Karnal Distillery Co. Ltd. v. L.P. Jaiswal

Harnam Singh, J.:— To appreciate the point arising in this case the facts must be set out in some detail.

2. On the 13th of December 1946, Mr. Ladli Pershad Jaiswal instituted Civil Suit No. 374 of 1946 for declaration to the effect that the meeting and the proceedings of the Board of Directors of the Karnal Distillery Co. Ltd. Karnal held on the 3rd of March 1946 and the extraordinary general meeting held on the 28th of March 1946 and all meetings of directors held after the 28th of March 1946, were ultra vires, illegal, ineffective and a fraud on the company and that the unanimous resolutions of the extraordinary general meeting dated the 16th of October 1945, continue to be in force and for a permanent injunction restraining the defendants from acting upon or carrying into effect the resolutions passed in the meeting of the Board of Directors held on the 3rd of March 1946, in the extraordinary general meeting held on the 28th of March 1946 and in other meetings of the Board of Directors held after the 28th of March 1946. In that suit the trial court fixed the following issues:—

(1) Whether the resolutions mentioned in paragraph 6 of the Plaint and passed at the extraordinary general meeting dated the 16th of October 1945, are ineffective as having been passed under coercion or undue influence?

(2) Whether the resolutions mentioned in issue No. 1 are invalid either because they amount to veto or result in creating a deadlock or being in contravention of the statutory provisions of the Companies Act?

(3) If issues Nos. 1 and 2 are not proved or proved respecting some of the resolutions, does the non-compliance with such resolutions amount to a mere irregularity and what is its effect on the subsequent impugned meetings?

(4) Whether a notice for the impugned meeting of 3rd March, 1946, was necessary under the Articles of Association?

(5) If issue No. 4 is proved, what is the effect of non-compliance on that meeting?

(6) If issues Nos. 1 or 2 are proved and issue No. 4 is not proved, was the meeting of 3rd March, 1946, illegal or ultra vires?

(7) Did not the plaintiff receive a notice of the meeting of 28th March, 1946?

(8) Issue No. 7 is decided against the plaintiff, was the notice sent in proper form and what is its effect?

(9) If issue No. 7 is decided in plaintiff's favour was the meeting of 28th of March 1946, valid for any reason?

(10) If the meeting dated the 3rd of March 1946, is found to be illegal or ultra vires, is the meeting dated 28th of March 1946 valid and binding?

(11) Do the resolutions passed at the meeting dated the 28th of March 1946 amount to fraud on the minority members or are otherwise (for reasons given in the plaint) illegal or ultra vires?

(12) Does the matter agitated in the plaint relate to the internal management of the company and what is its effect?

(13) Whether the relief of injunction in effect amounts to reinstatement of the plaintiff as chairman and director of the company? If so, is the plaintiff entitled to injunction to that extent?

(14) Whether the plaintiff is entitled to injunction as prayed for?

(15) Are the defendants entitled to special costs under section 35-A, Civil Procedure Code and how much?

(16) Relief?

3. On the 28th of March 1947, the Karnal Distillery Co. Ltd. Karnal, instituted a Civil Suit No. 99 of 1947 for the recovery of Rs. 44,070/13/- from Mr. Ladli Pershad and from Messrs L.P Jaiswal and Co., Karnal Mr. L.P Jaiswal is the sole proprietor of defendant No. 2. In civil suit No. 99 of 1947 the trial court fixed the following preliminary issues:—

(1) Whether the description of the plaintiff as given in the plaint is correct?

(2) Whether the description of the defendant as given in the plaint is correct?

(3) Whether the suit is liable to be stayed under section to of the Civil Procedure Code?

4. Now, Civil Suit No. 99 of 1947 proceeds upon the allegations that Mr. L.P Jaiswal, defendant No. 1 was the managing director of the Karnal Distillery Co. Ltd. Karnal between April 1941 and October 1946. The case then states that between the 31st of March 1944 and the 3rd of July 1944 Mr. L.P Jaiswal, acting as the managing director of the plaintiff corporation fraudulently and with a view to derive personal benefit, sold to Messrs L.P Jaiswal and Co. Karnal 25, 146 gallons of methylated spirit at the rate of Rs. 1/1/- per gallon while the market value of methylated spirit on the relevant dates was Rs. 2/8/- per gallon thereby causing loss to the plaintiff corporation in a sum of Rs. 36,147/8/3. Adding interest at the rate of 6 per cent, per annum the plaintiff corporation has instituted the suit for the recovery of Rs. 44,070/13/- from defendants Nos. 1 and 2.

5. The trial Court has found issues Nos. 1 and 2 against the defendants and there is no controversy about those issues in these proceedings. Issue No. 3 proceeds upon the objections that Mr. S.P Jaiswal, the person signing and verifying the plaint has no authority to do so, that the suit has not been filed with the authority of the plaintiff-corporation and that Mr. S.P Jaiswal who has signed and verified the plaint is not the managing director of the company and has no right to institute the suit on behalf of the company.

6. Clearly, any person acquainted with the facts of the case can verify the plaint and there is no doubt that it was open to the plaintiff corporation to authorise any person to institute the suit. The argument raised is that S.P Jaiswal has instituted the suit purporting to act as the managing director of the plaintiff corporation and that the status of Mr. S.P Jaiswal is in dispute in Civil Suit No. 374 of 1946.

7. In deciding issue No. 3 the real question is whether the matter in issue in Civil Suit No. 99 of 1947 is also directly and substantially in issue in Civil Suit No. 374 of 1946 within the meaning of section 10 of the Code of Civil Procedure, 1908.

8. Now, to bring the case within section 10 of the Code it is necessary that every matter in dispute should be directly and substantially in issue in the two suits. Indeed, the object of the rule contained in section 10 of the Code is to prevent courts of concurrent jurisdiction from simultaneously trying and adjudicating upon two parallel litigations in respect of the same subject-matter. A comparison of section 10 with section 11 of the Code shows that section 10 bars the trial of a suit whereas section 11 bars the trial of a suit and of an issue provided the conditions specified in sections 10 and 11 are satisfied. In plain English the words “matter in issue” occuring in section 10 means “the entire matter in controversy between the parties” and not one of several issues in the case. Authority for this view is to be found in Gargi Din Misra v. Debi Charan . I.L.R 51 All. 1017 and Mst. Nariban Bi v. Mst. Iqbal Begum . A.I.R 1935 Lah. 816..

9. Applying the test stated in the preceding paragraph to the present case I feel no doubt that the matter in issue in Civil Suit No. 99 of 1947 is not directly and substantially in issue in Civil Suit No. 374 of 1946.

10. For the foregoing reasons I allow Civil Revision No. 319 of 1948 with costs, set aside the order under revision and remit the case to the trial Court for trial in accordance with law.

11. Considering the that the suit was instituted on the 28th of March 1947 and the amount involved is Rs. 44,070/13/- I have no doubt that the trial court will proceed with the trial of Civil Suit No. 99 of 1947 with expedition. Panics are directed to approach in the trial court on the 9th of October 1950.

12. Petition accepted.