KIDAMBI VATAPATRA SAYI Vs. V VENKATA PUNNAYYA

JUDGEMENT

(1.) This L. P. A. arises our O. S. No 14 of 1955 on the file of Subordinate Judge, Guntur. The facts necessary for the determination of the question in issue may be stated thus.

(2.) The plaintiff , Kidambi Vatapatra Sayi, and defendants 1 to 3 are shareholders and directors of Chandra Art Studios Ltd., Madras, a company registered under the Indian Companies Act, 191 3/07/1946. The authorised share capital of the company is Rs. 3 lakhs, divided into three hundred shares of Rs. 1,000.00 each. The value of each share, viz., Rs. 1,000.00 is payable with application for shares. All shares have been subscribed and thus the share capital is fully paid up. At the inception, besides the plaintiff and the three defendants, there were two other Directors. The plaintiff was the Chairman of the Board of Directors throughout. For reasons, which we need not consider, the company, not long after commenced business, found itself in financial difficulties. C. V. Reddy, who held ten fully paid up shares, filed O. P. No. 253 of 1950 on the file of the Madras High Court for winding up of the company. The plaintiff and the defendants considered that the only way of saving the company and safeguarding the interests of the share holders was to get that petition withdrawn. Accordingly, it was agreed between the plaintiff and the defendants that the plaintiff should advance Rs. 10,000.00 pay Venkata Reddi, and obtain a transfer of his shares in the name of the plaintiff . Since the plaintiff already held shares of the value of Rupees 40,000/- and advanced loan to the tune of Rupees 14,000/- it was agreed that he should not be exposed to the entire risk of purchasing the shares of C. V. Reddi. It was, therefore agreed between the plaintiff and the defendants that the sum of Rs. 10,000.00 should be paid back to the plaintiff from out of the companys assets, or with the consent of the General Body of members allow the plaintiff to re-pay himself within two years from 23-8-1951 i. e., before 23-8-1953, with the amounts due from the company to the defendants and by making the necessary adjustments in the company accounts. It was also agreed that if the plaintiff could not realise the money in either of these two ways, the three defendants were to pay each 2,5000/- to the plaintiff and take a transfer of 2 1/2 shares. It was also agreed that the plaintiff alone was to receive the dividends on the shares payable for the two years after 23-8-1951, and the plaintiff should not be held responsible for the rise or fall in the value of the shares, or the change in the fortunes of the company.

(3.) According to the plaintiff , he paid Rupees 10,000/- to C. v. Reddi, and obtained a transfer of his ten shares by means of Ex. A. 4 dated 30-10-1950, and O. P. No. 253 of 1950 was dismissed . The terms orally agreed upon, the plaintiff and defendants were embodied in the agreement, Ex. A. 1 dated 23-8-1951. The defendants failed to implements the contract in spite of the plaintiffs demands and registered notice dated 4-12-1954 . Hence the present suit was filed on 26-2-1955. with the prayer for specific performance of the contract by directing the defendants to pay the plaintiff Rs. 2,500.00 each against 2 1/2 shares to be conveyed by him to each of them.