1962 (12) TMI 80 - SC - Companies Law

Supreme Court restores decree declaring resolutions invalid, grants relief. Plaintiff's conduct doesn't bar equitable relief.

Ladli Prasad Jaiswal Versus Karnal Distillery Co. Ltd.

Ladli Prasad Jaiswal Versus Karnal Distillery Co. Ltd. - 1963 AIR 1279, 1964 SCR (1) 270 Issues Involved:1. Validity of the resolutions dated October 16, 1945, and whether they were procured by coercion and undue influence.2. Validity of the resolutions passed on March 3, 1946, and March 28, 1946.3. Competency of the High Court to grant a certificate under Article 133(1)(a) or (b) of the Constitution.4. Whether the High Court transgressed the restrictions imposed by Section 100 of the Code of Civil Procedure in reversing the decree of the District Judge.Issue-Wise Detailed Analysis:1. Validity of the Resolutions Dated October 16, 1945:The primary issue was whether the resolutions passed on October 16, 1945, were procured by coercion and undue influence. The Subordinate Judge initially found that the defendants did not provide substantial particulars of coercion or undue influence and failed to submit evidence in support of their plea. Despite this, the District Judge later held that Ladli Prasad was in a position to dominate the will of the defendants, who were in a financially helpless position, and thus the resolutions were ineffective. However, Bishan Narain, J., of the High Court found that the District Judge's findings went beyond the pleadings and that there was no evidence to support the claim of undue influence. The Division Bench of the High Court, however, reversed this decision, concluding that Ladli Prasad was in a position to dominate the will of the defendants and had obtained an unfair advantage. The Supreme Court, upon reviewing the evidence, concluded that the findings of the District Judge were based on allegations not pleaded or proved and that the conditions for presumption under Section 16(3) of the Indian Contract Act were not fulfilled. Thus, the resolutions of October 16, 1945, were not invalid due to undue influence.2. Validity of the Resolutions Passed on March 3, 1946, and March 28, 1946:The resolutions passed on March 3, 1946, and March 28, 1946, aimed to cancel the resolutions of October 16, 1945, and remove Ladli Prasad from his positions in the company. The Subordinate Judge held these resolutions to be unauthorized and invalid due to lack of proper notice to Ladli Prasad and because they were intended to defraud him. The District Judge agreed that the resolutions were invalid but dismissed the suit because he found the October 16, 1945, resolutions invalid. Bishan Narain, J., affirmed the invalidity of the March 1946 resolutions and granted relief to Ladli Prasad. The Division Bench also found the March 1946 resolutions invalid but denied relief to Ladli Prasad on equitable grounds. The Supreme Court upheld the findings that the March 1946 resolutions were invalid and not binding on Ladli Prasad.3. Competency of the High Court to Grant a Certificate under Article 133(1)(a) or (b) of the Constitution:The Supreme Court examined whether the High Court was competent to grant a certificate under Article 133(1)(a) or (b) of the Constitution. The Attorney-General argued that the judgment of the High Court affirmed the decision of the court immediately below (District Judge) and did not involve any substantial question of law. The Supreme Court clarified that a single judge of the High Court, whether exercising original or appellate jurisdiction, is considered a court immediately below the Division Bench. Therefore, the High Court was competent to grant the certificate, and the appeal to the Supreme Court was justified.4. Whether the High Court Transgressed the Restrictions Imposed by Section 100 of the Code of Civil Procedure:The Supreme Court addressed whether Bishan Narain, J., transgressed the restrictions imposed by Section 100 of the Code of Civil Procedure in reversing the decree of the District Judge. The Supreme Court noted that the challenge before Bishan Narain, J., was based on the lack of adequate particulars of undue influence, absence of evidence, and misplacement of the burden of proof. The Supreme Court held that the findings of the District Judge were not binding on the High Court in second appeal because they were based on facts not pleaded or proved, and the presumption under Section 16(3) was incorrectly applied. Therefore, Bishan Narain, J., was within his rights to review the evidence and conclude that the plea of undue influence was not established.Conclusion:The Supreme Court allowed the appeal, restoring the decree passed by Bishan Narain, J., which declared the resolutions dated March 3, 1946, and March 28, 1946, invalid and granted relief to Ladli Prasad, subject to the protection of third-party rights. The Court also noted that the plaintiff's conduct did not disentitle him to equitable relief, and any action taken by the defendants pursuant to the invalid resolutions was ineffective.