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Bipul Chundra Gupta Vs. Hazi Nasib Ali Majumdar and ors. - Court Judgment

LegalCrystal Citation
CourtKolkata
Decided On
Judge
Reported in1Ind.Cas.655
AppellantBipul Chundra Gupta
RespondentHazi Nasib Ali Majumdar and ors.
Cases ReferredCrawther v. Thorley
Excerpt:
companies act (no. 1 of 1884) section 4 - members must be directly interested in management--business carried on by one person one, not as agent of persons financing him--suit for account against him maintainable. - .....made out of the business.8. on behalf of the defence it was contended that section 4 of the indian companies act 1882, was a bar to the suit as the partnership consisted of more than 20 persons and was not registered under the act.9. the first court gave a preliminary decree to the plaintiff against the defendants nos. 1, 2 and 3, but on appeal to the officiating district judge the plaintiff's suit was dismissed on the ground that the partnership was not registered under the companies act. the plaintiff now appeals to this court and the points urged on his behalf are (1) that the work was only for one season and not a continuing one and hence section 4 of the indian companies act has no application; (2) that section 4 indian companies act refers to business actually carried on by.....
Judgment:

1. The present appeal arises out of a suit brought by one Bipul Chundra Gupta against one Nasib Ali and 14 others, for some of whom their legal representatives were afterwards substituted.

2. It appear's that Nasib Ali, defendant No. 1, obtained a license for catching 'wild elephants in the Lushi Hills District in 1901 from the Superintendent of that district and organized a khedda in which enterprise a number of people including the plaintiff joined him as shariks.

3. A document was executed on the 17th Agra ban 1308 between Nasib Ali, defendant No. 1, as first party and 13 others (one of whom is the plaintiff himself) as second party. This document related to the business of the khedda, its management and the division of profits among the shariks.

4. It appears that one of the shariks named Nawsheneeab did not contribute towards the business and so was not treated as a sharik at all and was replaced by one Abdul Ali, defendant No. 15. Several persons subsequently purchased shares from some of the executants of the agreement and thus became interested in the business.

5. The agreement indicates how the profits are to be divided and in what proportion and among whom.

6. It appears that it was defendant No. 1 alone to whom the license was granted, but as the business required a considerable amount of money, the defendant No. 1 induced 13 others to join him in the business, which, number, after the execution of the agreement, swelled to 35.

7. The plaintiff brought this suit praying for a decree against defendant No. 1 and his brothers for an account and for the money that might be found due to the plaintiff on an account being taken, and in the event of no account being rendered, for the sum of Rs. 301-10-2, with costs and future interest. The above sum, it was alleged, was the proportionate share of the plaintiff in the profits made out of the business.

8. On behalf of the defence it was contended that Section 4 of the Indian Companies Act 1882, was a bar to the suit as the partnership consisted of more than 20 persons and was not registered under the Act.

9. The first Court gave a preliminary decree to the plaintiff against the defendants Nos. 1, 2 and 3, but on appeal to the officiating District Judge the plaintiff's suit was dismissed on the ground that the partnership was not registered under the Companies Act. The plaintiff now appeals to this Court and the points urged on his behalf are (1) that the work was only for one season and not a continuing one and hence Section 4 of the Indian Companies Act has no application; (2) that Section 4 Indian Companies Act refers to business actually carried on by more than 20 persons, while in the present case under the agreement only one man, namely, defendant No. 1, was to carry on the business without any interference on the part of the members of the second party (vide paragraph 4 of the agreement). There were other points also but in the view we take of the case we do not think it necessary to discuss them.

10. Section 4 of the Indian Companies Act is practically a reproduction of Section 4 of the English Act and our attention has been directed to the following English cases. Smith v. Anderson L.R. Ch. Div. 247, Crawthor v. Thorley 32 Eng. W.R. 330. The above cases were cited by the learned pleader for the appellant in support of his contention that to bring the case within the scope of Section 4 of the Indian Companies Act all the members of the Company or Association must be directly interested in the management of the concern either personally or through their duly constituted agent. In Smith, v. Anderson L.R. Ch. Div. 247 it was held that where a business is carried on by trustees, as trustees and not as agents or directors, the case will not come within the Act, if the trustees are less than 20 in number. The distinction between a trustee and a director was pointed out. It was observed that a trustee dealt with the property as principal, as owner, and as master subject only to an obligation to account to the cestue que trust; whereas a director entered into contracts not for himself but for the Company, and could neither sue nor be sued on them. This case was followed in Crawther v. Thorley 32 Eng. W.R. 330 where it was held that where trustees carry on business in their own names and, as between themselves and third parties, are responsible on their contracts, they carry it on as trustees only and not as agents of their association. If they are less than 20 in number they do not come within the scope of the Companies Act. Where they are not bound to obey the orders of their association and carry on the business in their own names and on their own liability, without any reference to the direction or orders of their association they can not be regarded as the agents of the association so as to bring the association within the scope of the Act.

11. Now applying these principles to the present case it is clear that the business was carried on by the 1st defendant alone and not by the association which financed him. The deed of partnership is not a deed executed by all the parties in favour of all, but one between the 1st defendant on the one side and the other partners on the other. The 1st defendant alone had the patta which authorized him to carry on the business and although there is a clause in the patta authorizing him to take partners, there is no promise on the part of Government to recognise his partners, nor is there anything to show that as a matter of fact any important relation ever existed between Government and any of the partners but the 1st defendant, nor is there anything to show that the other shariks incurred any liability to any body but the 1st defendant. The agreement between the 1st defendant and the others expressly deprived them of any power of interference with him. We find in paragraph 4 of the agreement the following passage: 'Entire charge of catching and selling elephants will rest with the first party (defendant No. 1). The second party (the other 13 shariks) shall not be allowed to interfere with that.' In accordance with the provisions of this paragraph we do not think that the defendant No. 1 can be regarded as the agent of the shariks. Under the agreement he could not only catch but also sell the elephants as he pleased and the second party had no power to interfere. The test whether defendant No. 1 was acting as an agent would turn on the question whether the other shariks had the power to revoke the authority given him in Clause 4 of the agreement. Under the terms of the agreement we do not think that they had this power.

12. It appears from the record that the business had commenced before the other partners were taken. And these partners were taken under the conditions that they should have no power to interfere with what the defendant No. 1 did with regard to the capture and sale of elephants. The shariks had only a share of the profits.

13. The above circumstances clearly show that the association carried on no business as an association and so did not come within the scope of the Indian Companies Act. This being our view, we think that the learned officiating District Judge was wrong in holding that the plaintiff's claim was barred by the provisions of that Act. We, therefore, set aside the judgment of the lower appellate Court and remand the case for disposal of the other points arising in the appeal to that Court. The appellant will be entitled to the costs of this appeal.


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