MEHTA J. - (1.) ON July 6, 1906, Seth Gumanmal Lodha, one of the proprietors and a nominee of the firm Kamal Nayan Hamir Singh of Ajmer, and Kanwar Ram Swaroop, son of Rai Bahadur Seth Champalal of Beawar, executed an agreement. Its relevant terms and conditions were as follows - "it was executed for the purpose of establishing a Cloth Mill at Beawar. The concern was to be started in the name of the Edward Mills Co. Ltd, Beawar. The two parties would invest bulk of the money and the management would also remain in their hands. They would keep their shares separate which would not be of the value of less than rupees one lac. The rights of both the parties would be equal and both the parties would have jointly and severally the rights of becoming Manager, Chairman, Secretary, Treasurer, etc. These rights would be exercised half and half by both the parties and they would be entitled to get the income in equal shares in respect of all the commissions, salary or any other kind of income. According to the terms of the Memorandum and Articles of Association the rights of the Chairman and Managing Director would jointly be exercised by Seth Guman Mal proprietor of the firm Kamal Nayan Hamir Singh and Kanwar Ram Swarup. After the registration of the Memorandum and the Articles of Association in the first general meeting, Guman Mal proprietor of Kamal Nayan Hamir Singh would discbarge the duties of the Chairman and would continue to do so for the full term of three years. During this period Ram Swarup would continue to act as Managing Director. Thereafter Seth Guman Mal would hold the office of the Managing Director and Ram Swarup would act as Chairman and that procedure would be followed in future. The work and the rights of the Secretary, Treasurer and Agent would be joint and would be carried on in the joint names of the parties. All the rights which the executants of the agreement, acquired, would not only be enjoyed by them till their life time, but they would also devolve upon their heirs, successors and administrators or upon those persons who might be their legal heirs and legal representatives. "
(2.) IN pursuance of the above agreement the Edward Mills Co. Ltd. , was incorporated on August 9, 1906. The substance of the agreement found place in clause VI of the Memorandum of Association. It runs as follows - "vi. Seth Guman Mal, son of Seth Raj Mal Lodha, Proprietor of the firm of Kamal Nayan Hamir Singh of Ajmer and Kunwar Ram Swarup, son of Rai Bahadur Seth Champalal of Beawar, or their heirs, executors, administrators, successors, representatives or their duly authorised agents or such other persons or persons as may from time to time be appointed by them, shall be Agents, Secretaries, Treasurers, the Chairman and the Managing Director of this Company, and shall not be required to vacate the said offices until they resign of their own accord, and as a remuneration for their services a fixed amount of Rs. 250/- per month shall from the date of commencement of the business upto the date the machinery may begin to work, be given to them ; and afterwards the said Seth Guman Mal, Proprietor of the firm of Kamal Nayan Hamir Singh of Ajmer and Kunwar Ram Swarup son of Rai Bahadur Seth Champalal of Beawar, shall be allowed 16 % only on the net profits of the earnings of the Company as their commission. As to the way in which the respective duties of the Chairman and the Managing Director shall be discharged, Seth Guman Mal and Kunwar Ram Swarup will from time to time settle between themselves and inform the office of the Company of the same. " Arts. 60 and 75 of the Articles of Association substantially convey the same terms and conditions. Under Art, 60 of the Articles of Association Seth Guman Mal and Ram Swarup were to be appointed ex officio Directors as also the Chairman and Managing Directors of the Company respectively. It also provided that their heirs, executors, etc. , as appointed by them, would be able to act as such. As to the way in which their respective duties would be discharged Seth Guman Mal and Ram Swarup would, from time to time, decide and settle between themselves and inform the Company's office of the same. Art. 75 lays down that Seth Guman Mal and Ram Swarup or their heirs, executors, etc. , would be the Chairman and Managing Director of the Company and would not be required to vacate the office until they resigned of their own accord. They would get Rs. 250/- per month from the date of the commencement of the business till the date the machinery started working. Thereafter they would get Rs. 16 % on the net profits of the Company as their commission. The defendant No. 1 Company's business was carried on in the manner as set out above and both Seth Guman Mal and Ram Swarup obtained commission at the rate of 16% on the net profits of the Company. The commission was credited in the name of the firms, Kamal Nayan Hamir Singh and Champalal Ram Swarup. Seth Guman Mal died on November 11, 1914. Thereafter the members of the firm Kamal Nayan Hamir Singh nominated Seth Gadhmal Lodha as their representative and by their letter, dated May 4, 1915, they informed Directors of the Company accordingly. The Company by its extraordinary general meeting held on July 23, 1915, passed a special resolution which was confirmed in the next meeting, held on August 16, 1916 appointing Seth Gadhmal in place of Seth Guman Mal. Ram Swarup died on January 5, 1916. His younger brother Motilal, defendant No. 2, was appointed in his place by a special resolution of the Company, which was confirmed at the extra ordinary general meeting held on June 8, 1916. Till the end of June 1938, Gadhmal and Motilal acted respectively as Chairman and Managing Director of the Company. The firm Champalal Ram Swarup, defendant No. 2, and other members of his family were adjudicated insolvent by the Bombay High Court on July 1, 1938 Thereupon defendant No. 2 Motilal vacated the office of the Managing Director and Seth Gadhmal Lodha remained the sole Chairman and the Managing Director. The adjudication was subsequently annulled by the above court. Gadhmal died on January 11, 1942. The Board of Directors of the Company appointed Seth Sobhagmal Lodha on January 17, 1942, in place of Seth Gadh Mal deceased as Chairman and Managing Director of the company. This appointment was temporary and was subject to the confirmation of the Company. An extraordinary general meeting of the Company for making the appointment was convened on February 8, 1942. The meeting was held in the office of the Company and Seth lobhag Mal Lodha first occupied the Chair. Before the meeting could transact the business, it was dissolved by Seth Sobhag Mal and his supporters left the meeting. The rest of the share-holders continued the meeting under the Chairmanship of K. K. Bhargava, Advocate, and passed a resolution appointing defendant No. 2 Motilal as the Agent, Secretary, Treasurer, Chairman and Managing Director of the Company for a period of 20 years. It was further resolved in the meeting that he would be entitled to get remuneration at the rate of 10% on the net profits of the Company every year and that he would also act as an ex-officio Director till he held the above named offices. On an application submitted by Sobhag Mal on February 11, 1942, under sec. 79 (3) of the Indian Companies Act, the District Judge, Ajmer Mr. K. R. Damle ordered that the meeting of the Company should be held on February 12, 1942, under the Chairmanship of the Seth Sobhag Mal. On April 8, 1942, Motilal went up in revision to the Court of Judicial Commissioner, Ajmer, against the above order of the District Judge He also made an application for interim injunction restraining Sobhag Mal Lodha from acting as Managing Agent, Chairman and Director, but that application was disallowed on May 8, 1942. On May 15, 1942, the Judicial Commissioner, Ajmer, granted an interim stay of the order of the District Judge and further directed that the resolution of the extra ordinary general meeting, dated February 8, 1942, electing Seth Motilal was to be acted upon until further orders. On June 3, 1942, that order was made absolute and since then Motilal defendant No. 2 acted as the Managing Director etc. of the Company. Seth Kanmal, one of the proprietors of the firm Kamal Nayan Hamir Singh and father of the plaintiffs Nos. 8 and 9, filed suit No. 867-A/1934 for partition of the joint family property in the Calcutta High Court. By an order dated April 1, 1935, Seth Gadhmal was appointed a receiver of the estate and joint properties including the joint business with power to carry on the existing joint business. On his death Seth Sobhag Mal plaintiff No. 1 was appointed in his place by an order, dated January 16, 1942. Thereafter Seth Sobhag Mal Lodha filed the present suit with the leave of the Calcutta High Court. The plaintiffs Nos. 2 to 9 and the defendants Nos. 4 to 6 are the other proprietors of the firm Kamal Nayan Hamir Singh, The case set up in the plaint is as follows: - The families of the plaintiffs and the defendants Nos. 3 to 6 carried on business under the name and style of M/s. Kamal Nayan Hamir Singh. The joint family of the defendant No. 2 also carried on the business under the name and style of M/s. Champalal Ramswarup of Beawar. It was decided by the two families that in the matter of holding offices of the Managing Director, Managing Agent, etc. , they should act through their nominees and pursuant to that decision Seth Guman Mal of the plaintiffs' family firm and Ram Swarup of the defendant's Nos. 2's family firm were respectively appointed nominees and representatives of the said firm for the purpose of managing the business of the company as Chairman and Managing Director. On the death of Guman Mal, Gadh Mal was nominated by Proprietors of the Firm Kamal Nayan Hamir Singh in his place. Similarly on the death of Ram Swarup, defendant No. 2 Motilal was nominated by the firm Champa Lal Ramswarup. At the commencement of the extraordinary general meeting held on February 8, 1942, Seth Sobhag Mal Lodha as Chairman, directed the Secretary of the Company to record the names of the share holders who were present. Thereupon some of the share-holders in collusion with and at the instigation of Motilal, defendant No. 2, and the member of his family created pandemonium and obstructed the Secretary from discharging his duties. They also wanted to remove Seth Sobhag Mal Lodha forcibly from the Chair. Thereupon Mr. Lodha dissolved the meeting and he and his supporters left the place. The rest of the share-holders insisted upon conducting extraordinary general meeting under the Chairmanship of Mr. K. K. Bhargava, Advocate, and passed a resolution appointing Motilal, defendant No. 2, as the Managing Director and Chairman. According to the plaintiffs, this resolution being not valid is not binding upon the Company or the plaintiffs or the defendants Nos. 3 to 6 as the same was not passed in a properly convened meeting and as no proper notice for the purpose had been given to the share-holders. The meeting of February 8, 1942, was not convened for altering the memorandum or the Articles of Association regarding change in the commission rate. The plaintiffs further averred that the orders passed by the Judicial Commissioner on May 15, 1942, and June 3, 1942, were without jurisdiction, null and void and were not binding upon the plaintiffs and the defendants Nos. 3 to 6. On April 1, 1942, the adult members of the firm Kamal Nayan Hamir Singh sent a letter to the Directors of the company, informing them that they had nominated Seth Sobhag Mal as their representative in place of Seth Gadh Mal with the same rights and privilege. The Board of Directors in a meeting held on April 18, 1942, passed a resolution appointing Seth Sobhagmal Lodha as Secretary, Treasurer, Agent, Managing Director etc. of the Edward Mills Company Ltd. , Beawar. Despite the above resolution defendant No. 2 Motilal was wrongfully in the sole management and possession of the said company, and was not permitting the plaintiff's representatives to participate in the management of the Company. The firm Kamal Nayan Hamir Singh received payment of half the commission from defendant No. 1 upto December 13, 1939, and the plaintiffs and the defendants Nos. 3 to 6 were entitled to Rs, 23,061/-, as their share in the commission for the years 1940 and 1941. They are further entitled to commission from January 1, 1941, upto the date of the suit. Further the plaintiffs are entitled to moiety of commission from January 1, 1942, upto the date of the suit @ 16% which amounts to Rs. 3,00,000/ -. The firm M/s. Kamal Nayan Hamir Singh is a family firm having business at Ajmer and other places in India. The deceased Seth Kanmal Lodha, father of the plaintiffs Nos. 8 and 9 filed a civil suit No. 867/a of 1934 for partition in the Calcutta High Court and late Rai Bahadur Seth Gadhmal Lodha was appointed as receiver of the firm and its business by an order dated February 20, 1935. On his death the plaintiff Seth Sobhag Mal Lodha was appointed a receiver in his place. The defendant Company could not terminate the agency of the plaintiffs without their consent and in any case under sec. 87-A, of the Indian Companies Act. . The plaintiffs were, therefore, entitled to be associated with defendant No. 2 in performing the duties of the Chairman, Managing Director, etc. In the alternative, the plaintiffs were entitled to recover from the defendant company a sum of rupees 5 lacs by way of damages for wrongful exclusion and dismissal from the offices of the Managing Director, etc. In the end, the plaintiffs claimed the following reliefs - (a) That, it may be declared that on the death of R. B. Seth Gadhmal Lodha, the plaintiffs' family firm Kamal Nayan Hamir Singh having appointed Seth Sobhag Mal Lodha as the nominee to act for them and the Board of Directors of the defendant company having accepted the nomination, Seth Sobhag Mal Lodha was entitled to be in management and control of the affairs of the defendant company jointly with defendant No. 2. (b) That it may be declared that the resolution purporting to have been passed on the 8th February, 1942, at the extraordinary general meeting of the Company held by the partisans of the 2nd defendant, who broke up the meeting being ultra-vires and invalid is not binding on the plaintiffs and the defendant company. (c) That it may be declared that the orders Ex P. passed by the Judicial Commissioner of Ajmer-Merwara in respect of the resolution purported to have been passed by the said meeting of the share-holders held on the 8th February, 1942, are without jurisdiction, null and void and not binding on the parties hereto. (d) That the defendants 1 and 2 may be ordered to hand over the management and charge of the affairs of the 1st defendant company to Seth Sobhag Mal Lodha on behalf of the plaintiffs' said family firm in accordance with the memorandum and Articles of Association of the defendant Company. (e) That the defendants or such of them as may be held liable may be ordered to pay to the plaintiffs and defendants No. 3 and 4 Rs. 3,73,061/-, the commission on net profits upto the date of the suit. (f) That in the alternative the defendants Company may be ordered to pay to the plaintiffs on behalf of the plaintiffs' said family firm damages to the tune of Rs 5 lacs for wrongful dismissal and exclusion of the plaintiffs' nominee from the management and control of the 1st defendant. (g) That the defendants Nos. 1 & 2 or one or more of them may be ordered to pay plaintiffs costs of the suit. (h) That such further and other relief as the circumstances of the case may require may be granted to such of the plaintiffs and in such capacity as may be found to be entitled thereto against such of the defendants, as may be held liable. The defendant Nos. 1 to 3 contested the suit. Defence of the defendants Nos. 1 and 2 are substantially the same. According to them Seth Gumanmal and Ram Swarup were the promoters of the Company in their individual and personal capacity. They were agents. Secretary Chairmen, Managing Directors etc. in their individual and personal capacity and not as the nominees or representatives of their respective firms. The company was the sole and the final authority to make the appointment and the light never vested in any other person or family. The appointments of Seth Gadhmal Lodha and Seth Motilal were not virtually by nominations made by the respective firms, but because of the fact that the company chose them by resolutions adopted in its extraordinary general meetings. They did not hold the position identical to those occupied by Seth Gumanmal & Ramswarup. No disorder or confusion prevailed at the meeting of February 1942. There was no apprehension of breach of the peace at that time, nor was any attempt made to remove Seth Sobhagmal Lodha forcibly from the chair. The share-holders made proposals for electing the chairman of the meeting. Sobhagmal Lodha however, illegally insisted on occupying the chair and finding the majority against him, he left the meeting along with his supporters. The meeting could not have been dissolved by Seth Sobhag Mal Lodha under any circumstances. The share-holders were within their rights to elect the chairman for the meeting and to proceed with the business. After Seth Sobhagmal Lodha had walked out, the resolution, dated February 8, 1942, was perfectly valid and did not violate the Memorandum of Association or the Articles of Association. The resolution of the Board of Directors of April 18, 1942, appointing Seth Sobhagmal Lodha was without jurisdiction and inconsistent with the Company's resolution of February 8, 1942. R. S. Motilal was the only person legally entitled to be in the sole management and charge of the defendant Company. The defendants further pleaded that the plaintiffs were not entitled to any damage or commission whatever. The suit related to the appointment and dismissal by a Company of its Managing Agent etc. , and that matter pertained to the internal affairs of the Company and as such they were outside the purview of the court. The suit was barred by sec. 11, C. P. C. on account of the decision of the Judicial Commissioner, Ajmer, and was bad for mis-joinder of the parties. Clause VI of the Memorandum of Association did not operate in law to create any agreement or contract between the Company and the persons named therein and was, therefore, not binding upon the Company. There was no privity of contract between the plaintiffs and the defendants Nos. 3 to 6 on the one hand and the defendant company on the other and, therefore, the suit for appointment of plaintiff No. 1 as also for the recovery of the damages was not maintainable. The suit was barred by sec. 69 of the Indian Partnership Act, 1932, as the firm Kamal Nayan Hamir Singh was a partnership firm and not a joint Hindu family firm and it could not have filed a suit without registration. Defendant No. 2 also pleaded that the plaintiffs had not come with clean hands as they themselves were guilty of repeated breaches of the contract. On more than one occasion they transferred shares to others in contravention of terms No. 5 of the agreement dated 6-7-1906. Gadhmal on the annulment of the attachment order did rot take the answering defendant No. 2 in the joint management of the Company in contravention of the clause I of the agreement and deprived him of his due shares of the Managing Agency commission for the years 1937 & 1938. The agreement between Seth Gumanmal Lodha and Seth Ramswarup was in substance a partnership agreement. The partnership must be deemed to have come to an end on the adjudication of the defendant No. 2 and other members of his family as insolvent and, therefore, no suit on the basis of the agreement could lay. The plaintiff and the defendants Nos. 3 to 6 did not constitute the firm as there have been many deaths in the family since 1936. In any case, the plaintiffs had no right to bring the suit after the death of Seth Gadhmal Lodha.
(3.) DEFENDANT No. 3 contested the suit on the ground that he had been wrongly impleaded and the plaintiffs are not entitled to get any relief. The District Judge, Ajmer, framed as many as 31 issues. The plaintiff examined 6 witnesses. The defendants produced 5 witnesses. Both the parties also produced a large number of documents in support of their respective pleas. The relevant documents have been referred to in the paper book. The trial court gave the following finding: (1) That the family firm of Seth Gumanmal and that of Ramswarup were the promoters of the Company, defendant No. 1 and the agreement, dated July 6, 1906, was executed by Seth Gumanmal Lodha and Ramswarup on behalf of their respective families. (2) That no partnership came into existence between the two families and the partnership created by the agreement of July 6, 1906, was between Seth Gumanmal and Kunwar Ramswarup only, carrying with it the necessary incidence and the resolution on the demises of the partners, if it could be deemed to have continued after their deaths, stood dissolved under sec, 42 of the Indian Partnership Act on defendant No. 2's adjudication as insolvent; (3) That the provisions in the memorandum of Association and the Articles of Association of the Company relating to the management are merely details of the management for the purpose of carrying on business of the company and that the Company was entitled to regulate details in such manner as it liked. Therefore, Clause VI of the Memorandum of Association and Arts. 60 & 75 of the Articles of Association could not be specifically enforced and they did not give any cause of action to the plaintiffs. (4) That the Company recognised the right of the firm Kamal Nayan Hamir Singh to the extent that its nomination of Seth Gadhmal as its representative in place of Seth Gumanmal was accepted by the resolution, dated July 3, 1915, and July 23 1915. Though half the commission was credited to the firm Kamal Nayan Hamir Singh, it would not amount to any implied agreement entitling the firm to take part in the management of the Company. (5) That there was no rowdyism or disorder in the general meeting of the Company held on February 8, 1942, so as to result in a breach of the peace and that the shareholders were entitled to elect the chairman. Seth Sobhagmal was not justified in asserting his right to preside over the meeting as he himself was a candidate for the office of the Chairman etc. The meeting of the share holders, dated February 8, 1942, therefore, was proper and justified, appointing defendant No 2 as Chairman and Managing Director. (6) That the plaintiffs are not entitled to be associated with defendant No. 2 as agents etc. (7) That with the institution of the suit for partition in the Calcutta High Court by Seth Kanmal the status of the joint family, even if it was joint, was changed and thereafter as the business was carried on jointly the firm became an ordinary partnership concern subject to the Indian Partnership Act. As the firm was not registered, Sec. 69 of the Partnership Act stood in the way of filing the suit without the registration of the firm. (8) That in the balance sheet a sum of Rs. 2015-6-6 as a moiety of the commission from January 11, 1942, is credited to Seth Gadhmal and the same amount to Seth Motilal. Similarly from 17-1-42 to 8 2-42 during which time Sobhagmal remained Chairman etc. half the amount of commission of Rs. 3706-2-6 was credited to Seth Sobhagmal, These amounts can be recovered by the heirs of Seth Sobhagmal or by the firm Kamal Nayan Hamir Singh. Aggrieved against the above judgment, the present appeal has been filed on behalf of the plaintiffs. Before the main points raised on behalf of the appellants in the course of the arguments are set out, it may be stated that Sobhagmal died in the course of the pendency of the appeal. In para 40 (a) of the plaint it is mentioned that it may be declared that on the death of Seth Gadhmal Lodha the plaintiffs' family firm having appointed Seth Sobhagmal to act as nominee for them, Seth Sobhagmal Lodha was entitled to be in the management and control of the affairs of the Company, jointly with defendant No. 2. In the case of personal action i. e. in an action where the relief sought is personal to the deceased, the right to sue will not survive to or against his representative. A right intimately connected with the individuality of the deceased will not survive on the basis of the well known maxim "actio personalis moritor cum persona", a personal right of action died with the person ). However, if emoluments are attached to the office, the right to sue will survive and the suit will not abate As has been conceded by learned counsel for the appellants no useful purpose is likely to be served by declaring at this stage that the deceased Seth Sobhagmal Lodha was entitled to be in the management and control of the affair's of the Company jointly with Seth Motilal, defendant No. 2. We are, therefore, not required to give any finding on this aspect of the matter. Learned counsel for the appellants raised the following main points in the course of his arguments: - (1) That the resolution of the Company dated February 8, 1942, appointing Motilal was not valid, as the general meeting of the share holders which had stood dissolved, was not to continue and approve of the appointment of defendant No. 2. (2) That sec. 69 6f the Partnership Act, 1932 does not apply to the case and that even if it is applicable, the plaintiffs case fell within the exception provided by sub-section, 3 ). (3) That there was an implied agreement between the plaintiff and the defendant company, as the latter ratified or acted upon the terms of the agreement, dated July 6, 1906, arrived at between the nominees of the two firms, Kamal Nayan Hamir Singh of Ajmer and Champalal Ram Swarup of Beawar. (4) That the plaintiffs-appellants and the defendants Nos. 3 to 6 are entitled for the years 1940 and 1941 to the moiety of commission of a sum of Rs. 23,061/-having not been contested by the defendants Nos. 1 and 2 and having been wrongly rejected by the trial court. ;