1936 (5) TMI 33 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the sub-lease and its legal effect.
2. Legality of the voluntary liquidation resolution of 14th October 1924.
3. Rights and validity of re-entry by defendant 3 on 15th October 1924.
4. Fraudulent nature of the voluntary liquidation and subsequent transactions.
5. Validity of the lease by defendant 3 to defendants 1 and 2.
6. Effect of the charge decrees on the plaintiff's auction purchase.
7. Right to compensation for improvements made by defendants.

Detailed Analysis:

1. Validity of the Sub-Lease and Its Legal Effect:
The court examined the sub-lease executed by defendant 3 to the Sathgram Coal Company Limited for 999 years. The primary questions revolved around the construction of this sub-lease and its true legal effect. The sub-lease was crucial in determining the rights and obligations of the parties involved.

2. Legality of the Voluntary Liquidation Resolution of 14th October 1924:
The court scrutinized the resolution passed on 14th October 1924 for the voluntary liquidation of the Sathgram Coal Company Limited. The plaintiff alleged that this resolution was fraudulent, collusive, and a mere paper transaction. The court found that the resolution was indeed fraudulent, as evidenced by the circumstances and the subsequent judgment of the High Court declaring the resolution void, inoperative, and a nullity.

3. Rights and Validity of Re-entry by Defendant 3 on 15th October 1924:
The court debated whether the re-entry by Mr. A.T. Creet (defendant 3) or by his agent was valid in law. It was contended that Mr. A.T. Creet re-entered the property on 15th October 1924 following the voluntary liquidation resolution. However, the court found that the re-entry was actually by L.A. Creet (defendant 1) and not by defendant 3, and that such re-entry was wrongful.

4. Fraudulent Nature of the Voluntary Liquidation and Subsequent Transactions:
The court found that the voluntary liquidation resolution and subsequent transactions were part of a fraudulent scheme involving the managing agents and partners of the Sathgram Coal Company Limited. The evidence included the testimony of Ram Chandra Marwari and the production of cheques indicating fraudulent transactions. The court concluded that the resolution of 14th October 1924 was a fraudulent resolution.

5. Validity of the Lease by Defendant 3 to Defendants 1 and 2:
The court examined the lease executed by defendant 3 in favor of defendants 1 and 2 on 25th May 1925. It was contended that this lease was a fraudulent transaction. The court agreed, finding that the lease was part of the fraudulent scheme to deprive the plaintiff of rightful possession.

6. Effect of the Charge Decrees on the Plaintiff's Auction Purchase:
The court considered the effect of two charge decrees obtained by defendant 3 against the Sathgram Coal Company Limited. It was argued that the plaintiff, as an auction purchaser, was subject to these charges. The court held that the plaintiff was not affected by the charge decrees in terms of possession, as the possession by defendant 3 was wrongful. However, the property would still be liable to a charge for any balance found in favor of defendant 3 upon taking accounts.

7. Right to Compensation for Improvements Made by Defendants:
The court addressed the defendants' claim for compensation for improvements made to the colliery. The court held that a trespasser or a person fraudulently in possession is not entitled to compensation for improvements under Section 51 of the Transfer of Property Act. Therefore, the defendants were not entitled to any set-off for improvements made.

Conclusion:
The appeal was dismissed with costs, subject to the variation that possession would not be restored to the plaintiff before one year from the arrival of the records in the lower court. The cross-objections were dismissed with costs. The records were ordered to be sent to the lower court with the greatest possible expedition.