KHULNA LOAN CO LIMITED Vs. JAHIR GOLDAR

JUDGEMENT

(1.) This appeal is directed against a decree in a suit for specific performance of a contract to grant a permanent lease. The case for the plaintiffs is that the defendant Company is the owner in possession of the disputed land by virtue of purchase at a sale for arrears of revenue, that the officers of the Company agreed to grant them a permanent lease for a premium of Rs. 787-8 and an annual rent of Rs. 68, that out of the premium the plaintiff paid into the office of the Company Rs. 600 in cash and executed a promissory note for the balance, Rs. 147-8, that on the 15th February 1908 the lease, duly engrossed and stamped, was tendered to the officers of the Company, but that the Managing Director declined to execute the document. The plaintiffs accordingly ask for a decree for specific performance against the Company. The suit as originally framed was brought against the Managing Director and the two Secretaries, but ultimately the plaint was amended and the suit was described as one against the Company. The Court of first instance held that there was a valid contract, but that the Court in its discretion should not specifically enforce it. The plaintiffs were accordingly awarded a decree for recovery of the sum paid by way of premium together with Rs. 17 as the price of the stamp and Rs. 50 as compensation. Upon appeal the Subordinate Judge has reversed this decision.

(2.) He has held that the Court of first instance has exercised the discretion vested in it rather arbitrarily and not in a judicial manner and that the plaintiffs are entitled to have a lease executed in their favour by the Company. The defendant has now preferred this appeal, which involves two substantial questions : namely, first was there a contract binding upon the Company ? and secondly, if there was a contract of this nature, should the Court in the exercise of its discretion grant specific performance of it ?

(3.) As regards the first question it is necessary to state that the negotiations for the permanent lease were carried on by the plaintiffs with one of the Secretaries of the Company, who, it is not disputed, had authority to grant ordinary agricultural leases without the sanction of the Directors. There was some controversy in the Court below on the question, whether these negotiations had been carried on with the Secretary alone, or whether the terms as arranged by him were also approved by the Managing Director and the second Secretary. In this Court upon an examination of the record it transpired that the Company had produced one of their office-records which showed that the terms had been approved by the two Secretaries as also by the Managing Director. It is consequently needless to discuss at length the question whether if the Secretary alone had arranged the terms they would have been operative as against the Company. But it may be observed that, as pointed out in the case of Newlands v. National Employer s Accident Association 54 L.J. Q.B. 428 : 53 L.T. 242 : 49 J.P. 628., a Secretary cannot ordinarily be treated as a general agent on behalf of the Company. He is, on the other hand, prima facie, a person invested with authority to give effect to the decisions of the Directors. [Barnett v. South London Tramways Co. 18 Q.B.D. 815 : 56 L.J. Q.B. 452 : 57 L.T. 436 : 35 W.R. 640.] But as in the present instance the terms of settlement with the plaintiffs were approved not merely by the Secretaries but also by the Managing Director, there can be no room for doubt that the agreement would be operative against the Company. The grant of lease of this description would be clearly within the scope of the apparent authority of the Managing Director. [Western Bank of Scotland v. Addie (1867) 1 H.L. (Sc.) 145., Reid v. Rigby (1894) 2 Q.B. 40 : 63 L.J. Q.B. 451 : 10 R. 280 : 119 Eng. Rep. 881. and Watteau v. Fenwick (1893) 1 Q.B. 346 : 5 R. 143 : 67 L.T. 831 : 41 W.R. 222 : 56 J.P. 839.] It is well settled that every act done by an agent in the course of his employment on behalf of the principal and within the apparent scope of his authority binds the principal, unless the agent is in fact unauthorized to do the particular act and the person dealing with him has noticed that in doing such act he is exceeding his authority. On this principle it has been held that where the Directors of the Company, who have power to borrow such sums of money on behalf of the Company as are authorized by resolution in general meeting, borrow upon a bond under seal without the requisite resolution having been passed, the Company is liable unless the lender had notice of the irregularity. Royal British Bank v. Turquand (1856) 25 L.J. Q.B. 317 : 6 El. & Bl. 327 : 106 R. R. 623 : 2 Jur (n. s.) 663., Agar v. The Athenaeum Life Assurance Society (1858) 3 C.B. (N.S.) 725 : 111 R.R. 817 : 27 L.J.C.P. 95 : 4 Jur. (n.s.) 211 : 6 W.R. 277 : 140 Eng. Rep. 927. The plaintiffs could not be expected to ascertain whether the Managing Director, before he settled the terms with them, had taken [the necessary antecedent steps under the constitution of the Company. They would be entitled to presume that he had acted regularly within the scope of his authority and in the manner provided in the Articles of Association. Bargate v. Shortridge (1855) 5 H.L.C. 297 : 101 R.R. 163 : 24 L.J. Ch. 457 : 3 Eq. R. 605 : 3 W.R. 423 : 10 Eng. Rep. 914. : Montreal & St. Lawrence Light and Power Co. v. Robert (1906) A.C. 196 : 75 L.J. P.C. 33 : 94 L.T. 229 : 13 Manson 184. : In re Land Credit Co. of Ireland, Ex parte Overend, Gurney & Co., (1869) 4 Ch. App. 460 : 39 L.J. Ch. 27 : 20 L.T. 641 : 17 W.R. 689. : County of Gloucester Bank v. Rudry Merthyr Steam and Goal Colliery Co. (1895) 1 Ch. 629 : 64 L.J. Ch. 451 : 12 R. 183 : 72 L.T. 375 : 43 W.R. 486 : 2 Manson 223. : Duck v. Tower Galvanizing Co. (1901) 2 K. B. 314 : 70 L.J.K.B. 625 : 84 L.T. 847.] "We must hold accordingly that the agreement is operative against the Company, or, in other words, that the Company would clearly fail in a suit for rescission.