Skip to content


Shrikishen Dhoot and ors. Vs. S.D. Kamlapurkur and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 2/1 of 1956
Judge
Reported in[1965]35CompCas913(AP)
ActsIndian Companies Act, 1913 - Sections 247(5); Hyderabad Companies Act
AppellantShrikishen Dhoot and ors.
RespondentS.D. Kamlapurkur and ors.
Appellant AdvocateB.C. Jain and ;C.P. Sarathi, Advs.
Respondent AdvocateSadashiva Rao, Additional Government Pleader, ;K. Ramgopal and ;V.R. Sawarikar, Adv. for Respondent No. 1, ;N. Narasimha Iyengar and ;K. Venkatachary, Adv. for Respondent No. 2, ;M.S. Krishnamurthy an
DispositionAppeal allowed
Excerpt:
company - sustainability of suit - section 247 (5) of indian companies act, 1913 and hyderabad companies act - plaintiff filed suit for recovery on basis of promissory notes - suit decreed in favour plaintiff - appeal preferred - matter send back after framing issue - issue decided in favour of plaintiff - appeal preferred - lower court erred in passing decree and making defendant personally liable as they were not directors merely members of sub-committee to enquire into claims made - resolutions passed by company as well as report of sub-committee not amounting to any conditional undertaking given by all or any of defendants to pay plaintiff amount claimed from contingent fund - moreover suit is not maintainable as remedy is there under section 247 (6) if plaintiff feels aggrieved by.....manohar pershad, j.1. o.s. no. 32/1 of 1953-54 out of which this present appeal f.a. no. 2/1 of 1956 on behalf of defendants nos. 1 to 10 arises was instituted by the first respondent herein for recovery of h.s. rs. 5,975 with interest thereon alleging that he was a member of the hyderabad bullion exchange and paid a membership deposit of h.s. rs. 1,000 initially and later on he deposited n. g. p. notes of rs. 5,000 as membership security deposit. in the month of august, 1947, he left for u.s.a. for higher studies and came back in the year 1950. after his return, he was informed that his security deposit amounts were being refunded by the defendants to the members as the said deposits were no longer required. on 9th june, 1952, he wrote to defendant no. 3, who was the then chairman of the.....
Judgment:

Manohar Pershad, J.

1. O.S. No. 32/1 of 1953-54 out of which this present appeal F.A. No. 2/1 of 1956 on behalf of defendants Nos. 1 to 10 arises was instituted by the first respondent herein for recovery of H.S. Rs. 5,975 with interest thereon alleging that he was a member of the Hyderabad Bullion Exchange and paid a membership deposit of H.S. Rs. 1,000 initially and later on he deposited N. G. P. Notes of Rs. 5,000 as membership security deposit. In the month of August, 1947, he left for U.S.A. for higher studies and came back in the year 1950. After his return, he was informed that his security deposit amounts were being refunded by the defendants to the members as the said deposits were no longer required. On 9th June, 1952, he wrote to defendant No. 3, who was the then chairman of the defendants' company for the refund of his deposit amount. By a circular letter dated 10th June, 1952, the defendants' company informed him that his deposit amount would be returned to him on his intimating to the defendants the amount of deposit due to him by the company. He was also informed that at a general body meeting of the defendants' company held on 9th June, 1952, a sub-committee was formed and appointed the defendants Nos. 8 to 10 to go into the accounts of the company and make a report and he was asked to appear before the said sub-committee. He appeared on 28th June, 1952, but the said deposit was not refunded to him. Subsequently, he was informed that in a general body meeting of the defendants' company held on 7th August, 1952, it was decided that the security amount due to him should be provided for on the contingent fund and that on repeated demands the defendants' company did not return the said N.G.P. notes to him. He, however, admitted that he received Rs. 500 in the shape of N.G.P. notes in full satisfaction of the original admission fee of Rs. 1,000. The plaintiff has impleaded defendants Nos. 2 to 7, the directors of the company ; defendants Nos. 8 to 10 the subcommittee members and the subsequent endorsees as parties to the suit. Defendants Nos. 2,3, 5, 6 and 8 to 10 while admitting that the plaintiff made an initial deposit of Rs. 1,000 and subsequently deposited N.G.P. notes of the value of Rs. 5,000 as membership security with the defendants' company, stated that by the order of the Registrar of Joint Stock Companies dated 25th December, 1949, the first defendant-company was declared defunct. As such, no suit could lie. They further stated that the N.G.P. notes were handed over to one G.S. Alshi on the authority of the plaintiff with an endorsement in his favour who, in turn, re-endorsed in favour of G.S. Alshi and by subsequent endorsements the N.G.P. notes were in the possession of the State Bank of Hyderabad. As such, he had no right to claim them from the defendants. They further denied their liability to pay interest or to re-deliver the promissory notes. They, however, stated that they were ready to deliver with the endorsement, the promissory note bearing No. 049661 of the face value of Rs. 500 but the plaintiff himself refused to take it. They also pleaded that the defendants' company had become defunct and dissolved and as such there was no question of defendants Nos. 2 to 7 being its directors. They, however, admitted that the assets of the company were in possession of the 2nd defendant. A legal plea was also raised that the court had no jurisdiction to try the suit as defendants Nos. 2, 3, 8, 9 and 10 were not the residents of Secunderabad. Another legal objection was raised that no suit could lie against a dissolved company without the liquidation proceedings in the High Court. The plaintiff filed a rejoinder denying the allegations of the defendants.

2. On these averments in the pleadings, the following issues were framed by the trial court:

1. Is the suit maintainable-

(a) in spite of the fact that defendant No. 1 became defunct ?

(b) in view of the provisions of the Companies Act ?

2. Has this court jurisdiction to try the suit ?

3. Was G.S. Alshi authorised to receive N.G.P. notes of value of Rs. 4,500 for the plaintiff ?

4. Is the plaintiff entitled to the interest claimed ?

5. Are Alshi, Hyderabad Bank Ltd., and Hyderabad State Bank, necessary parties to this suit

3. Evidence was produced on behalf of the parties. The trial court found issues Nos. 1, 2 and 5 in favour of the plaintiff.

4. On issue No. 3, it found that G.S. Alshi was not authorised to receive N.G.P. notes of the value of Rs. 4,500 on behalf of the plaintiff. On issue No. 4, it found that the plaintiff was entitled to interest also. In the result, the trial court decreed the suit against the appellants for the refund of the value of the notes together with interest till realisation. Against this judgment and decree is this appeal on behalf of defendants Nos. 1 to 10.

5. In this appeal Mr. Jain, the learned counsel for the appellants, apart from other contentions, contended that the case of the appellants was that the N.G.P. notes were endorsed in favour of the plaintiff who subsequently endorsed it in favour of the 13th defendant who, in turn, endorsed them in favour of the Hyderabad Bank Ltd. (12th defendant) and subsequently the notes were transferred in favour of the Hyderabad State Bank ; and unless the plaintiff proves that the endorsement alleged to have been made by him in favour of the 13th defendant was a forged one, the plaintiff cannot succeed in this action. He further drew our attention that in spite of this clear statement and the denial by the plaintiff that he made the endorsement in favour of the 13th defendant, the court below has not framed any issue and has not given any finding on this point and without such a finding, the determination of the liability cannot be effectively made. Sri Sadashiva Rao, the learned counsel for the plaintiff, very rightly conceded that the appellants had alleged that the endorsement was made in favour of the plaintiff and that fact has been denied by the plaintiff and no issue has been framed, but contended that evidence has been let in and this court can consider that evidence. It may be, as is urged by the learned counsel for the plaintiff-respondent, that he has led evidence, but as no issue was framed the appellants can rightly contend by saying that they could not produce the evidence. We agree with the contention of Sri Jain that unless the plaintiff proves that this alleged endorsement which is said to be in his favour is a forged one, it is very difficult to fix the liability of the defendant-appellants. As there was no issue there is no evidence and no finding of the court below. We, therefore, frame the following issue ;

' Whether the plaintiff has not received the endorsed promissory notes from the 13th defendant and also not endorsed the same in favour of that defendant, viz., G.S. Alshi ?'

and send back the case to the First Additional Judge, City Civil Court, Hyderabad, with a direction that the said court will submit its finding on the above issue within one month from the date of receipt of the file in that court after recording the evidence of the parties, if produced. One week for objections.

6. In pursuance of the above order, the First Additional Judge, City Civil Court, Hyderabad, submitted the following finding :

' ...so, in the light of the above discussion and on the strength of the evidence of P.W. 1, I hold this issue in favour of the plaintiff and against the contesting defendants.........'

7. The appeal then came up for final hearing after the receipt of the finding.

Chandrasekhara Sastry, J.

8. This is an appeal by defendants Nos. 1 to 10 against the decree in Suit No. 32/1 of 1953 decreeing in plaintiff's favour against them a sum of H. S. Rs, 5,975 with costs amounting to H. S. Rs. 947-15-0 and interest thereon at the rate of 6 per cent, per annum. The suit against defendants Nos. 21 and 12 was dismissed by the lower court with a further direction that the appellants, defendants Nos. 1 to 10, shall pay the costs of defendants Nos. 11 and 12. The plaintiff, S.D. Kamlapurkur, was a member of the Hyderabad Bullion Exchange Ltd., which is the first defendant (hereinafter referred to as the company). This is a limited company incorporated under the Hyderabad Companies Act. Defendants Nos. 2 to 7 were the directors of the said company. The allegations in the plaint were shortly as follows : The plaintiff was admitted as a member of the first defendant-company on 10th November, 1945, and he paid the membership fee of H.S. Rs. 1,000. On 8th December, 1945, the plaintiff deposited as security with the first defendant-company three N.G.P. notes of the total value of Rs. 2,500. Again on 6th August, 1946, he deposited thirteen more N.G.P. notes of the total value of Rs. 2,500. Thus, the plaintiff deposited in all-sixteen N.G.P. notes as security deposit with the first defendant-company of the total value of Rs. 5,000. From August, 1947, till the end of the year 1950, the plaintiff was in the United States of America for his studies. After he returned to Hyderabad, he learnt that the first defendant-company was refunding to the members, the security deposit amounts. On 9th June, 1952, he wrote to the third defendant for the refund of his deposit amount. On gth June, 1952, there was a general body meeting of the first defendant-company. At that meeting, a subcommittee was formed consisting of defendants Nos. 8 to 10 for going into the accounts of the company and for making a report and the plaintiff was asked to appear before the said sub-committee. The plaintiff appeared before the sub-committee on 28th June, 1952. A further meeting of the general body of the first defendant-company was held on 7th August, 1952, and it was decided that the security amount due to the plaintiff should be provided for in the contingent fund. In spite of repeated reminders, the deposit was not refunded to him. In November, 1952, the defendants required the plaintiff to contact defendant No. 8 in connection with the refund of the deposit amount but the 8th defendant gave evasive replies. Finally, the plaintiff got notice issued to the defendants demanding refund of the deposit amount together with the balance of interest that had accrued on the N.G.P. notes. But none of the defendants sent any reply. In paragraph 12 of the plaint it is alleged that defendants Nos. 2 to 7 being the directors of the company and being in possession of the assets of the company are personally liable to refund the deposit amount. It was also alleged that defendants Nos. 8 to 10 were the members of the sub-committee referred to above, appointed for the purpose of settling and paying the plaintiff, To the best of the plaintiff's information, defendants Nos. 8 to 10 are in possession of the amounts set apart for payment to the plaintiff. On these allegations, the plaintiff prayed for a decree directing the defendants to deliver the N.G.P. notes of the face value of H. S. Rs. 5,000 together with H. S. Rs. 975 being the balance of the interest due on the said notes up to 27th July, 1953. In the alternative, the plaintiff prayed for a decree for H. S. Rs. 5,975 against defendants Nos. 1 to 10 jointly and severally and for costs of the suit and further interest at the rate of 6 per cent, per annum.

9. Defendants Nos. 2, 3, 5, 6 and 8 to 10 filed a common written statement. They pleaded that, by an order of the Registrar of Joint Stock Companies, dated 25th December, 1949, and published in the Government Gazette, the first defendant-company was declared defunct on account of not carrying on any business, and that, ever since, it had remained defunct and has not been restored to the register either by the order of the Registrar or by the High Court. They admitted that the plaintiff appeared before the sub-committee consisting of defendants Nos. 8 to 10; but they stated that, on enquiry, it was found that the N.G.P. notes were delivered to one G.S. Alshi on producing a receipt signed by the plaintiff. Relying on G.S. Alshi's representation that he was authorised by the plaintiff to receive the N.G.P. notes, the secretary of the company, after taking two receipts, one represented to be signed by the plaintiff and another from G.S. Alshi that he was authorised to receive the N.G.P. notes under instructions from the plaintiff, delivered the N.G.P. notes to G.S. Alshi after endorsing them in favour of the plaintiff. The sub-committee submitted its report on 7th August, 1952, wherein in paragraph 15, the claim of the plaintiff regarding the return of the security deposit amount was deferred pending enquiries with the Public Debt Office. The subcommittee also recommended allowance to be made in the contingent fund to meet the claim of the plaintiff if his claim was found to be genuine. This report was accepted by the general body members of the bullion exchange on the same day. The plaintiff also attended that meeting. On enquiry, the sub-committee further found that the promissory notes of the value of Rs. 4,500, which were endorsed in favour of the plaintiff, were re-endorsed by the plaintiff in favour of G.S. Alshi. G.S. Alshi endorsed them in favour of the Hyderabad Bank Ltd., who, in its turn, endorsed them in favour of the Hyderabad State Bank. In view of that information, the sub-committee expressed its inability to do anything in the matter. Since the plaintiff received the said promissory notes which were endorsed by the company in his favour and negotiated them to others, he has no right to claim them or their value from the defendants. It was denied that the plaintiff had any cause of action against these defendants. It was further pleaded that, as the first defendant-company had become defunct and was dissolved, there is no question of defendants No. 2 to 7 being its directors and that the assets of the company are in possession of the 2nd defendant on behalf of the general body of members. As the first defendant company became defunct and was dissolved by the order of the Registrar striking it off from the register, the suit is not maintainable against it. It was pointed out that the proper procedure for the plaintiff was to have recourse to the proceedings under the provisions of the Companies Act. The assets of the company, which are held by the 2nd defendant, are subject to the orders of the general body of members and so, no relief can be claimed against him. The plaintiff's claim to recover the N.G.P. notes can only be from the Hyderabad State Bank in whose possession the notes are. It is further pleaded that G.S. Alshi, Hyderabad Bank Ltd., and the Hyderabad State Bank are necessary parties to the suit. No claim can lie against the dissolved company without liquidation 'proceedings in the High Court.

10. The plaintiff filed a rejoinder stating that he was not aware of the fact of the first defendant-company having been declared defunct by the Registrar of Hyderabad on 25th December, 1949. He asserted that that does not absolve the company and its directors and members from their liability and that persons, who are in possession of the assets of the company, are bound to discharge the liabilities of the company. He denied that he authorised G.S. Alshi to receive the N.G.P. notes. If the first defendant-company or any of its office bearers have either deliberately or negligently delivered the N.G.P. notes to G.S. Alshi on the latter's representation that he was the agent of the plaintiff, without making enquiries, the first defendant-company and all its directors and office bearers are liable to make good the value thereof to the plaintiff. The plaintiff had not received the N.G.P. notes nor had he endorsed them in favour of any person. The 2nd defendant is admittedly holding the assets of the company as trustee for the benefit of all the members including the plaintiff. Therefore, he is liable to pay the same to the plaintiff from the company's assets. The fact that the company became defunct does not affect the plaintiff's claim.

11. On the plea raised by the defendants, the Hyderabad State Bank and the Hyderabad Bank Ltd. are made parties to the suit as defendants Nos. 11 and 12 and G.S. Alshi was made a party as the 13th defendant but he remained ex parte after he was served by substituted service. The 11th defendant pleaded that it is not a necessary party to the suit and that it purchased the suit N.G.P. notes of the value of H. S. Rs. 4,500 bona fide from the Hyderabad Bank, the I2th defendant, without knowledge of the alleged fraud on the part of the 13th defendant and are, therefore, bona fide holders in due course. It prayed that the suit may be dismissed as against it.

12. The following issues were framed on 7th December, 1953, and 1st February, 1954:

(1) Is the suit maintainable

(a) in spite of the fact that defendant No. 1 became defunct ?

(b) in view of the provisions of the Companies Act ?

(2) Has this court jurisdiction to try the suit ?

(3) Was G.S. Alshi authorised to receive N.G.P. notes of the value of Rs. 4,500 for the plaintiff ?

(4) Is the plaintiff entitled to the interest claimed ?

(5) Are Alshi, Hyderabad Bank Ltd., and Hyderabad State Bank necessary parties to this suit ?'

13. By its judgment dated 1st February, 1954, the lower court considered the issues Nos. 1, 2 and 5 and found them in the plaintiff's favour. It held that the liabilities of the first defendant-company will be there and that, in any event, they will have to be discharged against its assets, if any, and that, therefore, the suit is maintainable. It further held that it had jurisdiction to try the suit and that defendants Nos. 11, 12 and 13 are necessary parties to the suit. Then, by its judgment dated 3oth August, 1955, the lower court held that the plaintiff is entitled to a decree against the defendants Nos. 1 to 10 for H. S. Rs. 5,975. It held that G.S. Alshi was not authorised by the plaintiff to receive the N.G.P. notes of the value of Rs. 4,500 and that the first defendant-company was negligent in delivering them to G.S. Alshi. It also held that though the N.G.P. notes were endorsed in favour of the plaintiff, the company still continued to be liable for the plaintiff's claim as they were not delivered to the plaintiff. It also noted that provision has been made in the contingent fund for meeting the plaintiff's claim if established. It is on these grounds, that a money decree was passed by the lower court against defendants Nos. 1 to 10 with costs and subsequent interest. It dismissed the suit against defendants Nos. 11 to 13, but ordered that defendants Nos. 1 to 10 shall pay the costs of defendants Nos. 11 and 12. Defendants Nos. 1 to 10 filed the above appeal. The plaintiff is the first respondent in the appeal and respondents Nos. 2 to 4 are defendants Nos. 11 to 13.

14. When this appeal was first heard by this court, this court, by its order dated 13th December, 1961, called for a finding from the lower court on the following issue :

' Whether the plaintiff has not received the endorsed promissory notes from the 13th defendant and also not endorsed the same in favour of that defendant, viz., G.S. Alshi ?'

15. Pursuant to this order the lower court submitted its finding on this issue by its judgment dated 15th February, 1962. It found the issue in favour of the plaintiff. After the receipt of the finding by this High Court, this appeal is again argued before us.

16. The following facts are now not in dispute : The plaintiff was a member of the first defendant-company. He deposited N.G.P. notes of the total value of Rs. 5,000 with the first defendant-company as security deposit. He left for the United States of America in the year, 1947, and returned to Hyderabad towards the end of 1950. But, meanwhile, it appears from the evidence that G.S. Alshi claiming to be authorised by the plaintiff and producing a letter purporting to be the letter by the plaintiff as well as a receipt purporting to be signed by him, received the N.G.P. notes of the value of Rs. 4,500 from the first defendant-company. It has to be stated that the company made endorsements on the N.G.P. notes in favour of the plaintiff himself and also obtained a receipt from G.S. Alshi in addition to the receipts which G.S. Alshi gave and which purported to be one given by the plaintiff. Thereafter, G.S. Alshi made endorsements on those notes in his own favour forging the signature of the plaintiff. Then he transferred them to the 12th defendant, the Hyderabad Bank Ltd., which, in its turn, endorsed them in favour of the 11th defendant, the Hyderabad State Bank. The Hyderabad State Bank got them renewed and is not in possession of the original N.G.P. notes as well as the renewed notes. The finding of the lower court that G.S. Alshi was not authorised by the plaintiff to receive the N.G.P. notes and that the receipt said to have been given by the plaintiff and the endorsement said to have been made by the plaintiff on the N.G.P. notes transferring them in favour of G.S. Alshi are not genuine, are not challenged before us in this appeal. Those findings are accepted. Therefore, the position is that the plaintiff did not receive the N.G.P. notes of the total value of Rs. 4,500 from the first defendant-company. On the strength of the forged endorsements made by G.S. Alshi, the said notes came into the possession of the Hyderabad State Bank, the 11th defendant, which got them renewed. Though defendants Nos. 11 to 13 are parties to this appeal, there is no appeal by the plaintiff against the decree of the lower court claiming any relief against them particularly the relief of delivery of the specific N.G.P. notes as against the 11th defendant.

17. On the facts stated above, the first point argued by Mr. B.C. Jain, the learned counsel for the appellants, is that the lower court erred in granting a decree for the money claimed in the plaint against defendants Nos. 2 to 7 (appellants Nos. 1 to 6) who were the directors of the first defendant-company, the Hyderabad Bullion Exchange Ltd. It is argued that the company is a limited company and the liability of the members is limited and that the directors cannot be made personally liable for the suit claim. In paragraph 12 of the plaint it is alleged that the defendants Nos. 2 to 7 being the directors of the company and being in possession of the assets of the said company are personally liable to refund the same to the plaintiff. The lower court, in its judgment, observed :

' It is admitted that provision has been made in the contingent fund for the payment of this deposit by Kapurchand subject to plaintiff establishing his claims.'

18. Therefore, the lower court decreed the suit against defendants Nos. 1 to 10. But it is not the plaintiff's case in the plaint that any money was deposited with the directors Nos. 2 to 7 or that there was an agreement between the said directors and the plaintiff that the former would pay the amount to the plaintiff. Under these circumstances, it is difficult to see how a decree can be passed against the directors for the suit amount. But Mr. V. R. Sawarekar, the learned counsel for the plaintiff, first respondent, relied upon the proviso to Clause (5) of. Section 247 of the Indian Companies Act (7 of 1913) which corresponds to Clause (5) of Section 560 of the Companies Act (1 of 1956). Section 247 of the Indian Companies Act reads as follows :

'247. (1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall within fourteen days after the expiration of the month send to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the official Gazette with a view to striking the name of the company off the register.

(3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the official Gazette, and send to the company by post a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved.

(4) If, in any case, where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting or that the affairs of the company are fully wound up, and the returns required to be made by the liquidator have not been made for a period of six consecutive months after notice by the Registrar demanding the returns has been sent by post to the company, or to the liquidator at his last known place of business, the Registrar may publish in the official Gazette and send to the company a like notice as is provided in the last preceding sub-section.

(5) At the expiration of the time mentioned in the notice the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the official Gazette, and, on the publication in the official Gazette of this notice, the company shall be dissolved : Provided that the liability (if any) of every director and member of the company shall continue and may be enforced as if the company had not been dissolved.

(6) If a company or any member or creditor thereof feels aggrieved by the company having been struck off the register, the court on the application of the company or member or creditor, may, if satisfied that the company was at the time of the striking off carrying on business or in operation, or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register and thereupon the company shall be deemed to have continued in existence as if its name had not been struck off, and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.

(7) A letter or notice under this section may be addressed to the company at its registered office, or, if no office has been registered, to the care of some director, manager or other officer of the company, or, if there is no director, manager or other officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum.'

19. That section confers power on the Registrar of Companies to strike off from the register the name of any company that is not carrying on business or in operation after following the procedure prescribed therein and, on the publication in the official Gazette of such notice, the company shall stand dissolved (vide Clause (5) of Section 247 of Act 7 of 1913). But it is argued by Mr. V. R. Sawarekar, the learned counsel for the plaintiff-first respondent, that, by virtue of the proviso to Clause (5), the liability (if any) of every director and member of the company shall continue and may be enforced as if the company had not been dissolved. This proviso only means that the existing liability of any director or member prior to the dissolution of the company will continue in spite of the dissolution. If the directors are not personally liable for the plaintiff's claim prior to the dissolution of the company, they will not be liable after the dissolution. It has therefore to be held that defendants Nos. 2 to 7, who are appellants Nos. 1 to 6, cannot be held personally liable for the suit claim and the decree against them has to be set aside.

20. It is next argued that no decree can be passed against defendants Nos. 8 to 10 (appellants Nos. 7 to 9), They are not the directors of the company. They are merely members of a sub-committee, who were authorised, by a resolution passed by the members of the Hyderabad Bullion Exchange Ltd., at their meeting held on 9th June, 1952, to go into the matter of accounts of the company and to make a report on all the outstanding matters and recommend for the distribution of the funds available. At that meeting, it was also unanimously agreed by the seventeen members present including the plaintiff, who was also one of the members of the Hyderabad Bullion Exchange Ltd., and who attended that meeting that the deposits of the members be returned to the members concerned subject to there being no claim against them. Subsequently, the sub-committee submitted its report, exhibit D-4(A) dated 7th August, 1952. In paragraph 15 of the said report, the defendants Nos. 8, 9 and 10, who formed the sub-committee, recommended that the claim of Sri Kamalapurkur (the plaintiff) for deposit amount had to be referred pending enquiries with the Public Debt Office and that, meantime, allowance has to be made in the contingent fund. This report was considered by the members of the Hyderabad Bullion Exchange Ltd., including the plaintiff on 7th August, 1952, itself. Resolution No. 6 passed at the said meeting is as follows :

' Regarding the claim of Mr. Kamalapurkur referred to by the committee under No. 15 it was resolved by the general body that the claim of Mr. Kamalapurkur be postponed till the result of the investigation with the P.D.O. in this behalf is known. It was further resolved to provide for the amount in the contingent fund.'

21. In paragraph 12 of the plaint, it is stated that defendants Nos. 8 to 10 were the members of the sub-committee appointed by the first defendant-company for the purposes of settling and paying the plaintiff and that to the best of the plaintiff's information, defendants Nos. 8 to 10 are in possession of the amounts set apart for payment to the plaintiff. Therefore, a decree was asked for against defendants Nos. 8 to 10 also. As members of the Hyderabad Bullion Exchange Ltd., the liability of defendants Nos. 8 to 10 was limited. The mere fact that they were formed into a subcommittee to enquire into the claims made by the members cannot render them personally liable for the suit claim. Therefore, the decree passed by the lower court against them cannot be sustained and has to be set aside.

22. The resolutions passed by the members of the first defendant-company on 9th June, 1952, and again on 7th August, 1952, as well as the report of the sub-committee do not amount to any unconditional undertaking given by all or any of the defendants Nos. 2 to 10 to pay to the plaintiff the amount claimed by him from out of the contingent fund. In fact, in paragraph 12 of the plaint, it is not alleged that any of these facts gave rise to the cause of action against defendants Nos. 2 to 10.

23. Mr. B.C. Jain further argued that, since the name of the company, the Hyderabad Bullion Exchange Ltd., was struck off from the register by the Registrar after following the procedure prescribed by Section 247 of the Indian Companies Act (VII of 1913) on 25th December, 1949, the company was no longer in existence on and from that date and that, therefore, the suit is not maintainable against that company, which is described as the first defendant in the suit (10th appellant in this appeal). As already noticed, under Clause (5) of Section 247, on the publication of the notice of the striking off of the name of the company from the register in the official Gazette, the company stood dissolved and was, thereafter, no longer in existence. The argument of Mr. B.C. Jain is that the remedy of any person aggrieved is only under Clause (6) of the said section which provides that if a company or any member or creditor thereof feels aggrieved by the company having been struck off the register, the court, on the application of the company or member or creditor, may, if satisfied that the company was at the time of striking off carrying on business or in operation, or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register. The said clause further provides for the court giving such directions as are necessary. The contention of Mr. B.C. Jain is that the plaintiff's remedy was only to apply under Clause 6 for the company being restored to the register before he could maintain the suit or to apply for its restoration and to pray for its winding up.

24. The learned counsel for the plaintiff-first-respondent again sought to rely upon the proviso to Clause (5) of Section 247. It will be noticed that the said proviso proceeds on the basis that the company itself is dissolved and is no longer in existence. In these circumstances, it has to be held that the suit against the first defendant, the Hyderabad Bullion Exchange Ltd., which was struck off from the register under Clause (5) of Section 247 of the Indian Companies Act of 1913 and thereby stood dissolved, is not maintainable.

25. In the result, the appeal is allowed and the suit is dismissed against defendants Nos. 1 to 10 also. The plaintiff shall pay their costs here and in the court below.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //