1938 (8) TMI 15 - HC - Companies Law

Summary

Issues:
1. Granting leave to defend unconditionally.
2. Authority to file the suit on behalf of the company.
3. Validity of defences raised by the appellant.
4. Set off claims by the appellant.
5. Bar of limitation.

Analysis:

1. The appellant contended that leave to defend the suit should have been given unconditionally. The appellant was given permission to defend upon furnishing security for Rs. 25,000. The court must ensure the defendant's case is bona fide and raises a triable issue showing a fair defense. The appellant's defenses were deemed not genuine, and the court confirmed the order requiring security.

2. The main issue was whether the suit was properly filed on behalf of the company. The plaintiff, a director of the company, claimed authority to sue. The Articles of Association empowered directors to institute suits jointly, but the appellant argued that proper authorization was lacking. The court found that the plaintiff had valid authority based on past resolutions and the delegation of powers to manage the company's affairs.

3. The appellant raised defenses including setting off a bonus owed by the company and a potential amount from the company's winding up. However, the court found these claims unsubstantiated. The appellant had previously waived the bonus claim, and no legal basis was provided for setting off potential future amounts against current dues.

4. The court dismissed the appellant's set off claims, emphasizing that the company should not have to wait for a winding-up to recover its dues. The appellant's claims were considered novel and lacked legal support. The surrender of bonus claims by all directors further weakened the appellant's position.

5. The appellant's plea of the suit being barred by limitation was refuted. An acknowledgment of liability by the appellant in a letter saved the suit from this defense. The court found the appellant's defenses to be vexatious and not bona fide, indicating an attempt to delay proceedings. Consequently, the court upheld the order requiring security and dismissed the appeal with costs, extending the time for furnishing security.