9911796707
|
Home
Issues: Validity of mortgage bond execution by company, ratification by company, equitable charge for debt, authority of officers to execute bond, principle of belief in authority, illegality on the face of the bond.
The judgment by the High Court of Madras, delivered by Curgenven, J., pertains to a case where the plaintiff sought to enforce a mortgage-bond executed on behalf of a company, which subsequently went into voluntary liquidation. The mortgage property was sold, and the 4th defendant purchased it. The main issue was whether the mortgage bond was validly executed to make the company liable. The lower courts ruled against its validity. The defendant argued that the directors were not competent to contract loans or charge the company's property. The court noted that the defendant's statement challenging the validity of the document was permissible under Order VIII, Rule 5, Civil Procedure Code. The plaintiff raised arguments of ratification by the company and an equitable charge for the debt, but these were not made trial issues. The court declined to entertain these in second appeal due to the lack of trial focus on these matters. The court examined the company's articles of association, specifically Article 15, which required deeds to be signed by the managing director, secretary, and working director for validity. The mortgage document was signed only by the secretary and working director, not the managing director. The court dismissed the argument that the managing director's absence made the execution valid, emphasizing that the power to execute deeds on behalf of the company resided in the directors collectively. Despite claims of special authorization for the two officers to borrow money, the court upheld the lower court's finding that such authorization was not proven. Additionally, the court considered the argument that even if the bond's execution was irregular, the mortgagee could enforce it based on the belief in the officers' authority. Citing legal precedents, the court held that if an illegality is evident in the bond, the plaintiff would not be protected. The court emphasized that a person dealing with a company is presumed to have constructive notice of the company's governing documents. In this case, the mortgagee would have discovered the requirement for signatures by all three specified officers if she had conducted due diligence. Despite the mortgagee's good faith, the court concluded that the bond was invalid, leading to the dismissal of the suit. The second appeal was dismissed with costs awarded to the 4th respondent, and the memo of objections was also dismissed.
|
