9911796707
TMI Blog1969 (2) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Bundi Companies Act, 1936. It wanted to obtain a licence for monopoly of motor service within the territory of the former Bundi State and therefore it approached the then Ruler of Bundi for the said purpose and a licence was granted to the Company by the Ruler on 31-7-1944, a copy of which has been placed on the record and marked Exhibit 7. According to the State, one of the conditions contained in the licence was that the defendant Company would take over the Bundi Petrol and Automobile Supply Agency (a commercial undertaking of the Bundi State) lock, stock and barrel and in lieu thereof pay a sum of ₹ 4,00,000 to the Bundi State . The case of the State is that the Company paid ₹ 1,00,000 in cash and agreed to issue 30,000 fully paid up ordinary shares of the face value of Bs. 10 each (total value of the shares being Bupees 3,00,000) in lieu of the balance of the price money i. e. ₹ 3,00,000. The Bundi State agreed to this proposal and the Company allotted 30,000 ordinary fully paid up shares. Besides the above mentioned 30,000 shares, Bundi State further acquired 11,600 ordinary fully paid up shares of ₹ 10 each of the Company. With the merger of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the agency were worth about a lakh of rupees at that time, and therefore, ₹ 1,00,000 were paid as price of the agency and the rest of the amount i. e. ₹ 3,00,000 were to be paid in lieu of grant of monopoly rights to ply buses and lorries within the territory of the former Bundi State for a period of 30 years. It was stated by the Company that these rights have been denominated as goodwill rights and the shares have been called as goodwill shares or money by the Bundi Government in their Order dated 10-1-1944 and in Clause No. 6 of the license Ex. 7. It was thus pleaded that out of ₹ 4,00,000 agreed to be paid by the Company to the former Bundi State ₹ 3,00,000 were paid by issue of 30,000 shares of ₹ 10 each in consideration of the aforesaid monopoly rights granted to the Company. It was, however, admitted by the Company that the dividends declared up till year 1950 only were paid to the State and the dividends claimed by the State in its suit have not been paid. With respect to these 30,000 shares, it was further pleaded that the price of these shares was agreed to be paid and adjusted by writing off ₹ 10,000 each year during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany examined one witness Brijnarain on its behalf, whereas no witness was examined by the State. The learned Civil Judge disposed of both the suits by a common judgment dated 21-12-1959. Suit No. 9 of 1958 filed by the Company was dismissed in entirety while suit No. 7 of 1958 filed by the State has been decreed in part and the Company has been directed to pay ₹ 13,575 to the State as the balance or the dividends still unpaid, and ₹ 1399.13 as interest as also penclente lite and future interest on the principal amount at 3%. It has been declared that the State is entitled to receive in future dividends and all other benefits on 11,600 shares mentioned in Part B of the Schedule 1 attached to the plaint. It has also been declared that the State is entitled to dividend etc. on 7,223 shares only issued in lieu of monopoly, and it has further been directed that the Company shall allot 242 Bonus shares not so far allotted by it. A direction has also been issued to the Company to issue share certificates in respect of 1,882 Bonus Shares. The rest of the claim of the State has been dismissed. 6. The State alone has come in appeal to this Court and consequently we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itories of former State of Bundi, and whether on account of these monopoly rights having come to an end on 1-4-1951 with the coming into force of the Motor Vehicles Act, 1939, the State is not entitled to get any dividends or benefits on account of the said 30,000 shares? On a consideration of the various documents produced by the parties and the statement of Brijnarain, the learned Senior Civil Judge has come to the conclusion that out of the amount of ₹ 4,00,000 paid by the Company ₹ 1,00,000 was for the stock or the assets held by the Bundi Petrol and Automobile Supply Agency and the 30,000 fully paid up shares worth ₹ 3,00,000 were issued by the Company in favour of the fonner State of Bundi as a consideration for the grant of monopoly rights and not as a price for sale of good-will of the agency. The learned Senior Civil Judge also came to the conclusion that the State of Rajasthan which is the successor to the former State of Bundi was entitled to dividends, bonus and other benefits on account of 30,000 shares of the value of ₹ 3,00,000 at the rate of ₹ 10,000 per year commencing from 11-1-1944 to 31-3-1951 and not thereafter, when the monopoly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 3. That the defendant company paid only a sum of ₹ 1,00,000 in cash out of the abovesaid sum of ₹ 4,00,000 and desired that the Bundi State may accept 30,000 fully paid up ordinary shares of the face value of ₹ 10 each share total value ₹ 3,00,000 towards the satisfaction of the balance of the above said claim. The Bundi State agreed to this proposal and the defendant company allotted 30,000 ordinary fully paid-up shares and issued the share certificates for the same. The relative share certificates bear the numbers, as shown in Part A of the Schedule I appended herewith, In reply to Para. No. 2 the Company in its written statement has pleaded inter alia as follows : It is, however, not admitted that the purchase price of ₹ 4,00,000, as mentioned in this paragraph, was for the stocks alone held by the Bundi Darbar at that time, which were hardly worth about a lac of rupees at the relevant date. The rest of the purchase money i. e. ₹ 3,00,000 were for the grant of monopoly rights within the Bundi State territory to be enjoyed for a period of 30 years. These rights nave been denominated as goodwill rights and the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000 was paid to Bundi State as price of the assets of the Bundi Petrol and Automobile Agency and the balance of ₹ 3,00,000 was paid in shares (30,000 shares of ₹ 10 each) in consideration of monopoly rights is emphatically denied, under Clause 2 (c) of the Motor Monopoly Licence, 1944, the value paid was one and whole and indivisible. The consideration of ₹ 4 lacs was paid for the entire business lock, stock and barrel of the Bundi State concern, viz. 'Bundi Petrol and Automobile Supply Agency..... Issue No. 3 which is the only relevant issue on the point has been framed as below: (3) Was the purchase price of ₹ 4,00,000 made up of ₹ 1,00,000 for the assets of the Bundi Petrol and Automobile Agency and ₹ 3 lacs for the amount of the monopoly rights or goodwill to be enjoyed for 30 years or was it for the assets alone? While framing the issues the lower Court has observed that: Issues have been framed with the consent of the parties. Issue No. 2 has been framed by me of my own accord. No other issue bas been suggested by any of them. 12. Learned counsel for the Company has urged that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bundi State shall always have the right to terminate the operation of the licence granted by these presents to the Company but only after giving one year's previous notice as a condition precedent and shall take over all the stock-in-trade such as stated in Para. 2 (c) above as shown in the books of the Company as well as the benefits of all the then existing contracts in favour of the said Company provided that in the case of such termination the Bundi Darbar shall pay to the Company the value of all the then existing assets of the Company including the balance of the goodwill money then outstanding as shown in its books together with an additional sum calculated at 10% of such valuation as compensation for compulsory acquisition. 16. The Indian Contract Act does not define the word 'goodwill' but in its legal sense the word 'goodwill' means every affirmative advantage as contrasted with negative advantage that has been acquired in carrying on the business, whether connected with tie premises, or its name or style and everything connected with it. or carrying with it, the benefit of the business. It includes the whole advantage of the reputation, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Mr. Bhargava, that the word 'goodwill' has been used in Clause 6 of the licence Ex. 7, as well as in Para (c) of the Council Resolution Ex. 5 not in its ordinary sense but in a peculiar sense, and that it was meant to refer to monopoly rights granted to the Company by the State of Bundi. 18. As already observed above there is nothing on the record to show that ₹ 3,00,000 were settled as the price of the 'goodwill' separately. On the other hand the frame of Issue No. 3 shows that the case of the State was that the whole of the price of ₹ 4,00,000 was in lieu of the assets of the agency and nothing was paid for the grant of monopoly rights to the Company. We are, therefore, of opinion that there is no substance in the contention raised by the Advocate General that 30,000 fully paid up shares of the value of ₹ 3,00,000 had been issued by the Company in favour of the State as price of the goodwill' of the agency. We are firmly of the view that no separate price was fixed for the 'goodwill' of Bundi Petrol and Automobile Supply Agency to be charged from the Company even assuming that it possessed 'goodwill'. 19. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission is that the Ruler of the former Bundi State in exercise of the powers as a sovereign granted monopoly rights to the Company ex-gratia. We, however, find it difficult to accept the interpretation put by the learned Advocate General. The main para (2) of the licence says that the Company shall have the monopoly of running the lorry and bus-services throughout the Bundi State territory for a period of 30 years, and shall run lorry and bus services on the following terms and conditions and then follow the sub-paras (a) to (h). In sub-para (c) it is mentioned that in consideration for and in lieu of the foregoing the Company shall pay to the Bundi State a lump sum of ₹ 4,00,000 i. e. the consideration for the payment of ₹ 4,00,000 is all that has preceded. The word foregoing is used in the sense 'what is previously mentioned' and therefore in the present case it would include the grant of monopoly rights to the Company which is mentioned in the main para (2) as well as sub-paras (a) and (b) also. The word 'foregoing' cannot be restricted to only what has been described in sub-para (c) and must be taken to refer not only to what is contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; as it is understood in the commercial sense or the legal sense but it referred to nothing else but the consideration for monopoly. 23. We now deal with the objection raised by the learned Advocate General that for the purpose of finding out what were the terms of the licence we should not look into any other evidence except the license itself. In support of his argument the learned Advocate General has relied upon Sections 91 and 92 of the Evidence Act and has submitted that when the terms of a contract or of grant or of any other disposition of property, have been reduced into the form of a document, no evidence can be given in terms of such contract, grant or other disposition of the property except the document itself. He has further submitted that Section 92 of the Evidence Act excludes evidence of any oral agreement between the parties to such document for the purpose of contradicting, varying, adding to, or subtracting from its terms. On the other hand the learned Counsel for the Company has relied upon proviso 6 to Section 92 which says that any fact may be proved which shows in what manner the language of a document is related to existing facts. He has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no escape from the conclusion that the consideration for grant of monopoly rights by the Bundi State to the Company for running the service and lorries exclusively within the territory of former State of Bundi was settled as ₹ 3,00,000 and in lieu thereof 30,000 fully paid up shares were issued by the Company in favour of the Bundi State and it was further agreed that ₹ 10,000 would be deemed to have been adjusted for each year the Company enjoyed the monopoly rights and thus the so-called 'goodwill account was as a matter of fact account of monopoly rights and the expression goodwill money' means nothing else but money paid for grant of monopoly rights. 28. Our conclusion in this respect is further fortified by the correspondence which passed between the Company and the State. In its letter dated 7-5-1953 a copy of which has been placed on the record and marked Ex. 12 the Company has written to the Government of Rajasthan that apart from 11,600 shares the Company had issued without any payment shares of ₹ 3,00,000 in consideration for the grant of transport monopoly for a period of 30 years. It is further mentioned in this letter that such am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice was served on the State on 30-7-1958, and thereafter the present litigation started by institution of suit No. 7 of 1958 by the State and a counter suit No. 9 of 1958 by the Company, 29. We have given this brief resume of the correspondence which took place between the State and the Company, and the facts leading to the institution of the suits by both of them to show that the State had never denied the stand taken by the Company that 30,000 fully paid up shares had been issued by the Company in lieu of grant of monopoly rights, nor it ever asserted that these shares were issued by the Company in lieu of the price of goodwill of the agency sold to the Company by the State. 30. In this connection we may also refer to Ex. A. 7 the 14th Annual Report of the Directors of the Company, along with profit and loss account and the balance sheet for the year ending 31st July, 1951. Among the Directors were, Major His Highness Mahara-wal of Bundi. who was the Chairman, and Shri Kesari Singh Mehta, Collector, Bundi, nominee of the State, and also Shri Mehtab Chand, Officer on Special Duty, Finance Department, Jaipur, nominee of the State. The report of the Chairman is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, however, state that the learned Advocate General was not able to give any satisfactory reply to this part of the argument of Mr. Bhargava as to how this report emanated from His Highness of Bundi and the two nominees of the Government of Rajasthan who were on the Board of Directors of the Company? 31. There is another aspect of the matter which may be mentioned here. We have not been told what was the goodwill of the agency nor any explanation has been furnished to us at the Bar as to how the goodwill of the agency came to be valued three times the price of its assets? We find it difficult to accept that the price of the goodwill of the agency, without there being anything on the record was considered to be worth thrice its visible assets, For this reason also, we are not prepared to accede to the submission of the learned Advocate General that the price of the goodwill of the agency was settled as ₹ 3,00,000. 32. Before we take leave of this topic we would also refer to the balance sheets of the Company which have been placed on the record from the year 1944 i.e. for the year ending on 31st July, 1945 upto the year ending on 31-3-1951. In the balance sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Mills Ltd. v. Union of India, AIR 1963 SC 953. In that case the then Ruler of Jodhpur State agreed to exempt or remit the State or Federal Excise duty on goods manufactured in the Mill premises and State or Federal Income-tax or super-tax or surcharge or any other tax or income-tax. Their Lordships were pleased to hold inter alia that the agreement entered into by the then State of Jodhpur rested solely on the consent of the parties and it was entirely contractual in nature and was not law because it had none of the characteristics of law. Their Lordships were further pleased to lay down that any and every order of a sovereign Ruler who combines in himself all functions cannot be treated as law irrespective of the nature or character of the order passed. In the words of their Lordships: From this point of view there is a valid distinction between a particular agreement between two or more parties even if one of the parties is the Sovereign Ruler, and the law relating generally to agreements. The former rests on consensus of mind, and the latter expresses the will of the Sovereign. If one bears in mind this distinction, it seems clear enough that the agreement of April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and does not call for any interference. 38. We now come to the second main contention raised on behalf of the State viz. that the Company having issued 30,000 fully paid up shares in favour of the former State of Bundi cannot question the consideration for the same and is bound to pay the dividends on all these shares and extend all other benefits due thereon to the State. We called upon the learned Advocate General to show to us whether there was any provision in the Company Law or any other law which debarred the Company from showing that the consideration for issuing particular shares was fictitious or had failed and become illusory and inoperative. We may state that the learned Advocate General expressed his inability to point out any such provision in the Company Law. But in support of his argument he placed reliance on paras 517 and 518 at pages 246 and 247 in Halsbury's Laws of England, Third Edition, Volume 6. Under the head 'Effect of share certificate', it has been observed by the author that a certificate under the common seal of the Company specifying any shares held by any member is prima facie evidence of the title of the Member to the shares. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n year 1924-25 the appellant company was entitled to deduct the loss to them in respect of the transaction of the shares allotted to them from the English Companies at their nominal value of ₹ 200 each? It was found by the Commissioner that in 1920 each share in the appellant company was worth ₹ 95. It was held that no loss was proved as the English Companies were liable to the appellant Company for the amount by which the sum realised was less than the nominal value of the allotted shares. It was further held that apart from the above consideration the Commissioner was not bound in law to take as the price paid the nominal value of the shares allotted. 41. In absence of any rule of law on the point we find ourselves unable to accede to the contention of the learned Advocate General that the nominal or face value of the shares is conclusive, and that the Company cannot under any circumstances show that the consideration for the issue of shares had failed or that the transaction of particular shares had become illusory or inoperative. 42. This brings us to the last contention raised on behalf of the State that even though the monopoly rights granted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poly rights to ply the buses and motor lorries exclusively in the territory of the former State of Bundi and thus the performance of the contract pertaining to the monopoly rights became impossible by a supervening event. Consequently, the State is bound to restore the advantage received by it with respect to grant of monopoly rights. 44. The learned Senior Civil Judge has held that in respect of 30,000 shares of the value of ₹ 3,00,000 given to the then State of Bundi by the Company, the State is entitled to dividend bonus and other benefits and rights accruing to it on shares representing the value calculated at the rate of ₹ 10,000 per year beginning from 11-1-1944 to 31-3-1951 but not on the remaining shares. The learned Advocate General, however, submitted that even though the Motor Vehicles Act had come into force on 1-4-1951 no permits were granted to other persons by the Transport Authorities till 31-3-1954 and therefore it is contended that the Company is not entitled to any relief with respect to the period prior to the grant of permits to other persons. This contention does not appear to be tenable because after coming into force of the Motor Vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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