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Atma Ram Sahni Vs. Chitra Production Co. and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberF.A.F.O. No. 20 of 1951
Judge
Reported inAIR1952P& H99; [1952]22CompCas146(P& H)
ActsCode of Civil Procedure (CPC) , 1908 - Sections 11; Companies Act, 1913 - Sections 162
AppellantAtma Ram Sahni
RespondentChitra Production Co. and anr.
Appellant Advocate N.L. Wadhera and; Tek Chand, Advs.; H.R. Sachdeva, A
Respondent Advocate H.R. Sachdeva, Adv.
DispositionAppeal dismissed
Cases ReferredHook v. Administrator
Excerpt:
.....a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 15. counsel for the appellant then submitted that the receipt given by khushi ram on the 12th april, 1947, clearly shows that he had received the articles mentioned therein in full and final discharge of the liability which the company had incurred. the use of these words 'for' and 'financier' makes it quite clear that whatever he was doing he was doing for amrit rai good and therefore his powers were limited by the letter read with the agreement and by having this receipt he could not exercise a wider power than the two documents referred to above gave him. rup kuar',3 all 633, which clearly shows that the plea of 'res judicata' still remains, apart..........copies of the resolution of the company duly attested. dated 12th april, 1947.for amrit rai sood,financier. sd. khushi ram.'on the 2lst april, 1947, amrit rai sood wrote a letter to the company saying that as he had taken possession of the picture 'aaj aur kal', intimation should be given to messrs. nishat theatres ltd., and his master voice company. the district judge has found in favour of amrit rai sood and has made the order that i have referred to above. an appeal has been brought to this court by atma ram sahni.7. counsel for the appellant submitted that reading all these various documents together the learned district judge should have held that by the acceptance of the film 'aaj aur kal' and some other movable property of the company amrit rai sood had been paid off, and.....
Judgment:

Kapur, J.

1. This is an appeal under Section 202 of the Indian Companies Act against an order passed by Mr. M. R. Bhatia, District. Judge, Ludbiana, dated the 30th November 1950.

2. On the application of Amrit Rai Sood one of the respondents in the present case, the Chitra Productions Ltd., was ordered to be wound up by this Court on the 20th December, 1948. In this application Amrit Rai Sood claimed to be a creditor of the company for over a lac and a half of rupees which was due to him on account of the balance 'due under a financing agreement duly carried out and amount paid' by him. In spite of notice having been served in the usual manner there was no appearance for either the Company or anybody else and the Company was as I have said before ordered to be wound up. The proceedings were then transferred to the District Judge, Ludhiana, who appointed Shri Krishan Kant Jain, an Advocate of Ludhiana, as the Official Liquidator.

3. On the 10th January, 1950, Amrit Rai Sood made an application to the Official Liquidator praying that his claim be admitted. In this application he alleged that he had advanced to the Company a sum of rupees one lac fifty thousand, and under the agreement under which he had lent the money he was entitled to receive the uncalled capital of the Company to the extent of Rs. 1,17,500/-. In his prayer clause he said that his claim was to the extent of rupees one lac according to clause No. 10 of the agreement which he asked to be admitted and payment made to him after realization of the call-money. Atma Ram Sahni filed his objection to this application on the 20th February, 1950. In this he pleaded that the debt of Amrit Rai Sood had been discharged by his taking the film 'Aaj Aur Kal' and other assets of the Company, and therefore he prayed that the claim of Amrit Rai Sood for one lac of rupees should be disallowed. The liquidator went into the evidence and made a report to the District Judge. Upon this the learned District Judge ordered that Amrit Rai Sood, the petitioner, had a lien on the uncalled capital of the Company and gave certain directions to the Official Liquidator. It is against this order that an apneal has been brought to this Court by Atma Ram Sahni. I may here remark that Atma Ram Sahni was one of the Directors of the Company at all material times. No objection has been taken as to the right of Atma Ram Sahni to appeal or to the procedure adopted by Amrit Rai Sood in getting the matter adjudicated upon in the District Judge's Court.

4. The liability of the Company seems to have arisen in the following circumstances. On the 9th December, 1946, a resolution of the Directors of the Company was passed authorising the Managing Director, Lal Chand, to enter into an agreement with Amrit Rai Sood to finance the Company up to a sum of Rs. 1,50,000/-. In pursuance of this resolution an agreement was entered into by Lal Chand on behalf of the Company. It is also signed by another Director of the Company fend Amrit Rai Sood who was to be the financier. This agreement is dated the 8th February, 1947. It recites that by a resolution dated the 9th December, 1946, the Directors of the Company had approved of the terms of this agreement and had authorised Lal Chand, one of the Directors, to enter into the agreement. Its terms provided that Amrit Rai Sood was to finance up to the extent of Rs. 1,50,000/-; and that he would have the right to nominate a Director of the Company. The relevant clauses of this agreement were as follows:

'4. The Financier will have the first and paramount lien over the income and proceeds of the picture 'Aaj Aur Kal' and no sums out of the said proceeds or income shall be utilised by the Company unless the financier has been paid back his loan of Rs. 1,50,000/- provided however that the lien of the financier shall be subject to the payment of deferred expenses incidental or pertaining to the production of the picture, only spent as per estimate annexed herewith, 'Aaj Aur Kal' such as studio hire and the Directors' remuneration. Directors' remuneration means the payment to Mr. K. A. Abbas only.

5. The financier or his representative appointed by him jointly with a representative of the Managing Agents shall control the expenditure and also operate the accounts of the Company. The Managing Agents shall not make any commitment binding on the Company without the approval of the financier.'

8. If at any time the picture is partly completed and the production cannot be carried forward for want of finances for a day even beyond the scheduled programme above the amount of Rs. 1,50,000/- the Company shall immediately arrange for finances in order to complete the picture and if the Company is unable to arrange for the said finances to complete the picture, the financier shall forfeit the picture to himself and shall complete the picture jointly with L. Daulat Ram of Pathankot. In that case the Company shall have no lien whatsoever over the picture or its profits but the commitments already made by the Company with Nishat Theatres, Ltd., and with Shorey Pictures for studio hire shall be binding on and be honoured by the financier and no further commitments can be made without the written approval of the financier.

10. In case the Company fails to fulfil any one of the conditions herein above given for any reason whatsoever the financier shall have the right to call the uncalled liability of one lac of the shares and forfeit the same to himself. This penalty shall in no way have any effect on the penalty provided in Clauses 7 and 8 supra. A list of share-holders has been furnished to the financier.'

5. On the 10th December, 1946, Amrit Rai Sood gave a letter to the Company which is not on the record, but it is quoted 'in extenso' in the report of the Liquidator, and it is agreed by counsel that this is a correct copy. The letter was as follows:

''This is just to inform you that L. Khushi Ram will conduct and supervise all financial arrangements entered by me with you per your agreement dated 9th December 1946 He has got full authority and all his commitments will be binding upon me.'

6. On the 9th April, 1947, a resolution of the Board of Directors was passed which was in the following terms:

'BUSINESS.

1. Resolved that since the Company has not been able to arrange any further finances to cover the deficit of about rupees one lac and the company is not in a position to fulfil its part of the agreement with the financier, the financier is hereby allowed to forfeit the picture and other assets of the Company vide clause No. 8 of the financiers agreement dated 8th February 1947, and the Managing Agents are authorised to hand over the charge by the 12th instant.

RESULTS.

2. The resolution discussed, amendment proposed by Mr. C. R. Govlani and supported by L. Atma Ram that for the completion of the picture immediately funds needed are Rs. 60,000/- by deferring the payment of Rs. 80,000/- which are also due but with the consent of the artists and the creditors shall be paid out of the realisation of the picture.

Further that the funds should be raised by the Directors partly by themselves and partly from Messrs. Nishat Theatres Ltd., till Saturday the 12th instant, failing which the picture may be sold immediately so as to pay the financier his investment provided that the consent of the financier shall be obtained for that purpose.

In case both the above propositions do not materialise by next Saturday, the 12th April, 1947, the financier Is hereby allowed to forfeit the picture and other assets of the Company vide Clause No. 8 of the financiers agreement dated 8th February 1947, and L. Lal Chand representing the managing agency is authorised to hand over the charge immediately provided that the financier shall waive his right to enforce his lien against the uncalled capital of the Company under clause No. 10 of the financiers agreement without affecting his other rights under the same and this will not be treated as a new agreement but only as an 'ex gratia' concession and '(in (?)) consideration (of (?)) the company's investment he may be requested for further 'ex gratia' concession he may be pleased to allow to the Company.'

There is evidence to show that this resolution was unanimously carried. On the 12-4-1947. Khushi Ram who had been appointed by the letter, which I have referred to above, by his son Amrit Rai Sood as his representative, gave a receipt in the following terms:

'Received from Chitra Productions Ltd., through Mr. Lalchand the following:

1. Picture 'Aaj Aur Kal' and raw material in the process of compilation.

2. Assets of the Company consisting of:

(1) Food Station Wagon (one).

(2) Stationery with one duplicator machine.

(3) Furniture and property concerning picture.

(4) Office furniture consisting of one table and 3 chairs.

In consideration of the 'ex gratia' release of his uncalled capital to the extent of about 50 (fifty thousand) thousand.

3. Copies of the resolution of the company duly attested.

Dated 12th April, 1947.

for Amrit Rai Sood,

Financier.

Sd. Khushi Ram.'

On the 2lst April, 1947, Amrit Rai Sood wrote a letter to the Company saying that as he had taken possession of the picture 'Aaj Aur Kal', intimation should be given to Messrs. Nishat Theatres Ltd., and His Master Voice Company. The District Judge has found in favour of Amrit Rai Sood and has made the order that I have referred to above. An appeal has been brought to this Court by Atma Ram Sahni.

7. Counsel for the appellant submitted that reading all these various documents together the learned District Judge should have held that by the acceptance of the film 'Aaj Aur Kal' and some other movable property of the Company Amrit Rai Sood had been paid off, and if he had any claim it should have been held that it had been given up under Section 63 of the Contract Act. In order to decide this it is necessary to construe the various documents which are given above or to which reference has been made by me. By Clause 3 of the agreement of the 8th February, 1947, Amrit Rai Sood had the right to nominate a Director of the Company who was to control along with the Managing Director the expenditure of the Company and also operate on its accounts. By his letter dated 10-12-46, Amrit Rai Sood informed the Company that his father Khushi Ram would conduct and supervise all financial arrangements entered into between the parties and he had full authority and all his commitments will be binding upon him (Amrit Rai Sood). Counsel for Amrit Rai contends that the language of the letter shows that financial arrangements referred to in this letter must be read subject to the various clauses of the agreement and particularly to Clause 5 by which his representative along with the Managing Director was to control the expenditure and operate on the accounts and by which the Managing Director could not incur any liability. The words used in the clause are 'shall not make any commitment binding on the Company without the approval of Amrit Rai Sood'. In Clause 8 the word 'commitment' is again referred to in connection with the following:

'The Commitments which had already been made by the Company with Nishat Theatres and Shorey Pictures for the hire of studio were to be binding on Amrit Rai Sood and no further commitments could be made without the written approval of Amrit Rai Sood.'

The letter of the 10th December 1946 bas in my opinion to be read subject to the agreement which had been entered into and which is specifically referred to in that letter.

8. The authority of an attorney has to be very strictly pursued, and Article 36 of Bowstead's Law of Agency, in my opinion, correctly lays down the limits of this authority. This has received the approval of this Court in 'Pritam Singh v. Intizamia Committee Gurdwara Harimandir Sahib', 52 Pun LR 84. The law is expressed in the following terms in Bowstead at page 49:

'Powers of attorney must be strictly pursued, and are construed as giving only such authority as they confer expressly or by necessary implication. The following are the most important rules of construction:

1. The operative part of the deed is controlled by the recitals.

2. Where authority is given to do particular acts, followed by general words, the general words are restricted to what is necessary for the proper performance of the particular acts.

3. General words do not confer general powers, but are limited to the purpose for which the authority is given, and are construed as enlarging the special powers only when necessary for that purpose.

4. The deed must be construed so as to include all medium powers necessary for its effective execution.'

9. In 'Midland Bank Ltd. v. Rackitt', 1933 AC 1, Sir Harold Reckitt had given a power of attorney in favour of Lord Terrington the head of a firm of solicitors. In a letter which he had given to the Bankers empowering Lord Terrington to draw cheques, he had empowered Lord Terrington to draw cheques upon the accounts at Hull 'without restriction'. In the power of attorney itself the following words were used:

'The principal ratifies and confirms and agrees to ratify and confirm whatsoever the attorney shall do or purports to do by virtue of these presents.'

and it was held that such a ratification clause did not affect the principal's right to object to the exercise of the power by the Attorney.

Lord Atkin at page 18 said as follows:

'But in any case it would appear to be a highly improbable construction to suppose that a principal using this form has precluded himself from objecting to a dealing with his property by a person who had notice in ordinary circumstances that the agent was exceeding his authority actual and ostensible.'

10. In 'Attwood v. Runnings', (1827) 108 ER 727, an authority which has never been impugned, Bayley, J., said: 'The plaintiff in this case relies on the authority given by two powers of attorney, which are instruments to be construed strictly.' and Holroyd, J., said:

'These instruments do not give general powers, speaking at large, but only where they are necessary to carry the purposes of the special powers into effect.'

11. In 'Lewis v. Ramsdale', (1887) 55 LT 179, a principal gave a power of attorney to an agent to manage real estate, recover debts, settle actions, also to 'sell and convert into money' personal property and to execute and perform any contract, agreement, deed, writing, or thing that might in the agent's opinion be necessary or proper for effectuating the purposes aforesaid, or any of them, and for all or any of the purposes of those presents to use the principal's name and generally to do any other act whatsoever which in the agent's opinion ought to be done in or about the principal's concerns as fully as if the principal were present, and did the same, his desire being that all matters respecting the same should be under the full management and direction of the agent. It was held that the general words were limited by the special purpose of the power of attorney, and did not authorise a mortgage of his personal property.

12. In 'Harper v. Godsell', (1870) 5 Q B 422, a partner gave a power of attorney to A which contained the following words:

'For the purposes of exercising, forme, all or any of the powers & privileges conferred by an indenture of partnership constituting the firm of B.W. & Co. & generally to do, execute, & perform any other act, deed, matter, or thing whatsoever... .in or about my concerns, engagements & business of every nature and kind whatsoever.'

It was held that the former words restrained the generality of the latter words, and consequently A could not under this power execute a deed in principal's name dissolving the partnership of B.W. & Co., & assigning over principal's share of the partnership property.

13. In 'Mt. Jan v. Fajjan', AIR 1938 Lah 351, a power of attorney was executed in favour of B entrusting him with the management of the principal's property. Power to mortgage & sell the property was also mentioned in the deed. The attorney sold the property although there was no necessity of the sale for the purpose of the management of the property, & it was held by Bhide J., that the attorney was authorised to sell the property when it was necessary for the purpose of the management of the property and that the sale could not be upheld as there was no necessity for the sale.

14. Applying these principles to the facts of the present case, the agreement of the 8th February, 1947, the terms of which had already been approved by means of the resolution dated the 9th December, 1946, has to be read together with the letter dated the 10th December, 1946. I have already held that in this letter when power is given to Khushi Ram to conduct and supervise all financial arrangements entered into under the agreement the authority must be construed as being subject to the financial arrangements contained in the various clauses of the agreements which have already been given 'in extenso'. Counsel for the appellant strongly relied on the words 'He has got full authority and all his commitments will be binding upon him'. These words cannot be torn from their context and be read as if they were not subject to the terms of the agreement which is specifically mentioned in this letter and in accordance with the rule which has been laid down in the cases that I have cited above, these terms even though they may be general must be confined to the terms of the agreement to which reference is made in the letter itself. The word 'commitments' here must refer to the commitments which are mentioned in Clauses 5 and 8 of the agreement.

15. Counsel for the appellant then submitted that the receipt given by Khushi Ram on the 12th April, 1947, clearly shows that he had received the articles mentioned therein in full and final discharge of the liability which the Company had incurred. This receipt is signed by Khushi Ram for Amrit Raj Sood the financier. The use of these words 'for' and 'financier' makes it quite clear that whatever he was doing he was doing for Amrit Rai good and therefore his powers were limited by the letter read with the agreement and by having this receipt he could not exercise a wider power than the two documents referred to above gave him. In this connection reference may be made to 'Bryant Powis and Bryant Ltd. v. La Banque Du Peuple' (1893) A C 170, where the use of the words 'per pro' by the attorney was held to put the other party on an enquiry as to the extent of the agent's, authority. See also 'Manmohan Nath v. Radha Kishan & Sons', AIR (21) 1934 Lah 815.

16. It was finally submitted by counsel for the appellant that Amrit Rai Sood must be held to have ratified what was done, by his agent because of the letter which he wrote on the 21st April, 1947. In view of what I have said above, all that was, accepted by Amrit Rai Sood would be the taking possession of the picture 'Aaj Aur Kal'. It would not ratify the other portions of the receipt by virtue of which the appellant claims that Amrit Rai Sood's agent had given up his claim on the uncalled capital of the company, even though an 'extra gratia' satisfaction may in law be binding if given under proper authority. There is a further objection taken to this 'ex gratia' satisfaction by counsel for the respondent who submits that in accordance with the agreement Amrit Rai Sood was entitled to uncalled capital amounting to about Rs. 1,00,000/- and what was given up by this receipt was only a liability of Rs. 50,000/-. In my opinion the letter of Amrit Rai Sood dated the 21st April, 1947, does not amount to ratification.

17. There is a further point which arises from the facts and that is that the Company was brought into liquidation at the instance of Amrit Rai Sood who in his petition had definitely alleged that he was a creditor of the Company to the extent of Rs. 1,50,000/-. If satisfaction had already been entered in regard to this claim the Company should at that time have objected to the right of Amrit Rai Sood to bring this application. Under Section 162 of the Indian Companies Act only a creditor to whom a sum of Rs. 500/- or over is due can bring an application for winding up. If nothing was due to Amrit Rai he had no right to bring a winding up petition. It was open to the Company and the Directors to object that Amrit Rai was not a creditor and had no right to bring the petition. The winding up having been ordered on his petition it amounts to a constructive decision of the question of his being a creditor and of the sum claimed by him and it is not open to the Company or its Directors to object at this stage that no sum of money is due to Amrit Rai Sood. In support of this proposition there is a judgment of their Lordships of the Privy Council in 'Hook v. Administrator-General of Bengal', 48 Cal 499. There a testator had provided that certain annuities should be paid out of a trust fund and the residue of the income be paid to the deacons of a Baptist Church subject to certain conditions with a gift over to another Baptist Church. During the lifetime of the last annuitant in an administration suit it was held that there was no intestacy as to surplus income. In further proceedings in the suit after the annuitant's death, the next-of-kin contended that under the reservation in the decree they were entitled again to raise the contention that the gift-over was invalid. It was held that it could not be raised as it was 'res judicata'. At p. 507 Lord Buckmaster said:

'That section prevents the retrial of issues that have been directly and substantially in issue in a former suit between the same parties, and this question obviously arises in the same and not in a former suit, but it does not appear that the learned Judge's attention was called to the decision of this Board in 'Ram Kirpal v. Rup Kuar', 3 All 633, which clearly shows that the plea of 'res judicata' still remains, apart from the limited provisions of the Code, and it is that plea which the respondents have to meet in the present case. In the words of Sir Barnes Peacock (at p. 41): 'The binding force of such a judgment in such a case as the present depends not upon Section 13 of Act X (10) of 1877' (now replaced by Section 11 of the Civil P. C., 1908), 'but upon general principles of law: If it were not binding, there would be no end to litigation'.'

This shows that a finding given at one stage of a proceeding is finding at another stage of the same proceeding.

18. In 'Gauri v. Ude', ILR (1942) Lah 559, it was held in the case of an execution proceeding that where an order for sale is passed after notice to the judgment-debtor without any objection being raised by him as to the question of sale ability the judgment-debtor is precluded from raising that question and impugning the sale on any ground which he might and ought to have taken before the sale. This supports the submission that as the appellants did not raise the question whether Amrit Rai Sood was or was not the creditor, he cannot now be allowed to raise that question. That the principle of 'res judicata' applies outside Section 11 of the Civil P. C. was held both in 'Hook v. Administrator-General of Bengal', 48 Cal 499 and in 'T. B. Ham Chandra Rao v. A .N. S. Ramchandra Rao', 45 Mad 320, where the case was one under Land Acquisition Act and where it was held that a dispute as to title to receive compensation which has been referred to the Court a decree thereon not appealed from renders the question of title 'res judicata' in a suit between the parties to the dispute. At p. 331, Lord Buckmaster observed as follows:

'It has been suggested that the decision was not in a former suit, but whether this were so or not makes no difference for it has been recently pointed out by this Board, in 'Hook v. Administrator-General of Bengal', 48 Cal 499, that the principle which prevents the same case being twice litigated is of general application and is not limited by the specific words of the Code in this respect.'

19. I am therefore of the opinion that the question of the right of Amrit Rai Sood to bring a petition for winding up which depended on his being a creditor of 500 rupees or more not having been contested at a previous stage of the proceedings, it is not open to Atma Rani Sahni or the Company now to contest that point and that principle of 'res judicata' applies to these proceedings. Atma Ram Sahni or the Company cannot therefore object to the existence of liability of the Company to Amrit Rai Sood.

20. I, therefore, dismiss this appeal and uphold the order of the District, Judge. The respondent will have his costs in this Court.


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