TMI Blog1933 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta from out of the Policyholders' Trust Fund. In September 1932 the United India Life Assurance Co. bought at Calcutta from the Calcutta Improvement Trust a vacant site valued at about Rs. 91,000 odd for the purpose of erecting a building on it. On the 12th October, 1932, a unanimous resolution was passed by all the directors of the company that a suitable building be constructed on the said plot at a total cost not exceeding 3 lakhs of rupees and that the amount actually expended or incurred for such building but within the limit of 3 lakhs of rupees be paid out of the company's Policyholders' Trust Fund. (See Exhibit A). At the same meeting a committee of five persons was appointed to take the necessary steps for the commencement, construction and completion of the building by approving plans and designs, inviting tenders etc., and paying from time to time out of the Policyholders' Trust Fund amounts payable in respect of the building but "within the sanctioned limit of 3 lakhs of rupees aforesaid." It appears that in pursuance of the resolution, in March 1933 the company obtained estimates for putting up a building of five stories at a cost of Rs. 2,75,000 and that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal sanctioned limit of 3 lakhs, and (2) that Messrs. Ballandie, Thompson and Mathews, architects, should be requested "to have the matter re-planned in such a way that the construction is to be proceeded with as far as the limit of 3 lakhs will allow (the said sum to include the architects' fee) but that the foundations and steel stanchions be so planned and laid as to eventually make the building, by further additions, a six-storeyed building as per the architects' design." (See Exhibit K.) On the same date the Managing Director wrote to the architects authorising them "to have the foundation prepared as for a six-storeyed building and also the steel stanchions for the portions which can be constructed within the present limit of cost but of such strength as should eventually be capable of supporting a six storeyed building." The committee also asked them for detailed suggestions and views as to the kind of building and accommodation that could be provided within the revised limit of 3 lakhs (See Exhibit L.) On the 5th October the architects telegraphed that the report would follow in a few days (See Exhibit M.) On the 7th October, 1933, referring to Exhibit M., the Managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Association authorised them to invest money only in the purchase of house property. (2) If the resolution if not ultra vires, is the action of the majority of the Board of Directors to put up a building at a cost of 3 lakhs but with foundations and steel stanchions as for a building that would ultimately cost Rs. 4,10,000 illegal and improper ? This issue raises the question whether the original scheme as modified at the last meeting of the directors can be accepted having regard to the fact that two of the directors did not approve of the modification. On both the issues the learned City Civil Judge found against the appellants and in the result the plaintiffs' suit was decreed as prayed for. In order to succeed in the appeal the appellants must obtain a decision in their favour on both the above points. If either of the points is decided against them the appeal will have to be dismissed. I propose to deal with the 2nd issue, first. According to Rule 116-A (1-i), money of the Policyholders' Trust Fund can be invested in the purchase of house property only by a unanimous resolution of all the directors. The original resolution was that a suitable building be constructe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er re-planned, that the foundations and steel stanchions should be so planned and laid as to eventually make the building by further additions a six-storeyed building. (See Exhibit K, para. 2). What the difference between the two schemes would be when given effect to though the amount of expenditure for both the schemes was restricted to 3 lakhs is clearly stated in Exhibit K itself. In para. 1 the Committee state : "The only question therefore for consideration is whether the building should straightaway be constructed on that basis (that is, on the plan involving the expenditure of 3 lakhs and odd) or whether, the building should now be finished half-way, the remaining being left over for completion at a later time. It was hoped that the former course would still be feasible after discussion with Mr. P.N.S. Ayyar. If however, such a course should not be feasible, the latter course be adopted and the building be proceeded with within the total cost originally sanctioned of 3 lakhs." This statement in the resolution makes the distinction clear beyond any doubt. If it is decided by the unanimous resolution of the directors that a house should be bought for a definite amount, can i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the other articles of association, i.e., if the articles of association read as a whole make the meaning of the expression clear, then I think effect should be given to that meaning, and we should not allow ourselves to be influenced by decisions which may have a general bearing on the point. In fact, in such a case there can be no room to look for guidance to decisions unless, of course, there are express decisions which have interpreted the meaning of this particular expression. The question is not to be treated as an abstract proposition of law if there is clear indication that the company intended that the expression should be understood in a particular manner. Exhibit B. is the Memorandum and Articles of Association of the United India Life Assurance Co. Ltd. It cannot be disputed that it draws a distinction between the money of the shareholders and that of the policyholders. Article 105-G dealing with the shareholders' money empowers the directors specifically to acquire or erect houses or buildings for the offices of the company or for transaction of its business etc. Article 116 dealing with the money of the policyholders empowers the directors by a unanimous resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey to be invested in the purchase of real estate may therefore be properly applied in the erection of new buildings." This observation no doubt supports the appellants; but it must be remembered that it was made with reference to cases under the Settled Estates Act in which the question was what was meant by investing money in the purchase of land under the Act. And further, to understand the true scope of this observation the case has to be considered in relation to a few other cases which arose under the Settled Estates Act, Land Clauses Act, etc. In Re Newman's Settled Estates, under the Settled Estates Act (19 20 Vict. c. 120) Section 23, money arising from timber cut under an order of the Court was ordered to be expended in erecting new farm buildings and other permanent improvements of the property. Whether it can be so held being a matter of some doubt to Sir George Jessel, M.R., he referred the matter to be heard by the Lords Justices. Sir William James pointed out that "the cases proceed on the principle that the erection of a building is substantially the same thing as the purchase of a new estate. No mischief can result from following these decisions" Sir G. Mellish, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple of construction but on the expressions of opinion found in various judgments which the learned Judge thought they were bound to follow. That the conclusion was anomalous having regard to the language was clear to the minds of all the Judges and it was also stated : (See Drake v. Trefusis ) that the principal should not be extended any further. Having regard to these considerations, with very great respect I do not think that these decisions should be relied on to show that house building means the same thing as the "purchase of house property" mentioned in Article 116 of the Articles of Association of the company. It may also be observed that it does not appear from the judgments referred to above that there were other provisions in the Acts which threw any light on the interpretation of the terms "purchase of land." In the case before us I have already referred to the fact, which is very important, that Articles 105-G and 175 throw considerable light on the question we have to decide and that Article 116 should be read along with these rules. That being so, there is no need to refer to any decisions at all in understanding the intention of those who drew up this Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company's funds apart from the trust, but the succinct phrase 'purchase of house property' in the trust provisions does not necessarily imply that they may not erect buildings, with trust funds, so long as 'purchase' includes both building and buying. The point has never directly come up for decision: but a question has often arisen in the English Courts whether funds which under the Settled Estates Act (19 20 Vict. c. 120) can only be applied to the purchase of land can be devoted to purchasing new or repairing old buildings. In 1874 in Re Newman's Settled Estates the trustees petitioned under the Act to be allowed to cut and sell timber and apply the proceeds to improving the property, . . . . . to building new granaries and to repairing farms. Sir W.M. James, L.J., ruled "The cases proceed on the principle that the erection of a building is substantially the same thing as the purchase of a new estate. The order may be taken as asked." Mellish, Lord Justice, demurred; but considered the authorities too strong to be departed from. In In re Bethlem Hospital on 27th February, 1875 the Master of the Rolls comments upon in Re Newman's Settled Estates and says: "The op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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