TMI Blog1936 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. For some reason the Government neglected to register this mortgage and the Directors of the Company similarly omitted to take any steps in the matter. The instalments for March 1926 and March 1927 were duly paid by the Company, and on 5th March 1928 the third instalment fell due. Before this date, however, Government had become aware of the non-registration of the mortgage, and on 20th January 1928 had caused the Company to execute a promissory note for Rs. 60,000 being the balance of the principal, after deducting the instalments which had been paid up to that time. The Company seems to have been throughout in financial difficulties, and the loan by the Government does not seem to have been a very judicious investment. In the month of April 1926, the Company borrowed Rs. 10,000 from the Bank of Bihar Ltd. On 26th January 1928 the Bank were demanding repayment of this loan with interest, and on 15th May the Bank brought a money suit in the Patna Civil Court for the recovery of this loan. The plaintiff, Ramgulam Singh, was a shareholder and a Director of the Company. There were two classes of Directors, ' Honorary ' and ' Permanent' and by the Articles of Association the forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an emergent general meeting of the Directors, but the only Directors present were Babu Mithila Saran Singh, Babu Ramgulam Singh, and the Managing Director, Babu Deodhari Singh. On this occasion Babu Mithila Saran Singh was unanimously voted to the chair. It was proposed that an extraordinary general meeting should be called to consider: "( a ) That the Company's business be settled at the impending session ( sic ) if any on the terms as may be agreed upon to conduct the business of the company; (b) that the business of the company be sent to liquidation." The third resolution is as follows: "That the second mortgage bond be executed in favour of Babu Ramgulam Singh who paid Rs. 5,000 (five thousand) the said (?) instalment of the Imperial Bank on 5th March 1928 to the amount of Rs. 5,000 aforesaid to be paid within a year with interest at 12 annas per cent. per month and the interest to be paid every six months, i.e., on the 30th of the month; six monthly interest will be incorporated with the principal and interest will run on the aggregate at the rate of 12 annas per cent. per month." Accordingly on 20th May 1928 the mortgage bond in question was executed and in it the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rs. 33,000 the 2nd defendant, Thakur Das, being the purchaser. On 24th September 1932, Babu Ramgulam Singh brought this suit to enforce his mortgage claiming about Rs. 7,500 and making Thakur Das 2nd defendant and the company 1st defendant. In the winding up proceedings an application was made to the High Court to stay the suit as against the Company and this was accordingly done and the suit has proceeded against Thakur Das alone, the Company taking no part. The learned Subordinate Judge dismissed the suit against the Company, but without costs having regard to the order for stay, but he granted a decree against 2nd defendant with costs. The plaintiff took his stand upon the following contentions: It was pointed out on his behalf that the Government had not sued on their mortgage but had proceeded under the Public Demands Recovery Act and accordingly what had been sold was the right, title and interest of the judgment-debtor at the date of the sale. Therefore, it was argued that no question of priority of mortgages arose. It was conceded that had the Government been able to proceed upon its mortgage, Babu Ramgulam Singh would have been merely a second mortgagee as contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndly, that he was uneasy about the position is shown by the note in the minutes of the meeting of the 4th March to the effect that Babu Ramgulam Singh was present but took no active part: also from the note" in the minutes of the 15th March that Babu Ramgulam Singh wanted five days to consult his legal adviser and that the document when completed was to be executed and registered immediately. Thirdly he was well aware that the company was in desperate financial circumstances and that its assets were in jeopardy, and that he knew on the 26th March that a liquidation had actually been decided upon; fourthly, it may be observed that notwithstanding that at the meeting of the 4th March Babu Ramgulam Singh had agreed to pay off the claim to the Bank of Bihar, he had not in fact done so, and fifthly, notwithstanding the entry in the minutes of the 4th March that a mortgage should be executed, it was not in fact executed until very much later, that is' to say the 20th May. Babu Ramgulam Singh therefore either knew that the Government would be unable to sue on their mortgage in which case the provision in his mortgage bond to the effect that his mortgage was to be considered secondary to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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