MADANLAL FAKIRCHAND DUDHEDIYA Vs. CHANGDEO SUGAR MILLS LTD

JUDGEMENT

(1.) THIS is an appeal of the plaintiff and it arises out of a decree of dismissal passed by Mr. Justice S. T. Desai in Suit No. 376 of 1956 filed on the Original Side of the High Court of Bombay. The appeal raises a question of construction under the Companies Act, 1956, and the question arises in this way.

(2.) THE first defendant company Shree Changdeo Sugar Mills Limited is a public limited company. Before it was incorporated into a public limited company, it was a private limited company. The promoters of the private limited company were the plaintiff Madanlal, defendant No. 2 Nanasaheb, defendant No. 3 Kundalik and Kasturchand, the father of defendant Nos. 7 to 10. The private limited company was incorporated in 1939 and later converted into a public limited company, as I have just said, in the year 1944 by reason of a settlement which was arrived at in the three suits pending in the High Court between Messrs. A. H. Bhiwandiwala and Co. , the Managing Directors of the Company, and the promoters. At the time when the company was incorporated, a promoters' agreement was arrived at on 18-12-1939 and it stated :

(3.) THE suit is resisted by the first defendant company mainly upon the contention that after the coming into force of the Companies Act, 1956, the agreements dated 18-12-1939 made between the Company on the one hand and each of the plaintiff, defendant No. 2, defendant No. 3 and Kasturchand on the other hand, as modified by the agreements dated 22-4-1941 had become void, illegal and inoperative and did not bind the first defendant company. It is contended that, in view of the provisions of Sections 9 and 76 of the Companies Act, 1956, the agreement dated 22-4-1941 to pay a sum equal to 6 1/4 per cent out of the Company's net profit to the original promoters, of whom the plaintiff is one, is not binding on the first defendant company.