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Shree Onama Glass Works Ltd. Vs. Shri Ram Harak Panday and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 47 of 1964
Judge
Reported inAIR1966MP282
ActsSpecific Relief Act, 1877 - Sections 9; Code of Civil Procedure (CPC) , 1908 - Sections 115; Companies Act, 1956 - Sections 291 and 293
AppellantShree Onama Glass Works Ltd.
RespondentShri Ram Harak Panday and ors.
Appellant AdvocateJ.V. Jakatdar, Adv.
Respondent AdvocateY.S. Dharmadhikari, Adv.
DispositionPetition dismissed
Cases ReferredSnyamapada v. Controller of Insurance
Excerpt:
.....has clearly found that shri pandit was so fully authorised by the directors that he was able to transfer possession of the jabalpur factory and the mine of the applicant to the defendants......the affairs of the plaintiff-applicant, which is a public limited company, are managed by a board of directors. at the relevant time, the general manager of the company was shri a. v. pandit. the company became indebted to the government as also to some private individuals. the second defendant, dr. t. b. sarvate and the third defendant, r. g. oka, were amongst its creditors. dr. sarvate was a director of the applicant for several years. he tendered his resignation on 15-5-1962. to liquidate the debts of the applicant, the first and third non-applicants (defendants) proposed for a transfer of the factory and the refractory works at jabalpur and for the transfer of the lease-hold rights in the mine. the matter was discussed in a meeting of the board of directors of the applicant on.....
Judgment:
ORDER

S.P. Bhargava, J.

1. The applicant, Shree Onama Glass Works, Ltd., Gondia, is a public limited company incorporated under the Indian Companies Act, 1956. It has its registered head office at Gondia, district Bhandara, in the State of Maharashtra. It owns a Glass factory and Refractory Works consisting of lands with the structures thereon situate in Jabalpur. The details have been shown in the map filed with the plaint. It also holds a mining lease for a fire clay mine in mouza Garha, Khasra number of which has been stated in the Schedule annexed to the plaint. It holds some other property also with which we are not concerned in the present case. The applicant was in actual possession of the aforesaid properties till 19-1-1962. On that day, the non-applicants got possession of the aforesaid properties through Shri A. V. Pandit, General Manager of the applicant. The applicant instituted a suit under Section 9 of the Specific Relief Act for possession of the aforesaid properties in the Court of the 1st Additional District Judge. Jabalpur, alleging that it was dispossessed without its consent and otherwise than in due course of law.

2. During the pendency of the suit, the applicant got possession of the mine and, therefore, it confined its claim to the possession of the factory and refractory works, situate at Jabalpur. The affairs of the plaintiff-applicant, which is a public limited company, are managed by a Board of Directors. At the relevant time, the General Manager of the Company was Shri A. V. Pandit. The Company became indebted to the Government as also to some private individuals. The second defendant, Dr. T. B. Sarvate and the third defendant, R. G. Oka, were amongst its creditors. Dr. Sarvate was a Director of the applicant for several years. He tendered his resignation on 15-5-1962. To liquidate the debts of the applicant, the first and third non-applicants (defendants) proposed for a transfer of the factory and the refractory works at Jabalpur and for the transfer of the lease-hold rights in the mine. The matter was discussed in a meeting of the Board of Directors of the applicant on 7-10-1961, vide Resolution (Ex. P-2) and later on 3-12-1961., vide Resolution (Ex. P-3). In these meetings, the proposed transfer of the aforesaid properties of the applicant was approved and on 3-12-1961, the Board of Directors resolved that inquiry be made from the State Government as to whether it would permit the transfer by lease of the factory and refractory works and the lease-hold rights in the mine. It was also resolved that a meeting of the general body of share-holders be convened after receipt of communication from the Government and that in the meanwhile, legal opinion in respect of the proposed transfer be also obtained.

3. The defendants (non-applicants) pleaded that on 16-1-1962, the General Manager of the applicant-Company, Shri A. V. Pandit came to Jabalpur with a circulating Resolution, dated 12-1-1962 of the Directors of the applicant which authorised him to finally settle the terms and conditions of transfer of the factory at Jabalpur and the said mine in favour of the defendants and to put the defendants in possession of the property. It was also urged by the defendants that a meeting of the three defendants and Shri Pandit took place on 18-1-1962 when terms and conditions of the transfer were finally settled between them. Thereafter, the circulating Resolution (Ex. P-4-A) was drafted by Shri Pandit which contained all the conditions which were settled between him and the defendants. According to Ex. P-4-A, the transfer of the Jabalpur factory and the mine was to be in favour of a private limited company named and styled as 'Onama Industries Private Limited'. The defendants and the applicant-Company were to be the share-holders and the charge of the Jabalpur factory with finished and unfinished goods and the mine was to be handed over to the defendants as representing the Onama Industries Private Limited on 19-1-1962. It was urged by the defendants that they were placed in possession of the Glass and Refractory Factory at Jabalpur and the mine at Garha on 19-1-1962 by Shri A. V. Pandit. It was further asserted that in the circumstances, stated above, the possession of the defendants could not be said to be without the consent of the plaintiff.

4. The trial Court on consideration of the various documents produced on record and the oral evidence adduced in the case came to the conclusion that the various acts done by Shri Pandit were in pursuance of the directions and powers' given to him by the Board of Directors of the applicant and that the possession of the Jabalpur factory which was given to the defendants by Shri Pandit on 19-1-1962 could only be deemed in the circumstances of this case to have been with the consent of the plaintiff-applicant for the purposes of Section 9 of the Specific Relief Act. It also held that the mere fact that the whole transaction suffered from some illegality or the title of the defendants was defective would not entitle the plaintiff-applicant to any relief under Section 9 of the Specific Relief Act. In that view, the trial Court dismissed the plaintiff's suit. It is against this decision that the present revision petition is directed.

5. Shri Y.S. Dharmadhikari, learned counsel for the non-applicants, has raised a preliminary objection to the effect that this revision petition is not competent because the applicant has the alternative remedy of a suit. Interference in revision in cases under Section 9 of the Specific Relief Act can be justified only in exceptional circumstances, e.g., when the suit is dismissed without trial under misapprehension of scope of Section 9 of the Act aforesaid (see Ajodhiya Prasad v. Ghasiram, AIR 1937 Nag 326) or where the balance of convenience in a case is not in favour of driving the plaintiff to a regular suit (see Bhojraj v. Sheshrao, AIR 1949 Nag 126; ILR 1948 Nag 422, or where the case of the applicant is clear (see Ramamanemma v. Bassavayya, AIR 1934 Mad 558). Interference in revision in a particular case would depend on the circumstances of that case. If the case is disposed of on an obvious misapprehension as to the legal position, the decision of the lower Court may be interfered with even in a revision. But, ordinarily the High Court will not interfere in revision with an order under Section 9 of the Specific Relief Act as there is the remedy by way of suit. In my opinion, in the present case, no exceptional circumstances exist and, as I would presently show, the scope of Section 9 of the Specific Relief Act has been rightly understood by the lower Court, no interference in revision is possible. In this view, I uphold the preliminary objection and on this short ground itself, the revision application is liable to be dismissed but I consider it proper to go into the merits of the case as well.

6. On merits, the contention of Shri Jakatdar is that as the applicant is an incorporated company and it enjoys the status of a legal entity, it could act only in the manner prescribed by the Companies Act, 1956, and as the powers of the Board of Directors are restricted under Sections 291, 292 and 293 of that Act, the consent to amount to a 'consent' within the meaning of Section 9 of the Specific Relief Act could only be accorded by the general body of the share-holders of the applicant by special resolution in accordance with the provisions of Section 189 of the Act. It was urged by the learned counsel that as the Board of Directors itself could not give a valid consent for transferring possession of the property in dispute to the defendants, the delivery of possession to the defendants must be held to have been given without the consent of the applicant and, therefore, the plaintiff-applicant was entitled to succeed in this suit.

7. The main question which arises for consideration in this case is whether the applicant can be said to be dispossessed of the suit property without its consent for purposes of Section 9 of the Specific Relief Act when the possession of the defendant came into existence with the consent of the Directors of the Company and was taken under a transaction which is invalid for want of consent of the Company in its general meeting as required by Section 298 of the Companies Act.

8. In my opinion, on consideration of all the circumstances of this case, it must be held that the plaintiff is not entitled to succeed in his suit under Section 9 of the Specific Relief Act. Section 9 of the said Act is not directly concerned with the legality of the transaction under which possession is taken by the defendants. This section becomes applicable only when the plaintiff is dispossessed 'without his consent'. The matter in issue is not whether the transaction was valid but whether the plaintiff was dispossessed 'without his consent'. Under Section 291 of the Companies Act, subject to the provisions of the Act, the Board of Directors of a Company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting. Section 292 of the Act enumerates certain powers to be exercised by the Board on behalf of a Company and enacts that it shall do so only by means of resolutions passed at meetings of the Board. Section 293 of the Act states the restrictions on powers of the Directors. It provides-

'293 (1)--The Board of Directors of a public company, or of a private company which is a subsidiary of a public company shall not, except with the consent of such public company or subsidiary in general meeting,-- (a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking; .

9. It would he noticed that Section 293 of the Act does not say that the Directors cannot do the acts enumerated in Clause (1) of that Section but provides that they cannot do it except with the consent of the Company in a general meeting. The power to do the act mentioned in that Clause is not taken out completely from the powers of the Directors but is only restricted by super-imposition of a condition precedent as to the requirement of resolution of the shareholders. The want of consent of the Company in general meeting may result in invalidating the transaction of the nature mentioned in Section 293 of the Companies Act but the crucial question is as to whether it also results in making the possession of the defendant taken under such a transaction without the consent of the company for purposes of Section 9 of the Specific Relief Act. For considering this question properly, it would be relevant to see as to what is the meaning of 'consent of a company' or 'the will' or 'privity' of the company under the general law. A company or a corporation though recognised as an artificial person by the law has no mind or body. It has no mental state unless the mental state of some living person is attributed to it. in the initial stages of the development of law relating to corporations, the Courts found it difficult to treat corporations at par in cases where it was necessary to show a mental state such as fraud, deceipt or malice. One view was that a corporation could have no mind at all. The other view was that the mental state of the agent must be recognised as that of the principal. In the case of Barwick v. English Joint Stock Bank, (1867) 2 Ex 259, it was held that the defendant-company was liable for fraudulent representation contained in a writing signed by its manager and it was further held that the requirement of Section 6 of Lord Tenterden's Act that no action shall be brought unless such representation be made 'in writing signed by the Party' was satisfied and that the fraud was properly charged in the declaration as the fraud of the defendants. There is abundant authority now for the proposition that corporation can be made liable in action for malicious prosecution, malicious libel and slander and malicious obstruction. (See Street on the Doctrine of Ultra Vires, 1930 Edn. pp. 266, 267). An instructive case on the point is a decision of the House of Lords in Lennard's Carrying Co. v. Asiatic Petrol Co, (1914-15) All ER 280. Under Section 502 of the Merchant Shipping Act, 1894, the owner of a British sea-going ship is not liable to make good to any extent whatever 'any loss or damage happening without his actual fault or privity' where any goods are lost or damaged by reason of fire on board the ship. In that case, the appellant-company was the owner of a certain ship which was under the management of one of its Directors and the company was held liable for damage resulting from fault or privity of the Director on the ground that the Director represented the directing mind and will of the company. Lord Chancellor Viscount Haldane in his speech made the following pertinent observations:--

'A corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person, of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. That person may be under the direction of the shareholders in general meeting; that person may be the board of directors itself, or it may be, and in some companies, it is so, that that person has an authority, co-ordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company, and can only be removed by the general meeting of the company.'

In all these cases, where liability has been fastened on the company, it could always be urged that the company did not authorise anyone to do any unlawful act and, therefore, the fault or the privity of the individual concerned is not the fault or privity of the company but the real test on the basis of which these cases were decided was not as to whether the company authorised the doing of the fault but whether the individual concerned does or does not represent, in the words of Viscount Haldane, 'the directing mind and will' of the company.

10. In my opinion, the question of 'consent' for purposes of Section 9 of the Specific Belief Act in those cases where company is the plaintiff should also be decided on similar principles, If it could be held on facts that possession was taken by the defendants with the consent of such living persons who represented the directing mind and will of the company and who were the very ego and personality of the corporation, it will follow that the possession was taken with the consent of the company and it will matter not that the transaction under which the possession was taken was really in excess of their powers and invalid. The (earned Additional District Judge in the instant case has clearly found that Shri Pandit was so fully authorised by the Directors that he was able to transfer possession of the Jabalpur factory and the mine of the applicant to the defendants.

11. The consent in a general meeting as required by Section 293 of the Companies Act may be necessary for making the transaction valid but for purposes of Section 9 of the Specific Belief Act, where the legality of the transaction is not the deciding factor, the question of consent must be answered on the general principles, referred to above. If those principles were applied, it cannot be disputed that the Board of Directors and the General Manager of the plaintiff-applicant were such persons to whom the affairs of the company were entrusted. They or any one of them might have acted in the mistaken exercise of their powers but they must be held to have always represented the directing mind and will of the company. The possession which was taken with their consent, therefore, will be possession taken with the consent of the company for purposes of Section 9 of the Specific Relief Act though it was taken under an invalid transaction.

12. It was urged by the learned counsel for the applicant that the words 'or otherwise dispose or occurring in Sub-section (1) (a) of Section 293 of the Companies Act are words of very wide connotation and they should be interpreted to cover all transactions, legal or equitable, affecting any type of interest in the whole or substantially the whole of the undertaking of the company. On the other hand, it was contended by the learned counsel for the non-applicant that these words have to be read ejusdem generis with the words 'sell' and 'lease' immediately preceding those words in Section 293(1)(a) of the Companies Act, It was argued that when the words are so read, they did not prohibit the doing of such transaction as mere negotiations or entering into some agreements pertaining to the property of the undertaking or merely giving permissive possession of the property by the Board of Directors to a third person. The decisions in Muktakeshi Dasi v. Pulin Behari Singh, (1909) 1 Ind Cas 155 (Cal). Badan Chandra Das v. Rajeswari Debya, (1905) 2 Cal LJ 570 and Eton Rural District Council v. Thames Conservators, 1950-1 All ER 996, were relied on by the learned counsel for the applicant for reading the phrase 'otherwise dispose of in that limited manner.

13. However, in the view I have taken, it is not necessary for me to express any concluded opinion on this point. In passing, however, I may refer to the case of Snyamapada v. Controller of Insurance, Govt. of India, Simla, AIR 1962 SC 1355, where interpreting the provisions under Section 86 (H) of the Indian Companies Act, 1913, which was an analogous provision to Section 293 of the Companies Act, 1956, their Lordships held that an agreement only to transfer the undertaking by Directors does not violate the section, it being merely tentative subject to final approval by company at the general meeting. The Resolutions (Ex. P-2 and P-3) and the circulating Resolution (Ex. P-4-A) indicate that final transfer of the Jabalpur factory of the applicant was contemplated to be made in future but was not actually made at the time when possession was given to the defendants.

14. For all these reasons, the revisionpetition must be and is hereby dismissed withcosts. Counsel's fee Rs. 200, if certified.


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