1974 (8) TMI 73 - SC - Companies Law

Whether the High Court of Bombay was right in directing additional evidence to be led by respondents Nos. 1 to 4 under Order XLI rule 27 of the Code of Civil Procedure? Held that - The application made by the official liquidator did not give sufficient particulars which in our view it should have. Once a show-cause notice was given to respondents Nos. 1 to 4 the official liquidator did not lead any evidence nor rely upon any other documents nor did respondent No. 5 who was instrumental in initiating the misfeasance case against respondents Nos. 1 to 4 lead any evidence. In our view there was no justification whatsoever for the District Court to reject the evidence which the respondents had intended to lead or to disallow the production of documents other than those already produced and for that reason the High Court rightly ordered that additional evidence be recorded in this case. The official liquidator failed to establish that the Nagpur company was entitled to the whole or part of the infringement commission by reason of the fact that it was a sole selling agent of the General Motors parts in that particular area or it had an exclusive sub-agency from the Bombay company. The High Court considered that the evidence in the case was not sufficient to establish either of these claims. We have not been persuaded to hold otherwise. It was agreed and accepted by all the associates that a commission of 2 per cent. on all such imports on the c.i.f. or f.o.b. invoice value as the case may be should be paid to the Bombay office. But in so far as sub-item V of Item III was concerned it was unanimously agreed that the associated offices should pay a commission of 5 per cent. on their imports covered by the licences owned by the Bombay offices. It is not one s case that the commission according to this letter was not paid and as the Nagpur company has received this commission it cannot claim any additional commission. These two items namely Rs. 9, 827 and Rs. 2, 100 which are allowable to the liquidator come to Rs. 11, 927. The other two items for Rs. 7, 689-12-0 and Rs. 2, 184 which relate to the purchases actually made by the Bombay company in pursuance of their offer and in pursuance of the majority resolution of April 25 1953 and the difference between the book value and the purchase value of the car by the Bombay company were also allowed. Apart from this item (5) for a sum of Rs. 2, 686-3-0 in connection with the wrongful remission to the Hyderabad company was also allowed. Appeal dismissed.

Summary

Issues Involved:
1. Whether the High Court of Bombay was right in directing additional evidence to be led by respondents Nos. 1 to 4 under Order XLI, rule 27, of the Code of Civil Procedure.
2. The merits of the appeal concerning specific financial claims against respondents Nos. 1 to 4.

Detailed Analysis:

1. Additional Evidence Under Order XLI, Rule 27:

The first issue was whether the High Court of Bombay was justified in directing additional evidence to be led by respondents Nos. 1 to 4 under Order XLI, rule 27, of the Code of Civil Procedure. The court highlighted that additional evidence could be admitted if the trial court improperly refused to admit evidence or if the appellate court required it to pronounce judgment. The rule states:

"(1) The parties to an appeal shall not be entitled to produce additional evidence, whether oral or documentary, in the appellate court. But if-
(a) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted, or
(b) the appellate court requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause,
the appellate court may allow such evidence or document to be produced, or witness to be examined.
(2) Whenever additional evidence is allowed to be produced by an appellate court, the court shall record the reason for its admission."

The court found that the district judge improperly rejected the respondents' request to lead evidence and cross-examine respondent No. 5, which justified the High Court's direction for additional evidence. The proceedings showed that the respondents were not given a fair opportunity to present their case, as the district judge had fixed the case for argument immediately after the written statement was filed, without allowing evidence to be led.

2. Merits of the Appeal:

Item (1): Rs. 20,000 Commission on Sales of General Motors Pumping Sets:
The claim was based on an infringement commission paid by Premnath Transport Co. to the Bombay company. The official liquidator failed to establish that the Nagpur company was entitled to this commission. The High Court found insufficient evidence to support the claim that the Nagpur company had an exclusive sub-agency entitling it to the commission.

Item (2): Rs. 36,000 Commission on General Motors Supplies:
The claim was that the Bombay company was retaining 5% commission instead of the agreed 2%. The High Court found insufficient evidence to support this claim, as the terms of the agreement between the Nagpur company and the Bombay company were not clearly established.

Item (3): Rs. 30,000 Commission on Supplies to Model Mills and Power House:
The claim related to commissions on supplies from the Mysore Electric Co. Ltd. The High Court found the evidence unsatisfactory and noted that the Nagpur company had received the agreed commission, with no basis for additional claims.

Item (4): Rs. 30,000 for Stock, Furniture, Motor Car, etc.:
The High Court allowed certain amounts, including Rs. 7,689-12-0, Rs. 2,184, Rs. 9,827, and Rs. 2,100, based on the difference between book value and purchase price. The court found no justification for challenging these amounts.

Item (5): Rs. 2,686-3-0 Improperly Remitted to Hyderabad Company:
This amount was allowed without dispute.

Item (6): Rs. 1,30,000 Commission on Sale of Stein-Muller Boiler:
The High Court disallowed this amount as the official liquidator failed to establish any connection between the Nagpur company and the sale. The evidence showed that the partnership firm I.D.D. was the sole selling agent for Stein-Muller machinery, and there was no agreement for commission payable to the Nagpur company.

Conclusion:
The Supreme Court found no reason to interfere with the judgment of the Bombay High Court. The appeal was dismissed with costs, upholding the High Court's findings on both the procedural issue of additional evidence and the substantive financial claims.