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HIGH COURT OF CALCUTTA
H. K. Bose, G. K. Mitter
SHALAGRAM JHAJHARIA - Appellant
Versus
NATIONAL CO. LTD. - Respondent
Suit 136 Of 1963
Decided On : FEBRUARY 13, 1964
Whether the effect of the agreement dated 27th January, 1962, was to create a sole selling agency or that the relationship created was that of seller and buyer or between principal and principal. Whether the provisions of Section 294 are directory or mandatory in character. Whether the appellant has made out a prima facie case for an injunction.
Fact of the Case:
The appellant received the notice dated 26th April, 1963, on 6th May, 1963, and on 9th May, 1963, he took inspection of the agreements and on 15th May, 1963, he took copies of the agreements and on 31st May, 1963, the appellant instituted the suit out of which this appeal arises against National Co. Ltd. (defendant No. 1), Ramnath Goenka (defendant No. 2), Bhagwandas Goenka (defendant No. 3), Bhagwati Prosad Khaitan (defendant No. 4) and Ghanshyam Kejriwal (defendant No. 6) for an injunction restraining the defendants and their servants and agents from getting passed the resolutions Nos. 7 and 8 mentioned in the notice dated 26th April, 1963, in the proposed annual general meeting to be held on the 31st May, 1963, or any subsequent date and also for injunction restraining the defendants and their agents and servants from giving any effect to the said resolution if passed and for certain other incidental reliefs. On the very same date the appellant applied for an interim injunction and an ad interim order was made. This application came up for hearing before A. N. Ray J. and on 19th June, 1963, the learned judge made an order dismissing the application and vacating the interim orders. It is against this order of the learned judge that the present appeal has been preferred.
Finding of the Court:
The agreement dated 27th January, 1962, is an agreement of agency and comes within the purview of Section 294 of the Indian Companies Act, 1956, as amended by the Act of 1960. The other agreement which was entered into on the 15th March, 1963, between the National Co. Ltd, and Delca International Corporation contains practically similar terms as the agreement of B. M. T. Commodity Corporation and also certain additional terms. In my opinion it is also an agency agreement as contemplated in Section 294 of the Companies Act, 1956. The provisions of Section 294 are mandatory in character. The appellant has made out a prima facie case for an injunction.
Issues: Whether the effect of the agreement dated 27th January, 1962, was to create a sole selling agency or that the relationship created was that of seller and buyer or between principal and principal. Whether the provisions of Section 294 are directory or mandatory in character. Whether the appellant has made out a prima facie case for an injunction.
Ratio Decidendi: The agreement dated 27th January, 1962, is an agreement of agency and comes within the purview of Section 294 of the Indian Companies Act, 1956, as amended by the Act of 1960. The other agreement which was entered into on the 15th March, 1963, between the National Co. Ltd, and Delca International Corporation contains practically similar terms as the agreement of B. M. T. Commodity Corporation and also certain additional terms. In my opinion it is also an agency agreement as contemplated in Section 294 of the Companies Act, 1956. The provisions of Section 294 are mandatory in character. The appellant has made out a prima facie case for an injunction.
Final Decision: Appeal allowed.
( 1 ) THIS is an appeal from an order of A. N. Ray J. refusing an application for an interlocutory injunction restraining the passing of certain resolutions of a company known as National Co. Ltd. at the proposed annual general meeting of the company. The appellant is a shareholder of the National Co. Ltd, The case of the appellant is that in the middle of 1961, the National Co. Ltd. purported to appoint in Calcutta one B. M. T. Commodity Corporation of New York State in the United States of America as its sole selling agent. After the said appointment the first general meeting of the National Co. Ltd. was held on July 17, 1961. On January 27, 1962. the board of directors of the said company by an agreement in writing appointed the said B. M. T. Commodity Corporation as its sole selling agent for the sale of jute backing cloth and ordinary burlap over the width of hundred inches manufactured by the said company for the territories of the United States of America, its possessions, Canada and Mexico with effect from February 1, 1962, inter alia, on the following terms and conditions :" (1) that National hereby appoint B. M. T. as its exclusive distributors in and for the United States of America, its possessions, Canada and Mexico only for the sale of (a) jute backing cloth, and (b) ordinary burlap over a width of hundred inches manufactured by National; (2) that B. M. T. hereby undertakes that it will represent National exclusively in the territories aforesaid for sale and distribution of the said two commodities and will not import, sell, handle or deal in any manner directly or indirectly in the said goods or any other similar substitute product manufactured by any one else in India or elsewhere ; (3) that B. M. T. shall make their best efforts to promote and secure maximum sales and/or distribution of National's said goods and shall in all matters act loyally and faithfully to National and take all possible steps to protect and safeguard the rights and interests of National; (4) that B. M. T. assures National that they have the capacity and the resources for sale or distribution of the goods of National; (5) that B. M. T. shall place their orders with National regularly from month to month, approximately one month in advance for manufacture in the succeeding calendar months and shall accept these ordered goods on shipment from National; (6) that B. M. T. shall effect sales of National's manufactured goods to B. M. T. 's customers at prices mutually agreed upon between National and B. M. T. ; (7) that B. M. T. shall regularly submit to National copies of all their sales contracts within a month from the date of the respective contract; (8) that B. M. T. shall pay National for all purchases of aforesaid goods at cost and freight port of destination basis at the following prices : (a) For jute backing cloth and burlap over hundred inches width ; Price as agreed upon less 12 per cent, thereon. (b) For jute backing cloth hundred inches and below in width : Price as agreed upon, less 91/2% thereon. The said 12 per cent, or 91/2% is subject to revision in case of change of rate or rates in customs duty, clearance charges, handling charges, etc. ; (9) that National undertakes to indemnify B. M. T. against all just claims made by B. M. T. 's customers for defective quality, shortage of material, wrong specifications, late shipment or non-shipment of goods by National, but National shall not be liable for any indirect or consequential claims, losses or damages or in case of force majeure ; (10) that National undertakes to protect B. M. T. against any decline in sales, prices, in case B. M. T. is unable to have its customers take delivery of goods because of decline in market prices and B. M. T. undertakes to use all its efforts to have its customers take delivery of goods contracted for and shall also take due action to recover such losses on price decline and possible damages for non-fulfilment of contract by such
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