1951 (9) TMI 23 - HC - Companies Law

Court dismisses appeal, upholds order in Amrit Rai Sood case; assets not discharge, res judicata applies.

The court dismissed the appeal and upheld the District Judge's order, ruling that Amrit Rai Sood's claim was not discharged by taking assets, the receipt ... Winding up - Company when deemed unable to pay its debts Issues Involved:1. Whether Amrit Rai Sood's claim against the company was discharged by his taking the film 'Aaj Aur Kal' and other assets.2. Whether the receipt given by Khushi Ram constituted full and final discharge of the company's liability.3. Whether the principle of res judicata applies to the proceedings regarding the winding-up petition filed by Amrit Rai Sood.Detailed Analysis:1. Discharge of Claim by Taking Assets:The primary issue was whether Amrit Rai Sood's claim against the company was discharged by his acceptance of the film 'Aaj Aur Kal' and other assets. The court examined the agreement dated 8th February 1947, which provided that Amrit Rai Sood was to finance the company up to Rs. 1,50,000 and had a lien over the income and proceeds of the film 'Aaj Aur Kal'. Clause 8 of the agreement allowed the financier to forfeit the picture and other assets if the company failed to arrange further finances. The court found that the letter dated 10th December 1946, which appointed Khushi Ram to supervise financial arrangements, must be read subject to the agreement's terms. The court concluded that the acceptance of the film and assets did not discharge the company's liability as the agreement's terms were not fully satisfied.2. Receipt Given by Khushi Ram:The court analyzed whether the receipt given by Khushi Ram on 12th April 1947 constituted a full and final discharge of the company's liability. The receipt mentioned the ex gratia release of uncalled capital to the extent of Rs. 50,000. The court held that the receipt, signed by Khushi Ram for Amrit Rai Sood, did not provide Khushi Ram with authority beyond the terms of the agreement and the letter. The court emphasized that the authority of an attorney must be strictly pursued, as per Bowstead's Law of Agency and relevant case law. The court concluded that the receipt did not constitute a full discharge of the liability, as Khushi Ram's authority was limited by the agreement and the letter.3. Principle of Res Judicata:The court addressed whether the principle of res judicata applied to the proceedings regarding the winding-up petition filed by Amrit Rai Sood. The court noted that Amrit Rai Sood had brought the winding-up petition as a creditor of the company, and the company did not object to his status as a creditor at that time. The court cited the Privy Council judgment in Hook v. Administrator-General of Bengal, which established that a finding at one stage of a proceeding is binding at another stage. The court held that since the company did not contest Amrit Rai Sood's creditor status during the winding-up petition, it could not raise that objection at a later stage. The principle of res judicata prevented the company from contesting the existence of liability to Amrit Rai Sood.Conclusion:The court dismissed the appeal and upheld the order of the District Judge, finding that Amrit Rai Sood's claim was not discharged by taking the film and assets, the receipt given by Khushi Ram did not constitute a full discharge of liability, and the principle of res judicata applied to prevent the company from contesting Amrit Rai Sood's creditor status. The respondent was awarded costs in the court.