1934 (12) TMI 10 - HC - Companies Law

Summary

Issues Involved:
1. Whether the defendant company entered into the agreement referred to in the plaint.
2. Whether the defendant company made the payment as alleged in the plaint.
3. Whether Mr. Murray was a director of the company at the time of the execution of the agreement and was he so held out by the defendant company.
4. Whether the plaintiff knew at the time of the execution of the agreement that Mr. Murray was not a director.
5. Whether the agreement was obtained by the plaintiff by fraud and in collusion with Mr. Murray.
6. Whether Mr. Murray fraudulently and in collusion with the plaintiff obtained the agreements from the company.
7. Whether the defendant company is estopped from raising the defense that the agreement in suit was not duly executed and duly sanctioned due to their acceptance, ratification, and actions upon the agreement.

Detailed Analysis:

Issue 1: Whether the defendant company entered into the agreement referred to in the plaint.
The plaintiff contended that the defendant company entered into an agreement on November 21, 1932, and agreed to pay Rs. 2,76,858 in specified installments. The defendant company, however, denied entering into the agreement, asserting that it was procured by fraud and collusion with Mr. Murray. The court examined the evidence and found that the agreement was indeed entered into by the defendant company.

Issue 2: Whether the defendant company made the payment as alleged in the plaint.
The plaintiff claimed that the defendant company paid Rs. 76,848 but failed to pay the subsequent installment of Rs. 40,000. The defendant company denied making any payments. The court, after evaluating the evidence, confirmed that the defendant company made the payments as alleged by the plaintiff.

Issue 3: Whether Mr. Murray was a director of the company at the time of the execution of the agreement and was he so held out by the defendant company.
The Articles of Association indicated that Mr. Murray was a director, but his term had expired by the time of the agreement. The plaintiff was unaware of this and believed Murray to be a director. The court found that although Murray was not re-elected, he was held out by the company as a director. The court concluded that the burden of proof was on the defendant company to show that Murray was not a director, which they failed to do.

Issue 4: Whether the plaintiff knew at the time of the execution of the agreement that Mr. Murray was not a director.
The plaintiff denied knowing that Murray was not a director at the time of the agreement. The court found no evidence to suggest that the plaintiff had such knowledge. The plaintiff acted in good faith, believing Murray to be a director based on the representations made by the defendant company.

Issue 5: Whether the agreement was obtained by the plaintiff by fraud and in collusion with Mr. Murray.
The defendant company alleged that the agreement was obtained by fraud and collusion. The court examined the detailed particulars of the fraud and collusion as set out in the written statement but found no substantial evidence to support these allegations. The court concluded that the agreement was not obtained by fraud or collusion.

Issue 6: Whether Mr. Murray fraudulently and in collusion with the plaintiff obtained the agreements from the company.
Similar to Issue 5, the court found no evidence to support the claim that Mr. Murray acted fraudulently or in collusion with the plaintiff to obtain the agreements. The court dismissed these allegations as unsubstantiated.

Issue 7: Whether the defendant company is estopped from raising the defense that the agreement in suit was not duly executed and duly sanctioned due to their acceptance, ratification, and actions upon the agreement.
The court found overwhelming evidence that the defendant company, through its shareholders and directors, ratified and acted upon the agreement. Payments were made under the agreement, and the plaintiff transferred his shares to the company. The court cited relevant legal authorities and concluded that the defendant company is estopped from claiming that the agreement was not duly executed and sanctioned. The court held that the company is bound by the unanimous agreement of its members and intra vires actions.

Conclusion:
The court ruled in favor of the plaintiff, granting a decree as prayed with costs. The defendant company was found to be estopped from denying the validity of the agreement due to their acceptance, ratification, and actions upon it.