THE ALOTE ESTATE & ANR. versus R. B. SETH HIRALAL KALYANMAL & ORS

Citation: [1970] 3 S.C.R. 740 · Decided: 20-02-1970 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

740 
THE ALOTE ESTATE & ANR. 
v. 
R. B. SETH HIRALAL KAL YANMAL & ORS 
February 20, 1970 
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] 
Company-Shares in Conipany-Allotment in consideration of al/ottee 
.transferring land to Co1npany--Jf in winding up proceedings enquiry can 
be 1nade into value of land ll'ithout rectification of Company's registration. 
The Appellants were allotted 18,000 fully paid up shares in a company 
in consideration of transferring 6,000 acres of agricultural )and to the con1-
pany for cultivation o'f sugar-cane. After a petition was filed for \\'inding 
up the company, two joint Liquidators were appointed and they took steps 
to settle the list of contributories. While these proceedings were pending 
an application was filed by Respondent No. 1 praying that an enquiry be 
made in respect of the price paid by the Appellant for the 6,000 acres of 
land. It was urged that such enquiry would show the value of the land 
to be well below the consideration for which the shares were allotted and 
that the Appellants would therefore be liable as contributories in respect of 
the difference. 
The company Judg.., held that in a proceeding for winding up 
and 
while settling the list of contributories it was not open to go behind the 
transaction entered into at the time of the formation of the company and 
that the consideration which had been freely accepted by the company could 
not be challenged as being inadequate in the absence of any allegation of 
fraud. 
However. the Division Bench, in appeal. held 
that an inquiry 
would be necessary as there ,,,.as an indication that the allottees of the 
shares had paid only a ·fraction of the nominal value. 
On appeal to this Court, 
HELD : Allowing the appeal, 
It cannot be disputed that a shareholder of fully paid up •hares will not 
be placed on the list of contributories or made to contribute towards the 
assets of the company unless the register is rectified and it is determined in 
appropriate proceedings that he is not a fully paid up shareholder. 
No 
steps were taken by the liquidators to have the register rectified or the con-
tract entered into by the company with the appellants avoided by means of 
appropriate proceedings. Even in the application filed by respondent No. 1 
there was no allegation of fraud. 
The facts stated related more to in-
adequacy of price or consideration and not to its being illulory or the like. 
The learned sin,gle judge. was therefore right and the Division Bench was 
in error in directing an inquiry i_nto the question whether· the appellants 
had paid consideration which was inadequate. [743 F, 744 C·D] 
In re Innes & Co., Limited, [1903] 2 Ch. Div. 254, 262, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1010 of 
1966. 
Appeal by special leave from the judgment and order dated 
July 9, 1965 of the Madhya Pradesh High Court, Indore Bench in 
Letters Patent Appeal No. 24 of 1962. 
A 
B 
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D 
E 
F 
G 
H 
A 
ALOTE ESTATE v. HIRALAL (Grover, J.) 
741 
S. V. Gupte, N. D. Karkhanis and A. G. Ratnaparkhi, for the-
appellants. 
Mohan Behari Lal, for respondent No. 1. 
C. K. Daphtary, C. P. Lal and N. N. Sharma, for respondents 
e 
Nos. 2 to 4. 
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D 
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F 
G 
H 
The Judgment of the Court was delivered by 
Grover, J. 
This is an appeal by special leave from a judgment 
of the division bench of the Madhya Pradesh High Court reversing 
the order of the Company Judge in an application made by respo,n-
dent No. 1 for an inquiry into the allegation that the consideration 
for 18,000 shares of the Vikram Sugar Mills Ltd. (now under liqui-
dation) valued at Rs. 18 lakhs was not fully paid up by the share-
holders, namely, the present appellants. 
The facts may be succintly stated. 
Appella;nt No. I, the A!ote 
Estate, was a firm consisting of two partners at the material time. 
It came into existence in 1944 when Vikram Sugar Mills Ltd., 
hereinafter called the "company", was proposed to be floated. The 
two partners· of the firm were His Highness Col. Sir Vikramsingh 
Rao Pawar, Ruler of the State of Devas (Senior) and R. K. N. 
Gajapati Raju of Vaizagapatnam who died sometime in 1946 with 
the result that the firm was dissolved. 
In 194 7 the ruler of Dewas 
(senior) was taken in adoption by Her Highness the Senior Dowa-
ger Maharanisaheba of Kohlapur. He assumed the uame and title 
of His Highness Maj. Gen. Sir Shahaji Chhatrapati Maharaja of 
Kohlapur. 
After the constitution of the firm called the Alote 
Estate

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