9,68,000/ .
The National Mills Company Limited, Ahmedabad, hereinafter referred to as the National Mills, was ordered to be companypulsorily wound up by an order of the Joint Judge, Ahmedabad, dated 14 3 1950 and Trikamlal J., Patel, Manyantray T. Mehta since deceased and Krishnalal B. Dave were appointed liquidators of the National Mills.
1,00,000/ as and by way of earnest money promising to pay the balance forthwith on the approval and sanction by the District Judge of his said offer.
He ordered that numberice of the application should be given to Chunilal and Adhyaru and they should file their statements and appear at the hearing before him.
Adhyaru and Madhubhai appeared by separate companynsel and Madhubhai, in the first instance, supported Adhyaru.
500/ per share for the purchase of the whole lot of 1936 shares, the District Judge was perfectly right in the exercise of his discretion in sanctioning the offer of Chunilal who was fulfilling his obligation under the agreement and was certainly entitled to better companysideration at the hands of the companyrt than Adhyaru.
He, therefore, ordered that the offer of Chunilal be accepted by the Liquidators and as the full price had already been paid by him, the 1936 shares be delivered to him or his duly authorised agent together with the necessary transfer forms duly signed.
When, however, Matubhai went with both the letters and the cheque to Trikamlal in the Court premises, he was number found there as evidently he had taken ill and gone home.
At the further hearing, the advocate for Madhubhai produced before the Court a receipt passed by the Liquidators showing that one Pasavala had deposited with them an amount of Rs.
Chunilal accordingly addressed to the Liquidators a letter on the same date in accordance with the said draft waiving all the objections to the tender made on 17 9 1954 and offering to take delivery of the said 1936 shares at the said rate in pursuance of the agreement dated 3 11 1953.
It may be observed that Madhubhai, one of the signatories to the letter dated 19 7 1955 had number appeared before the District Judge.
He negatived the companytention that Chunilal had companymitted a breach of the agreement dated 3 11 1953 observing that the tender purporting to have been made by the Liquidators on 17 9 1954 was number a valid tender.
He took into companysideration the circumstances under which, Chunilal had companye to write the letter dated 29 7 1955 and the events that had since happened in regard to Chunilals offer to purchase these shares and observed that even if Adhyaru may be inconvenienced by reason of Chunilals offer it would be unfair to penalise Chunilal and deprive him of the right to which he was entitled under the agreement.
The companytributories and the Liquidators in fact wanted to hold Chunilal to his obligation and to all intents and purposes would number have taken any farther proceedings against Chunilal if in fact he had fulfilled his obligation and paid to the Liquidators the full amount of Rs.
12,68,000/ .
The hearing of the appeal was then adjourned.
At the end of the second days hearing, however, his advocate was instructed to tell the Court that the companytributories had withdrawn from the Liquidators the authority to sell the shares by private negotiations but had asked them instead to sell the shares in the open market so that the shares might fetch a much higher value in the open market at Ahmedabad.
Further affidavits were filed by Madhubhai and by Matubhai the son of Chunilal pointing out the state of the market in regard to these shares.
3,00,000/ were to be paid in cash and the balance in 1936 shares of the Himabhai Company which were taken to be of the value of Rs.
These attempts failed and the Liquidators had, therefore, to approach some other party.
The said offer was sanctioned by the Court on 22 9 1953 and an agreement was entered into between the liquidators and the Himabhai Company for the sale of the properties therein mentioned for a companysideration of Rs.
He also asked for the stamped receipt for the amount paid by him in full settlement of the amount of the said shares.
9,68,000/ , though in the receipt which he gave to Chunilal he stated that the same was subject to approval by his companyLiquidator Dave and subject to the sanction of the District Court.
The discretion exercised by the District Judge therefore in favour of Chunilal was, it was submitted, erroneous and was rightly interfered with by the High Court.
He, however, stated that, without prejudice to the rights of the Liquidators and subject to the approval by Dave and subject to the sanction of the District Judge, he was sending the cheque for Rs.
These were the circumstances attendant upon the offer of Chunilal to purchase these 1936 shares which was placed by the Liquidators before the companyrt on 3 8 1955.
This position was well known to the Liquidators as well as to the companytributories and it was a realisation of this position that actuated the Liquidators in obtaining the letters of authority from such of the companytributories as they companyld before 17 9 1954 and purporting to tender the whole lot of 1936 shares to Chunilal so as to hold him to his obligation to pay the sum of Rs.
Between 19 7 1955 and 29 7 1955, 11 letters were addressed by 57 companytributories of the National Mills holding 108 shares to the Liquidators authorising them to dispose of the said 1936 shares to anyone in open market inasmuch as, according to their information, Chunilal had failed to make payment for those shares and to recover the loss, if any, incurred thereby from Chunilal, if need be, by taking necessary legal steps against him.
He number only procured from Chunilal on 29 7 1955 a letter withdrawing his companytentions about the companytract to purchase the shares at the value of Rs.
It was only when the hearing was resumed on 6 9 1955 that companynsel for Madhubhai produced before the High Court a receipt passed by the Liquidators that Pasavala had deposited with the Liquidators a sum of Rs.
The Liquidators replied on 18 9 1954 reiterating the position which they had taken up and insisted upon Chunilal fulfilling his obligation.
Even at that time there was numberquestion of any higher price being obtained by public auction of this block of 1936 shares in the open market.
Chunilal sent Thakersey N. Shah to Trikamlal on 2 8 1955 along with his letter of the same date asking Trikamlal to deliver the said 1936 shares to him and also 20 transfer forms duly signed by the Liquidators.
It appears that Chunilal also about the same time thought of waiving the objections which he had raised to the purported tender by the Liquidators on 17 9 1954 and approached Trikamlal J. Patel, one of the two surviving Liquidators, hereinafter referred to as Trikamlal, offering to take the said 1936 shares.
Trikamlal replied the same day stating that Dave had number returned from Bombay and, therefore, numberhing companyld be done till he returned.
500/ was ever possible to be realised by a sale of these shares in open market and the answer which was made by the companynsel for Madhubai to Baydekar J., on 16 8 1955 that these shares would probably fetch a higher price in the open market was merely the result of companycerted action on the part of Madhubhai and Adhyaru to clinch the bargain in favour of Adhyaru by making him offer Rs.
Trikamlal, however, handed over to Matubhai at that very time proxies for the said 1936 shares for the Annual General Meeting of the Himabhai Company which was to be held on 6 8 1955.
The companytributories also by these letters asked the Liquidators to support Madhubhai and others in the resolution which they were going to move at the Annual General Meeting of the Himabhai Company which was to be held on 6 8 1955 with a view to safeguard the interest of the companytributories but these directions also were number calculated to do anything further than try to punish Chunilal for his alleged breach of the agreement.
9,68,000/ along with the said letter and requested the Liquidators to deliver the said 1936 shares to him with transfer forms duly signed by them.
500/ per share subject to the sanction of the District Court.
He put on record that Trikamlal had already received the cheque for Rs.
The market never improved up to 4 8 1955 and it was after companysiderable effort that the offer of Adhyaru for the purchase of these 1936 shares was obtained by the Liquidators on 27 7 1955.
Nobody at that time thought that the shares were capable of realising more than Rs.
Trikamlal also, on 2 8 1955, cashed the cheque of Rs.
500/ per share.
There was numbererroneous exercise of discretion by the District Judge in favour of Chunilal as held by the High Court.
On 27 7 1955, Adhyaru addressed a letter to the Liquidators offering to purchase the said 1936 shares at Rs.
500/ per share.
600/ per share.
It was strenuously urged both before the High Court and before us by companynsel for Madhubhai and the Liquidators that numbernotice was given to the companytributories of the application made by the Liquidators before the District Judge and the interests of the companytributories were number properly safeguarded.
500/ per share and enclosed a cheque for Rs.
He stated that he would be sending his man, Shri Thakersey N. Shah, to Trikamlals chambers at the Court premises at 11 30 A.M. that day and requested that Trikamlal should deliver the said share certificates and the transfer forms duly signed by both the Liquidators to him.
9,68,000/ against delivery.
450/ per share.
8 in a Rupee.
The companytributories and the Liquidators were number bound to offer any portion of these shares to him and if they wanted to sell these shares to other parties they would have been entitled to do so.
Trikamlal accepted these documents but said that the share certificates were with his companyliquidator Krishnalal B. Dave, hereinafter referred to as Dave, and stated that he would hand them over on Tuesday the 2nd August 1955 after Dave had returned from Bombay where he had gone that evening, and after the relative transfer forms had been duly signed by both the Liquidators.
Chunilal, who was the senior partner in the Managing Agents firm of the Himabhai Company, is alleged number to have sanctioned the transfer and Adhyaru took umbrage at it and resolved to buy up the whole lot of 1936 shares of the Himabhai Company which were offered to him by the Liquidators at the price of Rs.
It was number cashed by them at any time.
After Dave returned from Bombay and the Liquidators had companysultations amongst themselves, they made a report on 3 8 1955 submitting both the offers of Chunilal and Adhyaru for sanction by the Court.
11,61,600 at the rate of Rs.
He gave a cheque of Rs.
9,68,000/ in exchange for the share certificates for 1936 shares which had been allotted by the Himabhai Company in their names together with blank transfer forms duly signed by both the Liquidators.
500/ per share but also procured from Mm on the same day another letter agreeing to give the Liquidators the dividend sanctioned at the Annual General Meeting of the Himabhai Company for the year 1954 in respect of these 1936 shares.
There was thus numberprospect at all on 3 8 1955 when the application was made by the Liquidators to the District Judge of obtaining anything beyond the said sum of Rs.
Chunilal rejoined by his letter dated 19 9 1954 setting out the companyrect facts according to him and pointed out that the tender was invalid and inoperative and that he had number refused the same.
This argument, however, ignores the true position that at numbermaterial time prior to 4 8 1955 the market price of the shares of the Himabhai Company was anywhere beyond Rs.
As regards Adhyarus offer, he stated that the same did number appear to be genuine and should number be accepted.
Each party was ordered to bear and pay his own companyts.
On the same date, Trikamlal also addressed a letter to Chunilal acknowledging the receipt of the cheque for Rs.
The appeal came for further hearing before the same Bench on 6 9 1955.
1,00,000/ as and by way of earnest which cheque the Liquidators kept with themselves pending the sanction of the District Court.
The cheque given by Adhyaru was ordered to be returned and the parties were ordered to bear their own companyts.
1 that Chunilal had a right under the agreement dated 3 11 1953, and 2 that Chunilal had number companymitted a breach of the said agreement, both of which companysiderations were wrong in law.
This position was severely attacked before the High Court and the High Court came to the companyclusion that Chunilal had numberright under the agreement dated 3 11 1953, that neither on the 17th number on the 18th September 1954 Chunilal was willing to abide by his undertaking and that he had companymitted a breach of the agreement, that Chunilal made his offer on 29 7 1955 after companying to know that Adhyaru had made his offer on the 27th July, that, if the matters had stood there, Adhyarus offer should have been accepted but, having regard to the companyduct of the Liquidators, Adhyarus offer also companyld number be accepted, that the interests of the companytributories were primarily to be companysidered by the Court and there being higher offers for the purchase of these shares as evidenced by the offer of Pasavala the proper companyrse was to sanction a sale by public auction of these shares so as to fetch the highest price available in the open market for the benefit of the companytributories.
Trikamlal had numberexpress authority from his companyLiquidator Dave in the matter of these negotiations but Trikamlal appears to have thought that he would be able to persuade Dave and companyplete the transaction.
The High Court accepted the position that numbermally the discretion exercised by the District Judge should number be interfere 1 with but came to the companyclusion that the exercise of the discretion here by the District Judge was erroneous inasmuch as the District Judge was influenced by two companysiderations, viz.,
In the report which they submitted to the District Judge, the Liquidators set out the facts in regard to the alleged breach of the agreement of 3 11 1953 by Chunilal and the letters which had been addressed by the companytributories to them between the 19th July and the 29th July 1955 and what had transpired between Chunilal and Trikamlal on and after 29 7 1955.
When the offer of Adhyaru was number accepted by the District Judge, both Adhyaru, and Madhubhai joined in taking an appeal to the High Court on 6 8 1955, filed a companymon memo of appeal and applied for interim relief before Bavdekar J., which was, however, refused, Chunilal undertaking through his advocate to hand back the shares to the Liquidators on Monday 8 8 1955 if they were handed over to him that day.
on the 24th and 25th August 1955.
No companytributory would have cared as the matters then stood to appear before the District Judge and we fail to understand what companytention the companytributories would have urged before the District Judge apart from that which was already urged by the Liquidators in their report.
This cheque was cashed by the Bank and the amount was credited to the account of the Liquidators.
25 8 1955 that companynsel was instructed by Madhubai to companyvey to the Court that these shares might fetch a much higher value in the open market at Ahmedabad.
These two letters along with the cheque for Rs.
They tried to induce Harshad kumar K. Adhyaru, hereinafter referred to as Adhyaru, to purchase these 1936 shares.
He had, in March 1955, purchased five shares of the Himabhai Company in the open market and had submitted them to the Himabhai Company for registration in his name.
In the meanwhile, Chunilal, through his companydirector Ratilal Nathalal, had an interview with Trikamlal in the office of Vasavda and Trikamlal gave to Ratilal Nathalal a draft of the letter to be addressed by Chunilal to the Liquidators waiving his objections to the tender which purported to have been made by the Liquidators to him on the evening of 17 9 1954 and offering to take delivery of the said 1936 shares for fully companysideration of Rs.
The High Court then called upon him to prove the bona fides and the genuineness of his companyplaint by producing before it an offer at the higher rate and the further hearing of the appeal was adjourned.
9,68,000/ and the said letter.
There was numberquestion also at that time of any companypetition between Chunilal on the one hand and Adhyaru on the other, much less between either or both of them and outside parties.
Adhyaru, in his statement, pointed out the circumstances under which he came to make his said offer and submitted that his offer being prior in time should be accepted in preference to the offer of Chunilal.
500/ for each share and that was also the anxiety of the companytributories in the letters which were addressed by them to the Liquidators between the 19th July and the 29th July 1955.
As a matter of fact, Madhubhai, who was one of the biggest companytributories of the National Mills, joined Adhyaru in the appeal which he took to the High Court against the judgment and order of the District Judge dated 4 8 1955 and made companymon cause with him.
A letter and a telegram dated 17 9 1954 were addressed by the Liquidators to Chunilal and he replied the same day denying that he had ever refused to accept delivery of whatever the Liquidators wanted to deliver to him.
9,68,000/ and promised to deliver the share certificates of the said 1936 shares together with the transfer forms duly signed by both the Liquidators on Tuesday the 2nd August 1955 on Dave returning from Bombay.
Ahmedabad, hereinafter referred to as the Himabhai Company, submitted their tender on 15 9 1953 offering to purchase the same.
The market price of the shares of the Himabhai Company, which was Rs.
The anxiety of the Liquidators all along was to obtain the sum of Rs.
Chunilal and Adhyaru accordingly filed their statements.
Chunilal denied that he had companymitted a breach of the agreement dated 3 11 1953, reiterated that he was always ready and willing to purchase the said 1936 shares as per the agreement and pointed out that he had even then showed his readiness and willingness to purchase the said shares and had already given the two letters as also the cheque for Rs.
Matubhai, son of Chunilal, went along with the said letter and the cheque to Trikamlal at his office in the Court premises at 2 P. M. Trikamlal, however, told him that Chunilal should address another letter to the Liquidators promising to pay the dividend which would be sanctioned at the Annual General Meeting of the Himabhai Company for the year 1954 and he, Matubhai, should bring such a letter to him in the Court premises at about 4 P.M. Chunilal accordingly addressed another letter to the Liquidators promising to pay the dividend which would be sanctioned at the Annual General Meeting of the Himabhai Company for the year 1954.
500/ per share and there was also numberquestion of giving any numberice to the companytributories in the matter of the said application.
Adhyaru was declared to be at liberty to withdraw the additional amount deposited by him with the Liquidators.
9,68,000/ to the Liquidators and that the matter of sale was thus really companypleted and companycluded between him and the Liquidators and submitted that in these circumstances the Liquidators had numberright to sell the said shares to anybody else except himself and were bound to transfer the said shares to him.
He stated further that on the return of Dave, he, Trikamlal, would submit the companyrespondence between Chunilal and himself to Dave for further action.
He sent a cheque for Rs.
Adhyaru was at first unwilling to do so.
11,61,600/ deposited by Pasavala in support of the offer was ordered to companytinue in deposit with the Liquidators until the public auction was held and the bid made at the public auction was sanctioned by the District Judge.
427 8 0/ or at the highest Rs.
He further called upon the Liquidators to deliver to him that very day whatever they wanted to deliver.
The appeal was heard before a Bench of the Bombay High Court companystituted by Gajendragadkar and Gokhale JJ.
The Liquidators, it was companytended, should have brought specifically to the numberice of the District Judge the desire of the companytributories to have the said shares sold in the open market and ought to have pointed out that a sale by public auction of these shares at that stage was likely to fetch more than Rs.
On the morning of 29 7 1955, there was an interview between one Ratilal Nathalal, a companydirector of the Himabhai Company on the one hand and Trikamlal on the other in the office of Vasavda, a labour leader in Ahmedabad, in the premises of the Majoor Mahajan.
9,68,000/ drawn by him in favour of the Liquidators to Trikamlal, the giving of the proxies by Trikamlal to him and the encashment of the cheque though it was hemmed in with a companydition that the acceptance was subject to the sanction of the District Court, really created in Chunilal an expectation amounting to an inchoate right depending on the fulfilment of the companyditions or at least a preferential claim to have these 1936 shares delivered to him together with the relevant transfer forms duly signed by the Liquidators.
Matubhai and Ratilal Nathalal, therefore, went to Trikamlals place of residence at 7 30 p.m. the same evening and handed over the two letters and the cheque to Trikamlal.
The Liquidators submitted both the offers to the Court for its companysideration and sanction.
9,68,000/ were handed over to Trikamlal on the evening of the same day at his place of residence and Trikamlal gave to Matubhai, the son of Chunilal, at that time the proxies in respect of these 1936 shares to enable Chunilal to vote at the Annual General Meeting of the Himabhai Company which was to be held on 6 8 1955 in any manner he desired so that Chunilal would be able to thwart the move which was companytemplated by Madhubhai and other share holders of the Company.
9,68,000/ drawn by Chunilal in favour of the Liquidators to the Bank for acceptance.
The District Judge, after hearing the arguments advanced before him by the Liquidators as well as Chunilal and Adhyaru, sanctioned the offer of Chunilal.
The Liquidator sent numberreply to this letter but it appears that they approached Chunilal and his legal advisers with a view to bring about a settlement of the dispute.
This was what may well have been referred to by the District Judge in, his judgment delivered on 4 8 1955 as a right.
Chunilal and Adhyaru were declared entitled to bid at the auction if they so desired.
20/ per share as and by way of dividend and that dividend was to be declared at the Annual General Meeting which was to be held on 6 8 1955.
The High Court set aside the order of the District Judge and ordered that the said shares should be sold in the open market and that the offer made by Pasavala should be taken as the minimum offer made for the purchase of the shares in question.
550/ per share and deposit the required additional amount in Court.
He stated that his companyliquidator Dave had gone outside, i.e., to Bombay and intimated that the Liquidators would properly deal with the subject after Dave had been acquainted with the matter.
The hearing before the High Court also proceeded on this basis and in the early stages of the hearing of the appeal before the High Court on 24 8 1955 and 25 8 1955 Madhubai actually supported Adhyaru.
The amount of Rs.
Even though Chunilal had initially numberright to have these 1936 shares offered to him by the companytributories and the Liquidators under Clauses 5 and 6 of the agreement, the events that happened in July 1955 culminating in his addressing those two letters of 29 7 1955 to the Liquidators, his giving the cheque of Rs.
The appeal came for admission before Baydekar J. on 18 8 1955 and at that time Bavdekar J., enquired of Madhubhai who had joined in the appeal what grievance he had to make against the order in appeal and the advocate for Madhubhai told Bavdekar J. that his grievance was substantial inasmuch as the companytributories felt that the shares in question might fetch a much higher value than Rs.
It was, therefore, number possible to distribute the shares to the companytributories.
625/ per share.
Chunilal and Adhyaru both applied for certificates for leave to appeal to this Court and the High Court granted the requisite certificates.
As a matter of fact, the alleged breach by Chunilal of the agreement was number accepted as such by the Liquidators and they, in fact, carried on negotiations with him after 19 9 1954 to induce him to fulfil his obligation thereunder.
The grounds of appeal which were urged recognised this very position that numberhing more than Rs.
50/ more per share than what Chunilal had offered in his turn.
Both were in effect simultaneous offers for the purchase of this block of 1936 shares at the price of Rs.
The High Court, therefore, felt justified in setting aside the order of the District Judge in favour of Chunilal and ordering the sale by public auction of these shares.
435/ in September 1953 was about Rs.
The directors of the Company had recommended Rs.
9,68,000/ , the said 1936 shares would be delivered to him.
500/ per share which Chunilal had agreed to pay for the same in certain events companytemplated in the agreement of 3 11 1953.
Adhyaru made up his mind finally on 27 7 1955 and he wrote a letter to the Liquidators offering to purchase these 1936 shares at the rate of Rs.
In the judgment which it delivered, the High Court laid great stress upon the observation of the District Judge that Chunilal was entitled to a right under the agreement.
They wound up by saying that the question of their delivering whatever they wanted to deliver did number arise unless Chunilal made payment by cash or by cheque of Rs.
The said additional amount was accordingly deposited in Court.
Even though both the offers of Chunilal and Adhyaru were placed before the companyrt each offering numbermore than Rs.
They also set out the offer which was made by Adhyaru and stated that the offer of Adhyaru was prior and made on 27 7 1955, that Chunilal had companymitted a breach of the agreement dated 3 11 1953 by refusing to encash the said 1936 shares, that by the said breach of the agreement the Liquidators were put to great trouble and companyld number pay the remaining annas 8 to the creditors and that Adhyaru also was a mill owner, and a substantial party.
By his letter dated 29 7 1955 addressed to the Liquidators, Chunilal had offered to give to the Liquidators the dividend sanctioned at the Annual General Meeting of the Himabhai Company for the year 1954.
500/ per share.
The fact that Adhyarus offer was dated 27 7 1955 and Chunilals offer was dated 29 7 1955 was neither here number there.
11,61,600/ at the rate of Rs.
The liquidators, invited sealed tenders for the purchase of the mills, land, bungalow, warehouses, etc, and the Himabhai Manufacturing Company, Limited,.
Counsel appeared also on behalf of one Grangaprasad Puria offering to purchase the said 1936 shares en bloc at the rate of Rs.
As the Annual General Meeting of the Himabhai Company was to be held on 6 8 1955, the Liquidators made an application to the District Judge on the evening of 3 8 1955 and the District Judge fixed the hearing for the next day, 4 8 1955.
On 30 7 1955, Chunilal addressed a letter to Trikamlal thanking him for giving him the proxies for the said 1936 shares.
