1938 (5) TMI 8 - HC - Companies Law

Court dismisses appeal in fraud case; plaintiff's claim rejected due to own fraudulent activities. Suit deemed incompetent.

The court dismissed the plaintiff's appeal in a case involving allegations of fraud and misfeasance related to a bank's establishment. The plaintiff's ... Winding up – Power of court to assess damages against delinquent, directors, etc. Issues:1. Allegations of fraud and misfeasance against defendants in relation to the opening and operation of a bank.2. Claim for compensation and damages by the plaintiff due to alleged false prospectus and closure of the bank.3. Plaintiff's involvement as a joint tortfeasor and his own misfeasance proceedings.4. Evaluation of whether the plaintiff was misled by misrepresentations in applying for shares.5. Competency of the suit considering previous misfeasance proceedings and limitation period.6. Interpretation of the Companies Act and liability of directors in cases of misfeasance.7. Application of res judicata principle in the context of the present suit.Analysis:The judgment pertains to a case where the plaintiff filed a suit against eight individuals for fraud and misfeasance in connection with the establishment and operation of a bank. The plaintiff alleged that the defendants, as directors of the bank, engaged in fraudulent activities, including issuing a misleading prospectus and improperly handling share allotments. The plaintiff sought compensation and damages amounting to Rs. 6500. However, it was revealed during the proceedings that the plaintiff himself was involved in fraudulent activities and was a joint tortfeasor along with the defendants. The plaintiff's misfeasance proceedings in the Allahabad High Court further highlighted his own misconduct, including fraudulent dealings with a third party.Regarding the issue of whether the plaintiff was misled by misrepresentations in applying for shares, the trial judge found that the plaintiff's motive for joining the bank was driven by personal gain rather than being induced by false representations made by the defendants or their agent. The trial judge also deemed the suit incompetent due to previous misfeasance proceedings against the defendants and the plaintiff, citing the principle of res judicata and the bar of limitation under Article 36 of the Limitation Act.The judgment delves into the interpretation of the Companies Act, emphasizing the liability of directors in cases of misfeasance. It was established that the plaintiff's cause of action fell under Section 100 of the Companies Act, and any liability in this regard had to be determined by the appropriate court under the Act. The judgment underscored that the plaintiff's attempt to seek civil remedies through the civil court after being penalized under Section 235 of the Companies Act was inappropriate and rendered the suit incompetent.In conclusion, the court dismissed the plaintiff's appeal, upholding the trial judge's decision. The court found no misrepresentation established against the defendants, highlighting the plaintiff's own fraudulent actions and greed as the driving force behind his involvement with the bank. The suit was deemed time-barred and incompetent, with costs awarded to the respondents and represented defendants.