T S SIVAPRAKASA MUDALIAR Vs. KMSAMARAPURI

JUDGEMENT

(1.) In February, 1948, two persons to whom we will refer as spon-dents 1 and 3, brought into existence two companies. One was the Thirnages-waram Weavers Welfare and Benefit Company, the shareholders of when are weavers working in Thirunageswaram. The other was Ramaswami and Company, Ltd., a private company consisting of only two shareholders, the first an third respondents themselves. These two persons were presumably responsible or the drawing up of the constitution of the two companies; and it was agreed pon at the same time that a managing agency agreement should be executed, where by the powers of management in the Thirunageswaram Weavers Welfare andBenefit Co., Ltd., should be exercised by Ramaswami and Co., Ltd., for a term of a years, with a further extension of 20 years upon the resolution of the company, at an ordinary general meeting. Unfortunately, these two respondents fell out ; and so made it difficult for them to conduct either their own business of Ramawami & Co., Ltd., or that of Thirunageswaram Weavers Welfare and Benefit C., Ltd., of which these two respondents are the two leading directors. The Weavers Welfare and Benefit Company became divided into two factions, the larger, controlling 240 to 305 shares out of a total of 403, supporting the third respondent, and the other, controlling anything upto 163 shares ; following the leadership of the first respondent. It would appear, if the allegations of the first respondent are true, that the third respondent, as the controller of the larger number of shareholders, succeeded in depriving the first respondent of all share in the management, with the result that the first respondent filed O.S. No. 395 of 1948, on the file of the District Munsif of Poonamallee for a declaration that he was equally entitled with the third rsepondent to manage the affairs of Ramaswami and Company, of which the main concern was the conducting of the Weavers Welfare and Benefit Company, and praying for an injunction to restrain the third defendant from unlawfully ousting, him from the joint managership of the companies. At the same time, he filed I.A. No. 939 of 1948 for a temporary injunction. A temporary injunction was passed on 3 November, 1948 ; but as the first respondent was not satisfied with the extent of the temporary injunction passed, he filed C.M.A. No. 90 of 1948 in the Court of the District Judge of Chingleput against the order in LA. No. 939 of 1948. On 10th November, 1948, on an application for the appointment of a receiver one Devaraja Mudaliar was appointed as receiver on the 4 December, 1948. The third respondent attempted to circumvent this order in favour of the first respondent by getting two men of his faction to file I.A. No. 54 of 1949 in C.M.A. No. 90 of 1948, to restrain the receiver from interfering with the affairs of the management of the Thirunageswaram Weavers Welfare and Benefit Company. By that time there were proceedings pending in the High Court also and so the learned District Judge dismissed that application. C.M.A. No. 52 of 1949 has been filed against the order of the District Judge dismissing LA. No. 54 of 1949, while in C.R.P. No. 92 of 1949, the third respondent prays this Court to revise and set aside the order of the District Judge appointing a receiver. We may add that: Devaraja Mudaliar refused to accept the office of receiver, with the result that the learned District Judge was unable to secure the unanimous approval of all interested parties with regard to the person to be appointed as receiver. Various names were submitted to him by the rival factions, and he appointed one Janab M.A. Sandhamiyan Sahib, whom he considered to be the most fitted for that office.

(2.) Very many points have been argued on behalf of the third respondent and the: two members of his faction who filed I.A. No. 54 of 1949. The first is that the Court had no jurisdiction to appoint a receiver in a going concern like Ramaswami and Company. Their learned advocate seeks as authority for that contention a brief dictum to be found at the conclusion of the judgment of Greaves, J., in Kailashchandra Butt V/s. Sadar Munsif, Silchar (1924) I.L.R. 52 Cal. 513 at 521. There, the learned Judge said without giving any reasons, ...there is no jurisdiction in a Court to appoint a receiver of a company. If it is necessary to protect the assets of a company other means must be sought which are provided by the provisions of the Companies Act. We find no provision in the Companies Act which excludes the jurisdiction of a Court to appoint a receiver; though since the Companies Act makes provision for dealing with circumstances in which a company is mismanaged, it should not be necessary in the vast majority of cases to appoint a receiver. It might even be improper to do so in certain circumstances. Our attention has been drawn to a number of instances in which Receivers have been appointed; and although the particular case that we are here considering does not fall within one of the categories of cases in which receivers have been appointed by courts, we think this is a case in which, if the allegations are accepted, the appointment of a receiver would be the most satisfactory way of dealing with the temporary difficulty that exists during the pendency of the suit. If the allegations of the first respondent be true he is kept out of possession and management by the third respondent and seeks in his suit to have it declared that he is entitled to participate equally with the third respondent in the management of Ramaswami & Co., Ltd.

(3.) It was next argued that even though it be unobjectionable to appoint a receiver for Ramaswami and Company with regard to its own business, it would be improper to appoint a receiver for that part of the business of Ramaswami and Company which deals with its managing agency on behalf of the Weavers Welfare and Benefit Company. It has been argued that since the contract of agency was between the Weavers Welfare and Benefit Company on the one hand and Ramaswami and Company on the other, a receiver cannot be substituted for Ramaswami and Company. If Ramaswami and Company is not to manage the affairs of the Weavers Welfare and Benefit Company, then it is argued, it is for the company to decide who shall manage it. The receiver is however only the manager of the business of Ramaswami and Company and was not substituted for Ramaswami and Company. The business of Ramaswami and Company was not taken away from it. That company continues to exist and to be the managing agents of the Weavers Welfare and Benefit Company. As the manager of that company, the receiver is entitled to perform all the duties of that company, including the managing agency of the Weavers Welfare and Benefit Company.