AMBALAL J DOSHI Vs. BHARAT TRADERS

JUDGEMENT

(1.) 1. This appeal arises out of the judgement and order dated 28th April, 1993 passed by the learned Company Judge in Suit No. 2 of 1979, whereby the suit has been decreed in favour of the respondent No. 1 - original plaintiff. The facts stated briefly are that the plaintiff firm consisted of two partners, Rajendra Sheth and Harish Himmatlal Sheth, who were members of the first defendant Company i. e. M/s Shri Bharat Hand-Weaving Mills Pvt. Ltd. (the Company ). Shri Himmatlal Sheth and Shri Harish Sheth were also Directors of the said Company. The defendants No. 2 to 6 belonged to the group of the defendant No. 2 - Shri Ambalal G. Doshi and according to the plaintiff, they were all members of the Company. Shri Himmatlal Sheth and Shri Ambalal G. Doshi had promoted the Company and were running the business of the Company. In substance, the Company had two groups of shareholders, led by Shri Himmatlal Sheth and and the other led by Shri Ambalal G. Doshi.

(2.) ACCORDING to the plaintiff, an arrangement had been arrived at between both the groups pursuant to which, a meeting was held between the parties on 24th September, 1973 in the office of M/s Singhvi and Company, Accountants and Auditors, and it was decided that the group of Shri Ambalal G. Doshi should take over the management of the Company from the group of Shri Himmatlal H. Sheth, and for that purpose, as a part of an overall agreement, it was agreed by Shri Himmatlal Sheth, that the shares held by him and the members of his group would be transferred to Shri Ambalal G. Doshi and the members of his group at the face value of Rs. 31/- per share and the shares had in fact been transferred at the aforesaid face value as per the said arrangement and the agreement had been acted upon between the parties. The plaintiff firm was acting as the sole selling agent of the Company and it was agreed that the plaintiff firm shall cease to act as such sole selling agent and shall terminate the agency agreement with effect from 30th September, 1973. According to the plaintiff, it was agreed between the parties that the outstanding amount standing to the credit of the plaintiff firm in the books of the Company as on 30th September, 1973 had to be paid in the manner indicated in the said arrangement and Shri Ambalal G. Doshi and his group undertook personal liability to pay the said amount in equal installments within a period of six months, with interest at the rate of 15% per annum. It was further the case of the plaintiff that it was agreed between the parties, that Shri Himmatlal Sheth be authorized to recover the outstandings of the Company and to credit the amount of such recovery when made towards the amount standing to the credit of the plaintiff firm and M/s Bharat Stores. However, if such outstandings were recovered directly by the Company, it would be paid over immediately towards the repayment of the amount due to the plaintiff firm and M/s Bharat Stores. According to the plaintiff, it was specifically understood that credit was to be given of those amounts of the outstandings, which were in fact recovered by Shri Himmatlal H. Sheth.

(3.) IT was also agreed that an option be given to Shri Himmatlal Sheth to purchase finished stocks of the Company as on 30th September, 1973 and the amount of such stock was to be adjusted towards the amount due to the plaintiff firm. The plaintiff firm exercised such option and purchased the available stock as on 30th September, 1973 for an amount of Rs. 8,770=50 and the said amount was given credit towards the amount due and payable to the plaintiff firm by the Company. It was also the case of the plaintiff that, on 9th October, 1973, the Company also wrote a letter to the plaintiff firm acknowledging the liability to pay the amount standing to the credit of the plaintiff firm in the books of accounts of the Company by six equal monthly installments. It was the say of the plaintiff that the amount standing to the credit of the plaintiff firm in the books of accounts of the Company was to the tune of Rs. 25,706=74 inclusive of the amount of Rs. 10,000/- paid as deposit by the plaintiff firm as per the agency agreement. The said amount was arrived at after giving credit for the amount of the value of the stock purchased by the plaintiff firm on 29th September, 1973. It was the case of the plaintiff that, an amount of Rs. 25,706=74 with interest at 15% per annum was due and payable by the defendants to the plaintiff firm. That, the defendants No. 2 to 6 had undertaken a personal liability for repayment of the said amount to the plaintiff firm. That, it was because of the fact that the defendants No. 2 to 6 had undertaken a personal liability that Shri Himmatlal Sheth and members of his group had agreed to transfer the shares belonging to them in the Company to the second defendant and the members of his group. That, as a part of the arrangement and because of the said arrangement, Shri Himmatlal Sheth and the members of his group had agreed to handover the management of the Company to the second defendant and the members of his group. As the defendants had failed and neglected to make payment for the same, the plaintiff had given notice dated 1st January, 1974 through their advocate to all the defendants making a demand for the amount then due according to the monthly installments. In response to the notice, the defendant had given a reply, which according to the plaintiff was false and got up. The plaintiff, therefore, instituted a suit in the Court of the learned Civil Judge (S. D.), at Rajkot, which came to be numbered as Special Jurisdiction Suit No. 63 of 1974. The appellants herein were the original defendants No. 2, 3 and 5 in the said suit. Another suit also came to be instituted against the Company by M/s Bharat Stores.