KARNAL DISTILLERY CO LTD Vs. LADLI PARSHAD JAISWAL

JUDGEMENT

(1.) THIS is Letters Patent Appeal presented by the Karnal Distillery Co. Ltd. , Shanti Farshad, madan Lal, and Shrimati Suraj Mukhi, defendants, from the Judgment of learned Single Judge allowing Regular Second Appeal No. 211 of 1954, granting reliefs to the plaintiff Ladli Parshad jaiswal in the terms mentioned in that Judgment, and reversing the judgment passed by the district Judge, Karnal, and partially restoring that of the Senior Subordinate Judge. The pedigree-table reproduced below indicates the relationship of the parties inter se: kishori LAL _____________________|_________________________ | | | durga Parshad Ladli Parshad Shanti Parshad | Plantiff Defendant 2 | | shrimati Suraj Mukhi defendant 5 ___________|____________ | | sajan Lal Madan Lal deft. 3 Def t. 4

(2.) KISHORI Lal, father of the plaintiff and defendant No. 2 and grandfather of defendants 3 and 4, had started in 1900 the business of distillation of alcoholic beverages under the name and style of 'kishori Lal and Sons'. It was a Joint Hindu family business the members of which were Kishori lal, his sons and grandsons. The same business was conducted also under the name of 'karnal distillery, Karnal'. In 1928 Kishori Lal died leaving a widow and three sons. Durga Parshad was the eldest, Ladli parshad comes next and Shanti Parshad is the youngest. On the death of Kishori Lal in 1928 the joint family business was continued by the sons with Durga Parshad as the karta of the joint family. In 1934 Durga Parshad died leaving two sons, defendants 3 and 4, and widow Shrimati suraj Mukhi defendant 5. On the death of Durga Parshad, Ladli Par-shad, as the second son of Kishori Lal, became the karta of the family and the joint family business was continued till November 1940 when the joint family disrupted and converted itself into a contractual partnership. The three branches of the family held equal shares. The contractual partnership did not last for more than a few months and its business was taken over by a private limited company known as the Karnal Distillery Co. Ltd. , which was incorporated on 23-3-1941 and which started working from 1-4-1941. The membership of this private limited company, was Confined to the members of the family and the three branches held almost equal shares at the time of the company's incorporation. The shares of the branch of Durga Parshad were 1004 while those of Ladli Parshad and Shanti parshad were 1003 shares each. The Articles of Association inter alia provided- (a) The maximum number of Directors would not exceed five and minimum two (vide Article 102 ). (b) Ladli Parshad, Shanti Parshad and Shrimati Suraj Mukhi, widow of Durga Parshad, were appointed first Directors of this company (vide Article 103 ). (c) With the exception of the Managing Director one-third of the Directors were to retire by rotation at the end of every year (vide Article 112 ). (d) The terms on which the Managing Director was appointed and which later on De-came a sore point with the other memoerg were to the following effect: the managing Director was Mr. L. P. Jais-wal and he was to continue to be Managing Director of the Company unless he voluntarily resigned his office, for a period of ten years from the date of the registration of the Company. His term of office was to continue for a further period of ten years unless notice to that effect was given within fifteen days of the expiry of the first eight years by a two-third majority at a special General Meeting convened for that purpose. During this period the appointment of the Managing Director, Mr. L. P. Jaiswai, was not liable to be revoked or cancelled. He was to devote as much of his time as he considered necessary or desirable to devote in the interests of the Company. There was no bar to the Managing Director engaging himself in any other business or profession provided such business or profession did not in any way compete with the business of the Company (vide Article 132 ). (e) Article 134 stated that the responsibility of the Managing Director for the due and proper management of the company's business shall not be lessened or abrogated by the existence of the board of Directors, the function of such Board during the continuance of the Managing Director in that office being to advise the Manag- ing Director without taking any active part in the management of the company's business. (f) The members would be expelled from membership at the instance of holders of two-third of the subscribed capital (vide Article 47 ).

(3.) ON the first of August, 1941, Ladli Par-shad was allotted 500 shares in addition to his previous holding. The immediate effect of this additional allotment was, that so far as Ladli parshad was concerned, he became invulnerable to Article 47, and so long he held his shares he could never be expelled, as there could never be a two-third majority even if all the other members were to join hands against him.