V K R S T FIRM, NOW REPRESENTED BY V K R S T MANICKA CHETTIAR Vs. ORIENTAL INVESTMENT TRUST LTDBY OFFICIAL LIQUIDATOR, GRAJAGOPALAN

JUDGEMENT

(1.) On 21 July 1939 the Court passed an order for the compulsory winding up of the Oriental Investment Trust, Ltd., a company registered under the Companies Act. An undivided Chettiar family carrying on business under the vilasam of V. K. R. S. T. claimed to rank as a creditor in the sum of Rs. 1,36,274-1-2. The Official Liquidator disputed the validity of the claim, except to the extent of Rs. 6310-7-0. As the investigation of the question involved a lengthy inquiry, it was decided that it should be tried in accordance with the procedure prescribed for the trial of a suit on the original side of the Court. After the pleadings had been closed the suit came on for hearing before Bell J. who held that the contentions of the Official Liquidator were well founded and consequently only allowed the firm to rank as a creditor for the admitted sum of Rs. 6310-7-0. This appeal is from the judgment of the learned Judge. It will be convenient hereafter to refer to the V.K.R.S.T. firm as "the firm" and the Oriental Investment Trust, Ltd., as "the company."

(2.) The members of the joint family were Kasi Viswanathan, his son Manikkam, his brother Narayanan, and Narayanan's son Somasundara. Narayanan died on 16 January 1939. Kasi Viswanathan died after the trial and the appeal has been preferred by his son as the manager of the family. The company was incorporated on 9 September 1936 with an authorised capital of Rs. 25,00,000 divided into 25,000 shares of Rs. 100 each. The shares actually issued numbered 6068, and at the date of the winding up order only Rs. 25 per share had been paid by the subscribers. The principal promoters of the company were Kasi Viswanathan and P.L.A.V.A.D. Ramanathan Chetty, who was then a local director of the Reserve Bank of India. Kasi Viswanathan and Ramanathan were appointed the managing directors, but from the inception of the company the management of its business was left entirely to Ramanathan, who was also the agent of the Madras branch of the firm. Narayanan was the member of the family in charge of the firm, but there is no doubt that Ramanathan controlled the Madras business of the firm as well as that of the company.

(3.) The articles of association provided that the business of the company should be managed by the directors of whom there were six, including the two managing directors. Authority was given, to the directors to delegate their powers to a committee consisting of one or more of their number. A formal agreement was entered into between the company and the managing directors under which, subject to the control of the directors they were to have "either jointly or severally" the general conduct and management of the business and affairs of the company and without prejudice to their general power, jointly and severally the power inter alia of buying and selling shares and securities on behalf of the company and of borrowing Rs. 25,000 without the sanction of the Board of Directors or Rs. 1,00,000 with the sanction of the board.