Judgment

JAGANMOHAN REDDY, J. :- This is a second round of litigation because on the first occasion this Court allowed Appeal No. 324 of 1965 on 20-9-1966 (reported in AIR 1967 SC 477) and remanded the case for being reheard and dealt with in accordance with the directions given in that judgment. After the matter went back a Division Bench of the Kerala High Court Raghavan, J. (as he then was) and Isasc, J. heard the matter but as there was a difference of opinion between the learned Judges the case was placed before Mathew, J. (as he then was) who agreed with the judgment of Raghavan, J. This is an appeal against that judgment by certificate. Inasmuch as this Court had earlier considered the case we may take the facts as stated in the following passage in that judgment.

"The appellant is a limited company incorporated under the Travancore Companies Regulation and is carrying on business, in the State of Kerala of manufacturing sugar, running a distillery and also a tincture factory. The appellant-company was floated with a view to taking over the business assets of a company called "Travancore Sugars Ltd." (which was being wound up and in which the State Government held the largest number of shares) the Government Distillery at Nagercoil and the business assets of the Government Tincture Factory at Trivandrum. For this purpose an agreement dated June 18, 1937, was entered into between the Government of Travancore and Sir William Wright on behalf of Parry & Co. Ltd., the promoters of the appellant-company. Under the said agreement the assets of all the three concerns were agreed to be sold by the Government of Travancore to the appellant-company. Clause 3 of the agreement provided that the cash consideration for the sale of assets of the Travancore Sugars Ltd. shall be 3.25 lakhs rupees. Clause 4 (a) provided that the cash consideration for the sale of the Government Distillery shall be arrived at as a result of joint valuation by the engineers to be appointed by the parties. Clause 5 (a) stated that the cash consideration for the sale of assets of the Government Tincture Factory shall be the value according to the books. Under clause 4 (b) and (c) of the agreement the Government undertook to recoggnise the transfer of the licence from the licensees of the distillery to the appellant and to secure to it the continuance of the licence for a continuous period of five years after the termination of the then existing licence. Under clause 5 (b) of the agreement the Government agreed to purchase the pharmaceutical products manufactured by the appellant in the tincture factory, for its medical requirements. Under clause 6 of the agreement all books of account and connected documents are to be open to inspection by the authorised officers of the Government. Under clause 10 the Government was entitled to nominate a director on the board of directors of the appellant-company who would not be entitled to any voting power or to interfere with the normal management of the company. Apart from the cash consideration referred to in the agreement. Cl. 7 of the said agreement provided for further payments as follows :

"(7) The Government shall be entitled to twenty per cent of the net profits earned by the company in every year subject however to a maximum of rupees forty thousand per annum such net profits for the purposes of this clause to be ascertained by deduction of expenditure from gross income and also after -

(i) provision has been made for depreciation at not less than the rates of allowances provided for in the income-tax law for the time being in force, and

(ii) payment of the secretaries and treasurers remuneration."

By another agreement dated January 28, 1947, the following clause was substituted for the above clause 7 of the original agreement :

"The Government shall be entitled to ten per centum of the net profits of the company in every years. For the purpose of this clause net profits mean the amount for which the company s audite