1930 (3) TMI 14 - HC - Companies Law

Court dismisses appeal, agent lacked authority to bind companies on promissory notes, form unclear.

The appeal was dismissed with costs as the court found that the agent lacked authority to bind the companies through the promissory notes, and the form of ... Bills of exchange and promissory notes Issues:1. Interpretation of promissory notes signed by an agent on behalf of a company.2. Authority of the agent to bind the company in making promissory notes.3. Liability of the company based on the form and content of the promissory notes.4. Determination of costs incurred in a Calcutta case as per a compromise agreement.Analysis:1. The judgment concerns a Letters Patent appeal where the appellant, Messrs. Jhandoo Mal and Sons, claimed certain amounts based on promissory notes signed by Mr. T.B. Gilani on behalf of the Dehra Dun Electric Tramway Company Limited and Dehra Dun Mussorie Electric Tramway Company Limited. The Company Judge dismissed the claim, stating that the companies were not liable based on the promissory notes presented.2. The appellant argued that Mr. Gilani was an authorized agent of the company to make promissory notes as per the Negotiable Instruments Act and Indian Companies Act. However, the court found that the appellant failed to establish Mr. Gilani's authority to bind the companies for promissory notes, as the company's memorandum and articles of association did not explicitly grant such authority to managing agents.3. The court distinguished the present case from precedents like Chapman v. Smethurst, where the company was held liable on a promissory note, emphasizing that in this case, the promissory notes' form did not clearly indicate the companies as makers. Referring to Sree Lal Mangtu Lal v. The Lister Antiseptic Dressing Company, the court held that the descriptions after Gilani's name were not sufficient to bind the companies, similar to the ruling in the mentioned case.4. Regarding the costs incurred in a Calcutta case, the court examined a compromise agreement between the parties, where costs were to be decided as per the order of the Hon'ble Court. The court found that the Company Judge's order aligning with the terms of the compromise was appropriate. The judgment only addressed items 1 to 4 of the application, leaving items 5 to 9 for the Company Judge's determination if further application is made.In conclusion, the appeal was dismissed with costs, emphasizing the lack of authority of the agent to bind the companies through the promissory notes and the form of the notes not clearly indicating the companies' liability.