BUSINESS LAW

CASE PRESENTATION

Seth Mohan Lal v. Grain Chambers

Ltd, 1967
Content

Facts
Contentions Raised
Judgement
 FACTS

The respondent company was formed for carrying out specific business that
relates with the exchange of commodities that included gur.

The Articles of association of the company made it compulsory for all the
members in the company to participate in company’s business transactions.

The company’s transactions were carried out based on the 1913 companies act
which did not contain any prohibition against the entering of a director into
transactions with the company.
The Act was then amended in 1936 which prohibited directors from
entering into transactions with the company, this did not change the
Company’s mode of operation.

The appellant company had entered into a transaction with the

respondents and had made huge deposits in monetary terms to the
account of the respondent in respect to the transaction.
The Indian Government had on February 15,1950 issued an
order that prohibits any person from
entering into transactions on ‘future’ in gur or make or receive
payments relating to any future as per the said date.

The appellant filed a petition against closing of the company

following their resolution to settle all outstanding transactions
before the closing day at the prevailing rate.
 CONTENTIONS RAISED

 By virtue of the notification dated February 15, 1950, all outstanding transactions
in ‘futures’ in gur became void.

 the resolution dated March 14, 1949, which permitted the company to enter into
transactions in‘futures’ in gur was invalid since the directors who took part in the
meeting were disqualified under 861(1) (h) and 91-B of the Indian Companies Act,
1913, as amended by Act 22 of 1936 and the company had not incorporated in its
Articles Regulation 94 of Table A, which validated acts done by directors when
disqualifications attaching to them were subsequently discovered.
 The resolution dated February 15, 1950 was not passed in the
interests of the company and the
resolution amounted to repudiation of the contracts by the company.

 By reason of the notification by the Government the substratum of

the company was destroyed
and no business could be carried on by the company thereafter.
 JUDGEMENT

The appeal court held that the notification had voided any
outstanding transaction in guts and futures.
Thus, no case was made out from the closing of the company and the
notification against the
transactions in futures in gut was to operate in the prospective.

THE APPEAL WAS DISMISSED

Thank You

Submitted By - Harsh Vardhan

2083033
BA LLB "A"