1955 (11) TMI 15 - HC - Companies Law

Summary

Issues Involved:
1. Personal liability of the second defendant for the suit debt.
2. Plaintiff's entitlement to sue based on the terms of the agreement.
3. Validity of the settlement of accounts in light of alleged pressure, coercion, undue influence, and fraud.
4. Reopening of the settlement of accounts.
5. Validity of the borrowing as contested by the first defendant.
6. Omission of credit for payments towards the suit debt.
7. Nature of the interest agreed upon and whether it is penal and excessive.
8. Correct amount due to the plaintiff and from which defendant.
9. Plaintiff's entitlement to sue given the agreement in favor of Vengu Lakshmi Ammal.
10. Validity of the negotiation of the instrument.
11. Binding nature of the suit debt on the first defendant company.
12. Limitation of the plaintiff's remedy to motor vehicles and exclusion of personal liability of the second defendant.
13. Binding nature of the acknowledgments signed by the second defendant on the first defendant company.
14. Usurious and excessive nature of the stipulated interest rate.
15. Reliefs entitled to the plaintiff.

Detailed Analysis:

1. Personal Liability of the Second Defendant:
The court found that the second defendant was personally liable for the suit debt. He had expressly included his personal liability in addition to the company's liability when signing the passbooks and executing the agreement (Ex. A.8). He acknowledged that the agreement was executed in respect of debts due to Subbiah Aiyar's estate and not in favor of Vengu Ammal, his widow.

2. Plaintiff's Entitlement to Sue:
The court ruled that the plaintiff, Parameswara Aiyar, was entitled to sue to enforce the terms of Ex. A.8. This agreement was executed in favor of Subbiah Aiyar's estate, of which Parameswara Aiyar was the validly appointed sole administrator by the court.

3. Validity of the Settlement of Accounts:
The court found that the settlement of accounts relied on by the plaintiff was not brought about by pressure, coercion, undue influence, or fraud, as contended by the defendants.

4. Reopening of the Settlement of Accounts:
The court held that the settlement of accounts could be reopened only regarding proved mistakes.

5. Validity of the Borrowing:
The court found that the borrowing was not void or non-binding on the company, except for a sum of Rs. 5,465 advanced for the Kalakad toddy shop dues and Rs. 7,547-15-0 advanced for the second defendant's life assurance payment. These payments were not for company purposes and were ultra vires of the company.

6. Omission of Credit for Payments:
The court found that Subbiah Aiyar had not omitted to give credit for any payments made towards the advances to the company.

7. Nature of the Interest:
The court found that the agreed interest of 12% compound interest was not penal and excessive. Compound interest was accepted by the brothers on behalf of the company in the vaddi chittais sent by Subbiah Aiyar, and they had signed for the balance found on the basis of compound interest at several settlements of accounts.

8. Correct Amount Due:
The court granted the plaintiff a decree for Rs. 1,94,407-5-11 with interest at six percent per annum from the date of the plaint, 19th December 1950, against the second defendant. The first defendant company was ordered to pay Rs. 1,76,708-5-11 out of this sum with similar interest and costs.

9. Plaintiff's Entitlement to Sue:
The court found that the plaintiff was entitled to sue both under the settlement of accounts (Ex. A.7) and the agreement in favor of Vengu Ammal (Ex. A.8).

10. Validity of the Negotiation of the Instrument:
The court ruled in favor of the plaintiff and against the defendants on this issue.

11. Binding Nature of the Suit Debt:
The court found that the suit debt was binding on the first defendant company except for the two sums related to the toddy shop and insurance payments.

12. Limitation of Plaintiff's Remedy:
The court answered this issue in the negative, indicating that the plaintiff's remedy was not limited to the motor vehicles, and the second defendant was personally liable.

13. Binding Nature of Acknowledgments:
The court found that the acknowledgments signed by the second defendant were binding on the first defendant company.

14. Usurious and Excessive Interest Rate:
The court found that the interest rate was not usurious or excessive and upheld the agreed 12% compound interest.

15. Reliefs Entitled to Plaintiff:
The court granted the plaintiff a decree for Rs. 1,94,407-5-11 with interest and costs as detailed above.

Appeals and Final Judgment:
The first defendant company and the second defendant filed appeals contesting the decree. The court dismissed the appeals, upholding the lower court's judgment. The court found that the debts were contracted for company purposes and utilized for such purposes, and the amounts decreed were correct. The court also dismissed the company's suit for accounts, affirming that the company had no right to call upon Subbiah Aiyar to render accounts. The court dismissed A.S. No. 341 of 1952 with costs and A.S. No. 357 of 1952 with the costs of the first respondent, Parameswara Aiyar.