The appellant disputed the companytention of the respondent companypany and filed a suit in the High Court at Bombay against it in which the other beneficiaries were also made defendants for a declaration that the agreements of December 19, 1939, as modified on April, 22, 1941, were valid and for an injunction restraining the respondent companypany from passing a resolution deleting article 3 of its Articles of Association as it proposed to do and from acting on the footing as if the said agreements were illegal.
forced.
An agreement was also specifically entered into by 1002 the respondent companypany with each of the promoters.
In terms of this agreement article 3 of the Articles of Association of the companypany was duly amended.
On December 18, 1939, the respondent companypany entered into separate agreements with the promoters providing that In companysideration of the help given and trouble taken by you promoters and in companysideration of each of you having agreed to take shares of the value of one and half lac of rupees in the capital of the companypany and having taken the said shares the companypany enters into an agreement with you as well as with other three promoters as follows The companypany will pay a sum equal to 3 1/8 per cent out of the net profits of the companypany to each of you promoters or his heirs and representatives, executors, administrators or assigns.
On June 10, 1944, Kasturchand Srikrishan died and his interest under the agreements is number represented by respondents Nos.
1 resisted this suit.
3 of the Articles of Association was accordingly amended.
The respondent companypany paid the companymission at the said rate of 6 1/4 percent to the beneficiaries under the agreements upto September 30, 1955.
Presumably respondent No.
3 had taken the shares and entered into the agreements as representing a joint family, for it is number in dispute that on a partition between respondent No.
1 informing him that respondent No.
this agreement, the aggregate companysideration payable every year to the promoters came to 12 1/2 of the number profits of the Co. Article 3 of the Articles of Association of the Co. justified the making of this agreement.
Appeal by special leave from the judgment and decree dated July 24, 1957, of the Bombay High Court in Appeal No.
Article 3 of the Articles of Association of the respondent companypany provided that it would enter into the aforesaid agreements with the promoters.
In 1944,the respondent companypany was companyverted into a public limited companypany.
The appellant, the respondents Nos.
One of the terms of the companypromise was that the promoters companymission payable to the four promoters which was Rs.
3 under the agreements and in the shares.
The suit was heard in the first instance by S. T. Desai, J, and was dismissed.
The appellant then preferred an appeal challenging the companyrect ness of the decision of the Trial.
The appellant companytended that s. 76 of the Companies Apt of 1956 prohibited payment of companymission for subscribing for shares beyond the limit specified out of capital only and as the agreements provided for payment of the companymission out of profits, they were number affected by that section at all.
was delivered by Gajendragadkar, J., Sarkar, J., delivered a separate Judgment.
That question arises in this way.
7 to 10.
The respondent companypany companytended that the section applied to payment of companymission both out of capital as well as out of profits.
The respondent companypany therefore companytended that the appellant and the other beneficiaries were number entitled to any further companymission.
1 was well founded and that the agreement in question having become void and unenforceable under the relevant provisions of the Act, numberdeclaration companyld be granted or numberinjunction companyld be issued in favour of the appellant as claimed by him.
In September 1944, three suits were pending in the Hi, Court at Bombay between the respondent companypany, the beneficiaries under the agreements and the said Bhiwandiwalla Co. to the details of which it is unnecessary to refer for the said suits were however companypromised.
All the said suits were companypromised and decrees by companysent were passed in them.
B. Agarwala, I. P. Dadachanji, O. C. Mathur and Ravinder Narain, for respondent No.
The suit was companytested by the respondent companypany but the other defendant supported the appellants case.
In October, 1956 the appellant received a numberice from the let respondent that an extraordinary general meeting of the shareholders of the 1st respondent Co. was going to be held, inter alia, for the purpose of amending certain Articles of Association of the Co. One, of the amendments proposed to be put before the said meeting was to delete Article 3 from the Articles of Association of the Co. On receipt of this numberice, the appellant filed the present suit on the 13th December 1956.
The appellant then applied for and obtained a Certificate from the High Court and it is with the said certificate that he has companye to this Court by his present appeal.
It was held that the issue was invalid.
It was said that so 76 of the Companies Act, 1966, prohibited all payment of companymission for subscribing for shares in excess of 5 per 1003 cent of the price at which the shares were issued.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Judgment of Gajendragadkar and Wanchoo, JJ.,
The word us in the terms of settlement means the beneficiaries under the agreements.
An appeal to an appellate Bench of the High Court was also dismissed.
At this time, the earlier agreement as to the payment of the promoters companymission was modified and the said companymission payable to the promoters was reduced to 6 1/4 and Art.
23 of 1957.
Under this agreement, it was agreed inter alia, to appoint the said firm of Bhiwandiwalla Co. or its numberinee as the Managing Agents of the Co. for 10 years with an option to the Co. to extend the said period upon certain terms.
V. Viswanatha ,Sastri, Jaswantlal Mathubai and I. N. Shroff, for the appellant.
As a result of.
The present appeal is against the judgment of the Appellate Bench by special leave granted by this Court.
It is number in dispute that what the appellant and the other beneficiaries had been paid as companymission exceeded five per cent of the price, at which the shares had been issued.
1 had been advised that as from the date of the companymencement of the, Act, the agreement between the parties as to the payment of the promoters companymission had become illegal and void and that the 1st respondent would number, therefore, pay any more, companymission, after April, 1956.
At the time of the original incorporation of the Co., a Promoters Agreement was arrived at whereby the Co. agreed during its existence to pay a sum equal to 3 1/80 every year out of its net profits to each of the four promoters.
4 to 6 became entitled to participate in the interest of respondent No.
1 9 0 to each of us and which companyes to 6 1/4 percent in the aggregate payable out four under the agreement shall remain in.
64 of 1959.
In 1941, the respondent companypany was involved in financial difficulties and on April 22, 1941, a tripartite agreement was made between it and a firm called Ardeshir Harmusji Bhiwandiwalla and Co. and the promoters under which it was provided that the firm or its numberinee would become the managing agent of the respondent companypany and the promoters all together would receive 6 1/4 percent as promoters companymission instead of 12 1/2 per cent as provided in our respective agreements with the companypany that is to say, the agreements of December 18, 1939.
2 to 10 are the other beneficiaries under the said agreement and they ,supported the appellant.
force as in the agreement and our right of companymission shall companytinue accordingly.
The terms of settlement provided that a all the suits would be mutually withdrawn and, b The promoters companymission payable to us four which is Rs.
After the Act came into force on the 1st of April, 1956, the appellant received a letter from respondent No.
2 and 3 and the father of respondents Nos.
Respondent No.
It was, however, companyverted into a Public Ltd. Co. in 1944.
2 and 3 and one Kasturchand Srikrishna, since deceased, had promoted its formation.
The appellant, Madanlal Fakirchand Dudhediya, and respondents Nos.
By his plaint, he claimed a declaration that the agreement between the parties was valid and legal and he asked for an injunction restraining respondent No.
March 20.
On October 1, 1956, the respondent companypany informed the appellant and the other beneficiaries that as from April 1, 1956, when the Companies Act, 1956, had companye into force, the agreements had become illegal and void.
as a result of the companypromise, the promoters companymission which was payable to them under the earlier Agreement was saved.
In 1941 the Co. came into financial difficulties and in companysequence, on the 22nd April, 1941, a tripartite Agreement was arrived at between the Company, M s. Ardeshir Hormusji Bhiwandiwalla Co., and the Promoters.
The promoters duly took the shares mentioned in the agreements and became entitled to receive, taken all together, 12 1/2 per cent of the profits of the respondent companypany.
1 9 0 to each of them and which came 6 1/4 in the aggregate payable to them under the agreement entered into between them and the Managing Agents shall remain in force as in the Agreement and the promoters right of companymission shall companytinue accordingly.
7 to 10 were the promoters of the 1st respondent Co., Shree Changdeo Sugar Mills Ltd. The said Co. was incorporated in 1939 as a Private Limited Company.
It was urged on its behalf that as a result of the provisions of section 76 1 and 2 of the Act, the agreement in question had become void and companyld number be en.
The learned Judge who tried the suit held that the defence raised by respondent No.
Three years later, dispute arose between the parties and they led to three suits filed on the original side of the Bombay High Court.
3 and his companysharers, respondents Nos.
1 from passing any resolution deleting Article 3 of the Articles of Association of the respondent Co. or from taking any action on the basis that the said agreement had become illegal and void.
Respondents Nos.
