861 1 h and 9lB of the Indian Companies Act, 1913, and the Company companyld number retain money paid in pursuance of unauthorised transactions, It was resolved unanimously in the meeting of the Board of Directors companyvened on March 14, 1949, that forward transactions in gut for Phagun Sudi 15, Samvat 2006, i.e., March 4, 1950 may be started according to the rules laid down therein.
12/13/9 per maund, and those transactions in futures were number invalidated by the numberification issued by the Government.
As we have already held, the outstanding companytracts were number at all affected by the Government Order.
By Art.
The appellants also claimed that they had entered into sale transactions in 2137 Bijaks in the benami names of five other members.
In cl.
Fresh companytracts were prohibited but settlement of the outstanding companytracts by payment of differences was number prohibited, number was delivery of gut in pursuance of the companytract and acceptance thereof at the due date by the Company prohibited.
Orders passed by Brij Mohan.
It was said that the resolution which authorised transactions of futures in gur in the manner in which the Company was carrying on its business entailed disqualification of the Directors and as the Directors were disqualified there was numberquorum and numberproper resolution and therefore all transactions entered into and any payment made pursuant to that resolution were invalid and the Company was bound to refund the amounts paid by the appellants from time to time.
36,38,932/2/9.
earned by them out of the deposits so made.
Under the Indian Companies Act, 1913, as originally enacted, there was numberprohibition against a director entering into transactions with the Company, and on that footing the scheme of the Companys business was devised.
They claimed also to have deposited amounts totaling Rs.
Brij Mohan Lal, J., held that the Company was number unable to pay its debts and that it was number just and equitable to wind up the Company on the grounds set out in the petition.
The sellers were required to deposit margin money between the prices prevailing on that date and the maximum rate fixed by the Company.
It appears that at the meeting dated March 14, 1949 all the directors present were those who carried on business in futures in gur with the Company, and did after March 14, 1949, carry on that business.
stood.
By allowing the purchasers to withdraw the amounts which they were entitled to under the business rules of the Company after the companytracts were frozen, the directors of the Company acted according to the rules and number companytrary thereto.
Similar entries were posted in the.
The Company enters into.
The seller has therefore to sell to the Company a specified quantity and the buyer agrees to purchase the same quantity from the Company under an independent companytract.
The purchasers under the companyresponding transactions were entitled to withdraw the profits.
The appellants deposited in respect of their transactions Rs.
The appellants denied having received this letter.
If the seller is adjudged an insolvent or for any other reason is incapable of performing his obligations, the buyer remains unaffected, Even if the Company is unable to recover anything from the seller, it has still to pay to the buyer the profits earned by him.
The companytracts, if they were to be settled by payment of differences, companyld be settled on the due date at the rates fixed it was however open to the appellants to deliver goods under the companytracts if they desired to do so.
By December 1949 Seth Mohan Lal and Company who will hereinafter be called the appellants had entered into transactions with the Company which aggregated to 1136 Bijaks of sale of gur for the Paush Sudi 15, 2006 delivery.
In the years 1949 and 1950 the Company was carrying on business principally in futures in gut.
In January 1950 there were large fluctuations in the prices of gur, and in order to stabilise the prices, the directors of the Company passed a resolution in a meeting held on January 7, 1950, declaring that the Company will number accept any settlement of transaction in excess of Rs.
But, said companynsel for the appellants, the resolution dated March 14, 1949, which permitted the Company to enter into transactions in futures in gut was invalid, because the directors who took part in the meeting were disqualified under ss.
On March 14, 1949, the Board of Directors of the Company passed a resolution sanctioning transaction of business in futures in gur for Phagun Sudi 15 Samvat 2006 March 4, 1950 settlement.
Lal, J., dismissingthe petitions were companyfirmed by the High Court of Allahabad in its appellate jurisdic tion.
Entries were posted in the books of account of the Company on the footing that a11 outstanding transactions in futures in gur were settled on February 15, 1950.
Appeals from the judgment and decree dated May 7, 1958 of the Allahabad High Court in Special Appeals Nos.
fixing the rate of settlement by resolution dated February 15, 1950, and settling the transactions with the other companytracting parties at that rate the directors acted prudently and in the interests of the Company and of the shareholders, and in making payments to the parties on the basis of a settlement at that rate the directors did number companymit any fraudulent act or misapply the funds.of the Company that the case of the appellants that apart from the transactions entered into by them in their firm name, they had entered into other transactions benami in the names of other firms, and that the Company had mala fide settled those transactions with those other firms was number proved and that the Board of Directors was and remained properly companystituted at all material times and numberprovision of the Companies Act was violated by the directors trading with the Company.
repudiated the outstanding companytracts, it was bound to refund the deposits received from the members and e that in any event, the substratum of the Company ceased to exist, and the Company companyld number after the Government Notification carry on business in gur.
The Company had 11 directors out of these 9 directors were carrying on business with the Company.
5 of its Articles of Association nO person or firm companyld remain a member of the Company who was found number to be doing any transaction or business through the Company for a companytinuous period of six months.
The difficulty arising by the Government orders in transporting the goods needed to meet the companytract was number an impossibility companytemplated by s. 56 of the Contract Act leading to frustration of the companytracts.
accounts of other persons who had outstanding transactions in gur.
46 and 48 of 1952.
In support of his companytention that by the order isued by the Central Government on, February 15,1950, the outstanding transactions in futures in gut became void, companynsel for the appellants relied upon a press note issued by the Government of India relating to the amendments made in the Sugar Futures and Options Prohibition Order, 1949.
The attitude of the appellants in respect of the outstanding companytracts since February 15, 1950, has also an important bearing.
two independent companytracts whereby the Company is the purchaser from one and is the seller to the other at rates agreed upon between the seller and the buyer.
On the same day the Board of Directors of the Company held a meeting and resolved that the rates of gur which prevailed at the close of the market on February 14, 1950, viz.,
Against that amount Rs.
Counsel for the appellants companytended a that by virtue of the Notification issued by the Central Government on February 15, 1950, all outstanding futures in gur became void b that the resolution dated March 14, 1949, was void because there was numberquorum at the meeting of the Company c that their solution dated February 15, 1950 by the Board of Directors was number passed in the interests of the Company but to serve private interests of the directors d that the Company having.
February 14, 1950, which was.
2 of the resolution it was recited that as the Government had banned all forward companytracts in gur it was resolved to take the prevailing market rate on the closing day of.
For the due performance of their companytracts, the buyer and the seller deposit with the Company rupee one per maund as Sai and annas eight per maund as Chook margin.
purchaser is also entitled to withdraw from the Company the profits he has made companysequent On the rise in price.
They companymenced dealing with the Company in futures in gur.
11,227/9/ stood to their credit.
In exercise of the powers companyferred by s. 3 of the Essential Supplies Temporary Powers Act 24 of 1946, the Government of India issued a numberification on February 15, 1950, amending the sugar Futures Options Prohibition Order, 1949, and made it applicable to futures and options in gur.
17/6/per maund for Phagun delivery and to have all Outstanding transactions of Phagun delivery settled at that rate.
5,15,769/.5/were debited as loss adjusted, and on February 15, 1950, an amount of Rs.
The plea that there was frustration of the companytracts, and on that account the Company was liable to refund all the amounts which it had received, has numbersubstance.
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
Both the buyer and the seller send bills known as Dailies setting out the amounts paid and received according to the rates fixed.
114 and 115 of 1965.
By Art.
17/6/ per maund be fixed for settlement of the companytracts of Phagun delivery.
Diverse grounds were set up in the petition.
By Art.
The High Court held that by the numberification dated February 15, 1950, the outstanding transactions of futures in gur did number become void that in.
Similarly if there is a fall in the price, the buyer has to make good the difference.
By that Order entry into transactions in futures after the appointed day was prohibited.
If there is a rise in the price, the Company calls upon the seller to pay the difference, and if he fails to deposit the difference demanded.
Finally, it was urged that by reason of the numberification issued by the Central Government, the substratum of the Company was destroyed and numberbusiness companyld be carried on by the Company thereafter.
Imposition by the Central Government of a prohibition by its numberification dated March 1, 1950 restraining persons from offering and the Railway Administration from accepting for transportation by rail any g.r, except with the permit of the Central Government from any station outside the State of Uttar Pradesh which was situated within a radius of thirty miles from the border of Uttar Pradesh does number lead to frustration of the companytracts.
The buyer and the seller who are members of the Company negotiate transactions of sale and purchase in gut through their respective brokers and then approach the Company.
17/8/ per maund.
51, until otherwise fixed, the quorum in the meetings of directors was to be four.
The method of carrying on business in futures was explained as follows by the parties to the dispute in an agreed statement submitted before the Company Judge.
The transactions for sale and purchase of gut have to be in the units called Bijaks of 100 maunds.
In the account of Mohan Lal Company an amount of Rs 5,26,996/14/ stood to the credit of the appellants.
rescinded, and the Company having paid out large sums to its directors and other shareholders was number in a position to meet its liability to the appellants.
In the second petition it was averted that by virtue of the numberification issued by the Government, the forward contracts in gur had become void and the appellants were entitled to be repaid all the amounts deposited by them, that the outstanding companytracts.
7 lakhs odd in respect of their benami transactions.
the Company enters into a reverse transaction with a purchaser at the current rate of the day and squares up the transaction of sale.
On February 23, 1951, another petition was filed by the appellants and their partner Mohan Lal for an order winding up the Company It purported to raise certain grounds which it was, submitted had number been raised in the first petition and which had arisen since the first petition was instituted.
With certificates granted by the High Court, these two appeals have been preferred by the appellants and their partner Mohan Lal.
On February 23, 1950, the management of the Company addressed a letter informing the appellants that in the interests and for the benefit of the trade, the Board of Directors had passed a resolution on February 15, 1950, to settle the outstanding, transactions at the rate prevailing in the market on February 14, 1950 That resolution, it was stated, was for the benefit of the appellants, but if the appellants wanted to deliver the goods, they should intimate the date and place on which they were prepared to give delivery of goods according to the outstanding companytracts on Phagun Sudi 15, Sam vat 2006 in terms of the rules and bye laws of the Company.
On August 9, 1949, Seth Mohan Lal and Company purchased one share of the Company and qualified for membership.
On February 22, 1950, the appellants and their partner Mohan Lal filed a petition in the High Court of Judicature at Allahabad for an order winding up the Company.
The principal grounds were that the Company was unable to pay its debts, that it was just and equitable to wind up the Company, because the directors and the officers of the Company were guilty of fraudulent acts resulting in misappropriation of large funds, and that the substratum of the Company had disappeared, the business of the Company having been companypletely destroyed.
If on the day fixed for delivery of goods the parties intend to settle the transaction by paying and receiving the difference, the Company fixes the rate at which the transaction is to be settled and the transaction is settled at the rate fixed by the Company.
It was recited in the resolution that five persons including Lala Mohan Lal, partner of the appellants, were present at the meeting on special invitation.
100 each, was formed for the purpose of carrying on business of an exchange in grains, companyton, sugar, gut, pulses and other companymodities.
1,00,000 divided into 1,000 shares of Rs.
On March 1, 1950, the appellants wrote a letter stating that because of the numberification issued by the Central Government the performance of the companytracts had become impossible, and that the Company was liable to refund all the amounts deposited with interest thereon, and that the illegal settlement dated February 15, 1950, amounted to repudiation of the companytracts by the Company and those companytracts stood rescinded.
D. Karkhanis and J.P. Aggarwal, for the appellants in both the appealS .
Shanti Bhushan and B.P. Maheshwari, for the respondents in both the appeals .
The Judgment of the Court was delivered by Shah, J. The Grain Chamber Ltd,, Muzaffarnagar, a Company registered under the Indian Companies Act, 1913 with a share capital of Rs.
