1936 (11) TMI 21 - HC - Companies Law

Summary

Issues:
Claim against defendant No. 3, Ownership of shares, Validity of shares as security, Application of Section 237 of Indian Contract Act, Costs allowed to defendant No. 3.

Claim against defendant No. 3:
The plaintiff bank appealed against a decree dismissing the claim against defendant No. 3, the contesting respondent. The lower appellate court upheld the dismissal, leading to a second appeal. The plaintiff bank sought to recover an amount due on an overdraft and enforce their charge on shares deposited as security.

Ownership of shares:
The plaintiff contended that the shares deposited as security belonged to defendant No. 3, the wife of the account holder. The courts found that defendant No. 3 had no interest in the firm and that the shares were not her property, a point not challenged on appeal.

Validity of shares as security:
The crucial issue was whether the shares, allegedly handed over by defendant No. 3 to her husband for safekeeping, could be validly deposited as security by the husband. The plaintiff bank relied on Section 237 of the Indian Contract Act, but the court found that the husband was not an agent of his wife, making the section inapplicable. The court concluded that the husband had no right to deal with the shares, leading to the dismissal of the claim against defendant No. 3.

Application of Section 237 of Indian Contract Act:
The court analyzed Section 237 and its illustration, emphasizing the requirement of a principal-agent relationship. As no such relationship existed between the parties in this case, the husband had no authority to deal with the shares, rendering the section inapplicable and supporting the dismissal of the claim against defendant No. 3.

Costs allowed to defendant No. 3:
The court addressed the costs granted to defendant No. 3 and deemed them excessive. While acknowledging her entitlement to costs for representation during a commission, the court reduced the amount awarded, citing unnecessary expenses incurred by instructing counsel from Agra. The court reduced the costs to a more reasonable sum, granting Rs. 100 instead of the initially awarded Rs. 223.

In conclusion, the court partially allowed the appeal by adjusting the costs awarded to defendant No. 3 but affirmed the lower appellate court's decree in all other aspects. The appellant bank was directed to pay a portion of the respondent's costs, and leave to appeal was refused.