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of <h1>Fraudulent actions lead to liability in embezzlement case; recoverable amount remitted, limitation not a bar</h1> <h3>Dehra Dun Mussourie Electric Tramway Co. Ltd. Versus Hans Raj</h3> The court found that there was no conspiracy between Mela Ram and Beltie Shah for embezzlement. Mela Ram's actions were deemed fraudulent, and he was held ... Winding up – Power of court to assess damages against delinquent, directors, etc. Issues Involved:1. Conspiracy and Embezzlement2. Fraud and Good Faith3. Liability of Legal Representatives4. Quantum of Damages5. Limitation and Bar of Suit6. Authority and Scope of Employment7. Survival of Cause of Action Against ExecutorsIssue-wise Detailed Analysis:1. Conspiracy and Embezzlement:The plaintiff's initial claim was that there was a conspiracy between Mela Ram and Beltie Shah Gilani to embezzle Rs. 39,750. However, the court found that the evidence did not establish any such conspiracy. It was concluded that Mela Ram was not in Beltie Shah's confidence when the latter misappropriated the sums. The embezzlement occurred independently of Mela Ram's involvement.2. Fraud and Good Faith:The court emphasized that in cases of fraud, which are not capable of direct proof, inferences must be drawn from circumstantial evidence. The party alleging fraud must establish it with cogent evidence. The court concluded that the evidence excluded any hypothesis of good faith on Mela Ram's part in granting receipts to Beltie Shah, indicating that Mela Ram's conduct amounted to fraud.3. Liability of Legal Representatives:The defendants argued that the estate of Raghu Mal, represented by his executors, was not liable for damages due to the maxim 'actio personalis moritur cum persona.' The court noted that while English law supports this maxim, Indian law, under the Legal Representatives Act and the Indian Succession Act, allows actions against legal representatives for wrongs committed within a year before the wrongdoer's death. Since the fraud occurred in 1923 and Raghu Mal died in 1926, the Act did not apply. However, the court held that the maxim should not be applied as it leads to inequitable results, and thus, the estate of Raghu Mal was liable for damages.4. Quantum of Damages:The plaintiffs claimed the entire sum embezzled by Beltie Shah. The court found that Mela Ram's fraud merely prevented the disclosure of the embezzlement, which was already complete. Hence, the plaintiffs were entitled to recover losses directly arising from Mela Ram's wrongful act. The court remitted the issue to the lower court to determine the amount that could have been recovered from Beltie Shah at the time of the audit.5. Limitation and Bar of Suit:The respondents argued that the suit was barred by limitation, as it was instituted in June 1929, while the wrong occurred in 1923. The court held that Article 95 of the Limitation Act applied, which starts the limitation period from the date of knowledge of the fraud. The fraud came to light in 1928, making the suit within time. Additionally, the court found that orders in proceedings under the Companies Act did not bar the suit.6. Authority and Scope of Employment:The court found that Mela Ram acted within the scope of his authority when he granted receipts to Beltie Shah. The defendants conceded that Mela Ram issued receipts and his right to do so was never questioned. Thus, Mela Ram's actions were within his employment scope, making his principals liable for his fraud.7. Survival of Cause of Action Against Executors:The court addressed whether the cause of action survived against Raghu Mal's executors. Under Section 306 of the Indian Succession Act, the liability of a deceased wrongdoer survives except in cases of defamation, assault, and other personal injuries not causing death. The court interpreted 'personal injuries' to mean injuries to the person, not property. Since the fraud caused pecuniary loss to the company, the estate of Raghu Mal was liable.Conclusion:The court concluded that Mela Ram's fraudulent actions made him liable for the company's losses, and the estate of Raghu Mal was equally liable. The court remitted the issue of the exact amount recoverable from Beltie Shah to the lower court for determination. The suit was not barred by limitation, and the estate of Raghu Mal was liable for the damages as the cause of action survived against his executors.
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