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TMI Blog1954 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... the official liquidator of the Gaya Sugar Mills Ltd. in liquidation. - 162 OF 1953 - - - Dated:- 24-11-1954 - MAHAJAN, BHAGWATI, JAGANNADHADAS AND VENKATARAMA AYYAR, JJ. M.C. Setalvad, H.J. Umrigar and Rajinder Narain for the Appellant. N.C. Chatterjee and B.P. Maheshwari for the Respondent. JUDGMENT Mehr Chand Mahajan, CJ. This appeal arises out of an application made by the official liquidator of the Gaya Sugar Mills Ltd. under section 185 of the Indian Companies Act praying that Nand Kishore Bajoria and Mahadeolal Jhunjhunwala be required to pay a sum of Rs. 14,77,000 to the official liquidator. The facts giving rise to the application, shortly stated, are these: Gaya Sugar Mills Ltd. was incorporated in 1934 with an authorized capital of Rs. 7 lakhs divided into 7,000 shares of Rs. 100 each. The capital was raised to Rs. one crore in 1946. Out of this, approximately, Rs. 65 lakhs was subscribed, and in order to obtain the balance, the directors issued debentures of Rs. 1,000 each of the value of Rs. 25 lakhs. The authorized capital of the company consisted of, amongst other shares, 2,000 seven per cent, preference shares of Rs. 100 each ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs under this scheme "Possession of assets appertaining to the Warsaliganj scheme will be forthwith given to the trustees of the debentures with full liberty to them to dispose of the same and to utilise the sale proceeds for redemption of the debentures and to make over surplus, if any, to the preference trustees hereinafter named for redemption of the redeemable preference shares "Messrs. Nand Kishore Bajoria and Mahadeolal are appointed trustees for the purpose hereinafter named and are in these presents referred to as preference trustees, "The shares in the Ryam Sugar Company Ltd. belonging to this company and Chakand land and Gaya land and the unrealised dividend due on Ryam shares and commission for sale of Ryam sugar of 1948-49 season will be vested in the preference trustees with, a power to the preference trustees to get and realise the dividend and commission and to sell the shares of Ryam Sugar Mills Ltd. and the Chakand and Gaya land and to utilise the sale proceeds for redemption of the preference shares. Ryam Sugar shares will be sold at Rs. 25 per share nett As regards Chakand and Gaya lands if the proceeds be more than 1 lakh the same will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo persons, however, who were styled as preference trustees were handed over the shares of the Ryam Sugar Mills and these shares were sold by them for a sum of Rs. 11,30,400 and this money is admittedly in the possession of these persons. On the 16th April, 1950, a winding up application regarding this company was made by some debenture holders and creditors and a winding up order was made on the 14th November, 1951, and an official liquidator was appointed to take charge of the affairs of the company on the 1st of February, 1952. Immediately after his appointment the official liquidator made the application out of which this appeal arose for an order to recover an amount of Rs. 14,77,000 from the respondents on the allegation that the said amount was held by them on behalf of the company. The respondents admitted that they had with them a sum of Rs. 11,39,400 and not Rs. 14,77,000 as claimed by the official liquidator, but contended that the said amount was lying with them as a trust to redeem the preference shares and that the company was not entitled to it. It was also contended that the said sum was not recoverable in a summary proceeding under section 185 of the Indian Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial liquidator any money, property or documents in his hands to which the company is prima faice entitled. This is a summary remedy provided by the Indian Companies Act for speedy winding up of the affairs of the company. The requirements of the section are that the person in possession and the person against whom an order can be made under this section should be a contributory, trustee, receiver, banker, agent or officer of the company and he should have in his possession or custody any money or property or documents to which the company is prima facie entitled. The company judge took the view that the two respondents were in the status of trustees and were in possession of the sum of money to which prima facie the company was entitled. He held that they held the money for benefit of the author of the trust, i.e., the Gaya Sugar Mills Ltd. The appeal Bench took the veiw that the official liquidator may be entitled to the money but that he was not entitled to the return of this money by the summary procedure provided by section 185 and the court had no jurisdiction to pass an order under this section inasmuch as the expression "trustee" in section 185 does not include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relationship between the company and these two respondents before the proposed scheme was sanctioned. The company, pending the sanction of the court, passed a resolution that the shares be sold, and the sale-proceeds be put in the possession of the two respondents, for distribution amongst preference shareholders in the event of reduction of capital being sanctioned by the court. In our judgment there can be no manner of doubt that in the situation that arose these two persons were the agents of the company for selling the shares, and keeping the sale-proceeds with them till the scheme was sanctioned, and if the scheme was not sanctioned, they remained agents of the company in custody of the sale-proceeds. They could not be trustees under an inchoate document, and therefore the only possible relationship that could be constituted between them and the company would be that of principal and agent appointed for a particular purpose and to meet a particular eventuality. The relationship of principal and agent need not be expressly constituted and can be brought about by implication of law on a particular situation arising or from the necessity of a case. In the present case this rela ..... X X X X Extracts X X X X X X X X Extracts X X X X
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