FIRM KISHORE CHAND SHIVA CHARAN LAL THROUGH RAGHUNATH PRASAD TANDON Vs. BUDAUN ELECTRIC SUPPLY CO LTD THROUGH PLJAITEY AND CO

JUDGEMENT

(1.) This is an appeal against a judgment and decree, dated 8 March 1940, of the Civil Judge of Budaun by which the plaintiffs claim for execution of the sale deed of an undertaking was dismissed. Defendant 1, heareafter called the company, is an electric supply company for the supply of electricity within the Municipality of Budaun, and defendant 2 is its managing agents. By an order of the Government, the company was required to sell its undertaking to the plaintiffs and by an award of the arbitrator appointed by the Government the sale price of the undertaking was determined to be Rs. 1,71,084-3-6. The plaintiffs alleging that they had been working the undertaking under the orders of the Government and that they were entitled to set off against the sale price the amount due to them for debentures of the company of rupees two lacs held by them raised an action in the Court of the Civil Judge of Budaun for an order against defendant 1 to execute the sale deed of the entire Electrical Undertaking at Budaun within a period prescribed by the Court, in default whereof the said sale deed be executed and sale completed by the Court on behalf of the said defendant. The defendants challenged the validity of the order of sale. They further challenged the validity and the finality of the award and they demurred that the action was misconceived and pleaded that the relief claimed could not be granted in law. The Civil Judge accepted the defence and dismissed the claim.

(2.) In this appeal the questions which arise for our consideration are largely legal ones, but before we examine them it is necessary to state certain facts about which there is no dispute and settle other facts about which there is some controversy. On 22 April, 1929, the Governor-in-Council in these Provinces granted a license to defendant 2 for supply, of electricity within the municipal area of Budaun. In or about the mon October, in the same year, the company was incorporated with a share capital of seven lacs and one of the objects set out in its memorandum of association was to acquire the said license and to supply electrical energy within the Municipality of Budaun. On 20 November 1930, the Provincial Government sanctioned the transfer of the said license to the said company. On 9 June 1932, the Provincial Government revoked the license on the ground that the company had failed to satisfy the Government that it was in a position fully and efficiently to discharge its duties and obligations imposed by the license.

(3.) At the time when this license was revoked the undertaking of the company was in a most nebulous condition. It certainly was not in possession of a plant to generate electricity and had no means to pay for it. It had acquired some land on lease from the municipality and had put up some buildings. It had purchased a large stock of cables, wires and poles and probably it had put up some of the mains and service lines on the streets, but its installations and the works which it was required to do under the license were wholly incomplete and it was not in any position to supply electrical energy. After the revocation of the license the company continued in the hope that its license would be renewed. To improve its finances on 17 November 1932 it arranged a loan of two lacs from the plaintiffs which is a joint Hindu family firm owned by three brothers. Under this arrangement the company issued debentures of rupees two lacs secured by a trust deed with two trustees, one of whom was one of the plaintiffs, which were underwritten and later on purchased by the plaintiffs. By another agreement of the same date the same plaintiff who acted as one of the trustees in the trust deed was also made an agent of defendant 2 and was to share in the commission of managing agency of defendant 2 and was to manage the business of the company at Budaun.