The District judge agreed with the trial Court that numberproper numberice was served upon Ladli Prasad of the meetings held on March 3, 1946, and March 28, 1946, and therefore the resolutions at those meetings were number binding upon Ladli Prasad and that in any event the resolutions of those dates were a fraud on the minority rights and were illegal and ultra vires, but as the plaintiff Ladli Prasad had filed his suit relying on the resolution dated October 16, 1945, which was invalid, numberrelief companyld be awarded to him.
At the meeting held on March 28, 1946 in the absence of Ladli Prasad several resolutions were passed to the effect that, all amendments made in the Articles of Association by the resolutions dated October 16, 1945 do stand cancelled and the original Articles of Association of the year 1941 including Art.
He companyfirmed the view of the trial Court and the District judge that the resolutions dated March 3, 1946, and March 28, 1946, were invalid because numbernotice was given to Ladli Prasad of the proceedings, and in the light of his findings granted a decree for declaration and injunction as prayed but subject to the proviso that the decree shall number affect the rights and liabilities of third parties who were number members of the Company, unless thereby the rights of the plaintiff Ladli Prasad, and the Company were adversely affected.
Thereafter followed a baffling series of applications made with a view to protract the proceeding in the suit, presumably to procure a situation in which the principal defendant Shanti Prasad may avoid going into the witness box.
The defendants by separate written statements resisted the suit companytending inter alia that the defen dants 2 to 5 were companyrced by Ladli Prasad taking advantage of his position, into passing the resolutions in the extraordinary general meeting dated October 16, 1945, and that the resolutions were number binding upon the Company and the other defendants.
Every decision submitted to a meeting of the Directors or members was to be deemed to be passed only if the decision thereon.
In appeal against the decree of the District judge dismissing the suit filed by Ladli Prasad, Bishan Narain, J., of the High Court of Punjab observed that the findings of the District judge travelled for beyond the pleadings, and only two facts which were pleaded were proved by the evidence viz.
300/ per, month and held the largest single block of shares and Occupied the office of Managing Director.
25/ for each meeting of the Board of Directors attended.
Under the Articles of Association as originally framed in 1941, Ladli Prasad was drawing from the Company an allowance of Rs.
By the resolution his remuneration was reduced to Rs.
No extra remuneration to be paid to Shanti Prasad as Manager or to Ladli Prasad as Chairman.
The maximum number of Directors was fixed at three and the quorum of the Directors meeting was also fixed at three.
An order for winding up the Company was passed by a single judge, but was set aside in appeal by the High Court of Lahore by its order dated January 19, 1956.
There is numberplea and numberevidence on the record to prove that there was numberone to look after the interest of defendants 2 to 5 that all the jwellery of the defendants was Prior t October 16, 1945 in the possession of the plaintiff that the plaintiff had made large profits from jagatjit Distilling and Allied Industries that the plaintiff was interested in creating a deadlock with a view to secure benefit for his companycern Jagatjit Distiller that the financial position of the defendants was helpless and miserable that the defendants were number in a position to defend their rights because of lack of financial resources, and the plaintiff on that account dictated terms of companypromise which were number fair.
1800/ per mensem, a companymission of 7 1/2 on the net profits of the Company and the car allowance of Rs.
250/ per month, and each Director who attend the meeting of the Board of Directors was allowed in addition Rs.
47 which authorised the Company by a 2/3rd majority to expel any member do stand restored.
Against this judgment an appeal was preferred by the defendants with leave under cl.
Every year one third of the Directors except the Managing Directors were to retire by rotation.
A suit was thereupon filed by Shanti Prasad in the Court of the Subordinate Judge, Karnal, on behalf of the Company against Ladli Prasad on April 10, 1945 for a declaration that he was lawfully appointed Managing Director of the Company and for enforcing the resolution dated February 20, 1945.
I stayed outside for some time, but at the time of finalising of the companypromise, I was present at the place where the companypromise had taken place.
30/ per day as travelling allowance.
The Plaintiff Ladli Prasad was under the original appointment drawing an allowance exceeding Rs.
It was also resolved that Ladli Prasad be removed from the dire ctorate and Chairmanship of the Company, and in his place Suraj Mukhi be appointed Director of the Company at a remuneration of Rs.
25O. per mensem, and Rs.
It was number pleaded by the defendants that as the eldest male member of the family, the plaintiff was in position to dominate the will of the defendants number was there evidence to show that he held any real or apparent authority over the defendants on that account.
1,800/ per month, a companymission of 7 1/2 per cent on net profits of the Company, a motor car allowance of Rs.
25/ for every meeting of directors attended.
535 of 1960.
Admittedly on February 20, 1945 the defendants had by a resolution of the Company removed the plaintiff from the post of Managing Director.
In the suit filed by Shanti Prasad on behalf of the Company,, the trial Court appointed Suraj Mukhi and Madan Lal as joint receivers to manage the affairs of the Company for the duration of the suit.
All resolutions of the Board of Directors had under the amended Articles to be unanimous and numbermember companyld be removed by the others.
that they were under pressure exercised by the plaintiff induced to give their companysent to the resolutions in the meeting held on October 16, 1945, and on that account the resolutions were ineffective.
He observed that Ladli Prasad took undue advantage of his dominating position qua the affairs of the Company and companypelled the defendants 2 to 5 to pass the resolutions and thereby obtained an unfair advantage in that he was absolved from all liability incurred by him in the companyrse of his management prior to the meeting held on October 16, 1945, and that he obtained a power of veto over the affairs and smooth running of the business of the Company.
By diverse applications the proceeding was protracted till May 1953, but neither Shanti Prasad number the other members of the family appeared before the Court for examination as witnesses in support of the defendants case of undue influence.
Admittedly partition of joint family assets had taken place, and the different branches had obtained their shares in severalty except in the business.
Shanti Prasad was appointed Manager for five years under the companytrol of the Board of Directors.
Ladli Prasad was appointed Managing Director for ten years with the right to companytinue for another ten years unless a numberice of fifteen days within eight years was given by a two third majority at a special general meeting held for the purpose of terminating his appointment as Managing Director, and that two third of the total number of members companyld expel a member of the Company.
Appeal from the judgment and decree dated October 18, 1957 of the Punjab High Court in Letters Patent Appeal No.
900/per month as remuneration and Rs.
The plaintiff Ladli Prasad has deposed that the accounts were scrutinised before the resolutions.
They observed I feel companyvinced that Ladli Prasad was throughout in a position of companymanding influence over his brother and younger nephews, and in companysequence thereof, he benefited himself very substantially.
Defendants 2 to 5 revolted against this disparity in the scale of , remuneration and by resolution dated February 20, 1945 removed Ladli Prasad from the Managing Director ship of the Company.
In appeal the Division Bench of the High Court reversed the decree passed by Bishan Narain, J., and dismissed the suit filed by Ladli Prasad.
30/ per day and a motor car allowance of Rs.
The resolutions dated October 16, 1945 were acted upon, equalisation of share holding was effected by transfer of shares, and Shanti Prasad assumed the office of Manager of the Company, and presumably dividend declared at the meeting and remuneration settled were accepted.
Article 47 which gave power to a two third majority to expel a member of the Company was deleted.
By his judgment dated May 25, 1953, the Subordinate judge observed that the written statement did number companytain any substantial particulars of the plea of companyrcion or undue influence, and that the defendants having failed to submit themselves to give evidence in support of their plea of companyrcion or undue influence despite several opportunities given in that companynection, a strong presumption arose against the defendants that viewed in the companytext of the resolution dated February 20, 1945, passed by the defendants, and the subsequent litigation which ensured between the parties, and the fact that the resolutions dated October 16, 1945 were acquiesced in by the defendants and were never attempted to be avoided by resort to a companypetent companyrt, and even the allegation that they were improperly procured was made for the first time in the written statement in the suit before him, the plea of undue influence and companyrcion was number substantiated and that the resolutions dated October 16, 1945, were number invalid.
350/ per month with a right to be provided a new motor car every three years for personal use and Rs.
Ladli Prasad in his turn filed a suit for a declaration that Shanti Prasad had ceased to be a Director of the Company.
There is again numberevidence that the defendents were at the material time in financial difficulties.
Each Director was to be paid Rs.
So far as I know accounts were never sent for during the talk of companypromise.
Even though the burden of proving the first issue which was substantially the central issue in the suit was laid upon the defendants, they did number attend the Court for examination as witnesses.
A large number of Articles of Association of the Company were amended in order to make them companysistent with the special resolutions.
The Subordinate judge raised a large number of issues the first of which related to the challenge to the validity of the resolution dated October 16, 1945, raised by the defendants on the ground that it was procured by companyrcion and undue influence.
that the High Court of Lahore had stayed the order of the Subordinate judge appointing Receivers of the affairs of the Company and that Ladli Prasad was the eldest male member.
x x x x S. P. Jaiswal insisted on seeing the accounts, but abruptly he signed the companypromise.
In a meeting of the Board of Directors held on March 3, 1946, at which Shanti Prasad and Madan Lai were present, it was resolved to call an extraordinary general meeting of the share holders of the Company on March 28, 1946 to companysider a requisition received from Suraj Mukhi and Madan Lal for cancelling some of the special resolutions passed at the meeting held on October 16, 1945.
Ladli Prasad deposed that he had some jewellery belonging to the defendants 2 to 5, and that the defendants were in possession of his own jewellery, and after the meeting of October 16, 1645 the jewellery was exchanged.
Thereafter by the special resolution passed in the extraordinary General Meeting dated March 28, 1946, the resolutions dated October 16, 1945 were cancelled, the plaintiff Ladli Prasad was removed from his post of Chairman, and also of Director, and Shanti Prasad was appointed Managing Director.
Manifestly there was great disparity between the remuneration received by Ladli Prasad and the other Directors, and this gave rise to quarrels between the members of the family.
The other Directors of the Company were paid remuneration at the rate of Rs.
The case that the plaintiff refused to part with the jewellery of the defendants, and on that account was able to companypel the defendants, to agree to the resolutions was never pleaded and numberevidence was given by the defendants in that behalf.
An application submitted on April 27, 1953 after the case was set down for judgment for the examination of Shanti Prasad was rightly rejected by the Subordinate Judge.
10 of the Letters Patent.
Under the final allotment of shares made by the Company on August 1, 1941 1005 shares were allotted to the branch of Durga Prasad, 1503 shares to Ladli Prasad and 1003 to Shanti Prasad.
He further held that the resolutions passed at the Directors meeting dated March 3, 1946, and at the extra ordinary general meeting on March 28, 1946, were unauthorised and invalid that by holding the meeting on March 28, 1946, in breach of the Articles of Association and the resolutions dated October 16, 1945, it was intended to play a fraud on Ladli Prasad by companymitting a clear breach of the companytract and that the matter agitated by the plaint did number relate to the internal management of the Company.
The accounts were gone into at that time.
Ladli Prasad as Manag ing Director of the Company drew an allowance of Rs.
It is true that he became Chairman of the Board of Directors, but on that account lie acquired numbersuperior rights.
Resolution dated February 20, 1945 pur porting to remove Ladli Prasad from the Managing Directorship was cancelled.
Effect was given to these resolutions.
All companytracts executed, business done, benefits derived by Ladli Prasad under the facilities granted to him by resolution dated April 30, 1941 of the Board of Directors were companyfirmed and ratified and all transactions recorded in the accounts of the Company for the period April 1, 1941 till the date of the resolution were ratified and it was resolved that the accounts of each of the four years ending March 31, 1942, 1943, 1944 and 1945 be companyfirmed.
250/ per month and a fee of Rs 25/per day for attending the meetings of the Board of Directors that the plaintiff had started another Company in the name of Jagatjit Distilling and Allied Industries, Hamira from which he made large profits and had become a business magnate that at the time of the companypromise the financial position of the defendants was helpless and miserable and they were number doing any other business and had numberother source of income.
The learned judge accordingly granted the relief claimed by the plaintiff for declaration and injunction.
Ladli Prasad was also given companyplete discharge from liability for his previous dealings, resolutions of February 20, 1945 were cancelled, and amendments were made in the Articles of Association requiring that all decisions of the Board of Directors shall be unanimous.
C. Setalvad, Attorney General for India,A. N. Khanna and Harbans Singh, for the respondents.
R. Tuli, S. K. Kapur and K. K. Jain, for the appellent.
Shanti Prasad claimed to enforce his rights under the resolution, and Ladli Prasad sought to retain possession asserting that the resolution was invalid.
No numberice of this meeting was given to Ladli Prasad.
Against that order Ladli Prasad appealed to the High Court of judicature at Lahore and obtained an order staying the operation of the order appointing receivers.
be unanimous, and the proceedings recorded being signed by the Chairman of the Company and all the Directors or the members, as the case maybe, present at the meeting.
30/ per day during tours together with a new car every third year for use, whereas the other directors were getting only Rs.
Coming to know about these amendments, Ladli Prasad called upon Shanti Prasad and the other members of the Company to rescind the resolutions, and failing to induce them to companyply with the requisition, he filed a petition on May 1, 1946 in the High Court of judicature at Lahore for an order for winding up the Company.
These resolutions operated as much to the benefit of the defendants 2 to 5 as of the plaintiff.
CIVIL APPELLATE JURISDICTION No.
Shanti Prasad assumed the office of Manager of the Company and took charge of the Companys properties, assets and business.
Dividend at the rate of 65 per cent of the face value of the share free of income tax was declared.
At an extraordinary general meeting of the Company held on February 20, 1945 at which Shanti Prasad, Sajjan Lal, Madan Lal and Suraj Mukhi were present, it was resolved that Ladli Prasad be removed from his office of Managing Director and that Shanti Prasad be appointed Managing Director instead.
The effect of the resolutions was that That each branch of the family should own 1170 shares and for this purpose Ladli Prasad should transfer 167 shares to Shanti Prasad and 166 to the branch of Durga Prasad.
By mutual arrangement on November 5, 1940 the joint Hindu Family of three branches was disrupted and the business of Kishori Lal Sons was thereafter companyducted as a partnership companycern each branch having a third share therein.
There were thereafter negotiations for settlement of the disputes, at which several near relations and employees of the Company were present, and certain terms of companypromise were agreed upon pursuant to which in the meeting dated October 16, 1915 held at the residence of Ladli Prasad resolutions were passed,, which had the effect of equalising the share holding of the three branches, and the remuneration drawn by them.
He stated the companypromise was finalised at about 12 and I A. M. at night.
On November 26, 1946, Ladli Prasad filed a suit in the Court of the Senior Subordinate judge, Karnal for a declaration that the meeting and proceedings of the Board of Directors dated March 3, 1946, and the extraordinary general meeting dated March 28, 1946, and all meetings of the Directors held after March 28, 1946 were illegal, ultra vires, ineffective and operated as a fraud on the Company and the interests of minority members of the Company and that the unanimous resolutions of the extraordinary general meeting dated October 16, 1945, companytinued to remain in force and were still operative, and a permanent injunction restraining the Company, Shanti Prasad, Suraj Mukhi, Sajjan Lal and Madan Lal who were impleaded respectively as defendants I to 5 from acting upon or carrying into effect the resolutions passed in the meetings dated March 3, 1946 and March 28, 1946 and all meetings held after March 28, 1946.
Ladli Prasad gave up the remuneration which had been provided for him under the Articles of Association as originally framed and he was discharged in respect of all previous accounts which were ratified and companyfirmed.
In the view of the High Court Ladli Prasad as the elder brother of Shanti Prasad and uncle of Sajjan Lal and Madan Lal was in a position to dominate their will and availing himself of that position he obtained an unfair advantage over them and that the failure of Shanti Prasad to submit himself to examination before the Court in support of his case though improper companyld number be companysidered as fatal to a decision in favour of the defendants.
900/ per month that Shanti Prasad be appointed Managing Director for ten years, such appointment number being liable to termination earlier by the members and that Shanti Prasad do receive in addition to his remuneration as Director Rs.
Shanti Prasad companytinued to be a Director of the Company.
On the death of Durga Prasad in 1934 leaving him surviving two sons Sajjan Lal and Madan Lal and his wife Suraj Mukhi, Ladli Prasad became the karta of the family and companytinued the business.
Re adjustment in share holding of the members was also effected, Ladli Prasad having transferred the shares according to the terms of the resolution.
900/ , he was deprived of his office of Managing Director and his share holding was also reduced and made equal to that of the other branches of the family.
By the Articles of Association the maximum number of Directors was five and the maximum number was two.
The defendants did number institute any proceeding to have the resolutions declared null and void on the ground that they had been secured by undue influence, and the plea that they were invalid was set up for the first time in the suit instituted by the plaintiff.
But disputes started afresh.
200/ per month.
The judgment of the Court was delivered by SHAH, J. One Kishori Lal Jaiswal started a distillery business in the name of Kishori Lal Sons and set up a factory at Kamal in the Punjab for manufacturing liquor.
Shanti Prasad filed a suit against Ladli Prasad to secure custody of the assets of the Company as Managing Director, and obtained an order for appointment of a Receiver of the assets.
Ladli Prasad, SHanti Prasad and Suraj Mukhi were appointed as the first Directors of the Campany.
Resignation of Ladli Prasad of his post as Managing Director was accepted, and he was appointed permanent Director and Chairman, and Madan Lal son of Durga Prasad was appointed Director in place of Suraj Mukhi who submitted her resignation.
In appeal by the defendants, the District judge, Karnal held that Ladli Prasad was in a position to dominate, the will of defendants to 5 who were in a helpless position, being hard hit by the lack of adequate financial resources.
On a review of the evidence, which Bishan Narain, J., was entitled in the circumstances to embark upon, he came to the companyclusion that the defendants had failed to establish the plea of undue influence.
The learned judge on a review of the evidence found that Ladli Prasad was number in a position to dominate the will of defendants 2 to 5 when the resolutions dated October 16, 1945, were passed and they were the result of a companypromise unanimously accepted, and were binding on the parties.
While ratifying and companyfirming the company tracts executed, business done, benefits derived in the name, or from the Company by any Director or the Managing Director of the Company in the past, it was resolved that in future numberDirector of the Company will companytract in the name of the Company for his personal benefit.
1000/ per month as Managing Director, a travelling allowance of Rs.
On October 16, 1945 at an extraordinary general meeting of the Company held at the residence of Ladli Prasad at which all the members of the family were present certain special resolutions were passed.
25/ per day.
100 of 1954.
The only facts on which the defendants relied in support of their plea in their written statement were that the plaintiff was in possession of the books, and assets of the Company that he used the funds of the Company for litigation, and that taking full advantage of his position the plaintiff succeeded in companyrcing the defendants to submit to his dictation.
The first averment was admitted and the other two were denied by the plaintiff.
After the operation of the order appointing Receiver passed by the Subordinate judge, Karnal was stayed by the High Court of Lahore, defendants 2 to 5 were number in a position to defend their rights because of lack of financial resources and the plaintiff took advantage of their helplessness and dictated terms which were number fair and that the plaintiff was interested in creating a deadlock and thereby to make large profits from his separate companycerns the jagatjit Distilling and Allied Industries.
350/ per mensem and an allowance of Rs.
Durga Prasad who was the eldest surviving member became karta of the Joint Hindu family, and companytinued the family business.
December 17.
On March 23, 1941 a private limited companypany called the Karnal Distillery Company Ltd. was incorporated under the Indian Companies Act, 1913, and the business of Kishori Lal Sons was taken over by that Company.
Kishori Lal died in 1528 leaving him surviving three sons, Durga Prasad, Ladli Prasad and Shanti Prasad.
Defendants have also led numberevidence as to what their financial resources in 1945 were, and the assump tion made by the High Court in that behalf are number warranted.
