S K GHANDY Vs. LPEPUGH

JUDGEMENT

(1.) This an appeal by the plaintiff in a suit for damages. The plaintiff is a share-holder in the Hoogly Coal Company, Limited, incorporated under the Indian Companies Act. The first defendant, a share-holder of the company, was appointed its first director by the articles of association and has been a director thereof since its incorporation. The company has been joined as the second defendant. The circumstances which have given rise to the claim for damages may be briefly narrated.

(2.) On the 23 September, 1914, the first defendant obtained a lease for 999 years of coal land in Mouza Bon Bistupur held under proprietary right by one Sanjilal. The consideration was the payment of Rs. 30,000 as premium and royalties on; the working. On the 23 June, 1915, the defendant company was incorporated to take over the Bon Bistupur concern from the first defendant on terms contained in a draft agreement. The capital was fixed at two and a half lacs of rupees covered by 50,000 shares of Rs. 5 each. This agreement between the first defendant and the company was executed on the 2nd July, 1915. On the 5 July, 1915, 40,000 fully paid-up shares were awarded to the first defendant as consideration. Messrs. W.A. Lee & Co. were at the same time appointed Managing Agents and they continued as such for about a year when their services were dispensed with. The evidence showed that till September, 1917, the concern was looked after by the first, defendant who was also the sole director. During all this time, the premium of Rs. 30,000 had not been paid to the vendor nor had he executed the conveyance to the company. But in January, 1916, the first defendant had agreed to deposit shares to the extent of one lac to secure the company against the charge for premium, as, under the agreement, the company took the property free of encumbrances. On the 3 September, 1917, the first defendant granted a sub-lease for 999 years to one Bagchi. This sub-lease included not only the Bon Bistupur concern but also two other collieries which were owned by the defendant. The consideration for the transfer was an aggregate sum of Rs. 80,000 premium. Royalties were also to be paid but at increased rates which were double the original rates. Possession was given to Bagchi under this sub-lease. The case for the plaintiff is that this sub-lease, in so far as it relates to Bon Bistupur, is fraudulent and in breach of the duty of the first defendant as director of the company. On the 17th September, 1917, the first defendant gave notice of meeting of the share-holders of the defendant company for the next day; but the meeting was not held, apparently because no one was present. After further notice, a meeting was held on the 26 November, 1917, when a resolution was proposed to confirm the lease to Bagchi on payment of royalty. The first defendant was in the chair and voted in favour of it while others present voted against it; he then declared the resolution carried. A doubt, however, was raised as to the legality of the proceeding, and a further meeting was held on the 16 February, 1918. The plaintiff protested but a resolution was carried in these terms: That the company confirm the lease granted by the first defendant on the 3rd September, 1917, so far as it relates to the lease of Bon Bistupur on royalty and accepts the offer of the first defendant to pay over the royalties as they accrue due to the company and to make no further claim on him.

(3.) The case for the plaintiff is that this resolution was a fraud on the minority and was not binding on the company. On these allegations the plaintiff instituted the present suit on behalf of himself and the other share-holders of the defendant company. The reliefs claimed were framed in the following terms: 1. Judgment for Rs. 50,000 as damages for wrongful acts, to be paid to the defendant company. 2. Judgment that the first defendant may be ordered to deliver up to the defendant company certificates of the said shares held by him or his nominees in order that the same may be cancelled and that the first defendant be ordered to pay to the defendant company at the rate of Rs. 5 per share in respect of such shares, if any, as have been transferred to bona fide holders for value.