LexPIERCE LESLIE & CO. LTD. versus VIOLET OUCHTERLONY WAPSHARE AND OTHERS VICE VERSA
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PIERCE LESLIE & CO. LTD.
. v.
VIOLET OUCHTERLONY WAPSHARE·
AND OTHERS VICE VERSA
December 20, 1968
[S. M. SIKRI, R. S. BACl!AWAT AND K._S. HEGDE, JJ.]
Trust-Conzpany acting as secretary of .another con1pany-Jf brings
about -ruiuciary relationship between rhem-Secretal){ co1npany buying
assets of the main c'ompany and flouting a new Company-If fraudulent
transaction-Old company dissolved-Suit by shareholders of old company
to je/ as/de transaction-Limitation-Suit if maintainable by shareholders- -
Escheat-Jf properties vest in Government by escheat.
.
.
One \V owned sevefi:i.1 tea, coffee· and other plantations. In 1927,
he_ formed a limited company and conveyed his estates to the company.
All the shares of the c<Jmpany were held by him and the members of his
family. The· company borrowed Rs. !Ot lakhs from the Imperial Bank of
India against the issue of debentures secured by an English mortgage.
The loan was repayable on March 15, 1937. ·In default of payment with-
in November 15, 1937, the trustee under the debenture trust deed v.'::i.S
authorised to enter into possession of the estates and sell them.
The
appellant-company was appointed as the secretary of the company.
Since 1931, the family \Vas keen on selling.the estates, but none of
the offers materialised. In 1936, there was a slump in tea and coffee
p:ices and there was a possibility of a further slump. The Bank was
pressing for the payment of its dues and the company \Vas not in
a
position to liquidate the
debt \Vithout· selling the estates. The family
tried unsuccessfully to raise loans. In the beginning of November 1937,
the family had a firm offer from A.L. & Co. for the purchase of all the
estates for Rs. 14 lakhs, but the family was anxiOus to retain one of
them.
The appellant-company offered Rs. 10 lakhs for all the estates
excluding the estate vihich the family wanted to retain. The family knew
that this estate, if sold separately, "vould not fetch more than Rs. 2 Jakhs
and yet they chose to retain it and to accept the appellant's offer. At a
meeting all the shareholders (members of the family) unanimously ac-
ccptcLl the proposal. Thev were all sui" juris and had business acumen.
They knew the value of the properties and accepted Rs. 10 !akhs as a
just and fair price. The offer enabled them to retain the estate 'vhich
they wanted to retain and at the same time enabled them to liquidate
the Bank's dues. They had legal advice· and the document$ \Vere iri
proper legal form.
The meeting was also attended by the chairman of
the company and the director nominateLl by the Imperial Bank.
After
the transfer, the company went into voluntary liquidation and it stood
dissolved on March I, 1940, under s. 209 H of the Companks Act. 1913.
The appellant· took possession of the properti~s on January 10, 1938 and
promoted a new co111pany to
which the properties \Vere tra:isferred by
convcvances. dated January 14. 1939 and !\-lay 15, 1939 50% of the
shareS cf the new company were hcl<l b'y the appcHant-cornpany \vhich
managed and controlled the ne\V company. The memb.ers of the farn:Iy
made no complaint about the transaction for 12 years, but, on December
21, 1950, they instituted a suit against the appellant and others alleging
that the cld company had not· been wound up in accordance with Jaw
and \Vas still in existence, that the old company wa~ the real owner of
the properties and the ne\v compa~y held them in trust _for the old
204
SUPREME COURT REPORTS
[1969] 3 S.C.R.
company, that the appellallt took advantage of .its fiduciarv capacity and
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gained -pecuniary advantage and that the various sales and conveyances
were vitiated by fraud, and prayed for a decree vesting or retransferring
the properties to the old company or the family.
The trial court dismissed the suit, but the appeal to the High Court
was allo\ved in part.
In appeal to this Court, on the q-tions : ( 1 )(a) Whether tb<re was
a fiduciary relationship between the appellant and the old company, and
(b) Whether the appellant gained a pecuniary advantage by
availing
itself of the fiduciary character; (2) Whether the suit was barred by
limitation, and (3) Whether the members of the family as shareholders
of the old company were entitled to maintain the suit,
HELD: (l)(a) The appellant company was the. secrelllry of tbe old
company, was in charge of its
correspondence and accounts and was
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