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TMI Blog1974 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... . On August 27, 1952, respondent No. 5 resigned as managing director and in his place two directors, O. V. Krishnamurthi, respondent No. 2, and M. Ganpatram, respondent No. 3, were appointed directors. These two new directors were the employees and directors of a concern known as Industrial & Agricultural Engineering Co. (Bombay) Ltd.-hereinafter called "the Bombay company". Respondent No. 4, T. K. Shamu, is the cousin of respondent No. 1, Raghawa Desikachar. There was also a partnership firm consisting of respondent No. 1 and some others. The office of this partnership was located in the office of the Bombay company. After August 27, 1952, respondent No. 5, having resigned the office of managing director, was only a shareholder and it transpired that as the company was not making profits, the directors called a meeting of the shareholders of the company on July 29, 1954, in order to obtain a special resolution for voluntary liquidation of the company. Even before this meeting took place, respondent No. 5, as shareholder of the company, filed an application on July 26, 1954, in the District Court at Nagpur againt the company. Respondents Nos. 1 to 4 are other parties praying for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission on the sale of a boiler manufactured by Stein-Muller to M.P. Electricity Board for Itarsi Power House through the instrumentality of the Nagpur Company. ... 1,30,000-0-0 Total... 2,48,686-3-0 Thereafter, the official liquidator applied for certain amendments to the application and for impleading respondents Nos. 1 to 4, directors of the company in liquidation. The district judge by his order dated December 7, 1957, allowed the application and accordingly the application dated July 11, 1956, was amended. Respondents Nos. 1 to 4 by their reply dated December 27, 1957, showed cause against the said application of the official liquidator and requested that they may be allowed to lead evidence in connection with the charges mentioned in the application of the official liquidator. They also requested that they be allowed to cross-examine respondent No. 5, managing director of the said company. The district judge, however, by his order dated September 4, 1958, rejected the application of respondents Nos. 1 to 4 and on October 9, 1958, he passed a decree against respondents Nos. 1 to 4 for items (1), (2), (5) and (6), namely, for Rs. 20,000, Rs. 36,000, Rs. 2,686-3-0 and Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, in several decisions, laid down the circumstances in which an appellate court will be justified in directing additional evidence to be recorded for the disposal of the appeal. Order XLI, rule 27, of the Code of Civil Procedure, under which additional evidence could be called for, states thus : "(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) Wherever additional evidence is allowed to be produced by an appellate court, the court shall record the reason for its admission. " It is apparent that by the terms of the above rule, it is only where the court has improperly refused to admit evidence or where the appellate court requires additional evidence to be recorded in order to enable it to pronounce j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t judge. The order made in those proceedings is as follows : "Mr. Amin for the respondents wanted that the petitioner should be put into the witness box so as to enable him to cross-examine the petitioner on the point of alleged misfeasance. From the record it appears that the petitioner was under cross-examination for a great length of time and it is on the material elicited in his evidence, as also on the record otherwise available here, that the charge of misfeasance is made. Mr. Amin's contention is that when the petitioner was cross examined by Mr. Mani, Mr. Mani represented the four different companies and not these respondents. This may be so, but I do not think now I should allow another cross-examination of the petitioner when from the record it appears that a detailed and searching cross-examination was made of the petitioner ...................Besides, there was no question of leading any evidence, since the case was fixed for argument from January 21, 1958. The only part which the parties had to play was to point out the documents on which each relied for proving or disproving the alleged misfeasance......... I do not think it is possible for me to put the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. Now coming to the merits of the appeal. The first challenge is to the disallowance of Rs. 1,30,000. This amount represented the commission on the sale to M.P. Electricity Board of a Stein-Muller Boiler for Itarsi Power House through the instrumentality of the Nagpur company. The reason why the High Court disallowed this amount is because the official liquidator failed to establish that there was any connection with the Nagpur company and the sale of this boiler to the Itarsi Power House of the M.P. Electricity Board. On the admitted facts of the case itself this conclusion is amply justified. It appears that there was a partnership firm known as Industrial and Agricultural Engineering Co., hereinafter called "I.D.D." This partnership firm was the sole selling age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to the commission. This was denied by the directors. 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. In so far as item (2) for Rs. 36,000 is concerned, here again the Nagpur company was being paid 15 per cent. and 20 per cent. commission in respect of machinery and spare parts, respectively, by the Bombay company which company was retaining 5 per cent. of the commission in respect of the orders placed by the Nagpur company. According to the official liquidator, the Bombay company was only entitled to retain 2 per cent. and consequently the Nagpur company would be entitled to a further 3 per cent. which has been wrongly withheld. Here again the High Court considered that there was not sufficient evidence to sustain the claim. Shantilal Shah who gave evidence did not spell ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, Rs. 7,689-12-0, Rs. 2,184, Rs. 9,827 and Rs. 2,100. Nothing has been shown as to why these claims were not properly allowed. The appellant, however, challenges the item for Rs. 9,827 as not being the correct amount. In fact, the book value is Rs. 39,309-4-9. The High Court took the difference between the book value and the stock purchased by the Bombay company after August 28, 1952, since the date of resignation of Shantilal Shah. Accordingly, it took the opening stock as per the balance-sheet dated March 31, 1953, at Rs. 53,574-4-0. The closing stock as per audit report dated March 13, 1953, reduced to the extent of 7/9 was Rs. 24,092-0-0 leaving an amount of Rs. 29,482-4-9. This amount was transferred to the Bombay office and the difference between the above amounts amounted to Rs. 9,827. Shantilal Shah was questioned about this, but he did not know how it was made up of. No explanation was also given on behalf of the official liquidator as to how the item was made up of. For this reason this item was not allowed. Similarly, no exception can be taken to the amount of Rs. 2,100 which was allowed because within few months of its purchase the scooter was sold to the Delhi bran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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