TMI Blog1952 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ween P.V. Padmanabha Naidu, the managing partner of the Associate Industrial Engineers, and some of the directors of the company of whom the most prominent was one P. A. Jabbar Sahib. He filed two criminal complaints against Padmanabha Naidu. On 1st October, 1946, Mr. Oates, one of the partners of the managing agency firm wrote to the directors of the company stating that he had severed his connection with the firm and that the firm had been dissolved. Thereupon the board of directors resolved on 6th October, 1946, that in view of the criminal cases pending against Padmanabha Naidu and the non-receipt of the audit report and the dissolution of the managing agency firm, the business and all monies and other transactions of the company by the managing agents be suspended till the final decision of the disputes. Subsequently, on 11th November, 1946, two of the directors were constituted as a committee to carry on the business of the company. On 29th November, 1946, this committee filed a complaint against Padmanabha Naidu for wrongfully withholding the delivery of account books and records of the company. On 6th January, 1947, two shareholders field a petition in this court for windin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 10,000 in respect of the third item. In the result he held that the managing agents would be entitled to a sum of Rs. 11,705-9-6 Against this order of the learned Judge the managing agents have filed O.S.A. No. 32 of 1951. O.S.A. No. 20 of 1952 is by the committee of directors. In this judgment the managing agency firm will be referred to as the appellant-and the committee of directors as the respondents. To understand the basis of the claim of the appellant it is necessary to set out the material terms and conditions of the managing agency agreement, Exhibit P. 2. They are as follows: Clause (1): The said appointment of the managing agents shall be initially for a period of 20 years from the date of these presents notwithstanding any change in the constitution or in the name and style of the said firm, its successors and assigns; Clause ( 3 ) The managing agents shall be entitled to the following remunerations: ( a )An office allowance for the first six months from the date of these presents a sum of Rs. 800 (eight hundred) per month; for the next six months thereafter at the rate of Rs. 1,200 (one thousand two hundred) per month; and thereafter at the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim was resisted by the respondents mainly on the following grounds: ( a )that the suspension of the managing agency by a resolution of the company dated 6th October, 1946, was proper and therefore the appellant was not entitled to any remuneration or office allowance thereafter; ( b )that the managing agency firm had ceased to exist when it must be deemed to have been dissolved by one of the partners severing his connection with the firm; ( c )that the winding up of the company was due to the negligence, default and mismanagement of the managing agents. Before the Official Liquidator, apart from these grounds which were contained in the affidavit filed by the respondents in answer to the claim, certain other legal objections were also raised. These objections are founded on the provisions of the Indian Companies Act. The learned Judge held that the resolution of the 6th October, 1946, purporting to suspend the managing agency was ultra vires and invalid. He further held that notwithstanding the retirement of one of the partners, Mr. Oates, the managing agency firm must be deemed to have continued and therefore there had been no lawful termination by the company of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clear that this minimum payment is something different from the office allowance. Besides if it is argued that this pro vision is in the nature of a stipulation for additional remuneration in a different form, then it would offend the provision of section 87-0(2) of the Act. It only remains to be considered whether the appellant is entitled to the amount of the second item as office allowance defined in the agreement for management. We cannot agree with the learned counsel for the respondent that the agreement does not define the office allowance. When a specific sum is mentioned as the office allowance payable, we fail to see why this allowance cannot be held to be defined. The respondent's counsel, if we understood him aright, wanted us to construe the word "defined" to mean "described in detail". This is to say, the agreement should specify the number of clerks, peons, attenders, stationary etc. Counsel was enable to cite any authority in support of this construction and we have no hesitation in refusing to adopt what appears to us to be an unreasonable interpretation. The learned Judge, as already mentioned, disallowed the appellant's claim to the second item on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the company and were not included in the office allowance payable to the managing agents. In our opinion the appellant was entitled to the office allowance for the period upto the date of winding up, viz, 6th December, 1949, at the rates mentioned in clause (3) of the agreement. The second item of the claim must be allowed in its favour. The third item of claim is by way of special damages payable to the appellant for the premature termination of the managing agency. The appellant's counsel experessly abandoned the appellant's claim to damages on the basis of the remuneration of ten per cent. of the annual nett profits of the company and confined the basis of his claim to the provision for the payment of the office allowance at a fixed rate. Though according to this basis he would be entitled to claim at the rate of Rs. 1,500 a month for the balance of the term of 20 years, he restricted his claim to Rs. 25,000. Clause 8 of the managing agency agreement provides that except in the case of managing agents being found guilty of fraud or gross negligence or in cases where the law provides, the managing agents shall not be liable to be discharged from their office, and under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he day of his arrival in the colony and in addition he was to be allowed certain commissions on remittances made by him to England. The company also agreed to defray all expenses for offices, warehouses and staff of clerks. The agent arrived in the colony in December, 1865, and commenced business. In March, 1867, the voluntary winding up of the company was ordered to be continued under supervision and in January, 1868, the agent's services were put an end to. The agent claimed salary at 750 per annum from 18th January, 1868, to 18th December, 1870, and commission on certain remittances made by him and also estimated commission which would have been payable to him during the remainder of his engagement, expenses of his voyage and legal proceedings. The Vice Chancellor made the following declaration as regards his claims: "Following what was done in Yelland's case allow to Mr. Clark his full salary to the end of the five years." Also allow to him a proper sum for rent and office expenses for the same period, having regard to the amount expended whilst the company was a going concern, also his commission upon all goods handed over by him under the power of attorney at invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The ruling in Reigate v. Union Manufacturing Co. ( Ramsbottom ) is more or less on similar lines. Here a manufacturing company employed the plaintiff as agent for a period of seven years for the sale of their goods. The agent was to obtain orders at agreed prices and he was to get a commission upon the invoice prices of all goods delivered by the company and duly paid for by the purchasers. Before the expiry of the period of seven years the company passed resolutions for voluntary winding up and eventually sold their business. In an action to recover damages for breach of the agreement it was held that the company was liable to damages. The enquiry as to damages was directed to be made by the Official Referee and the company was allowed to show circumstances which might lead to the conclusion that during the remainder of the period there was very little prospect of any large quantity of business being done. Before applying the principles laid down in the above decisions to the facts of the present case we think we should also refer to a decision not cited before us, namely, Rhodes v. Fordwood. A and B agreed that for seven years A should be the sole agent for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing Co. ( Ramsbottom ) Buckley in his Commentary on the Companies Act, 12th Edition, sums up the legal position on a review of all the authorities thus: "Where two parties mutually agree for a fixed period the one to employ the other as his sole agent in a certain business at a certain place, the other that he will act in that business for no other principal at that place, a condition that the business itself shall continue to be carried on during the period named is not to be implied in the absence of special circumstance, e.g., if under the terms of the agreement the principal is bound to accept orders obtained by the agent" (pages 619-620). In our opinion this principle must be applied with greater force to the case of a managing agency such as that with which we are concerned in the present case. We have excluded altogether out of consideration cases in which though the company may continue to carry on business the managing agents' services have been wrongfully dispensed with. Such cases would stand on quite a different footing. Here we have a case where the company has been compelled to close down its business and it is only by this event that the managing agency ..... X X X X Extracts X X X X X X X X Extracts X X X X
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