M M HUSSAIN Vs. LAMINATED PACKAGE P LTD

JUDGEMENT

(1.) The plaintiffs are the appellants. O.S.No. 188 of 1978 on the file of the Principal Subordinate Judge, Visakhapatnam has been filed by the plaintiffs for a declaration that the plaintiffs are entitled to a sum of Rs. 5,000/- per month under an agreement with a charge on the 1st defendant-company and personal liability of the Directors of the 1st defendant-company and to direct the defendants to pay the 1st plaintiff a sum of Rs. 14,000/- with a charge on the 1st defendant-company and also to direct the defendants to pay Rs. 3,500/- to the 1st plaintiff with a charge on the 1st defendant-company and to direct the defendants to pay a sum of Rs. 1,500/- to the 2nd plaintiff every month with a charge on the 1st defendant-company and make the Directors personally liable.

(2.) For the sake of convenience the parties to this appeal will be referredto in accordance with their ranking in the suit.

(3.) The averments in the plaint in brief, are as follows:- The 1st plaintiff was running Kamal Steel Industries'. In 1967 there was a proposal to start Corbmandel Fertilisers Company at Visakhapatnam and the 1st plaintiff conceived the idea of manufacturing laminated jute bags as an ancillary business to supply to the Coromandal Fertilisers Company. In pursuance of his idea, the 1st plaintiff applied to the National Small Scale Industries Corporation, New Delhi, through the Industries Department, Hyderabad for import of machinery from West Germany. After spending a lot of amount for the formalities, he finally obtained the import license on 14-2-1968- When he wanted to install the machinery and run the business, he felt short of funds and hence the 1st plaintiff wanted to approach some financiers to promote a private limited company and hence he entered into a preliminary agreement with M/s. General Credit Corporation, Calcutta and at that juncture the 2nd defendant, who happened to be the friend of the 1st plaintiff, met the 1st plaintiff and talked about business and hence the preliminary agreement with General Cred it Corporation was cancelled and an agreement was entered into between the 2nd defendant and the 1st plaintiff. They agreed to incorporate the conditions of the agreement in the memorandum and articles of association of the Private Limited Company. Under this agreement it was agreed that 25% of the subscribed capital of Rs. 3 lakhs should be given as fully paid up shares to the 1st plaintiff and the 1st plaintiff shall be a permanent Director and he shall also receive a sum of Rs. 1,500/- per month for the services already rendered by him. After the agreement the Private Limited Company with the name of the 1st defendant was promoted by the 1st plaintiff and incorporated under the Companies Act. The 2nd defendant became the Managing Director and defendants 3 to 5 were the Directors and defendants 2 to 5 were paying Rs. 1,500/- per month to the 1st plaintiff till 1974 and the 1st plaintiff was acting as an occupier-cum-Resident Director of the 1st defendant-company till 1974. Subsequently the Directors were gradually neglecting the 1st plaintiff and were not keeping him informed about the affairs of the company and they were not even showing the balance sheet and other details. They entertained an evil design and the 2nd defendant wrote a letter on behalf of the 1st defendant on 12-4-1969 to the 1st plaintiff stating that the interest of the 1st plaintiff is only Rs. 86,972-00 but not any share holdings in the company and that the above said amount represents the value of the money deposited for purchasing the machinery towards 10% of its value and that the remaining 15% of its value was given by bank security. The 1st plaintiff on inquiry from the Registrar of Companies learnt that all the shareholders are family members of the 2nd defendant and that no share holdings were allotted to the 1st plaintiff and hence the 1st plaintiff was constrained to raise a dispute with the 2nd defendant and others. After some discussion between the parties on a number of occasions, both sides felt that it is proper for them to decide the matter amicably and that as per desire they entered into an agreement dated 6-11-1974 (Ex.A-33) signed by the 2nd defendant on behalf of the 1st defendant. As per the said agreement the 1st plaintiff shall be paid Rs. 3,500/- per month for his life and the 2nd plaintiff shall be paid Rs. 1,500/- per month for her life and after their life similar amounts shall be paid to two of their sons for their life and there shall be a charge for those amounts on the assets of the 1st defendant and also the Directors shall be personally liable for the payment of those amounts. Subsequently defendants 2 to 5 sold their shares to defendants 6 to 10 and they have declined to pay the amount as per Ex.A-33 and payment of the amounts was stopped from March, 1978. Hence the plaintiffs are constrained to file the present suit.