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of <h1>Invalid Mortgage Bond Due to Execution Irregularities - Importance of Framing Trial Issues</h1> <h3>Kotla Venkataswamy Versus Chinta Ramamurthy and Ors.</h3> The court found the mortgage bond invalid due to irregularities in its execution by company officers, ruling against its enforcement despite the ... - Issues: Validity of mortgage bond execution by company officers, authority to contract loans on behalf of the company, ratification of the instrument, equitable charge for the debt, interpretation of company's Articles of Association, authority to execute deeds on behalf of the company, enforcement of bond marked by irregularity, principle of belief in authority of officers, obligations of a person dealing with a company.Analysis:1. The main issue in this case is the validity of the mortgage bond execution by the company officers. The plaintiff sought to enforce a mortgage bond against a company that subsequently went into liquidation. The bond was signed by the Working Director and the Secretary of the company. The plaintiff claimed that the debt was contracted in accordance with the powers and authority possessed by these officers under the company's articles and resolutions.2. The defendant contested the validity of the bond, arguing that the company officers were not competent to contract loans or charge the company's property. The defendant's written statement raised objections to the form of denial and cited a relevant English case. However, the court referred to Civil Procedure Code provisions and previous judgments to address the issue of denial and traversal of statements in the pleadings.3. The court examined whether the mortgage bond was validly executed to make the company liable. Both lower courts ruled against the validity of the bond. The plaintiff attempted to raise additional arguments regarding ratification by the company and an equitable charge for the debt, but these were not raised as trial issues. The court emphasized the importance of framing issues properly for trial and declined to entertain these new arguments in second appeal.4. The interpretation of the company's Articles of Association was crucial in determining the authority to execute deeds on behalf of the company. The court analyzed Article 15 of the Articles, which required deeds to be signed by specific officers. The absence of the Managing Director's signature on the bond raised questions about the validity of the execution by the Secretary and Working Director. The court concluded that these officers alone were not legally competent to execute the mortgage deed.5. The court also considered the principle of belief in the authority of the officers who executed the bond. While there are cases where this principle applies, the court emphasized that if an illegality is apparent, the plaintiff will not be protected. The court highlighted the obligations of individuals dealing with companies, including the requirement to be aware of the Companies Act and the company's Articles of Association.6. Ultimately, the court found that the mortgage bond was invalid due to irregularities in its execution by the company officers. Despite the plaintiff's good faith and the money being applied to the company's purposes, the court held that the bond could not be enforced. The dismissal of the suit was based on the lack of proper trial of substantial issues and the invalidity of the bond. The second appeal and memo of objections were both dismissed with costs to the respondent.
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