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Guntur Cotton, Jute and Paper Mills Co. Ltd., Guntur Vs. (Pydah) Venkatachalapati and Another - Court Judgment

LegalCrystal Citation
CourtPrivy Council
Decided On
Case NumberPrivy Council Appeal No. 32 of 1931 (From Madras)
AppellantGuntur Cotton, Jute and Paper Mills Co. Ltd., Guntur
Respondent(Pydah) Venkatachalapati and Another
Advocates:Herbert Canliffe and Thomas Stangman, for Appellants ; Upjohn and Narasimham, for Respondents. Solicitors for Appellants, Douglas Grant and Dold ; Solicitors for Respondents, Barrow Rogers and Nevill.
.....had made a secret profit from the lease, and he thought that there was no evidence to support the higher rate of rs.26-8-0. he also pointed out that in any case the rs. 18,000 awarded was wrong as in fact the whole of the 4,000 puttis had not been manufactured but only 2,749. his colleague, shrinivasa ayyangar, j., disagreed on the main question of liability. the reasoning of his judgment on this point is not very clear, but he seems to have thought that there was evidence to support both the higher rate of rs.26-8-0 and a secret interest of at all events respondent 1 in the lease. he therefore affirmed the finding of the trial judge as to the liability of the respondents for the difference of rs.4-8-0 per putti, but he agreed with his learned colleague that it could only be charged.....

Sir George Lowndes:

These consolidated appeals arise out of prolonged disputes over the management of a Madras manufacturing company which seems to have had an unusually troubled existence. (Their Lordships after setting out facts which fully appear in AIR 1929 Mad 353 proceeded to give the decisions of the High Court as follows.) Further appeals against the final decree were lodged by the company and respondent 1 and all the four appeals were heard together. Judgment was delivered on 3rd February 1928, with the result that the company's appeals were dismissed, and on respondent 1's appeals both the preliminary and final decree of the District Court were varied. The Rs.18,000 damages were reduced to Rs. 12,370-8-0; the Rs.7,039-10-8 for commission, and the Rs.46,011-10-0 in respect of interest on loans were eliminated ; the Rupees 4,430-9-7 on account of barred decrees was reduced to Rs.484-5-4 and the costs were to a large extent laid upon the present appellants.

The company now appeals to His Majesty in Council, complaining not only of these variations but seeking also wider relief than was accorded to it by the District Judge. On the other side only respondent 1 (who was defendant 2 in the suit) has been represented before the Board. Their Lordships have not thought it necessary in this case to hear counsel for respondent 1 as they are satisfied that the conclusions come to by the learned Judges of the High Court cannot be attacked by the appellant company. They will give their reasons briefly under the four heads of complaint which have been argued before them. On the first head the main contentions of the company were concerned with the mortgage in favour of Sathirazu, the wife of respondent 1. It was executed, as already stated, on 2nd January 1918, and was for Rs.1,23,354-11-9 which was said to be the amount due for principal and interest in respect of the ladies' advances up to 2nd January 1918. Inasmuch as the mortgagee was not made a party to the suit it is manifest that the company's contention that the Courts in India should have held the mortgage to be void cannot be supported. There is apparently still pending in the local Courts a suit by the mortgagee for the enforcement of her security in which all questions as to the validity of the transactions can be decided between the proper parties.

But it is further contended that a sum of Rs. 74,000 which was repaid to Sathirazu by the respondents, in part after the date when their activities as secretaries and treasurers should have ceased, ought to have been ordered to be refunded by them. Both the District Judge and the High Court refused to accede to this contention and their Lordships have no doubt they were right. It is not now at all events disputed that a sum of Rs. 78,000 was in fact advanced by the lady and was utilised for the proper purposes of the company. There is no ground therefore upon which the repayment of the smaller sum out of the funds of the company can be impugned. There remains under this head only the question of the Rs.46,011-10-0 in respect of interest which the District Judge ordered to be repaid but which the High Court disallowed. The ground of this claim was that the rate of interest on Sathirazu's advances to which the respondents had committed the company was excessive. It is, their Lordships think, a sufficient answer to this contention to say that no attempt was made on behalf of the company to prove that the money, of which it is clear the company was in urgent need, could have been raised at any lower rate. It was suggested in the trial Court that the real lenders were the respondents, but this was not established, and no charge of this nature has been made before the Board. Turning next to the question of the leases, the matter stands as follows. The mill as already stated was completed in 1914. The respondents however soon found that they could not work it on the company's account at a profit and a system of so called "leasing" was adopted. The method as explained to their Lordships was to make a contract with the "lessee" for the supply of a certain quantity of jute which the company was to manufacture into bags for him at a fixed rate, the company's profit on the transaction being the difference between the actual cost to them of the process of manufacture and the rate agreed on.

The lease in 1915 was advertised and the tender of one Nalam was accepted. He agreed to supply 4,000 puttis of jute and to pay Rs.22 per putti for the cost of manufacture (a putti being the equivalent of 500 lbs.), and at this price the company apparently made a profit. Subsequently to the acceptance of his tender a partnership was formed under which Nalam agreed to share the profits of his contract with one Chennaya and Satyana-rayanamurthy; respondent 1's son, whose share was to be 6-annas in the rupee. The appellant company charged that the son's name was merely a cloak for the two respondents who were thus secret sharers, and that the lease was a fraud on the company. The trial Judge held this charge to be unsustained. He was however of opinion that the respondents could and ought to have secured the rate of Rs.26-8-0 per putti instead of Rs. 22, and he held them responsible for the difference of Rs.4-8-0 in respect of the 4,000 puttis, i. e., the sum of Rs.18,000 which was included in the preliminary decree.

In the High Court Wallace, J., agreed with the lower Court that there was no evidence that the respondents were interested in or had made a secret profit from the lease, and he thought that there was no evidence to support the higher rate of Rs.26-8-0. He also pointed out that in any case the Rs. 18,000 awarded was wrong as in fact the whole of the 4,000 puttis had not been manufactured but only 2,749. His colleague, Shrinivasa Ayyangar, J., disagreed on the main question of liability. The reasoning of his judgment on this point is not very clear, but he seems to have thought that there was evidence to support both the higher rate of Rs.26-8-0 and a secret interest of at all events respondent 1 in the lease. He therefore affirmed the finding of the trial Judge as to the liability of the respondents for the difference of Rs.4-8-0 per putti, but he agreed with his learned colleague that it could only be charged upon the 2,749 puttis actually manufactured. In the result, by the decree of the High Court the Rs. 18,000 was as above stated reduced to Rs.12,370-8-0. Their Lordships are told that a further appeal upon this point under the provisions of the Letters Patent, based upon the difference of opinion between the learned Judges, is still pending in the High Court, but there is no appeal by respondent 1 before this Board and the decree for Rs.12,370-8-0, so far as the Board is concerned, stands.

The appellant company now seeks to restore the figure of Rs.18,000 awarded by the trial Judge, but their Lordships have some difficulty in understanding upon what this contention is based. Assuming in the company's favour that there was sufficient evidence to support the higher rate of Rs.26-8-0 and that the respondents were guilty of a breach of their duty to the company in accepting the Rs.22, it clearly does not follow that they were responsible for any loss in respect of the unmanufactured puttis. The raw material for the balance was not supplied by the lessee, and there is no evidence that this was in any way the fault of the respondents, or that damages could have been recovered from the lessee.

They think therefore that this claim must necessarily fail.

The only other question raised under this head was as to the subsequent lease for 1918-19. It was put up to auction and knocked down to one Varadaraghaviah, the brother of respondent 2. It is the company's case that this auction was collusive, but both Courts in India have negatived the contention and this point had not been pressed. It was however concurrently found that after the auction respondent 1 was given a 2-annas share in the proceeds of the contract which worked out at Rs.2,200-4-3 and for this sum he has been made liable. He has not appealed and his liability stands. The contention of the company before their Lordships is that he should have been charged with the whole profits of the partnership and not merely with his individual share. In the trial Court this claim was supported by reference to the case of Imperial Mercantile Credit Association v. Coleman(1). The contention does not appear to have been pressed in the High Court, and under the circumstances their Lordships think it sufficient to say that the case in question was rightly distinguished by the trial Judge, and that upon the facts proved the liability of respondent 1 could not be held to extend beyond his 2-annas share. (Their Lordships agreed with the High Court's decision on the point of commission and proceeded). It only remains to deal with the claim in regard to the time-barred decrees. Of these a detailed list of 144 decrees was laid before the Commissioner upon which he found the respondent liable on the ground of negligence for Rs. 9,897-15-6 in respect of 39 decrees. This was reduced by the District Judge to Rs. 4,430-9-7 upon 16 decrees. The High Court allowed only Rs.484-5-4. Under this head the claim of the appellant company before the Board was for the restoration of the amount allowed by the Commissioner, but the argument was in effect confined to certain items in respect of which it was said that the respondents had admitted liability before the District Judge.

There was, their Lordships think, no possible ground upon which the Commissioner's figure could be supported. In order to debit the respondents with the unrealized amounts of these decrees it was necessary for the appellant company to show that the amount in each case could have been recovered from the decretal debtors and that the failure to do this was due to the negligence of the respondents, but no attempt seems to have been made to establish either branch of the charge. Their Lordships are also unable to accede to the argument as to the so-called admissions. The District Judge no doubt says in his judgment that as to 13 items of which the numbers are specified "the defendants' pleader states that he has no objection," and that item 79 was also given up on a scrutiny of the records. In the judgment of the High Court however only 2 of the 13 items and item 79 are said not to have been contested. Their Lordships are asked to hold on the state of the record that the learned Judges of the High Court had overlooked the admission as to the other 11 items. This in the absence of clear evidence on the point their Lordships are unable to do. It is quite possible that the admission was disputed in the High Court or it may have been allowed to be withdrawn. If such a slip had been made the attention of the Court should have been called to it in India. So far from this having been done, their Lordships find that in the company's petitions for leave to appeal to His Majesty in Council no suggestion that anything of the kind had occurred, though other grounds of complaint are set out in great detail. For the reasons given their Lordships are of opinion that the appeals must fail and should be dismissed with costs. They will humbly advise His Majesty accordingly.

Appeals dismissed.

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