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Mandal Ghat Zemindary Syndicate Ltd. Vs. Gour Mohan Mullick and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberApplication for leave to appeal to the Supreme Court No. 14 of 1952
Judge
Reported inAIR1953Cal509
ActsConstitution of India - Article 133(1); ;Code of Civil Procedure (CPC) , 1908 - Section 110
AppellantMandal Ghat Zemindary Syndicate Ltd.
RespondentGour Mohan Mullick and ors.
Appellant AdvocateH.N. Sanyal and ;Purusottam Chatterjee, Advs.
Respondent AdvocateN.C. Sen Gupta and ;Chandra Nath Mukherjee, Advs.
Excerpt:
- .....nine years on receipt of a certain consideration and this was the most important term of all--'all rents and decrees due to the parties hereto in respect of the zemindary on the date of execution of the lease aforesaid will be duly assigned to the company at such agreed price as may be fixed by the board and to be paid by the allotment of fully paid up shares.'in pursuance of that agreement a limited company, which is the petitioner company before us, was formed and the memorandum of association, as also the articles, was signed on 19-11-1940. the certificate of incorporation was obtained on the next day. on 23rd december following, the lease stipulated for in the agreement of september 24 was executed. the next thing which happened was that on. 27-12-1940, three powers of attorney were.....
Judgment:

Chakravartti, C.J.

1. This is an application for leave to appeal to the Supreme Court from a judgment and decree passed by a Division Bench of this Court in a First Appeal. The judgment is one of reversal. It follows that if the petitioner can make out that the two matters mentioned in Clause (a) of Article 133(1) of the Constitution are of the requisite value, it will make out a claim to leave to appeal as of right. There is no difficulty about the amount or value of the subject-matter of the dispute in the Court of first instance, but the value of the subject-matter still in dispute on appeal requires a little close examination. The learned counsel for the petitioner conceded that if the case failed by the valuation test, he could not contend that it was otherwise a fit case for appeal.

2. The facts briefly stated are as follows. Touzi No. 4 of the Howrah Collectorate, knownas Perganah Mandalghat, is owned by a number of co-sharers who may conveniently be classed under four heads, namely, the Mullicks Sree Sree Lakshmi Narayan Jew, represented by Manohar Lal Seal Shebait, N. N. Law and the Satkhira Zamindars. These cosharers had all separate accounts standing in their names. It appears that default having been committed in the payment of revenue, the estate was advertised for sale to be held on 25-9-1940, and about that point of time, the co-sharers other than the Satkhira Zamindars, conferred between themselves and agreed to come to an arrangement by which the imminent sale as well as such revenue sales in future might be averted. The terms of the arrangement appear to have been agreed to between the parties on 23-9-1940, and on the next day, namely, the 24th a formal deed of agreement was executed. By that deed it was provided that a private limited company would be formed for the purpose of taking over the shares of the executants in the zamindary, that after the formation of such a company, the executants would grant a lease of their shares to the company for a period of ninety nine years on receipt of a certain consideration and this was the most important term of all--

'all rents and decrees due to the parties hereto in respect of the Zemindary on the date of execution of the lease aforesaid will be duly assigned to the company at such agreed price as may be fixed by the Board and to be paid by the allotment of fully paid up shares.'

In pursuance of that agreement a limited company, which is the petitioner company before us, was formed and the memorandum of association, as also the articles, was signed on 19-11-1940. The certificate of incorporation was obtained on the next day. On 23rd December following, the lease stipulated for in the agreement of September 24 was executed.

The next thing which happened was that on. 27-12-1940, three powers of attorney were executed in favour of the petitioner company by which the company was authorised to collect from the tenants the arrears of rent due to the several co-sharers up to the date of the execution of the lease. One of those powers of attorney was executed by the Mullick cosharers. The preamble to the powers of attorney, which were all in the same language, recited that prior to the formation of the company and the execution of the lease it had been agreed that the co-sharers would assign all the arrears of rents and other dues in respect of the zamindary to the company 'for the total consideration of Rs. 20,000/- to be paid by the allotment of 200 fully paid up shares of Rs. 100/- each in the Company, to be issued to each of us and our said cosharers in proportion to the amount of arrears of rents and other dues actually realised in respect of his share in the Zemindary under his separate account.' The preamble proceeded to state that as it would take some time to ascertain the amount and other particulars of the arrears of rent and other dues and to execute and register a formal deed of assignment, it had been agreed in the common interest of all that until the execution of the formal deed of assignment, an irrevocable power of attorney should be granted to the company to collect and realise on behalf of the co-sharers all arrears of rent and otherdues accrued up to 23-12-1940, that is to say, up to the date of the execution of the lease. It will be noticed that while the agreement executed on 24-9-1940, left the consideration to be paid by the company for the assignment of the arrears unspecified the power of attorney recited that the consideration had been fixed at Rs. 20,000/- to be paid in the shape of 'two hundred shares of the face value of Rs. 100/-each.

3. It appears that no deed of assignment was ever executed and one of the Mullick cosharers, namely, Gour Mohan Mullick, became dissatisfied with the arrangements which had been made and in fact began repudiating them. Eventually, he brought a suit in the Court of the First Subordinate Judge at Howrah on 10-9-1946, for a declaration that the agreement of 24-9-1940, in so far as it differed from the draft agreement executed on the previous day, the memorandum and the articles of association of the private limited company which had been formed, the certificate of incorporation, the lease granted on 23-12-1940, and the power of attorney, dated 27-12-1940, were all void 'ab initio' and not binding upon him. He prayed further for recovery of possession of his share as also for damages for the use and occupation of his share by the company for accounts to be taken of the dues for arrears of rent and, alternatively, for a decree for his share of the rent for a period of five years from 23-12-1940.

4. Besides the remaining co-sharers, the - private limited company namely, The Mandalghat Zemindary Syndicate Ltd., was made a defendant in the suit. The company's defence was that the documents in respect of which a declaration of invalidity had been prayed for were all good and valid documents, that the plaintiff was not entitled to any accounts, nor entitled to any damages or any decree for his share of the rent for the period of five years.

5. Of the issues framed in the suit, those numbered 9, 10 and 11 are material. They were as follows:

9. Is the plaintiff entitled to a decree for accounts?

10. Is the plaintiff entitled to a decree for damages? if so, to what extent?

11. To what relief, if any, is the plaintiff entitled?

6. The trial Judge held against the plaintiff in regard to his principal prayer and came to the conclusion that the several documents which the plaintiff had impugned as void 'ab initio' were all good and valid documents, Having come to that conclusion, he proceeded to consider the further prayers made by the plaintiff and held that the plaintiff could not obviously recover possession of his share in the zemindary. As regards the claim for his share of the rent for the period of five years, the learned Judge held that no demand for the same had been made and consequently no cause of action had arisen. With regard to the claim on account of Malikana, by which was meant not the rent due from the tenants, but the rent due under the lease, the learned Judge held that the amounts were still lying with the company and the plaintiff would be entitled to take the money any time he liked. He pronounced an adjustment of a certain amount against the dues of the plaintiff to have been in order, but recorded no specific finding with regard to the prayer for accounts.

7. Thereafter an appeal was taken to this Court and in that appeal the findings of the trial Court in respect of the documents were not challenged. Only three points are said to have been urged, namely, that the shebait of the deity co-sharer was not competent to execute the agreement and therefore the incorporation of the company was invalid in law; (2) that the company was liable to render accounts of all realisations made; and (3) that, in any event, even if the incorporation of the company was held valid, the plaintiff was entitled to his share of the Malikana from the date of the execution of the lease up to the date of the suit.

8. The learned Judges of this Court held that they had no jurisdiction to consider the first ground taken by the appellants. With regard to the third ground, they held that the plaintiff was clearly entitled to the arrears of Malikana, but he was bound by the adjustment made by the company in respect of a sum which the plaintiff owed to N. N. Law. With regard to the claim for accounts, the learned Judges held that no assignment had yet been made by any of the parties for the arrear rents in favour of the company, and, therefore, whoever might have been responsible for that state of things, the position which they found in the case was that the company had realised rents under the powers of attorney, in other words, not in its capacity as an assignee of the rents but in the capacity of an agent under the powers of attorney. The learned Judges held that it consequently followed that as the facts were at the time, the company must be held liable to render accounts of the realisations which it had made under the powers of attorney to the grantors of the power on whose behalf it had made the realisation. The actual order made by the learned Judges with respect to the accounts is as follows:

'The Company is further liable to render accounts in respect of the arrears of rent which had accrued due before the execution of the lease which the Company was authorised to collect under the Power of Attorney. The plaintiff will be entitled to his share of the arrears of, rent as were so realised by the Company under the Power, less the proportionate share of costs of collection etc.'

9. The learned Judges, as I have already stated, also made a decree for the plaintiff's share of the Malikana, less the amount adjusted, but that part of the decree is not proposed to be challenged in the intended appeal.

10. The intended appeal is -solely directed against the decree made by the learned Judges in respect of the plaintiff's prayer for accounts. It will be noticed that the decree declares the plaintiff to be entitled to his share of the arrears of rent as realised by the company less the costs of collection, which means that the amount found due to the plaintiff on accounts being taken will have forthwith to be paid out to the plaintiff. That being so, when the petition for leave to appeal was first moved before us and a question as regards the valuation was raised, we considered it proper to direct the intending appellant to satisfy us by proper affidavits as to what the amount was which had been collected on behalf of the plaintiff as arrears' of rent. An affidavit was, in the first instance, filed, annexed to which there was a chart showing the collections, but as that chart was not vouched for by the Chartered Accountants who had prepared it, we directed a further affidavit to be filed. Such an affidavit was subsequently filed and there is a statement annexed to the affidavit of the collections made which is properly certified by Messrs, Ray & Ray, Chartered Accountants. Dr. Sen Gupta on behalf of the plaintiff respondent agreed to accept the figures given in this chart as the true figures of the collections made, although he qualified his admission by saying that he was making it only for the limited purpose of the present petition for leave to appeal. (11) According to the chart attached to the appellant's affidavit, the total amount of the gross collections up to 30th Chaitra, 1357 B. S., is Rs. 3,36,023-13-0. The actual collection expenses are Rs. 92,626-15-9 and the net collections left after deducting the actual expenses amount to Rs. 2,43,396-13-3. In the plaintiff's share the gross collections are Rs. 43,410-3-0, the actual expenses Rs. 11,966-3-6 and the net collections Rs. 31,443-15-6. No further collections, it is stated, are expected. It follows that in terms of money the company will have to pay to the plaintiff a sum of Rs. 31,443-115-6 under this Court's decree.

11. The above being the practical implication of the decree it was contended by Mr. Sanyal who appeared on behalf of the intending appellant that the value of the subject-matter in dispute on appeal was clearly the sum of Rs. 31,443-15-6. His argument was that the plaintiff's prayer was one for accounts and for payment to him of such amount as might be found due to him. The company's case was that the plaintiff was not entitled to have any accounts in the suit at all and therefore when, in that state of the pleadings, the decree in effect directed the company to pay a sum of Rs. 31,443-15-6 no part of which, according to the company, it was liable to pay under any decree made in the present suit, the dispute obviously comprised and covered the whole of the amount and consequently the value of the subject-matter in dispute was the whole sum of Rs. 31,443-15-6.

On behalf of the plaintiff respondent, it was contended by Dr. Sen Gupta that it was not the company's case that it was entitled to retain the arrears of rent collected without paying anything to the co-sharers; but its case was that for the arrears of rent assigned, to it, it would have to pay Rs. 20,000/- in the shape of two-hundred shares of the company of the face value of Rs. 100/- each. According to the terms of agreement of 24-9-1940, and the recitals in the preamble to the powers of attorney to which I have already referred, the consideration for the arrears of rent would be paid by the allotment of fully paid up shares in proportion to the amount of arrears of rent or other dues actually realised in respect of the shares of each co-sharer. It appears from the chart prepared by the Chartered Accountants that on the basis of collections made in the plaintiff's share, the number of shares in the company to which he would be entitled is 25.84.

Dr. Sen Gupta's contention was that the sum of Rs. 20,000/- contemplated by the parties was only the face value of the shares, but if the shares were actually allotted to the co-sharers, the property which they would thereby get would not merely be the face value of the shares but their intrinsic value. It was said that the shares, after they had been allottedto the co-sharers of the Zamindary, would entitle such co-sharers to receive dividend on them for a period of at least nintynine years and in view of the vastness of the Zamindary, the intrinsic value of the shares would be far in excess of their face value and indeed the value would be so great that if in the plaintiff's case, it was set off against the amount of the collections which had been made on his behalf, the result would be a minus figure. Dr. Sen Gupta's contention accordingly was that on the company's own case and on the case which, according to the grounds taken in the memorandum of appeal the company intended to urge before the Supreme Court, the value of the subject-matter in dispute in the intended appeal would be the difference between the sum of Rs. 31,443-15-6 and the intrinsic value of the 25.84 shares to which the plaintiff was entitled, if the former was at all larger than the latter.

Mr. Sanyal's reply to Dr. Sen Gupta was that what the parties contemplated was the face value and nothing more and so far as matters stood at present, it was only the face value of the shares which had to be regarded. In his submission, however, no question of working out the difference between the true value of the shares, whether face value or intrinsic value, and the amount of the net collections payable to the plaintiff under the decree arose, because in so far as the present suit was concerned the question of the allotment of the shares was altogether foreign to it, inasmuch as no deed of assignment had yet been executed and the Court had not found that the plaintiff was entitled to any shares or that the company was bound to allot him any. Mr. Sanyal's argument, therefore, was that the true test was what was in dispute in the appeal itself? and if that test was applied, the subject-matter in dispute was clearly the whole sum of Rs. 31,443-15-6.

12. We have considered this matter with care and it appears to us that the contention of Mr. Sanyal is correct. If the decree of the High Court had dealt with the whole of the contractual relations between the parties and pronounced on the right of the plaintiff to obtain the shares and the liability of the company to allot them, some question of setting off the value of the shares against the amount of the net collections in the hands of the company might be relevant. As I see the position, it is that so far as the present suit is concerned, the plaintiff is asking for an immediate payment of such amount as may be found due to him on an account being taken and under the decree sought to be appealed from such amount is Rs. 31,443-15-6. Again, so far as the present case is concerned, the defendant company's case is that it is not liable to render accounts at all and therefore its case is that it is not liable to make any cash payment to the plaintiff. That being so, the rival cases are a claim for a certain amount of money and a denial of any liability to make any payment in pursuance of any directions that can be given in the present suit. I do not think that the expression 'amount or value of the subject-matter in dispute' means the amount or value of the subject-matter of all disputes between the parties. The true scope of the expression is indicated by the words 'on appeal' which follow, and therefore it seems to me that the true test is, what is really in stake in the appeal itself?

Another good test of a practical nature would be one suggested by Mr. Sanyal and that is, when the plaintiff seeks to execute the present decree against the company, would the company be entitled to put him off by saying that he must wait for the shares to be allotted to him or to set off the value of the shares which the plaintiff would be entitled to under the terms of agreement? It is perfectly clear that so far as the present litigation is concerned, the company could not possibly plead in bar of the execution of the Court's decree against it, any option to pay by shares. That being so, it seems to me that the value of the subject-matter in dispute being the value of such subject-matter as is in dispute in the intended appeal itself and that dispute in the present case being whether the plaintiff will get Rs. 31,443-15-6 or nothing at all -- the company denying its liability altogether -- the subject-matter in dispute must be taken to be the entire amount of the net collections.

The question of payment by shares does not arise and is in no way involved, because the shares were only to be given as the consideration for an assignment of the arrears, --as their price, so to say -- but no assignment has taken place and therefore there is nothing yet to pay for by shares and what the plaintiff, on his part, is claiming and has got by the decree, is not the price of the arrears in his share, but the arrears themselves as his own money. If that claim is upheld, as it has been by the decree, the question of assignment is altogether eliminated, because the plaintiff cannot be under an obligation to assign the arrears and at the same time be entitled to recover them forthwith and the company also cannot enforce the agreement to assign in the present suit, nor claim to pay by shares, since no assignment, which only would ' bring in the question of payment by shares, has taken place. If the decree had been that the company must hold the collections, or deposit them in Court to be held, pending decision of the rights of the parties as to the agreement for an assignment and subject to adjustment on such decision, some question might arise of setting off the value of the shares against the amount of the collections in determining the value of the subject-matter of the dispute in the appeal. But the decree, by directing payment of the collections as the plaintiff's, own money, collected by the company as his agent, gives the go-by to assignment altogether and, as I have already pointed out, no question of payment by shares can arise, unless an assignment is made which has not been done. The whole dispute in the proposed appeal, therefore, is and must be whether or not the company is liable to account and pay up the amount due.

It is true that in the grounds taken it is stated that the plaintiff should have been held to be entitled only to an allotment of a proportionate number of shares upon assignment of the arrears, but that only means that on that finding the present suit for accounts should have been dismissed and not that a decree for the allotment of a proportionate number of shares should have been made. In my opinion the subject-matter of the dispute in the proposed appeal is the whole sum of Rs. 31,443-15-6, and that being so, Clause (a) of Article 133(1) of the Constitution is satisfied.

13. In the result, the application succeeds and we hold that the intending appellant is entitled to the leave asked for. Let a certificate issue under Article 133(1)(a) of the Constitution. We assess the hearing-fee at three gold mohurs, but costs will abide the result of the appeal

14. The 'ad-interim' order for stay stands automatically vacated.

Sinha, J.

15. I agree.


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