CHANDULAL AND CO LTD Vs. NATWARLAL CHUNILAL BHALAKIA

JUDGEMENT

(1.) FIRST Appeal No. 134 of 1951 is filed against the decree passed by the Third Joint Civil Judge (Senior Division) at Ahmedabad in Civil suit No. 163 Of 1949 declaring that defendant No. 1 Company was not authorised and entitled to give or pay any extra remuneration to its Secretary, Treasurer and Agent for managing its affairs and on its behalf the affairs of the Bhalakia Mills Company Ltd. , and the resolution passed on 20-7-1949 by the defendant No. 1 Company in that connection was ultra vires and illegal, and restraining the defendant No. 1 Com-many by a permanent injunction from acting up to and from paying in terms of the aforesaid resolution extra remuneration to defendant 5.

(2.) THE circumstances which gave rise to the suit may be shortly stated as follows:-- In 1927, one Chandulal Karsandas Mashruwala, Chhotalal Bhalakia and some others thought of erecting a Textile Mill at Ahmedabad, and with that object in view they floated Chandulal and Co. Ltd. the present defendant 1 winch was to be appointed to manage the Textile Mill. The share capital of the defendant No. 1 Company was Rs. 640 divided into 128 ordinary shares of Rs. 5/- each representing 0-0-1 1/2 pie of a rupee. 72 of these shares were allotted to the said Chandulal and his nominees who had agreed to manage the affairs of the defendant No. 1 Company and on its behalf to act as Secretaries, Treasurers and Agents of the Textile Mill and 5g shares were allotted to subscribers of the capital of the Bhalakia Mills Company, Ltd. and each of those persons who agreed to subscribe 171 ordinary shares, each of Rs. 100/- in the capital of. the Bhalakia Mills Company was allotted one ordinary share of the defendant No. 1 Company. Chandulal and Company Ltd. was formed on 4-1-1928 and Bhalakia Mills Company Ltd. was also registered on the same date. For the sake of brevity, the Bhalakia Mills Company, Ltd. will hereafter be referred to as "the Mills Co. " and Chandulal and Co. Ltd. will hereafter be referred to as 'defendant No. 1 Co. ' the management of defendant No. 1 Company and on its behalf of the Mills Co. was vested in the first instance In Seth Chandulal Mashruwala, who however resigned on 6-6-1931. He was succeeded as the Managing Agent of the two companies by Seth Jethalal Purushottamdas Bhalakia in 1932, and the following was substituted for the original Clause (15) in para. III of the Objects of the defendant No. 1 Company in its Memorandum of Association.

(3.) THE Articles of Agreement entered into between defendant No. l Company and the said Jethalal in connection with the managing agency were executed on 24-2-1932 and are at Ex. 126, Article 1 of this Agreement stated inter alia that the sole and exclusive right to manage the affairs of the defendant No. 1 Company was to vest