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Khulna Loan Co. Limited Vs. Jahir Goldar and anr. - Court Judgment

LegalCrystal Citation
CourtKolkata
Decided On
Judge
Reported inAIR1914Cal687,24Ind.Cas.209
AppellantKhulna Loan Co. Limited
RespondentJahir Goldar and anr.
Cases ReferredDe Cordova v. De Cordova
Excerpt:
company - secretary--managing director, powers of--grant of permanent lease--principal and agent--act done by agent in course of employment--binding upon principal--presmption by third party that act of managing director is regular--specific performance against company--discretion. - .....eng. rep. 857., and reference has been made to the well-settled principle that the court will not decree specific performance where the enforcement of the decree would compel a breach of trust by a person placed in the position of a trustee. on the other hand, it has been argued that the plaintiffs are entitled to a decree for specific performance, because it would be anomalous to hold that although the defendant company is not entitled to repudiate the agreement or to obtain a rescission of it, the company is still able to escape the liability there under. reference has been made on behalf of the respondents in support of this position to the cases of bigg v. strong 3 sm. & g. 592 : 6 w.r. 536 : 107 r. b. 167 : 65 eng. rep. 793. : ridgway v. wharton 6 h. l. c. 238 at p. 297 : 27 l.j......
Judgment:

1. This appeal is directed against a decree in a suit for specific performance of a contract to grant a permanent lease. The case for the plaintiffs is that the defendant Company is the owner in possession of the disputed land by virtue of purchase at a sale for arrears of revenue, that the officers of the Company agreed to grant them a permanent lease for a premium of Rs. 787-8 and an annual rent of Rs. 68, that out of the premium the plaintiff paid into the office of the Company Rs. 600 in cash and executed a promissory note for the balance, Rs. 147-8, that on the 15th February 1908 the lease, duly engrossed and stamped, was tendered to the officers of the Company, but that the Managing Director declined to execute the document. The plaintiffs accordingly ask for a decree for specific performance against the Company. The suit as originally framed was brought against the Managing Director and the two Secretaries, but ultimately the plaint was amended and the suit was described as one against the Company. The Court of first instance held that there was a valid contract, but that the Court in its discretion should not specifically enforce it. The plaintiffs were accordingly awarded a decree for recovery of the sum paid by way of premium together with Rs. 17 as the price of the stamp and Rs. 50 as compensation. Upon appeal the Subordinate Judge has reversed this decision.

2. He has held that the Court of first instance has exercised the discretion vested in it rather arbitrarily and not in a judicial manner and that the plaintiffs are entitled to have a lease executed in their favour by the Company. The defendant has now preferred this appeal, which involves two substantial questions : namely, first was there a contract binding upon the Company and secondly, if there was a contract of this nature, should the Court in the exercise of its discretion grant specific performance of it ?

3. As regards the first question it is necessary to state that the negotiations for the permanent lease were carried on by the plaintiffs with one of the Secretaries of the Company, who, it is not disputed, had authority to grant ordinary agricultural leases without the sanction of the Directors. There was some controversy in the Court below on the question, whether these negotiations had been carried on with the Secretary alone, or whether the terms as arranged by him were also approved by the Managing Director and the second Secretary. In this Court upon an examination of the record it transpired that the Company had produced one of their office-records which showed that the terms had been approved by the two Secretaries as also by the Managing Director. It is consequently needless to discuss at length the question whether if the Secretary alone had arranged the terms they would have been operative as against the Company. But it may be observed that, as pointed out in the case of Newlands v. National Employer's Accident Association 54 L.J. Q.B. 428 : 53 L.T. 242 : 49 J.P. 628., a Secretary cannot ordinarily be treated as a general agent on behalf of the Company. He is, on the other hand, prima facie, a person invested with authority to give effect to the decisions of the Directors. [Barnett v. South London Tramways Co. 18 Q.B.D. 815 : 56 L.J. Q.B. 452 : 57 L.T. 436 : 35 W.R. 640.] But as in the present instance the terms of settlement with the plaintiffs were approved not merely by the Secretaries but also by the Managing Director, there can be no room for doubt that the agreement would be operative against the Company. The grant of lease of this description would be clearly within the scope of the apparent authority of the Managing Director. [Western Bank of Scotland v. Addie (1867) 1 H.L. (Sc.) 145., Reid v. Rigby (1894) 2 Q.B. 40 : 63 L.J. Q.B. 451 : 10 R. 280 : 119 Eng. Rep. 881. and Watteau v. Fenwick (1893) 1 Q.B. 346 : 5 R. 143 : 67 L.T. 831 : 41 W.R. 222 : 56 J.P. 839.] It is well settled that every act done by an agent in the course of his employment on behalf of the principal and within the apparent scope of his authority binds the principal, unless the agent is in fact unauthorized to do the particular act and the person dealing with him has noticed that in doing such act he is exceeding his authority. On this principle it has been held that where the Directors of the Company, who have power to borrow such sums of money on behalf of the Company as are authorized by resolution in general meeting, borrow upon a bond under seal without the requisite resolution having been passed, the Company is liable unless the lender had notice of the irregularity. Royal British Bank v. Turquand (1856) 25 L.J. Q.B. 317 : 6 El. & Bl. 327 : 106 R. R. 623 : 2 Jur (n. s.) 663., Agar v. The Athenaeum Life Assurance Society (1858) 3 C.B. (N.S.) 725 : 111 R.R. 817 : 27 L.J.C.P. 95 : 4 Jur. (n.s.) 211 : 6 W.R. 277 : 140 Eng. Rep. 927. The plaintiffs could not be expected to ascertain whether the Managing Director, before he settled the terms with them, had taken [the necessary antecedent steps under the constitution of the Company. They would be entitled to presume that he had acted regularly within the scope of his authority and in the manner provided in the Articles of Association. Bargate v. Shortridge (1855) 5 H.L.C. 297 : 101 R.R. 163 : 24 L.J. Ch. 457 : 3 Eq. R. 605 : 3 W.R. 423 : 10 Eng. Rep. 914. : Montreal & St. Lawrence Light and Power Co. v. Robert (1906) A.C. 196 : 75 L.J. P.C. 33 : 94 L.T. 229 : 13 Manson 184. : In re Land Credit Co. of Ireland, Ex parte Overend, Gurney & Co., (1869) 4 Ch. App. 460 : 39 L.J. Ch. 27 : 20 L.T. 641 : 17 W.R. 689. : County of Gloucester Bank v. Rudry Merthyr Steam and Goal Colliery Co. (1895) 1 Ch. 629 : 64 L.J. Ch. 451 : 12 R. 183 : 72 L.T. 375 : 43 W.R. 486 : 2 Manson 223. : Duck v. Tower Galvanizing Co. (1901) 2 K. B. 314 : 70 L.J.K.B. 625 : 84 L.T. 847.] 'We must hold accordingly that the agreement is operative against the Company, or, in other words, that the Company would clearly fail in a suit for rescission.

4. As regards the second question, it is necessary to state that, as has now transpired, the Managing Director acted only in concurrence with the two Secretaries and without the authority of the entire body of Directors. While the negotiations with the plaintiffs were in progress, the tenants in actual occupation of the land also approached the Directors and prayed that they might be granted a permanent lease. Their application was accepted by the Directors on the 22nd February 1908, when they refused to approve the terms arranged by the Managing Director and the Secretaries with the plaintiffs. The plaintiffs lost no time and commenced the present litigation on the 28th February 1908. The true position, therefore, is that although the plaintiffs are entitled to hold the Company bound by the act of the Managing Director, as a matter of fact his act was not confirmed by the entire body of Directors, who repudiated the terms as arranged by him at the earliest possible opportunity. Consequently, the plaintiffs are entitled to rely on the agreement, not because there was in fact an agreement made by the officers of the Company on its behalf in a duly authorised manner, but because the Company is estopped, so far as the plaintiffs are concerned, to repudiate the act of the Managing Director. Under these circumstances, it has been urged on behalf of the Company that the Court, in its discretion, should refuse specific performance. Reliance has been placed upon the observations of Lord Eldon in the case of Mortlock v. Buller 10 Vessy 292 at 313 : 7 R. R. 417 : 32 Eng. Rep. 857., and reference has been made to the well-settled principle that the Court will not decree specific performance where the enforcement of the decree would compel a breach of trust by a person placed in the position of a trustee. On the other hand, it has been argued that the plaintiffs are entitled to a decree for specific performance, because it would be anomalous to hold that although the defendant Company is not entitled to repudiate the agreement or to obtain a rescission of it, the Company is still able to escape the liability there under. Reference has been made on behalf of the respondents in support of this position to the cases of Bigg v. Strong 3 Sm. & G. 592 : 6 W.R. 536 : 107 R. B. 167 : 65 Eng. Rep. 793. : Ridgway v. Wharton 6 H. L. C. 238 at p. 297 : 27 L.J. Ch. 46 : 5 W.R. 804 : 10 Eng. Rep. 1287 : 4 Jur. (N. S.) 173. and Bromet v. Neville (1909) 53 Solicitor's Journal 321,. The case of Bigg v. Strong 3 Sm. & G. 592 : 6 W.R. 536 : 107 R. B. 167 : 65 Eng. Rep. 793. may at first sight appear to lend some support to the contention of the respondents. In that case, a property was owned jointly by a father and his son. The son contracted to transfer the entire property without authority from his father. The father subsequently discovered this, but he took no steps to repudiate the agreement made by his- son. The interested transferee brought a suit for specific performance both against the father and the son. The Court held that although in so far as the father was concerned, there was no initial agreement to which he was a party, he had subsequently ratified the agreement by the son. The Court held in fact that silence on the part of the father with full knowledge of all the circumstances indicated that he had acquiesced in the transaction by the son and that consequently his position was precisely the same as if he had originally authorised the son to enter into the agreement on his behalf. It is plain, consequently, that the Court granted specific performance as against the father on the basis that the father by his subsequent conduct had placed himself in the position he would have occupied if he had expressly authorized the son before the contract was made. In the case before us, the Company has never acquiesced in the transaction. On the other hand, the Company repudiated the agreement as soon as it was brought to the knowledge of the Directors and the Company actually granted a lease to the original tenants. It is further worthy of notice that in the case of Bigg v. Strong 3 Sm. & G. 592 : 6 W.R. 536 : 107 R. B. 167 : 65 Eng. Rep. 793. the Court was not invited to consider whether under all the circumstances, specific performance should be granted or refused. The cases of Ridgway v. Wharton 6 H. L. C. 238 at p. 297 : 27 L.J. Ch. 46 : 5 W.R. 804 : 10 Eng. Rep. 1287 : 4 Jur. (N. S.) 173. and Bromet v. Neville are of no assistance to the respondents, as the facts and circumstances were essentially , different. The position, consequently, is this. There was in fact no agreement made by any person duly authorised to grant a permanent lease on behalf of the Company, although by reason of the position of the Managing Director the Company might not be free to repudiate and to obtain a cancellation of the agreement entered into by him The Company has never ratified or acquiesced in the act of the Managing Director. The Company has, on the other hand, repudiated his act at the earliest possible opportunity. Should the Court, under the circumstances, grant specific performance against the Company It has further not been shown that the plaintiffs would be really prejudiced if specific performance were refused, as might possibly have been the case if they had obtained possession on the basis of the agreement and had altered their position on the faith thereof. On the other hand, the effect of a decree for specific performance would be to enforce upon the Company a contract which had not been made by a duly authorised officer and which had been repudiated by the Directors at the earliest possible opportunity. The cases of Harriett v. Yeilding 2 Sch. and Lefn. 549 : 9 R. R. 98. and Saresh Chandra Basu, v. Hari Dayal Singh Bad 5 Ind. Cas. 236 : 11 C.L.J. 346 : 14 C.W.N. 451. amply indicate that the Court will be slow to decree specific performance in a case of this description. We must add, however, that we are not impressed by the reason principally assigned by the appellant for refusal of specific performance, namely, possible hardship to the original tenants to whom the company has already granted a permanent lease. It is plain that they were aware of the negotiations with the plaintiffs and as they have taken a lease from the Company with full knowledge of the antecedent agreement, they cannot justly complain of any possible hardship. Thomas v. Dering 1 Keen 729 : 6 L.J. Ch. (n.s.) 267 : 1 Jur. (O.S.) 427 : 48 Eng. Rep. 488. : De Cordova v. De Cordova 4 App Cas. 692 : 41 L.T. 43.

5. We must, consequently, hold upon the second point that specific performance should be refused.

6. The plaintiffs are clearly entitled to a refund of the money they have paid Rs. 600, on account of premium, with interest thereon Rs. 450 at the rate of 12 per cent. per annum from January 1908 to the date of this judgment. The plaintiffs are also entitled to the value of the stamp Rs. 17. There will consequently be a decree in favour of the plaintiffs for Rs. 1,067, which will carry interest at 6 per cent. per annum from this date to the date of realization. The plaintiffs will also have full costs both in the Court of first instance and in the Court of appeal below together with the usual interest thereon. Each party will pay his own costs of this appeal. The result is that this appeal is allowed, the decree of the Subordinate Judge set aside and a decree made in favour of the plaintiffs in the terms mentioned.


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