The main legal point established in the judgment is the interpretation of the agreement as a loan and the application of S. 70, Contract Act in determining the rights of the parties.

Lord Atkin:-

This is an appeal from the High Court at Lahore who reversed a decree of the Subordinate Judge at Delhi in favour of the plaintiffs, the present appellants. The circumstances in which the plaintiffs' claim arose are as follows: The defendant was chairman of the Delhi Sugar Mills Ltd., an Indian company which carried on business at New Delhi. The company, before December 1933, had had dealings with a Belgian company, Messrs. Atelier de Construction de J. J. Gillains who may be called the contractors, who had been engaged in providing equipment for the company and held shares in the company. Apparently in December 1933, it was desirable for the company to obtain further financial assistance as they were contemplating making an addition to their factory, and for that purpose were acquiring a lease of a site which it was proposed should be mortgaged presumably to the contractors. Negotiations were opened between the defendant and the plaintiffs, a Belgian bank. The plaintiffs were bankers of the contractors and were represented at New Delhi by Mr. Van Campenhout, the general attorney of the bank, and Mr. Delait, the manager of their office. The contractors were represented by Mr. Palante who was their general attorney in India, and was also a director of the company. On 27th December 1933, a meeting took place at the bank's office at Delhi at which Mr. Van Campenhout and Mr. Delait, representing the bank, Mr. Palante, representing the contractors, and the defendant were present. Terms were arranged and were expressed in a letter signed by the defendant and addressed to Mr. Van Campenhout. The letter is in the following terms :

Delhi, Dated 27th December 1933.

A.J. Van Campenhout, Esquire,

Attorney of Societe Beige de Banque, S. A.,

Bruxelles; Swiss Hotel, Delhi.

DEAR SIR,

In continuation of our conversation regarding the question of the transfer of shares held by Messrs. J. J. Gillains in the Delhi Sugar Mills, Ltd., in favour of Societe Belge de Banque S. A (which question is being dealt with separately), I have the pleasure to inform you that I agree to sell 250 fully paid up shares standing in my personal name to your bank on the following conditions :

(i) That this sum of Rs. 25,000 will be expended by you in securing the lease of the factory site and in paying the Company's half share of the costs of securing the mortgage deed of the factory, etc., in favour of Messrs. J. J. Gillains and the cost of the transfer of the said shares. Whatever balance is left over will be paid to the Delhi Sugar Mills Ltd.

(ii) The sum of Rs. 25,000 stated above, will thus be treated as a loan to the Company from me.

(iii) That an interest of 6½ percent. will be paid by the Company on this loan which will be transferred to your Bank.

(iv) That the Bank will not be entitled to any dividend on these shares and will have only the right to the interest as stated in clause (iii).

(v) That I guarantee to re-buy at the same price these shares within six months and that the Bank will guarantee to re-sell to me these shares at any time I like within the stipulated period of six months.

(vi) Should I fail to re-buy these shares by the end of this period, and/or to pay the interest, the Bank will have the right to sell the shares to anybody else, and to claim from me damages, if any, and to keep the dividend. The dividend, if any, earned on these shares within the next six months will be transferred by the bank to me after the same has been received from the Company.

(vii) That you will obtain Messrs. J. J. Gillain's consent to this transaction.

Yours faithfully,

GIRDHARI LAL.

The letter was acknowledged by a letter of the same date signed by Mr. Van Campenhout and handed personally to the defendant. Mr. Palanto had at the meeting assented to the transaction. The acknowledgment is as follows:

Delhi, Dated 27th December 1933.

Girdhari Lal Chaudhary, Esquire,

Chairman, Delhi Sugar Mills, Limited,

New Delhi.

DEAR SIR,

I beg to acknowledge with thanks your letter of dat