TaxTMI 
TaxTMI 
2008 (6) TMI 353
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....0 7-8-1987 2,75,000 22-8-1987 25,000 13-11-1987 20,000 18-11-1987 50,000 20-11-1987 1,80,000 3. Out of the said amount of Rs. 6,00,000 borrowed from the plaintiff, the first defendant had repaid a sum of Rs. 2,25,000, i.e., a sum of Rs. 50,000 on 5-4-1988 and Rs. 1,75,000 on 15-11-1988. A sum of Rs. 3,75,000 remains to be paid by the first defendant against the said loan. The plaintiff had 1,250 equity shares each to the value of Rs. 100 in the first defendant. The first defendant had diverted the funds of the company to other companies controlled by the second defendant and the second defendant had resorted to falsification of that accounts and under statement of income to promote the other companies at the cost of the first defendant. There arose a dispute between the plaintiff and his wife Mrs. Shantha Natraj and the second defendant, the managing director of the first defendant. Mrs. Shantha Natraj, wife of the plaintiff is one of the directors of the first defendant, filed a company petition before this court for certain relief. Subsequently, the said disputes were settled by entering into a memorandum of understanding dated 25-9-1989, between ....
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....ntainable either on facts or on law and the same is bad for misjoinder of parties since there is no cause of action as against the second defendant and hence the suit is liable to be dismissed as against the second defendant. According to the first defendant, the plaintiff had never lent any amount and that the second defendant was conducting his business inter alia as a builder and a promoter at Bombay and on the representation made by the plaintiff, the first defendant decided to promote the first defendant-company to carry out specific projects in Madras. Since neither the plaintiff nor the second defendant wanted to block their monies in share capital, it was decided that the subscribed share capital would be Rs. 5,00,000 out of which the second defendant has to subscribe at the first instance 50 per cent and one another person, Mr. Subramanyam and the plaintiff to subscribe each 25 per cent. Since Mr. Subramanyam backed out, it was decided that the second defendant would subscribe to 75 per cent of the share capital while the plaintiff would subscribe to 25 per cent of the share capital. It was also decided that each of the promoter shareholders would bring in finance proporti....
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....o takeover the shares from the plaintiff and therefore are not bound to pay for the same. The claim for Rs. 25,000 is denied because the defendants had not borrowed any amount much less an amount of Rs. 25,000 as alleged in the plaint. These defendants are jointly and severally liable to pay any amount much less a sum of Rs. 7,75,000. For the suit notice dated 16-6-1989, issued by the plaintiff, the defendant have sent a suitable reply dated 30-6-1989. There was no agreement to pay any interest. The suit is frivolous and vexatious and is liable to be dismissed with costs of the defendants. 6. On the above pleadings, the learned Trial Judge had framed as many as six issues for trial. The plaintiff was examined as P. W. 1, and exhibited exhibits A1 to A17 were marked on the side of the plaintiff. On the side of the defendants, the defendants have examined one S. Seshadri as D. W. 1 and exhibits B1 to B4 were marked. 7. After meticulously scanning the evidence, both oral and documentary evidence and giving due deliberations to the submissions made by both sides, the learned Trial Judge finding no material to reject the claim of the plaintiff has decreed the suit as prayed for wi....
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....n section 434(1)(b) of the said Act in support of his contention. Section 434(1)(b) of the Companies Act runs as follows : "Company when deemed unable to pay its debts.-(1) A company shall be deemed to be unable to pay its debts- ****** (b )if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor of the company is returned unsatisfied in whole or in part;" 12. Relying on a ratio decidendi in Electronics Corpn. of India Ltd. v. Secretary, Revenue Department, Government of Andhra Pradesh [1999] 97 Comp. Cas. 470 (SC) learned counsel for the appellants would contend that against the first defendant-company, a legal entity alone, the lis filed by the plaintiff is maintainable and that the second defendant is not liable for the debt incurred by the first defendant. The short facts of the said ratio decidendi are that the Civil Appeal No. 142 of 1983 was filed by the Electronics Corporation of India Ltd./appellant. According to the appellant, in the year 1963, the State of Andhra Pradesh had granted a large area of land to the Department of Atomic Energy of the Central Government. In 1964, the Department of Atomic Energy gave ....
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....tion from the assets of its members; the liability of the members, or shareholders is limited to the capital invested by them ; similarly, the creditors of the members have no right to the assets of the corporation, Salomon v. Salomon & Co. [1897] AC 22 (HL) relied on." 14. There cannot be any two opinion with regard to the abovesaid two ratio decidendies relied on by learned counsel appearing for the appellants. But only thing for consideration is whether those dictums can be applicable to the present facts of the case. The plaintiff has filed the suit on the basis of exhibit A1 memorandum of understanding entered into between the plaintiff, defendants and Mrs. Shantha Natraj, the wife of the plaintiff. A careful reading of exhibit A1 will go to show that the said exhibit A1 memorandum of understanding came into existence only because of arriving at the consensus between the parties in respect of the dispute that had arisen between the parties in Suit Nos. 377 and 376 of 1989 before this court (Original Side). Learned counsel appearing for the appellants relying on clause III to exhibit A1, which reads as follows : "'Sri B. Natraj and Akshaya Finance and Investments will be ....
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....e cost of the first defendant. Only on that score, the abovementioned civil suits were filed by the plaintiff against the defendants before the High Court and to settle the said issue exhibit A1 came into existence between the parties and that as per the terms of exhibit A1, the second defendant had issued five cheques as detailed above and when those cheques were presented in the bank, were dishonoured. Under such circumstances, the contentions of learned counsel appearing for the appellants that the second defendant is not liable for the suit claim cannot be sustainable. It is further pertinent to note that the second defendant has not entered into box before the trial court to establish his case. D.W. 1 Seshadri, even in the cross-examination would admit that the entire affairs of the first defendant was looked after only by the second defendant. Hence, I hold on point No. 1 that the second defendant is jointly and severally liable for the suit claim along with the first defendant. Point No. 2 : 16. Even though there was no specific issue framed before the Trial Court as to the fact, whether the suit is bad for misjoinder of party like the second defendant, it was contende....