Creditors will not be affected due to non-passing of the resolution to borrow.

S. Nainar Sundaram, J.

1. The defendant company in O.S. No. 103 of 1978 on the file of the First Additional Subordinate Judge, Tirunelveli, is the appellant in this appeal. The respondent is the plaintiff in the suit. Though the controversy raised has got mostly the tinge of legality, yet, the necessary facts of the case have got to be set out. The plaint proceeds as follows:

The plaintiff carries on chit fund business in Tirunelveli Town. The defendant company enrolled as subscriber No. 34 in respect of the chit registered under M.C. No. 625/13. The capital was Rs. 25,000 and the subscription was Rs. 625 per month to be paid in forty instalments. The chit commenced on 15.8.1983 and the date of the termination of the chit was 15.11.1976. The defendant company, at the sixth instalment on 17.1.1974 bid and became the prized subscriber and collected the prize amount on 11.2.1974 and a chit promissory note was executed by the then Managing Director as well as another Director of the defendant company, namely, M. Ramasubramaniam and M. Lakshmanan respectively, on 11.2.1974 by way of collateral security for payment of future subscriptions amounting to Rs. 25,052.37. The defendant company paid upto the eighth instalment and from the ninth instalment, which fell due on 15.4.1974, the defendant company committed default. As a result and as per the terms of the transaction, the defendant company became liable to pay all the future subscriptions from the ninth to the fortieth instalment, amounting to Rs. 20,000 in a lump sum with interest at the rate of 12 per cent per annum from the date of default. The following amounts were paid by the defendant company:

The balance payable by the defendant company is Rs. 11,801.03. The plaintiff issued a notice through counsel, which was received by the defendant company on 1.4.1978. The defendant Company sent a reply on 8.4.1978, putting forth untenable contentions. The plaintiff wants recovery of the amounts due.

2. The defendant company contested the suit, putting forth various contentions, and the gist of the relevant contentions may be summarised as follows:

The transaction was ultra vires the powers of the Directors of the defendant company, because the transaction did not have the backing of a requisite resolution passed in the meeting of the Board of Directors. The documents purporting to evidence the transaction were not executed for and on behalf of the defendant company. The defendant company has not been given credit of the dividends out of the amounts of discount from the ninth to the fortieth instalment. The court below framed as many as seven issues and assessed the evidence, oral and documentary, placed by the parties and ultimately it countenanced the case of the plaintiff except with regard to its claim for interest from 15.4.1974. The court below allowed the plaintiff interest only from 1.4.1978, the date of acknowledgement by the defendant company of the notice issued by the plaintiff. The court below granted a decree in favour of the plaintiff as per its findings. This appeal is directed against the judgment and decree of the court below.

3. Mr. V.Shanmugham, learned Counsel for the defendant company, appellant herein, would develop and project the legal contentions, to covet interference in appeal at the hands of this Court. It would be convenient if I take up the contentions put forth by the learned Counsel for the defendant company, one by one. The first contention advanced by the learned Counsel is that the defendant company, which is a company governed by the Companies Act I of 1956, hereinafter referred to as the Act, had no power to enter into a chit transaction and hence, the suit transaction is ultra vires the powers of the defendant company itself. In answer, Mr.T.R. Mani, learned Counsel for the plaintiff, respondent herein, would submit that Ex.B-1 is the certified copy of the Memorandum of Association of the defendant company and, as per Clauses 14 and 24 found the