasing property at Cochin for Kerala Kaumudi. The Division Bench holds that "it is this money that is utilised for payment to Mani as part consideration of the shares to be transferred by Mani and his group". However, the Division Bench discounts this payment because "They very transactions itself may be open to serious challenge. The money of the company cannot be appropriated for a personal purpose of a person having a fiduciary capacity vis-a-vis the company". As a statement of law this is a doubtful proposition. Be that as it may, it is apparent that Mani received some consideration for the transfers although the consideration may have moved from Kerala Kaumudi to Mani. To sum up - the transfers by Mani and his children were effected validly to Madhusoodhanan.93. Since the further resolution to delete Art. 74 formed no part of the notice of the Extraordinary General Meeting, which in all fairness it should have, we have no doubt in our minds that the special resolution on the basis of such defective notice is insupportable in law and cannot be given effect to. This finding is sufficient to hold that the deletion of article 74 of the Articles of the company was invalid and that therefore Madhusoodhanan continued to be the managing director of Kerala Kaumudi as claimed by him in CS 3/89.In the circumstances we hold that Madhusoodhanan and his group were not served with the notice dated 1.8.86. It is therefore unnecessary to decide whether the period prescribed in the notice to apply for the shares was too short or contrary to the Article of Association of Kerala Kaumudi.124. Once we have held that Madhusoodhanan and his group all of whom heldshares in KeralaKaumudi, were not given notice to apply for allotment of the additional shares, it must be held that the subsequent allotment of the shares to Ravi and Srinivasan at the meeting held on 8.8.86 and the affirmation of such allotment at the meeting allegedly held on 16.6.86 were vitiated thereby and invalid.As far as the question of consideration is concerned, we have already held that parties can agree to subsequently determine the price at which the were sold and section 9 of the Sale of Goods Act, 1930 expressly provides that such contracts are perfectly legal. Besides, the Karar in terms does not call upon parties to determine the consideration. All it says is that once the consideration was determined by Madhusoodhanan and Mani, it would be made known to the others. Since there was no such determination, there was no question of informing anyone. The finding that there was no determination of the consideration in respect of the inherited shares as a ground for holding that the Karar was not specifically performable is similarly incorrect as the determination of the price formed no part of the Karar.This section is an instance of such legislative clarity that it needs no paraphrasing to highlight its intent. The Division Bench was clearly wrong in its foray into the question of the value of the assets allotted under the Karar. It has, despite Explanation 1 to Section 20(2) refused specific performance of the Karar on one of the excluded grounds viz., inadequacy of consideration.Although the learned Single Judge in disposing of CP 26/87 gave directions for the appointment of Arbitrators, to determine the value of the shares, in our view it would be more appropriate to do so in decreeing the suit for specific performance of the Karar. It is also not clear from the material on record, in which of the brothers name 9 shares of the late Sukumaran and the 3 shares of Madhavi now stand. Who ever is recorded as the owner of the shares shall further transfer six of those shares to Madhusoodhanan.The explanation given by Laisa that she used to sign whatever papers had been sent by Madhusoodhanan is unbelievable. The Division Bench by relying upon a narrative in a biography of Norman Birkett (The Life of Lord Birkett of Ulverston by H. Montgomery Hyde) chose to accept it. According to Laisa herself, she had been a director of the company, operated the banking accounts and otherwise done whatever was necessary in the discharge of her duties as a director since 1972. As we have noted earlier, differences between the 4 brothers had been simmering for a long time which manifested itself in 1984. This was also noted by the Division Bench when it said, "in the year 1984, differences became somewhat apparent". In the circumstances,facile explanation, that she signed every document in 1985 because of her faith and trust in Madhusoodhanan is clearly false.162. The next reason given by the Division Bench for allowing the application for rectification was that the original share transfer deeds had not been produced. Madhusoodhanan had filed an application for production of the original share transfer deeds. He said that he could not produce the share transfer deeds because they were in the administrative office of KIPL and that he had been prevented from entering that office. That the administrative office of KIPL is within the Kerala Kaumudi premises in a separate room was also the finding of the Division Bench. Madhusoodhanan and isgrievance that they were being denied access tooffice since April, 1986 was not rejected by the Division Bench as not genuine. But the Division Bench observed "A mere alibi of inability to enter the office, cannot be accepted as a sufficiently strong reason for their grievous omission". This conclusion is as starting as it is unreasonable. For the reasons given earlier in connection with transfer ofshares in KeralaKaumudi, we are of the view that here also, the minutes and the other records of the company, which prima facie raise a presumption of their veracity, have not been sufficiently disproved by the evidence tendered on behalf of the petitioners in the application for rectification.The next reason given by the Division Bench for permitting rectification of the share register of KIPL was that no price had been fixed for the shares and that there were not even negotiations with parties regarding such fixation of price. This is, for reasons already stated, an incorrect statement of the law. Moreover, in this case there is the additional factor which has persuaded us to hold that the Division Bench was wrong, namely Article 16 of the Articles of Association of KIPL whichBoard of Directors shall fix price at which the shares for the time being forming part of the capital of the company may be purchased in pursuance of transfer notice and the price thus fixed shall be known as the ‘fairUntil the ‘fairhas been fixed as herein provided, a sum equal to the capital paid up on any share shall be deemed to be the fair value of such share".final conclusion that there had been a non-compliance with section 108 of Companies Act because there was no indication about any purchase of stamps or about the share transfer deeds having been duly stamped, is an exercise in speculation. The Articles of Association of KIPL themselves require compliance with section 108 before any transfer can be effected. When the minutes recorded that share transfer deeds had been placed before the Board, when the transfers were approved by the Board in the presence of the only witness for the petitioners, and when none of the documents which were duly maintained by the company recording the transfers of the shares had been disproved, we cannot uphold a finding that the share transfer deeds must have been improperly stamped or executed in violation of the provisions of Section 108 of Companiessee no reason to interfere with this finding of fact. It is true that the Division Bench proceeded on an erroneous basis then it held that the learned Single Judge had dismissed the application on the ground of delay. Since we have upheld the factual finding of the court of the first instance, this misreading of the Trialjudgment by the Division Bench is of no consequence.Logically the Division Bench should have also rejected the appeal preferred from the decree in CS No. 4/49. However, the Division Bench rejected the appeal on the sole ground that although KIPL had been denied access in 1986, the suit had been filed only in 1966. According to the Division Bench "The inaction for a period of two years can be taken to have resulted in the extinction of the present possession. If the plaintiff does not have present possession, injunction could not be an available relief". This nature piece of reasoning appears to proceed on the basis that the period of limitation for extinction of a possessory right is two years which it is not. Besides the claim of KIPL was that it was being denied access. The denial was s continuous one. It was therefore open to KIPL to file a suit while such denial continued by seeking to injunct the obstructers from continuing with the obstruction.evidence and the documents referred to hereinabove prove beyond a shadow of doubt, that the administrative office of KIPL was in Kaumudi Buildings. That is also the Division Bench has held. Having come to this conclusion the division bench erred grievously in denying KIPL the relief it claimed only on the ground of delay, as if what was being with by the Division Bench were an interlocutory application for interim relief.