Fiduciary profit recovery and limitation under the residuary article upheld; pre-existing managing agency commission was validly payable.

A managing agent's entitlement to additional commission was upheld because Section 87-C of the Indian Companies Act applied only to managing agency appointments made after the amending Act commenced; the pre-existing agreement and directors' resolutions therefore made the commission validly payable. The company's claim to profits earned by the managing agent from sugar transactions was held not to fall within claims for tortious compensation or agency misconduct, but within the equitable principle that a fiduciary must account for gains made through misuse of position. The residuary limitation article applied, so the suit was within time, subject to deduction of godown rent.

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Issues: (i) Whether the managing agent was entitled to receive commission in addition to the remuneration fixed under the managing agency agreement without sanction under Section 87-C; (ii) whether the company's claim for the profit earned by the managing agent from sugar transactions was barred by limitation and, if not, under which article of the Limitation Act it fell.

Issue (i): Whether the managing agent was entitled to receive commission in addition to the remuneration fixed under the managing agency agreement without sanction under Section 87-C.

Analysis: Section 87-C of the Indian Companies Act applied only to appointments of managing agents made after the commencement of the amending Act. The managing agency agreement in question had been executed before the section came into force. The additional commission was payable under the agreement and the directors' resolutions, and there was no illegality under the pre-existing law.

Conclusion: The additional commission was validly payable and the claim against the estate failed on this issue.

Issue (ii): Whether the company's claim for the profit earned by the managing agent from sugar transactions was barred by limitation and, if not, under which article of the Limitation Act it fell.

Analysis: The claim was not one for compensation for tortious wrong within Article 36, nor a claim for neglect or misconduct in the course of agency within Article 90. The claim rested on the equitable principle embodied in Section 88 of the Indian Trusts Act, 1882, namely, that a person in a fiduciary position who gains a pecuniary advantage by use of that position must hold it for the beneficiary. The appropriate residuary provision was Article 120, and the suit was within time.

Conclusion: The claim was not time-barred, and the company was entitled to recover the profit, subject to deduction of the amount debited towards godown rent.

Final Conclusion: The appeals were disposed of by rejecting the challenge to the commission claim but granting partial relief to the company on the fiduciary profit claim, with costs and interest as directed.

Ratio Decidendi: A fiduciary who uses his position to gain a pecuniary advantage for himself holds that advantage for the person to whom the fiduciary duty is owed, and a suit to recover such gain falls under the residuary limitation provision rather than articles confined to tortious compensation or agency misconduct.

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