WILLIAM ROWE RAE Vs. LEWIS PUGH, EVANS PUGH

JUDGEMENT

(1.) The facts material for the determination of the questions raised in these two appeals, which have been heard one after the other, lie in a brief compass and may be shortly narrated.

(2.) On the 11 June, 1914, Pugh and Bowden formed a syndicate to work a deposit of China clay in the district of Bhagalpur upon the terms that Pugh should provide the finance and have a ten annas share, while Bowden should work the property and have a six annas share, all properties acquired by Bowden in the district to be on syndicate account. Subsequent to the date of this agreement, Bowden acquired a two-fifths interest in leases of certain property in the locality mentioned, and a certain amount of China clay was extracted though the progress of the prospecting and developing scheme was by no means satisfactory. The position thus was that though Pugh provided the influence required, and Bowden the expert knowledge necessary a financier was needed as a complement, if the business was to be a commercial success. Pugh and Bowden were accordingly joined by Rae, and on the 1 September, 1917, two documents were executed each among these three gentlemen; the first was an agreement, the second a deed of declaration of trust. The Articles of Agreement were in the following terms: Articles of Agreement made and entered into this first day of September, 1917, between Lewis Pugh Evans Pugh of Patna in the Province of Behar and Orissa, Barrister-at-Law of the first part, George William Bowden of 43, Dhurrumtolla Street, Calcutta Engineer of the second part, and William Rowe Rae of No. 7, Church Lane in Calcutta merchant of the third part. Whereas in terms of an agreement made between the said Lewis Pugh Evans Pugh and the said George William Bowden and dated the 11 Say of June 1914, the said George William Bowden has prospected for minerals in the District of Bhagalpur and with the help of monies partly obtained from the said Lewis Pugh Evans Pugh and partly of his own has discovered clay and minerals in the lands set out in the Schedule hereto and has obtained or is about to obtain leases of the said lands in his own name but for and on behalf of and for the benefit of the parties to these presents in equal shares. And whereas there has been expended by the said Lewis Pugh Evans Pugh and the said George William Bowden respectively the sum of Es.10,000 and Es.5,000 in the prospecting operations aforesaid and in negotiating for and for obtaining leases of the said lands. And whereas it has been agreed between the parties hereto that they the said parties (hereinafter called the Syndicate) should form a Syndicate for the purpose of floating a Company to acquire a portion of the said land, viz. the land known as Pathargatta lakheraj, and mine for China clay in the said lands on the terms hereinafter contained. Now these presents witness that it is hereby mutually agreed between the parties hereto in manner following that is to say: First. - That the said agreement between the said Lewis Pugh Evans Pugh and George William Bowden dated the eleventh day of June, 1914, shall be and is hereby determined in all respects and these presents are entered into in supersession of the said agreement in all its particulars. Second. - Within two months or as soon thereafter as possible from the date on which the leases so obtained and to be obtained by the said George William Bowden in the schedule mentioned are registered the said William Rowe Rae shall duly form and register under the Indian Companies Act, 1913 a Company limited by shares to be called the Colgong China Clay Company, Limited, with a capital of Rs. 2,50,000 divided into twenty-five thousand shares of Rs. 10 each for the purpose of acquiring from the Syndicate on lease for nine hundred and ninety-nine years the underground rights in all the China clay in Patharghatta lakheraj land and working China clay in the said lands and such surface rights as may be necessary for the purpose of erecting works and buildings and working the said clay at a rental of Rs. 1,200 per annum. Third : The said William Rowe Rae shall advance without interest all sums still necessary up to a limit of Rs. 10,000 for the purpose of obtaining and registering proper leases of the said lands and for the formation and registration of the said company. Fourth. - The Syndicate shall grant lease in the second paragraph of this agreement mentioned to the Company when formed for the sum of Rs. 50,000 and such further sums as are in the next paragraph hereof mentioned to be paid and satisfied as to Rs. 50,000 aforesaid by the allotment of shares to the following persons in the following numbers: To the said Lewis Pugh Evans Pugh one thousand six hundred and sixty-six shares of Rs. 10 each. To the said George William Bowden one thousand and five hundred shares of Rs. 10 each. To the said William Rowe Rae one thousand and five hundred shares of Rs. 10 each. To Peter Rae a brother of the said William Rowe Rae three hundred and thirty-four shares of Rs. 10 each. Fifth. - The Company when formed shall as part of the consideration for the lease of the said rights and in addition to the payments mentioned in the last preceding paragraph pay without interest and in cash to the said Lewis Pugh Evans Pugh the aforesaid sum of Rs. 10,000, to the said George William Bowden the aforesaid sum of Rs. 5,000 and to the said William Rowe Rae all sums that may be advanced by him in terms of the second paragraph of these presents. Sixth. - The firm of Rae and Company (at present consisting of the said William Rowe Rae and Peter Rae) as it is now or may hereafter be constituted shall be the Managing Agents of the Company for a period of at least ten years from its incorporation upon such terms as may be agreed upon hereafter. Seventh. - Provided always that, should the said William Rowe Rae fail to float the proposed Company within six months from the signing of the last of the said leases, this agreement shall be void and he shall be entitled to receive back any monies expended by him in terms of these presents, but nothing over and above the sum HO expended and the said agreement between the said Lewis Pugh Evans Pugh and George William Bowden hereinbefore shall be revived and come into force again.

(3.) The Deed of Trust was in the following terms: This Indenture made this first day of September 1917 between George William Bowden of No. 43 Dhurrumtolla Street in Calcutta, Engineer of the first part, Lewis Pugh Evans Pugh of Patna in the Province of Bihar and Orissa Barrister-at-law of the second part, and William Rowe Rae of No. 7, Church Lane in Calcutta aforesaid merchant of the third part. Whereas the said George William Bowden has obtained or is about to obtain certain leases in respect of the lands specified in the Schedule hereunder written for the considerations mentioned therein respectively and for the several terms of years or periods therein mentioned respectively with the mining and other rights therein mentioned and subject to the covenants in the said leases to be contained, and whereas the said lands and rights therein have been and will be acquired in terms of the said leases by the said George William Bowden on behalf of himself and the said Lewis Pugh Evans Pugh and William Rowe Rae in equal shares. And whereas the parties hereto have agreed to execute these presents for the purpose of defining their respective beneficial interests in the premises and to enter into and become bound by the stipulations on their respective parts hereinafter contained. Now this indenture witnesseth as follows: First. - In consideration of the premises the said George William Bowden hereby declares that as from the respective dates of the said leases he has held and now holds and will hold the lands therein mentioned in terms of the said leases and subject to the rents, covenants and conditions therein respectively reserved and contained as to one undivided third part or share thereof upon trust for the said Lewis Pugh Evans Pugh and as to one other undivided third part or share thereof upon trust for the said William Rowe Rae and as to the remaining one undivided third part or share thereof for his own absolute use and benefit. Second. - Each of the parties hereto; hereby covenants with the others and other of them as follows: (a) To pay or contribute his due proportion of the rents reserved and to be reserved by the said leases respectively and of the expenses incurred or to be incurred in performing and observing and covenants on the part of the lessee and the conditions therein contained. (b) Not to do or omit to do anything in relation to the premises in contravention of the covenants and conditions in the said leases contained. (c) To keep indemnified every other party hereto from all actions! claims and demands incurred or to be incurred by such last-mentioned party by any default on the part of the covenanting party in performing his obligations under these presents. Provided always that, should the said William Rowe Rae fail to incorporate and float the company mentioned in an agreement of even date herewith between the parties in terms thereof, this indenture shall be cancelled so far as it purports to affect the said William Rowe Rae and it shall thereafter be read as if made between the said Lewis Pugh Evans Pugh and George William Bowden only, and the shares of them respectively in the said properties shall be ten-sixteenths and six- sixteenths after repayment to the said Lewis Pugh Evans Pugh of the monies advanced by him in terms of the agreement of the eleventh day of June 1914 between the said last-named parties.