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TMI Blog1990 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... sociations of persons, etc. They had various shareholdings and interests in all these concerns. Because certain disputes arose, they referred the dispute to arbitration, and, finally, settled the same With effect from July 1, 1985, as per the said agreement. The relevant clauses as far as this petition is concerned are the following: "19.1 The parties have made up their accounts and have determined the amount due by one group including their companies, firms, associations and trusts to the other group, their companies, firms, associations and trusts. Accordingly, as on June 30, 1985, a sum of Rs. 1,72,20,656 is payable by NRB/LRB group to SRB/DAB group in full and final settlement of all the inter se claims. Out of the above, NRB/ LRB group has already paid Rs. 11,50,000 after June 30, 1985, to SRB/ DAB group and has made further payments of Rs. 1,86,595 to other parties on account of SRB/DAB group, the payment whereof SRB/DAB group hereby acknowledges. Accordingly, the balance payable by NRB/LRB group in full and final settlement is Rs. 1,59,14,061. 19.2 It is agreed that the said amount shall be paid by Rajaram Bandekar (Sirigao) Mines Pvt. Ltd. (RBSMPL) to Bandekar Brothers Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 22, 1980, but excluding the amounts stated as payable/receivable under any other clause hereof. The parties shall not claim any further amounts from each other on whatsoever account". It is the case of the petitioner that the petitioner's group (DAB) and the other group of Suvarn (SRB) performed their obligations under the said family arrangement by making payments of their liabilities of Rs. 1,17,38,165 due to the other groups, namely, NRB/LRB. The petitioner says that the company was required to pay a sum of Rs. 16,00,000 to the petitioner, another sum of Rs. 16,00,000 to the said Suvarn R. Bandekar and a sum of Rs. 15,34,061 to Bandekar Brothers Pvt. Ltd. immediately on execution of the said agreement. However, the amount which was payable under the said agreement to the petitioner and to the said SRB group was not paid at the time of the execution. It was agreed at that point of time that the amount would be paid by 10th of April, 1987. Thereafter, it appears that a part payment was made but it was even beyond April 10, 1987, and, according to the petitioner, as on the date of the filing of this petition, a sum of Rs. 3,55,000 was due and payable to the said SRB/DAB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned judge who by an order dated 6th June, 1989, dismissed the said application mainly holding that the company had miserably failed to prove that the agreement is not binding on the company and the company is not a party to the said agreement. The appeal filed against the same was also dismissed by the District Judge. Against the said judgment, the company then preferred Civil Revision Application No. 195 of 1989 in this court. The learned judge by his order dated 12th of January, 1990, upheld the order of the learned civil judge and dismissed the said revision application. In the order, the learned judge observed as follows: "However, as rightly pointed out by Mr. Chagla, it is rather difficult to accept the contention of Mr. Usgaonkar that the company could not have been made a party, as it is an admitted position that the same company acted upon the said agreement by, on the one hand, accepting the distribution of assets, and on the other, the liabilities under clauses (18) and (19) of the agreement. This fact is clearly established by the certificate dated 6th September, 1988, issued by Mr. Vijay S. Parab, the practising company secretary, which is on the records of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to pay the said amount. Since the company has failed to do so despite a notice sent as provided under the law, this petition deserves to be admitted as the company is taking a totally dishonest stand not to pay the amount to the petitioner. The company has filed its reply to the said petition. The main contention of the company is that there is no privity between the petitioner and the company and that the company is not liable to pay any amount. The company also has pleaded that there is an arbitration clause under the said agreement, and that consequently, the remedy of winding up resorted to by the petitioner was misconceived. As regards the statement found in the balance-sheet, the company has taken a peculiar stand which it is better to set out in the same words as found at paragraph 4: "As to the ground of acknowledgment of the liability pleaded in the petition, there is no acknowledgment of liability as contended by the petitioner. Acknowledgment amounts merely to renewal of liability. It is not a creation of liability. Therefore, unless there was earlier liability created, acknowledgment, if any, in the balance-sheet and books of account is of no consequence". The comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement is an agreement between the members of the company in their individual capacity and not an agreement binding on the company nor can it be said that the company is a party to such an agreement. On the question that this issue has been decided in earlier proceedings, Mr. Chagla has pointed out that there is an issue of estoppel as far as this company is concerned and till this decision is reversed it is not open to the company to contend that it is not a party to the said agreement nor can it contend that this agreement is not binding on the company. As against this, Mr. Zaiwalla submitted that the order is in an interlocutory proceeding and the court can, at best, be said to have taken a prima facie view of the matter. It will not make any difference that such an order might have been confirmed in all subsequent proceedings, in appeals and revisions, but it cannot be said that thereby the suit is liable to be dismissed. Mr. Zaiwalla submitted that the suit is still pending and it is possible that at the time of the hearing of the suit, the court can go into all aspects of the matter and can give a clear finding which alone can be said to be final and conclusive. Mr. Zaiwalla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with regard to the payment due by April 10, 1987, it was Mr. Narayan Bandekar who expressed his inability to pay the amount within that time and not the company. Mr. Zaiwalla, therefore, submitted that there is no acknowledgment of any liability as far as the correspondence is concerned. Mr. Zaiwalla further submitted that even though the balance-sheet contained a note as mentioned above, it cannot be said that that itself shows any liability for the company as such. He submitted that as the agreement itself shows, the dues are in respect of various companies, firms, trusts, belonging to various groups, and it is not that it is really a debt due and payable by the company as such. In this connection, he relied on clause 19.1 as set out above, which at once shows that it was not a liability or a debt due and payable by the company as such to the petitioner. Mr. Zaiwalla's broad proposition is that unless it can be said that the agreement has been confirmed or ratified by the company, a family agreement made between the members of the family by itself will not be binding on the company. In this connection, he relied on a judgment of a Division Bench of the High Court of Bombay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of valuable premises of the company. The learned single judge held that these are not acts which could be performed by the managing director in the ordinary course of the business of the company. He then took note of the fact that under the Companies Act, the managing director is subject to the superintendence, control and direction of the board of directors and that he does not have all powers of management. He also observed that the managing director is only entrusted with such powers of management as are entrusted to him by virtue of an agreement or a resolution in a general meeting of the board of directors or such powers as are given by the memorandum and articles of association. It is on these facts that the learned judge held that the said agreement was not binding on the company. I am inclined to accept the proposition that the company will not be bound by any agreement if an agent of the company has entered into an agreement without actual authority, whether express or implied, to enter into a contract. I am inclined to accept the proposition that for any such agreement to be binding on the company, that company should either accept the said agreement or ratify the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,719 but the legal title of the same is not yet transferred to the companies and hence the amount of Rs. 24,75,719 paid is shown under 'Loans and advances' and no depreciation has been charged thereon. The appropriate entries would be passed as and when the legal titles are transferred". What is the explanation for all these notings which clearly indicate the acceptance of assets and acknowledgment of liabilities? How did the company permit such notes to be appended to the balance-sheets? Mr. Chagla pointed out by referring to sections 210 to 227 of the Companies Act and submitted that no balance-sheet could have been presented without approval of the board of directors. I am inclined to agree with him. In any case, it is for the company to explain by giving cogent reasons as to how such notes were appended to the balance-sheet. In the absence of any explanation and in the absence of any relevant material which the company ought to have placed before this court for the purpose of clarifying the same, I must necessarily draw an adverse inference that such a balance-sheet was prepared after following the due procedure and if all the material was placed before the court was, that wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of liability may not be a matter of business of the company. It may as well be a matter of management of the company with no application of principle relating to the doctrine of ultra vires. After arguments were over, the petition had been reserved for judgment as I had another connected matter before me arising on an application made under section 41 of the Arbitration Act in which the question was one of furnishing security to satisfy the claim of the petitioner. When that matter was taken up, the advocates agreed that without prejudice to the rights and contentions of the parties, the said Narayan R. Bandekar and other members of his group would furnish security to the satisfaction of the Special Officer of this court within a period of six weeks from the date of the said order. It was on this concession and without arguments that I passed an order and disposed of the said matter (G R. A. No. 160 of 1990). After I passed that order, on the next day, Mr. Zaiwalla proposed to tender an affidavit on behalf of the company to contend that there would be no question of taking the company to liquidation inasmuch as the claim of the petitioner stood secured by virtue of that order. M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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