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Bikram Kishore Parida and ors. Vs. Benudhar Jena - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberA.H.O. Nos. 25 and 28 of 1974
Judge
Reported inAIR1976Ori4
ActsSpecific Relief Act, 1963 - Sections 20; Contract Act, 1872 - Sections 10
AppellantBikram Kishore Parida and ors.
RespondentBenudhar Jena
Appellant AdvocateM.N. Das and ;S.C. Ghosh, Advs.
Respondent AdvocateB.M. Patnaik and ;K.M. Jena, Advs.
Excerpt:
.....as share holders including his name as well as the names of 3 plaintiffs mentioning different shares to be held by each of the plaintiffs. 1, clearly establish that defendant no. 1) also reveals that his financial condition was not at all good at that time, he has not shown as to wherefrom he got the amount of rupees 10,000/- which he deposited. 1 was not in a sound financial position to deposit the money and plaintiffs were taking active part in the management without any remuneration clearly establish that the amount of rs. this clearly shows that it was agreed upon between plaintiffs on one hand and defendant no. it may be that the promisor never anticipated that his promise would give rise to any legal obligation, but if a reasonable man would consider that he intended so to..........plaintiffs and also against the finding that the plaintiffs have contributed rs. 35000/- towards share money. both the appeals have been heard analogously. 5. the contention on behalf of defendant no. 1 in this court is that the agreement (ex. 5) and receipts. exs. 3, 4. 6, 8, 9 and 30 are not genuine and the payment of rs. 15,000/- to defendant no. 1 by the plaintiffs was not towards share money but towards loan and besides this amount plaintiffs have not paid anything more. 5a. the disputed agreement (ex. 5) was typed by p. w. 5 an employee of the national foundry and rolling mills since 1948 who was also working as the typist in the company that was formed for the pilot project. he has stated that he typed out the agreement on 23-3-1959 out of the draft supplied by defendant no, 1.....
Judgment:

Das, J.

1. Plaintiff's case may be stated in short. Plaintiffs and defendant No. 1 were well acquainted with one another since a long time and they proposed to start a foundry business under the Pilot Project Scheme of the Government of Orissa. In pursuance of that they agreed to start a company under the name and style of 'Utkal Foundry and Engineering Co.' The Government insisted that there would be difficulty in having a number of partners from private entrepreneurs. Accordingly, an agreement was entered into by the plaintiff and the defendant No. 1. The essential terms were that the name of the defendant No. 1 would be shown as the private entrepreneur, but the money for the shares was to be advanced by the plaintiffs; defendant No. 1 shall transfer 26, 250 shares out of 35,000 shares ostensibly held in his name; each of the plaintiffs and defendant No. 1 would have 1/4th interest in the shares standing in the name of defendant No. 1. Plaintiffs would invest according to their ability and the excess investment by any of the plaintiffs over and above Rs. 8750/-would carry interest at the rate of 61/2a p. c. p. a. till such excess investment is repaid in cash or by adjustment; the money due from defendant No. 1 as his share would be repaid by him to the plaintiffs out of the amount to which he may be entitled along with interest thereon at the rate of 61/2 p. c. p. a. In pursuance of the agreement the plaintiffs allowed the name of defendant No. 1 to be shown ostensibly as the private entrepreneur so that the work would be carried out smoothly at the Government level. This was done as defendant No. 1 had influence with the political party then in power. The company was registered and the plaintiffs paid the entire money. The plaintiffs have fully paid the money for the 35,000 shares allotted in the name of defendant No. 1 and after subscribing the money, the plaintiffs carried on the work of the business of the company and continued to manage the work jointly as agreed upon by them. Defendant No. 1 became the Managing Director of the Board of Directors and got a resolution passed for transfer of 7000 shares in name of plaintiff No. 1 and 7000 share in the name of plaintiff No 2 and 3000 shares in the name of plaintiff No 3 and the same was sent for sanction of the Government. Defendant No. 1 assured that further shares would be transferred to the plaintiffs. On a resolution of the meeting of the Board of Directors after approval of the Government for transfer of 17000 shares, the defendant No. 1 did not transfer the same.

2. Defendant No. 1 in his written statement has denied the agreement said to have been executed by him and averred that the agreement is false and fabricated and he never put his signature to such a document. At one time he thought of promoting the business along with plaintiffs and others and this was not practicable. The plaintiffs filed application for transfer of some shares in their favour which was approved by the Board of Directors. But subsequently, the Board of Directors withdrew that resolution on the ground that it will not be beneficial to the interest of the company. Defendant No. 1 further stated in the written statement that he had great trust in plaintiff No, 1 and the other two plaintiffs are associates of plaintiff No. 1. On the suggestion of plaintiff No. 1 he had thought of promoting a company with all the plaintiffs, and some other persons as members but the same could not materialise. Subsequently he allowed the plaintiffs 1 and 2 as partners in the Pilot Project Scheme and he described himself as partner in all correspondence. But the attempts were not preceded or succeeded by any agreement oral or written. The plaintiff No. 1 was assisting him in the affairs of the company. Plaintiff No. 1 was expecting that the defendant No. 1 would persuade the Board of Directors to take him as share-holder in the company. He had full confidence in plaintiff No. 1 and very often left papers of the company and other papers with him.

3. The trial court decreed the plaintiffs suit and ordered that each of plaintiffs is entitled to hold 8750 shares out of 35000 held by defendant No. 1 and directed defendant No. 1 to execute an instrument of transfer in respect of 17,000 shares the title of which had already passed at the rate of 7000, 7000 and 3000 in favour of the plaintiffs nos. 1, 2 and 3 respectively

4. Defendant No. 1 came up in appeal. The learned Single Judge came to conclusion that the agreement (Ex. 5) is not genuine, but the plaintiffs have paid Rupees 35,000/- to defendant No. 1 as per Exs. 3, 4, 6, 8, 9 and 30 which has been invested by the defendant No. 1 in the company towards shares worth Rs. 35000/- and that there has been an agreement between the parties for transfer of 17.000 shares by the defendant No. 1 in favour of the plaintiffs and the plaintiffs are entitled to transfer 17,000 shares in their favour. As against the decision of the learned Single Judge the plaintiffs have filed A. H. O. No. 25/74 challenging the finding that agreement (Ex. 51 is not genuine, and the defendant No. 1 has filed A. H. O. No. 28/74 challenging the decision of the learned Single Judge directing transfer of 17000 shares in favour of the plaintiffs and also against the finding that the plaintiffs have contributed Rs. 35000/- towards share money. Both the appeals have been heard analogously.

5. The contention on behalf of defendant No. 1 in this court is that the agreement (Ex. 5) and receipts. Exs. 3, 4. 6, 8, 9 and 30 are not genuine and the payment of Rs. 15,000/- to defendant No. 1 by the plaintiffs was not towards share money but towards loan and besides this amount plaintiffs have not paid anything more.

5A. The disputed agreement (Ex. 5) was typed by P. W. 5 an employee of the National Foundry and Rolling Mills since 1948 who was also working as the Typist in the company that was formed for the Pilot Project. He has stated that he typed out the agreement on 23-3-1959 out of the draft supplied by defendant No, 1 and defendant No. 1 signed it in his presence. He is an independent witness and nothing has been brought out on record to discredit his statement. He supports the version of P. Ws. 8, 12 and 13 who were plaintiffs in this suit. Defendant No. 1 had not the courage to deny the signatures in his statement in court. We accept the statement of P. W. 5 in this regard.

Mr. Patnaik contended that the signature of defendant No. 1 on this document does not tally with his signature in the two cheques (Exs. 1 and 2) which were encashed by him in bank and he has drawn our attention to some difference in the signature. We have compared the signature of defendant No. 1 on this document with a large number of undisputed signatures on documents which consist of resolutions of the Board of Directors in Ex, A series, notices issued by defendant No. 1 for holding meeting and correspondences by defendant No. 1 with the Government such as Exs. 32, 42, 46/c-1, X-11/a, X-13, X-14, X-15/a, X-17, X-18. X-19/ X-20, X-25, X-26 X-27, Z-6/a, Z-8. Z-9. Z 5 and Z-1. We are of opinion that the signature of defendant No. 1 in ex. 5 tallies with his signatures on those admitted documents. The signature on the cheques relating to bank transaction may be of different type from the signatures relating to other transactions. We, therefore, hold that signatures of defendant No. 1 on Exts. 5, 6, 8, 9, 3, 4 and 30 are genuine,

Mr. Patnaik also contends that the letter head used for Ex. 5 was not in existence at the time of execution of Ex. 5. He has drawn our attention to Ex. V and contends that this was the letter head which was in use then. P. W. 5 asserted that the letter head on which Ex. 5 was engrossed was in existence at the time of its execution. Excepting denial by defendant No. 1 there is no other evidence available from the defence side to support defendant No, 1. P. W. 5 asserted that on this particular letter head he typed the contents of Ex. 5 on 23-3-1959. He supports the statement of the plaintiffs in this respect. Admittedly defendant No. 1 is in possession of the accounts which will throw tight about payments relating to printing of letter heads. He could have produced the accounts to show when different letter pads were printed. He issued notice in his name as the Managing Director for production of the registers and account books. In his statement in court he states that he telephoned to the Accountant and came to know that those documents are not traced out. Accountant has not been examined. The evidence of non-production of those documents is not satisfactory. We accept the statement of P. W. 5 which supports the evidence of the plaintiffs and we hold that the letter head was in existence in March, 1950,

Mr. Patnaik has contended that the recitals in Ex. 5 show that this document was not in existence in March 1950. He contends that the recital in Ex. 5 that shares worth Rs. 35000/- were 'held by him now' shows that it was a subsequent concoction inasmuch as by that time defendant No, 1 had not held any shares. Ext. H dated 17/18-3-1959 would show that the Government had already intimated that shares worth Rs. 35,000/- had been allotted to defendant No. 1. It is contended by Mr. Das that the expression 'held by him' refers to the letter Ex. H in which it has been mentioned that the shares were allotted to defendant No. 1. It is contended by Mr. Patnaik that in Ex. 5 it is mentioned that the remuneration which 'was' fixed for the Managing Director would show that this document was not in existence at that date inasmuch as the Board of Directors fixed the remuneration of the Managing Director by its resolution dated 23-4-1962 as per Ex. A/4. The contention, of the plaintiffs in this regard is that the word 'was' has been wrongly mentioned and relates to the memorandum of association (Ex. M). a sample copy of which had already been sent to defendant No. 1 prior to that date containing an article to the effect that the Board of Directors are to fix the remuneration of Managing Director. According to plaintiffs the fact of remuneration of the Managing Director in Ex. 5 relates to file remuneration that would be as per Ex. M We have already held that Ex. 5 was typed out and was signed on 23-3-1959. We, accept the explanation of the plaintiffs to the effect that the expression 'held' refers to the allotment of share in Ex. H and the fixing of remuneration of the Managing directors refers to the provisions in the memorandum of association (Ex. M).

Mr. Patnaik further contends that Ex. 5 has not been mentioned in the receipts (Exs. 6, 8 and 9) that followed Ex. 5 and also it has not been mentioned in the notices sent by the plaintiffs to defendant No. 1 prior to the institution of the suit. The receipts relate to acknowledgment of payment of money and the notices are to the effect that the money bad been advanced by the plaintiffs for transfer of shares and the defendant No. 1 did not transfer the shares which resulted in blocking of money for a long time. It is not necessary that the agreement should be referred to in these documents.

6. For the reasons stated above, we hold that Ex. 5 is a genuine document. For the very same reasons also we hold Exs. 6, 8 and 9 are genuine documents.

7. The second contention of defendant No. 1 is that the payment of Rs. 15,000/-by the plaintiffs is not share money but it is by way of loan. The payment of Rs. 15,000/-by the plaintiffs is admitted. Even though defendant No. 1 had filed an additional written statement, nowhere it has been asserted in the written statement that this advance of Rs. 15,000/- was by way of loan. It is an admitted fact that since March, 1953 the plaintiffs, defendant Mo. 1 and some others decided to start a company under the Pilot Project Scheme. In all correspondence to the Government defendant No. 1 was mentioning 'we' which shows that he was all along writing letters on behalf of the plaintiffs and others and the defendant No. 1 was describing himself as a partner in those letters. In the beginning defendant No. 1 had written to the Government the names of 8 persons as share holders including his name as well as the names of 3 plaintiffs mentioning different shares to be held by each of the plaintiffs. He had also sent an application to this effect to the Senior Research Officer, Ministry of Commerce and Industries, Department of Company Law Administration Research and Statistics Division, New Delhi. But the Government did not want to have so many persons in a firm of Pilot Project and selected defendant No. 1 as the entrepreneur and expressed its intention that defendant No. 1 would be appointed as the Managing Director. It was also intimated by the Government that in case there are a number of entrepreneurs in one scheme each having some shares in the company they will naturally have the right to say as to who will be the Managing Director from among them, and it may so happen that though defendant No. 1 has been selected on his merit due to his technical abilities to manage the proposed company, the other share holders whose total shares would be much higher than that of defendant No. 1 may not choose defendant No. 1 to be the Managing director and the person whom they will choose may not be up to the expectation of the committee, and accordingly advised that defendant No. 1 would try to contribute the entire share allotted to the entrepreneur and in case he is not able to do so, he should try to take a major portion of it and take in one or two more partners whose shares put together may be less than that of defendant No. 1. In response to the above letter defendant No. 1 intimated that he would take plaintiff No. 1 having a share of worth Rs. 10,000/- and plaintiff No. 2 Rs. 5000/-and he would contribute towards share of Rs. 20,000/-. After sanction of the scheme defendant No. 1 describing himself as a partner wrote to the Director of Industries stating;

'We have to inform you that we are willing to invest Rs. 15000/- in the proposed company towards the contribution of entrepreneur immediately and the balance of Rupees 20,000/- within six months from the formation of the company. We would, therefore, request you to kindly approve the above and oblige.'

Thereafter, defendant No. 1 was informed that shares worth Rs. 35,000/- had been allotted to him and the terms stated above had been accepted. Defendant No. 1 was directed to get the memorandum and articles of association printed as per the sample copy enclosed and to take further instructions of the company. He was directed to comply with all the above requirements by 30-3-1959. These correspondences would show that defendant No. 1 has all along admitted himself to be a partner along with plaintiffs and all letters he was writing on behalf of the firm and not for himself only. Further undisputed documentary evidence is that the Board of Directors passed resolution for transfer of 17000 shares in favour of plaintiffs and defendant No. 1 also repeatedly stressed on the Government to approve such transfer. The documentary evidence in this case also reveals that after 15-4-1959 the date on which the amount was deposited, plaintiffs were all along working as partners in the firm. They also show that not only all the plaintiffs were working in the management of the company but also plaintiff No. 1 was running the business as if he was the Managing Director and he was signing letters on behalf of the Managing Director. In view of these undisputed circumstances and in absence of any pleading as to loan we hold that the amount of Rupees 15000/- was advanced towards share money. In this connection it is argued by Mr. Patnaik that plaintiff No. 2 paid Rs. 8000/-but the receipt Ext. 9 is for Rs. 7000/-. The explanation on behalf of the plaintiffs is that for purchase of shares plaintiff No. 2 is to contribute Rs. 7000/- and receipt was made accordingly. The excess of Rs. 1000/- was to be returned subsequently because as it was meant for completing the amount of Rs. 15000/-. It also appears to be reasonably probable from the fact that subsequently while plaintiff No. 2 paid Rs. 8000/- only, a receipt of Rs. 9000/- was given by defendant No. 1-vide Ex. 1-vide Ex. 4. We hold that the receipt Ex. 9 has been sufficiently explained by the plaintiffs.

8. The next contention of Mr. Patnaik is that the balance amount of Rs. 20,000/-was not advanced by the plaintiffs. This amount of Rs. 20,000/- was paid in two instalments, The first instalment of Rupees 10,000/-, according to plaintiffs, has been paid by them under receipts Exts. 3 and 4. P. W. 2, the Accounts Clerk of the company who is an independent witness has typed out those receipts and he also says that defendant No. 1 has signed these receipts. He corroborated the statement of the plaintiffs to this effect. Moreoever, defendant No. 1 himself has also admitted in Ex. Z-1 dated 29-11-60, the letter written by him to the Chairman of the Board of Directors that the amount of Rupees 10,000/- deposited op that day was towards the share amount from private shareholders. We have already held that under Ex. 4 though plaintiff No. 2 paid Rs. 8000/-, receipt has been granted for Rs. 9000/- which is the excess amount while Ex. 9 was granted.

Mr. Patnaik further contends that plaintiff No. 1 has stated that he had paid the amount at Sambalpur and in that connection he has drawn our attention to a letter said to have been signed by plaintiff No. 1 on 29-11-1960 and also photographic copies of some eptries in the account books said to have been made by plaintiff No. 1 on that date and also that there was no bank account at Sambalpur on that date. The Accounts book had pot been produced and we have already held that there is no satisfactory evidence for non-production of the accounts book by defendant No. 1. As such reliance cannot be placed on these photographic copies. In view of the admission of defendant No. 1 in Ex. Z-1 that the amount has been advanced by the private share holders the question whether the amount was paid at Sambalpur or at Cuttack is not of much importance. So also whether there was any bank account at that time at Sambalpur or pot, loses importance.

The second instalment of Rs. 10,000/-according to plaintiffs was advanced by plaintiff No. 1 on 3 occasions which is supported by the receipt Ex. 30.

To appreciate the statement of witnesses for the plaintiffs regarding the genuineness of signatures on Exts. 3, 4 and 30 we hold, tor the reason we have already given for Exts. 5, 6, 8 and 9, that the signatures of defendant No. 1 on these documents are also genuine signatures, we have also compared the undisputed signatures in order to appreciate the statement of the witnesses.

Ex. 36 series, correspondences between plaintiff No. 1 and defendant No. 1, clearly establish that defendant No. 1 was all along depending on plaintiff No. 1 for management and progress of affairs of the company, so much so, that on various occasions defendant No. 1 had intimated plaintiff No. 1 from Sambalpur to go with money otherwise defendant No. 1 would be placed at a very difficult, situation for want of funds. The evidence of defendant No. 1 (D. W. 1) also reveals that his financial condition was not at all good at that time, He has not shown as to wherefrom he got the amount of Rupees 10,000/- which he deposited. His evidence also shows that he had no capacity at that time to be ready with Rs. 10,000/-. Ex. 40, a letter dated 6-3-1962 shows that defendant No. 1 had written to the plaintiffs to come with Rs. 3,000/- as there was nothing in the bank and defendant No. 1 was in a difficult position about financial affairs. The conduct of defendant No. 1 during that period that he was insisting OP the Government to approve transfer of shares in favour of plaintiffs and Government was insisting on him for full payment of the balance money and the fact that the defendant No. 1 was not in a sound financial position to deposit the money and plaintiffs were taking active part in the management without any remuneration clearly establish that the amount of Rs. 10,000/-was also advanced by the plaintiffs.

9. On the above findings we hold that receipts Exts. 3, 4 and 30 are genuine documents and the amount of Bs. 20,000/- was contributed by plaintiffs towards share money.

10. The question then arises as to whether plaintiffs will be entitled to have 8750 shares to be transferred to each of them or they are entitled to transfer of only 17000 shares in their favour as resolved by Board of Directors and approved by Government. Admitted fact is that, Board of Directors resolved that defendant No. 1 would transfer 17000 shares out of 35000 shares to plaintiffs. Defendant No. 1 also wrote to the Chairman to move Government for sanction and chairman also moved Government for such sanction and defendant No. 1 repeatedly pressed, on Government for sanction. It is contended on behalf of defendant No. 1 that as there is no agreement for transfer of 17000 shares in favour of plaintiff, the relief to that extent cannot be granted. The recitals in plaint would show that not only plaintiffs have claimed 1/4th each out of 35000 shares but also they have narrated the subsequent developments as per the conditions laid down by Government and as per the provisions of the memorandum of association (Ex. M) the Board of Directors have resolved for transfer of 17000 shares in favour of plaintiffs and Government have accorded sanction to this, but in spite of that, defendant No. 1 was not transferring the said shares. It will thus appear that plaintiffs' claim is not based only on the claim of 1/4th share each out of 35000 shares, but also they claim transfer of 17000 shares as decided by the Board Directors and sanction by Government. From the statement of defendant No. 1 in Court it would appear that he and plaintiffs sat together and decided that plaintiff No. 1 would have 7000 shares, plaintiff No. 2 would have 7000 shares and plaintiff No. 3 would have 3000 shares and thereafter plaintiffs put application for shares at this rate. This clearly shows that it was agreed upon between plaintiffs on one hand and defendant No. 1 on the other, that plaintiffs Nos. 1 and 2 would get 7000 shares each and plaintiff No. 3 would get 3000 shares. It has been stated in Anson's Law of Contract at page 29:--

'The intention of the parties is a matter of inference from their conduct, and the inference is more or less easily drawn according to the circumstances of the case.'

At page 32 it has also been stated that:--

'The test of an intention to effect legal relations is an objective one. It may be that the promisor never anticipated that his promise would give rise to any legal obligation, but if a reasonable man would consider that he intended so to contract, then he will be bound to make good his promise.'

In this case the conduct of the parties especially of defendant No. 1 clearly establishes that there was a contract for transfer of 17000 shares. Therefore we hold that there was an agreement between the parties that defendand No. 1 is liable to transfer 17000/-shares in favour of plaintiffs.

11. In the prayer in plaint plaintiffs have asked for transfer of shares as resolved by the Board of Directors and approved by Government and they have also claimed transfer of shares to the extent of 8750 each according to terms in Ex. 5. The transfer of shares is subject to the decision of the Board of. Directors and also subject to tie terms of memorandum of association, In the memorandum of association (Ex. M) it has been provided that without the sanction of the Governor no share can be transferred and Government can release its share only in favour of the entrepreneur. The intention of Government all along is that defendants would continue as the Managing Director and would have a maximum number of shares. In view of this position, it cannot be definitely said at this stage, whether Government will release any share in future and that will also depend on several other contingencies. The position is thus indefinite and declaration as prayed for by plaintiffs cannot be given under such circumstances in a suit for specific performance of contract. The relief to be granted in such a suit is discretionary and is based on principles of equity and thus prayer for declaration of future transfer of shares cannot be granted. The plaintiffs are, therefore, entitled to have a transfer of, 17000 shares by defendant No. 1.

12. Accordingly, it is held that plaintiffs are entitled to have 17000 shares transferred in their favour by defendant No. 1. The suit be decreed accordingly, with proportionate costs.

13. A. H. O. No. 25/74 is allowed in part with proportionate costs and A. H. O. No. 28/74 is dismissed with costs.

G.K. Misra, C.J.

14. I agree.


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