1946 (8) TMI 19 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the contract of October 23-24, 1941, was made subject to the result of suit No. 1001 of 1941.
2. Whether the question of Mr. Jamnadas Mehta having purchased the shares before Mr. Nissim's insolvency can be re-opened or is res judicata.
3. Whether Mr. Jamnadas Mehta did in fact purchase the shares.
4. Whether the bank can still make title to the shares as pledgee of Mr. Nissim.
5. Whether Mr. Nissim waived any notice required under Section 176 of the Indian Contract Act.
6. Whether the Official Assignee is estopped from disputing that the plaintiff is the absolute owner of the shares.
7. Whether the issue is res judicata by reason of suit No. 396 of 1940.

Detailed Analysis:

1. Contract of October 23-24, 1941:
The court determined that the contract was made subject to the result of suit No. 1001 of 1941. The plaintiff purchased the shares subject to the contentions of the parties in the pending suit, meaning the plaintiff took all the respective rights, title, and interests of the vendors, subject to any defects of title that might flow from the determination of the contentions in suit No. 1001 of 1941. The bank retained its position as pledgee of Mr. Nissim, and the plaintiff only acquired the bank's interest as a pledgee for Mr. Nissim.

2. Res Judicata:
The court held that the question of Mr. Jamnadas Mehta's alleged purchase of the shares is not res judicata. Although the same issue was previously tried, the Official Assignee was only a formal party in suit No. 1001 of 1941 and did not participate, thus lacking reciprocity. The doctrine of res judicata requires mutuality, and since the Official Assignee did not actively participate in the previous suit, the issue could be re-opened.

3. Purchase of Shares by Mr. Jamnadas Mehta:
The court found that Mr. Jamnadas Mehta did not purchase the shares. The evidence and documents did not support the alleged transaction. The court concluded that no enforceable agreement was made in July 1940 for Mr. Jamnadas Mehta to take over all Mr. Nissim's liabilities and securities. The documents and entries were seen as attempts to hold the position in suspense until the crisis of July 1940 was resolved.

4. Bank's Title to Shares as Pledgee of Mr. Nissim:
The court held that the bank could not sell the shares as pledgee of Mr. Nissim without giving reasonable notice of the sale as required by Section 176 of the Indian Contract Act. The sale to the plaintiff was invalid as it breached this requirement. The right to redeem remains until a lawful sale is conducted.

5. Waiver of Notice:
The court found no evidence that Mr. Nissim waived the notice required under Section 176 of the Indian Contract Act. The attempt to ask Mr. Deshpande about a conversation with Mr. Nissim was objected to and upheld by the trial judge.

6. Estoppel:
The court dismissed the allegation that the Official Assignee is estopped from disputing the plaintiff's ownership of the shares. The letters relied upon did not raise any estoppel as they were guarded and did not conclusively indicate that the Official Assignee had disclaimed interest in the shares.

7. Res Judicata by Suit No. 396 of 1940:
The court concluded that the issue is not res judicata by reason of suit No. 396 of 1940. The suit was filed before the alleged transactions of July 1940 and did not mention them. The consent order in the suit did not bind the Official Assignee regarding the 26,000 shares.

Conclusion:
The appeal was allowed, and an order for redemption of the 26,000 Asian shares was passed in favor of the Official Assignee. An inquiry was ordered to determine the amount due to the bank under the instrument of pledge dated September 1, 1939, with consequential directions for redemption. The plaintiff was ordered to pay the Official Assignee's costs of the counter-claim and the appeal.