PUNJAB NATIONAL BANK LIMITED Vs. VIKRAM COTTON MILLS

JUDGEMENT

(1.) Ranjit Singh was a director of Ranjit Singh and Sons Ltd. - which acted as a Managing Agent of Shri Vikram Cotton Mills Ltd. - Shri Vikram Cotton Mills Ltd. - hereinafter called the Company, - opened a cash-credit account with the Punjab National Bank, and to secure repayment of the balance due at the foot of the account on June 27, 1953 four documents were executed - three by the Managing Agents on behalf of the Company and one by Ranjit Singh. The three documents executed by the Managing Agents were (i) promissory not for Rupees 13,00,000 payable with interest at the rate of 2 1/2 per cent over the Reserve Bank of India rate with a minimum rate of 6 per cent per annum until payment; (ii) a deed of hypothecation of goods described in the Schedule annexed to the document; (iii) a letter to the Bank agreeing that during the continuance of the agreement evidenced by the letter of hypothecation, the Company will remain solely responsible for all loss, damage or deterioration of the securities delivered to the Bank caused by theft, fire, rain, robbery, dacoity or by any other cause whatsoever. Ranjit Singh executed a deed called an "agreement of guarantee" agreeing to pay on demand all monies which may be due as "ultimate balance" from the Company to the Bank.

(2.) In December 1953 the Company closed its business. The stocks pledged were disposed of by the Bank and the amount realised was created in the account of the Company. The Bank claimed that an amount of Rupees 2,56,877/12/6 remained due at the foot of the account.

(3.) Some creditors of the Company had in the meantime filed a petition in the High Court of Allahabad for an order winding up the Company. On February 22, 1956, a scheme of composition was settled among the creditors that the total liability of the Company was Rupees 34,45,197-11-2 and the total assets of the Company were Rupees 5,00,000, that the Company was desirous of confirming " a lease agreement" and that in order to safeguard the rights and interests of the Company and its unsecured creditors the Company had entered into an agreement with the lessee. The scheme was sanctioned by order of the High Court of Allahabad dated May 21, 1956 under Section 391 of the Indian Companies Act, 1956 after rejecting the opposition of the Bank.