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Ahmedabad Jubilee S. and M. Co. Vs. Chhotalal Chhaganlal - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberSecond Appeal No. 464 of 1905
Judge
Reported in(1908)10BOMLR141
AppellantAhmedabad Jubilee S. and M. Co.
RespondentChhotalal Chhaganlal
DispositionAppeal allowed
Excerpt:
company-contract with a company-memorandum and articles of association-commission contract-contract [with promoters.; the memorandum and articles of association of a company embody only the social contract, that is, a contract between the share-holders inter se, and possibly between the share-holders and the' directors, and do not constitute any contract between the company and its promoters. - - 88 5. the suit must therefore fail inasmuch as there never was a contract between the company and the plaintiff or the promoter in whose shoes he now claims to stand......on appeal the decree was reversed, and a decree passed in the plaintiffs favour.3. the defendant company now appeals.4. the suit is based upon contract and the first question which arises is whether there was ever any contractual relation between the plaintiff and the company. to make out the affirmative the plaintiff relies upon the memorandum and articles of association of the company. but these documents embody only the social contract, as it has been called, i. e., a contract between the share-holders inter se, and possibly between the share-holders and the directors, and do not constitute any contract between the company and its promoters under one of whom the plaintiff now claims: eley v. positive government security life assurance company. (1876) 1 ex. d. 885. the suit must.....
Judgment:

Batchelor, J.

1. The plaintiff sued for an account of the commission due to him from the defendant Company, and for the recovery of the sum which might be so found due.

2. The suit was dismissed in the first Court but on appeal the decree was reversed, and a decree passed in the plaintiffs favour.

3. The defendant Company now appeals.

4. The suit is based upon contract and the first question which arises is whether there was ever any contractual relation between the plaintiff and the Company. To make out the affirmative the plaintiff relies upon the Memorandum and Articles of Association of the Company. But these documents embody only the social contract, as it has been called, i. e., a contract between the share-holders inter se, and possibly between the share-holders and the directors, and do not constitute any contract between the Company and its promoters under one of whom the plaintiff now claims: Eley v. Positive Government Security Life Assurance Company. (1876) 1 Ex. D. 88

5. The suit must therefore fail inasmuch as there never was a contract between the Company and the plaintiff or the promoter in whose shoes he now claims to stand. Upon another ground also we think that the appeal must be allowed. The clause of the Memorandum of Association under which the claim is based is No. 10 which must be read with No. 7. But these clauses constitute no valid contract. What they purport to do is to give a perpetual annuity to the promoters and their assignees in consideration for certain services said to have been already rendered. But such past services can form no legal consideration under the Contract Act, nor can Sub-section (2) of Section 25 of that Act assist the plaintiff here inasmuch as the services said to have been rendered could not have been rendered to the Company, for the Company was admittedly not then in existence.

6. One other objection to the suit may also be noticed, and that is this:-The plaintiff claims under the promoter Maneklal Dalsookh and relies upon certain resolutions of the Company as authorising the transfer of the claim to his name. The first of these resolutions is that of the 20th August 1900, Exhibit 25, which, under Clause (10) of the Memorandum of Association, had to be confirmed by a subsequent special resolution.

7. Now the meeting called to confirm the resolution of the 20th August was held on the 9th of September, but instead of confirming the previous resolution simpliciter, the Company confirmed it subject to an added proviso, and that we think was no valid confirmation, for there is nothing before us to show how far the added proviso may have influenced the members in accepting this modification of the original resolution: compare Wall v. London and Northern Assets Corporation (1898) 2 Ch.469.

8. The appeal failing upon the above grounds, the Honourable Mr. Setalvad had asked us to send down an issue of fact as to 'whether a contract between Maneklal or the plaintiff and the Company should not be inferred from the conduct of the parties.

9. As we have already indicated, the case is now before us in second appeal, and we do not think that in this litigation this Court would be justified in going out of its way to cure any defects which the plaintiff has committed.

10. The issue suggested is one which should have been raised before the Courts of fact and we are not disposed to allow it to be raised now with the result of inaugurating a different case from that which the Company made before the lower Courts.

11. The result is that the appeal must be allowed and the plaintiffs suit must be dismissed with coststhroughout.


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