B. M. Lal, J. - (1.) THESE three analogous First Appeal are directed against a common judgment and decree dated 31-7-1981, passed by HI Additional District Judge Kanpur arising out of three original suits Nos. viz. 83 of 1973, 278 of 1974 and 208 of 1975 filed by the appellants/plaintiffs M/s. Patiala Flour Mills Co. Ltd. Patiala (hereinafter referred to as the appellant) against the U. P. State Industrial Corporation Ltd. Kanpur (subsequently changed von enclature U. P. State Industrial Development Corporation Ltd. Kanpur. for short the Corporation). To be more specific it may be stated that First Appeal No. 492 of 1981 arises out of original suit No. 83 of 1973. First Appeal No. 489 of 1981 arises out of original suit No 278 of 1974 and the First Appeal No. 490 of 1981 arises out of original suit No. 208 of 1975. Trial Court consolidated all the three aforesaid original suits and dismissed the same by the common judgment and decree dated 31-7-1981.
(2.) IN all the aforesaid three original suits main relief claimed by the appellant is that a decree for specific performance of contract entered into between the parties vide agreement dated 6-4-1966 (Ext P-13) may be passed and/or any other order which the Court may deem fit and proper under the circumstances of the case may be passed. CASE OF THE APPELLANT In short the case of the appellant against the defendant/respondent no 1 is as under ;- M/s. Patiala Flour Mills Co. Ltd. Patiala is a subsidary Co. of Modi Group of Industries incorporated under the Companies Act, 1956. M/s. Modipon Ltd Modinagar, defendant/respondent no. 2 in all the aforesaid three appeals, is also a Company incorporated under the Companies Act 1956. The Modi Group of Industries foated a Company namely M/s. Modipon Ltd referred to above. It was incortporated with an object to manufacture reyon. nylon and other staple fibres. It was to be set up in collaboration with M/s. Rohm and Hass Company, U. S. A. The authorised capital of the Company was Rs. 10 Crores but the issued capital was Rs. 2 Crores, against 20 Lakhs equity share of Rs. 10/- each. The foreign collaborator M/s. Rohm and Hass subscribed 8 lakhs shares of worth Rs. 80 Lakhs. The Modi group of Industries and their associates subscribed shares worth Rs. 61,20.000\-. The shares worth Rs. 58.80 Lakhs (49 per cent of the issued shares) were offered to the public as per clause 19 of Rule 57 of the Rules framed under the Securities Contract (Regulation) Act 1956 (hereinafter referred to as the Rules and Act respectively). These shares worth Rs. 58.80 lakhs were to be under written and the Modis including respondent No. 2 approached the Corporation to underwrite the whole public Issue of Rs. 58.80 lakhs. The Corporation, however, could not underwrite, more than 20 per cert of the issued equity shares capital (i. e. more than Rupees fourty lakhs in the instant case since issued equity shares Capital was Rs. 2 crore without the approval of the Government. Detailed negotiations continued between the Directors of the Modies, respondent No. 2. Corporation and the Government Ultimately the Corporation informed Sri K. N Modi of the Modi Group and the respondent no. 2 that, it was favourably inclined towards their request to underwrite the whole issue of Rs. 58.80 lakhs. It was agreed in principle that in case the public failed to subscribe to the shares, then the Modi Group will be bound to buy back these shares worth Rs. 18.80 lakhs after the expiry of three years from the date of start of the factory because the Corporation wanted to limit its subscription to maximum of 20 per cent of the Issued Equity shares capital i.e. Rs. 40 lakhs in case the public failed to subscribe to the Issued shares. The shares were thrown open far public subscription on 12th March 1966 and the offer was closed on 24th March 1966. On the close of the offer it was found that the public subscribed only 451,50 shares of the face value of Rs. 10/- each totolling Rs. . 4151,500/- The Corporation subscribed the balance shares of Rs. 54,28,500/-, Thereafter, the contract was to be entered into between M/s. Modi Pon Ltd., the respondent no. 2 and the Corporation but .when it was pointed out that M/s. Modi Pon Ltd., the respondent No. 2 could not be a party to the transaction for the purchase of its own shares; M/s. Patiala Flour Mills Co. Ltd a subssidary Company of the Modi Group entered into an agreement dated 18-4-1966 (Ext. P-13) with the Corporation, at the behest of M/s Modi Pon Ltd. Under the aforesaid Agreement Corporation agreed to sell 1,88.000 shares of the face velue of Rs 10/- each totalling a sum of Rs. 18.80 Lakhs to effect transfer after the expiry of 3 years of the start of the production or 5 years from the date of rist subscription whichever is earlier. It was also agreed upon interalia that the price of the shares would be the amount invested by the Corporation plus interest at the rate 8 1/2% per annum to be calculated from the date of investment. It was also agreed upon that penal interest at the rate 12% per annum will be payable as damages in the event the appellant commits default by not purchasing the shares within the stipulated time. The plant of M/s. Modipon Co. was commissioned in March 1968. On 21st January 1970 Mr. R. B. Gujarmal Modi wrote a letter to the Corporation asking it to retransfer these shares to the Mills of the face value of Rs. 4 lakhs as per the agreement dated 18th April 1966 (Exbt. P-13). But the Corporation did not sell back the scares as per this agreement because by that time market value of the shares! had gone up. By letter dated 20th May 1970 and from time to time by subsequent letters. Corporation Informed the appellant that it has decided not to sell the shares to the appellant, which gave rise to the cause of action for filing aforesaid suits and as such the appellant filed aforesaid three original suits for specific performance of the contract against the respondents. CASE OF CONTESTING RESPONDENT NO. 1. In short the case of the contesting respondent No. 1 resisting the claim of appellant is as under :- The Modie approached the Corporation to underwrite shares worth Rs. 58.80 lakhs The Corporation agreed to underwrite these shares up to the extpert of worth Rs. 40 lakhs outright but for the balance shares worth Rs. 18.80 lakhs it desired to be excused as the same was not possible without permission of the Government Howeven, the appellant succeeded in getting permission granted from the Government for the Corporation to underwrite shares worth Rs. 18.80 lakhs also. By letter dated 8-1-1966 (Exbt. 8), Modis made offer to the Corporation to underwrite these shares. By letter dated 13-1-1966 (Exbt. 9) Corporation accepted the offer of appellant. By letter dated 21-1-1966 (Ext 10), the appellant agreed to enter into the agreement dated 16-4-1966 (Exbt P-13). The Corporation as such accepted the offer of the appellant on the condition that Modis will purchase these shares from the Corporation in case the Corporation desires to sell them. Besides this the respondent no. 1 resisted the claim of appellant on other grounds interalia : A It was not a concluded contract. B. It was barred by the Specific Relief Act. C. It was barred by Securities Contract (Regulation) Act D. It was barred by section II08-A and 108-B of the Companies Act. E. It was against public policy. F. It was a contract from the purchase of movable property and the contract for the buying of shares which could not be specifically enforced.
(3.) CONSIDERING relevant pleadings of respective parties, trial court framed following issues : 1-a. Whether the suit is under valued ? 1-b Whether the court fee paid is Insufficient ? 2. Whether Shri K. N. Modi has been authorised by a resolution of the plaintiff Company to sign and verify the plaint ? 3. Whether Sri K. N. Modi was Director of Plaintiff Company at the time of filing of the suit ? 4. Whether the agreement dated 18-4-1966 between parties is void and not enforceable under section 20 of the Securities Contracts (Regulations) Act, 1956 and rules framed under the said Act ? 5. Whether the suits for Specific performance are not maintainable in view of section 14 of the Specific Relief Act ? 6. Whether the agreement dated 18-4-1966 is vague, ineffective and incapable of specific performance ? 7. Whether the clauses 1 and 2 of the agreement dated 18-4-1966 do not amount to concluded agreement for reasons stated in para 1 (ii) and (iii) of the written statement ? 8. Whether clause 2 of the agreement dated 18-4-1966 is not enforceable for reasons stated in paras 23, 32 and 33 of the written statement ? 9. Whether there is concluded agreement dated 18-4-1966 between the parties regarding shares of Rs. 18.8 lakhs or any part thereof ? 10.Whether the suit as framed is not maintainable ? 11.Whether the agreement relied upon is against public policy and is liable to fall on the ground ? 12.To what relief if any, is (he plaintiff entitled ? 13.Whether Specific Performance of contract could not be claimed in part ? If so, whether the later two suits are under-valued and court fee paid is insufficient ? 14.Whether the provisions of section 20 of the Specific Relief Act stand attracted to the fasts of this case alleged by defendant No. 1 ? Its effect ? 15.Whether the plaintiff can avoid the provisions of section 108-A and 108-B of the Companies Act, 1956 for reasons indicated in paras 32-B, 32-C, 32-D, 32-E. 32-F and 32-G of the plaint ? FINDINGS OF TRIAL COURT ON THE ISSUES Trial Court decided issue No. 1 (a) and 1 (b) as preliminary issue by order dated 7-4-71 and held that Che suit is neither under valued nor the court fee paid is insufficient.;