SETH SOBHAGMAL LODHA Vs. EDWARD MILLS LTD

JUDGEMENT

(1.) ON July 6, 1906, Seth Gumanmal Lodha, one of the proprietors and a nominee of the firm Kamal Nayan Hamir Singh of Ajmer, and Kanwar Ram Swaroop, son of Rai Bahadur Seth Champalal of Beawar, executed an agreement. Its relevant terms and conditions were as follows - "it was executed for the purpose of establishing a Cloth Mill at Beawar. The concern was to be started in the name of the Edward Mills Co. Ltd, Beawar. The two parties would invest bulk of the money and the management would also remain in their hands. They would keep their shares separate which would not be of the value of less than rupees one lac. The rights of both the parties would be equal and both the parties would have jointly and severally the rights of becoming Manager, Chairman, Secretary, Treasurer, etc. These rights would be exercised half and half by both the parties and they would be entitled to get the income in equal shares in respect of all the commissions, salary or any other kind of income. According to the terms of the Memorandum and Articles of Association the rights of the Chairman and Managing Director would jointly be exercised by Seth Guman Mal proprietor of the firm Kamal Nayan Hamir Singh and Kanwar Ram Swarup. After the registration of the Memorandum and the Articles of Association in the first general meeting, Guman Mal proprietor of Kamal Nayan Hamir Singh would discbarge the duties of the Chairman and would continue to do so for the full term of three years. During this period Ram Swarup would continue to act as Managing Director. Thereafter Seth Guman Mal would hold the office of the Managing Director and Ram Swarup would act as Chairman and that procedure would be followed in future. The work and the rights of the Secretary, Treasurer and Agent would be joint and would be carried on in the joint names of the parties. All the rights which the executants of the agreement, acquired, would not only be enjoyed by them till their life time, but they would also devolve upon their heirs, successors and administrators or upon those persons who might be their legal heirs and legal representatives. "

(2.) IN pursuance of the above agreement the Edward Mills Co. Ltd. , was incorporated on August 9, 1906. The substance of the agreement found place in clause VI of the Memorandum of Association. It runs as follows - "vi. Seth Guman Mal, son of Seth Raj Mal Lodha, Proprietor of the firm of Kamal Nayan Hamir Singh of Ajmer and Kunwar Ram Swarup, son of Rai Bahadur Seth Champalal of Beawar, or their heirs, executors, administrators, successors, representatives or their duly authorised agents or such other persons or persons as may from time to time be appointed by them, shall be Agents, Secretaries, Treasurers, the Chairman and the Managing Director of this Company, and shall not be required to vacate the said offices until they resign of their own accord, and as a remuneration for their services a fixed amount of Rs. 250/- per month shall from the date of commencement of the business upto the date the machinery may begin to work, be given to them ; and afterwards the said Seth Guman Mal, Proprietor of the firm of Kamal Nayan Hamir Singh of Ajmer and Kunwar Ram Swarup son of Rai Bahadur Seth Champalal of Beawar, shall be allowed 16 % only on the net profits of the earnings of the Company as their commission. As to the way in which the respective duties of the Chairman and the Managing Director shall be discharged, Seth Guman Mal and Kunwar Ram Swarup will from time to time settle between themselves and inform the office of the Company of the same. " Arts. 60 and 75 of the Articles of Association substantially convey the same terms and conditions. Under Art, 60 of the Articles of Association Seth Guman Mal and Ram Swarup were to be appointed ex officio Directors as also the Chairman and Managing Directors of the Company respectively. It also provided that their heirs, executors, etc. , as appointed by them, would be able to act as such. As to the way in which their respective duties would be discharged Seth Guman Mal and Ram Swarup would, from time to time, decide and settle between themselves and inform the Company's office of the same. Art. 75 lays down that Seth Guman Mal and Ram Swarup or their heirs, executors, etc. , would be the Chairman and Managing Director of the Company and would not be required to vacate the office until they resigned of their own accord. They would get Rs. 250/- per month from the date of the commencement of the business till the date the machinery started working. Thereafter they would get Rs. 16 % on the net profits of the Company as their commission.

(3.) DEFENDANT No. 3 contested the suit on the ground that he had been wrongly impleaded and the plaintiffs are not entitled to get any relief.