P. C. K. MUTHIAH CHETTIAR & ORS. versus V. E. S. SHANMUGHAM CHETTIAR & ANR.

Citation: [1969] 1 S.C.R. 444 · Decided: 26-07-1968 · Supreme Court of India · Bench: R.S. BACHAWAT · Disposal: Case Partly allowed

Judgment (excerpt)

P. C. K. MUTlllAll CllETTIAR & ORS. 
v. 
V. E. S. SHANMUGHAM CHETflAR & ANR. 
July 26, 1968 
IR. S. BACllAWAT AND K. s. HEGDE, JJ.] 
Contract--agreenient to sell shares-non.disclosure of receipt of 
subs1an1ia/ dividends 1vlzich purchaser ll'<.'S under fiducilzry duty to disclose-
if vitiated by fraud. 
Lirnitation Act, 1908-s. 13-e:cc/usion of tirne durit11: 1vhicl1 defen-
datzt ahroad--causc of actiun arisinK abroad or defendant abroad al tinr.e 
A 
B 
of its accrual-if 1naterial. 
C 
C was the o\\.·ncr of five original shares in a Ruhbcr Estate in Malacca. 
After his death in !Rcember, 1912 hi• son the fir..t responclcnt entered 
into a compromise agreement in July, 1915 \i.tith the appellant. \\'ho \\'3.S 
in partnership with C during his lifetime, \\'hereby it was agreed that out 
of five shar-os, 2 ! would belong to the partnership and the 
remaining 
2~ shares to the first respondent, furthermore, the appcll<.int undertook 
to recover the 5 shares and account to the first rcspond~nt for 2 i shares 
D 
and for the income and dividends arising from them. 
In January, 1924, 
while the appellant and the first respondent were both at Ma lace a, they 
entered into another a¢recment whereby the first respondent transferred 
his rem:iining 21 shares to the defendant on receipt of 18.000 d-Jllars 
a' con<1i<lcralion. 
Jn Scptcn1bcr, 1927 the first rc:;pondcnt inc;titutcd a 
suit again.st the appellant in India for a declaration that he was entitled 
to all the original five shares and for accounts and consequential i'elicf, as 
both his agreements y;jth the appellant -w·e·re vitiat·~d hy fraud and fraudu~ 
E 
lent concealment. 'Ibe Trial Court granted the declaration, but the High 
Court, in appeal mid tha1 while the arrangement of July. 1915 was valid, 
that of January, 1924 was vitiated by fraud ;1n<l that the appellant was 
therefore liahle to account for 2i shares and dividends 
amounting to 
15,535 dollars with interest. 
The lli~h Court also rejected a contention 
raised by the appellant that the period of his absence from the country 
could not be taken into account for determining the period of limitation 
~~nd tliat the suit v,1as therefore harred by limitation. 
F 
On appeal to this Court, 
HELD : (i) The defendant had concealed the fact that he had col-
lected 35,535 dollars as dividend on the ~hares antl had the resnondent 
kno\Vn this, he v.·ould not have parted with the shares with all their accrued 
benefits for l 81000 dollars. 
The defendant \Vas under a fiduciary obliga-
tion to disclose t~ true state of affairs. 
Tbz l\vo court-. had therefore 
G 
rightly found that the agreement was vitiated by fraud. [446 l-'-G] 
(ii) Jn computing the period of limitation prescribed for. the suit, 
"the time during: which the defendant has h~cn ahscnt from lnd1a" hns to 
be excluded under sec. 13. The words of the section !IJ'e clear and full 
effect must be given to its lan~age. The section makes no exception for 
cases in which th-~ cause of action arose in a forci!!n country or for case.<> 
in \vhich the defendant was in a foreign country at the time of the accrual 
II 
of the cause of action. ! 44 7 l'rF] 
Awl Krixto Rose v. l,yon & Co .. (1887) I.LR. XIV Cal. 457; '."'<I 
."1<.tliuk.1n11i v. Andappa, A.LR. 1955. !\1ad. 96; referred to and apphed. 
.. 
• 
• 
> • 
A 
MUTHIAH v. SHANMUGHAM (Bachawat, !.) 
445 
Ruthinu v. Packiriswami. A.LR. 1928 Mad. 1058; ~nd Subramania 
Chettiar v. Maruthamuthu, A.I.R. 1944 
Mad. 
437 
disapproved 
and 
overruled. 
· 
(iii) On the material on record it was necessary to revise the basis of 
valuation of the shares and to modify the decree passed by the High Court. 
C1v1L APPELLATE JURISDICTION: Civil Appeal No. 705 of 
B 
1965. 
c 
D 
E 
F 
G 
H 
Appeal from the judgment and decree dated November 28, 
1958 of the Madras High Court in Appeal No. 756 of 1964. 
M. S. K. Sastri and R. Thiagarajan, for the appellants. 
T. R. Srinivasan and R. Kopa/akrishnan, for respondent 
No. 2. 
The Judgment of the Court was delivered by 
Bachawat, J. Subramanian Chettiar was the owner of 5 
original shares subsequently represented by 1250 shares in the 
Chop Leong Watt Hin Rubber Esta!le in Malacca. 
On Decem-
ber 9, 1912 Subramanian died leaving behind him his widow and 
his son the plaintiff Shanmugham. 
In August 1913 the attorney 
of Subramanlan's widow took out letters of administration to his 
estate. 
Subramanian, the defendant and certain others were 
partners in the P.M.S. Firm at Malacc

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