IN THE SUPREME COURT

In the Matter of
Balkrishan Gupta and Ors.
(Petitioner)
V.

Swadeshi Polytex Ltd. and Anr.

(Respondent)

Memorandum on behalf of the Appellant

Counsel for the Appellant

Mahua Dutta
Roll No.-93
Semester:-2
Section – A

HIDAYATULLAH NATIONAL LAW UNIVERSITY,

RAIPUR
 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

TABLE OF CONTENTS

LIST OF ABBREVIATIONS

INDEX OF AUTHORITIES

 CASES REFERRED

 BOOKS

 LIST OF STATUTES

 DIGEST AND MANUALS

STATEMENT OF JURISDICTION

STATEMENT OF FACTS

ISSUES RAISED

SUMMARY OF ARGUEMENTS

ARGUEMENTS

PRAYER……..
 LIST OF ABBREVIATIONS

S. Section

AIR All India Reporter

Art. Article

HC High Court

SC Supreme Court

ILR Indian Law Review

SCC Supreme Court Cases

Bom Bombay

Corp. Corporation

Ltd. Limited

V. Versus

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

INDEX OF AUTHORITIES

CASES REFERRED

 Jagat Tarini Dasi v. Naba Gopal Chaki

 Hawks v. Arthur

LIST OF STATUTES
 The Indian Contracts Act, 1872
 The Code of Civil Procedure
 The Constitution of India
 The Companies Act, 1956

DIGESTS AND MANUALS

 All India Reporter

 Supreme Court Cases

BOOKS
 Polloc & Mulla, India Contracts and Specific Relief Acts, 12th Edition
 Avtar Singh, Contract and Specific Relief

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

STATEMENT OF JURISDICTION

The appellant humbly submits this memorandum in appeal against the judgment and decree passed
by the High Court of Bombay reversing the judgment and decree passed by the Civil Judge,
Bombay.
The appellants approach the honorable Supreme Court under :-

1) Section - 96 of the Civil Procedure Court says that an appeal shall lie from every decree
passed by any court exercising original jurisdiction, by the court authorized to hear appeals from the
decisions of the said court.

2) Section - 109 of the Civil Procedure Code says that The Supreme Court may at from time to time
regard appeals from the courts of India and an appeal shall lie to the Supreme Court from any
judgment, decree or final order in a civil proceeding of a high court.

3)  Article 136 of The Constitution of India vests the Supreme Court of India with a special power
to grant special leave, to appeal against any judgment or order or decree in any matter or cause,
passed or made by any Court/tribunal in the territory of India.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

STATEMENT OF FACTS

1. Sitaram Jaipuria, the adopted son of Mangturam Jaipuria became the Chairman and Managing
Director of the Cotton Mills Company in 1964. In 1970, the Polytex Company was established,
Rajaram became the Managing Director of the Cotton Mills Company and Sitaram continued
as its Chairman. Sitaram became the Chairman and Managing Director of the newly
established Polytex Company in which the Cotton Mills Company had acquired 10 lakhs
shares.

2. From about 1975-76 on account of a very serious set back in its financial position the Cotton
Mills Company could not meet the wage bill, the dues of the U. P. Electricity Board and
several other monetary claims against it

3. . The Collector of Kanpur passed an order under Section 182-A of the U. P. Land Revenue Act.
1901 read with Section 5 of the Uttar Pradesh Government Electricity Undertakings (Dues
Recovery) Act. 1958 appointing a Receiver in respect of the Cotton Mills Company for a period
of six months with various powers and in particular to seize 1 lakh of shares of the Polytex
Company held by the Cotton Mills Company and to pledge them in favour of the State
Government of Uttar Pradesh against a loan for the purpose of meeting the dues payable to the
employees of the Cotton Mills Company and he made a further order under Section 149 of the
Land Revenue Act read with Section 5 of the U. P. Government Electrical Undertakings (Dues
Recovery) Act, 1958 attaching the remaining 9 lakhs shares of the Polytex Company held by the
Cotton Mills Company and empowering the Receiver to seize them.

4. On February 11, 1984, the Cotton Mills Company and four others, namely, Rajaram Jaipuria,
Mahabir Prasad Dalmia, Siyaram Sharma and K. B. Agarwal sent a notice to the Polytex

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

Company under Section 169 of the Act requiring the Board of Directors of the Polytex
Company to call an extraordinary general meeting of the Polytex Company to consider and, if
thought fit, to pass with or without modification the ordinary resolutions.

5. S. Jagannathan member of the Board of Directors as the nominee of I. F. C. I. was appointed as

the Chairman of the meeting by the Division Bench . The Meeting was, however, adjourned as a
shareholder had obtained an order of temporary injunction restraining the holding of the meeting.
When the requisitionists applied to the High Court of Allahabad to fix a fresh date of the
meeting, the High Court declined to do so by its order as the temporary injunction had been
issued by a Court not subordinate to it. Then the requisitionists filed two Special Leave Petitions
before this Court against the order of the Allahabad High Court. On June 20, 1984, this Court
passed the order directing the Allahabad high court for holding the meeting on any day in second
week of august.

6. In the meanwhile the Appellant Balkrishan Gupta had filed an application before the High Court
of Allahabad questioning the right of the requisitionists to issue notice under Section 169 of the
Act to call the extraordinary general meeting.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

ISSUES RAISED

1. Whether the swadeshi cotton mills company has the right to join as a requisitionist of a meeting
under Section 169 of the Companies Act, 1956 or to vote at a meeting of the company.

2. Whether by the pledge of certain shares, the Cotton Mills Company suffered any such
diminution or curtailment.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

SUMMARY OF ARGUMENTS

1. Whether the Swadeshi Cotton Mills Company has the right to join as a
requisitionist of a meeting under Section 169 of the Companies Act, 1956 or to
vote at a meeting of the company.

The Swadeshi Cotton Mills Company has no right to join as a requisitionist of a meeting under
section 169 of the Companies Act, 1956 or to vote at a meetimg of a company because the company
has ceased to be a member because of the default done by the company and appointment of the
receiver by the Collector of Kanpur under Section 182-A of the U. P. Land Revenue Act. 1901 read
with Section 5 of the Uttar Pradesh Government Electricity Undertakings (Dues Recovery) Act.
1958.

2. Whether by the pledge of certain shares, the Cotton Mills Company suffered
any such diminution or curtailment.

Yes after pledging the shares the cotton mills company suffered such diminution and curtailment
because after pledging the shares the Receiver had been appointed by the Collector in respect of the
shares held by the Cotton Mills Company and they had also been attached, the receiver already
pawned the shared of the cotton mills company in favor of UP Government. Hence the shares held
by the Cotton Mills Company could not be taken into consideration for determining the required
qualification to issue the notice under Section 169 of the Act requisitioning the extraordinary
general meeting.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

ARGUMENTS

1. Whether the Swadeshi Cotton Mills Company has the right to join as a
requisitionist of a meeting under Section 169 of the Companies Act, 1956 or to
vote at a meeting of the company.

Section 169 of Companies Act,1956 states that-

Calling of extraordinary general meeting on requisition.

(1) The Board of directors of a company shall, on the requisition of such number of members of the
company as is specified in Sub-section (4), forthwith proceed duly to call an extraordinary general
meeting of the company.

(2) The requisition shall set out the matter for the consideration of which the meeting is in be called,
shall be signed by the requisitionists, and shall he deposited at the registered office of the company.

(3) The requisition may consist of several documents in like form, each signed by one or more
requisition's.

(4) The number of members entitled to requisition a meeting in regard to any matter shall be:

(a) In the case of a company having a share capital. such number of them as held at the date of the
deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company as at
that date carries the right of voting in regard to that matter;....

The principal ground urged on behalf of the appellants is that the extraordinary general meeting had
not been validly called since the Cotton Mills Company had ceased to enjoy the privileges of a
member of the Polytex Company by reason of the appointment of a Receiver by the Collector of
Kanpur in respect of the ten lakhs shares in the Polytex Company held by the Cotton Mills
Company, the attachment of the 9 lakhs shares out of the said 10 lakhs shares and also the pledge of
3,50,000 shares out of the said 10 lakhs shares with the Government of Uttar Pradesh as security for
the loans advanced by it. The total paid-up equity share capital of the Polytex Company is Rs.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

3.90,0007 and it is riot disputed that if the 10 lakhs shares held by the Cotton Mills Company are
omitted from consideration, the remaining requisitionists would not have sufficient voting strength
to issue a notice under Section 1691 of the Act. The Cotton Mills Company could not, therefore,
join the other requisitionists in issuing the notice under Section 169 of the Act calling upon the
Polytex Company to call the extraordinary' general meeting.

A person ceases to be member by transferring his share to another person, by transmission of his
share by operation of law, by forfeiture of share, by death, or by any other reason known to law.
Section 182-A of the Land Revenue Act which provides for the appointment of a Receiver in
respect of the assets of a defaulter who is liable to pay an arrear of revenue or any other sum
recoverable as an arrear of revenue

Under Section 51 of the CPC, 1908 a Receiver may be appointed by a civil court on the application
of a decree-holder in execution of a decree for purposes of realising the decree-debt. This is only a
mode of equitable relief granted ordinarily when other modes of realisation of the decretal amount
are impracticable. A Receiver appointed under that section will be able to realise the amounts due
from a garnishee and his powers are akin to the powers of a Receiver appointed under Order 40 rule
1 of the CPC, 1908.
In the present case the company has ceased to be a member because of the default done by the
company therefore a receiver has been appointed by the Collector of Kanpur under Section 182-A of
the U. P. Land Revenue Act. 1901 read with Section 5 of the Uttar Pradesh Government Electricity
Undertakings (Dues Recovery) Act. 1958. And hence all the shares acquired by the company got
transmitted to the receiver by the operation of the order passed by the collector.

Calcutta High Court in the case of Jagat Tarini Dasi v. Naba Gopal Chaki2 stated that

"On the whole, we are disposed to take the view that, although" a Receiver is not the assignee or
beneficial owner of the property entrusted to, his care, it is an incomplete and inaccurate statement
of his relation to the property to say that he is merely its custodian" (Underlining by us). Thus
whatever may be the other powers of a Receiver dealing with the property which is in custodia legis

1
Companies Act, 1956
2
ILR(1907) 34 Cal 305

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

while in his custody, he is not to he construed as either an assignee or beneficial owner of such
property.

Therefore from the above judgment it can be said that the receiver is not merely a custodian of
property and exercises rights over the property. Thus in the present case the receiver has right over
the shares of the company.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

2. Whether by the pledge of certain shares, the Cotton Mills Company suffered
any such diminution or curtailment.

Pledge:

Section 172 of the Indian Contracts Act, 1872 states that “the bailment of goods as security for
payment of a debt or performance of a promise is called ‘pledge’.

Pawnor:

The person delivering the goods is called the ‘pawnor’.

Pawnee:

The person to whom goods are delivered is called ‘pawnee’.

A pawn therefore is a security, where, by contract a deposit of goods is made as security for a debt.
The right to property vests in the pledge. that the Directors of the Polytex Company who knew A
Receiver had been appointed in respect of the shares in question, he had been attached by

The Collector of Kanpur under a order under Section 182-A of the U. P. Land Revenue Act. 1901
read with Section 5 of the Uttar Pradesh Government Electricity Undertakings (Dues Recovery)
Act. 1958 appointing a Receiver in respect of the Cotton Mills Company for a period of six months
with various powers and in particular to seize 1 lakh of shares of the Polytex Company held by the
Cotton Mills Company and to pledge them in favour of the State Government of Uttar Pradesh
against a loan of Rs. 13.5 lacks for the purpose of meeting the dues payable to the employees of the
Cotton Mills Company. The Receiver also took possession of 9 lakhs shares 1 lakh shares out of the
9 lakhs shares in favour of the Government of Uttar Pradesh against a loan of Rs. 15 lakhs and on
1.5 lakhs shares against a further loan. Thus out of the 10 lakhs shares of the Polytex Company of
the face value of Rs. 1 crore held by the Cotton Mills Company. 3.5 lakhs shares stood pledged in
favour of the Government of Uttar Pradesh and the remaining 6.5 lakhs shares of the face value of
Rs. 65 lakhs remained with the Receiver.

Delivery of goods to the pawnee by the pawnor is an essential for a contract of pawn.

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

A Receiver had been appointed by the Collector in respect of the shares held by the Cotton Mills
Company and they had also been attached, the receiver already pawned the shared of the cotton
mills company in favor of UP Government. Hence the shares held by the Cotton Mills Company
could not be taken into consideration for determining the required qualification to issue the notice
under Section 169 of the Act requisitioning the extraordinary general meeting and that if those
shares were omitted from consideration then the shares held by the other requisitionists would not
be sufficient to issue the said notice.

In case of Hawks v. Arthur3 the respondent hawks pledged his good to the respo Arthur against a
loan of $6550. After pledging his goods he got into a contract with the third party making those
goods as consideration which he had already pledged and he took undue advantage of the third
party on the basis of those goods. Later on it was held by the court that the appealant cannot use
pledged goods as consideration to enter into another contract as after pledging his goods he
temporarily loses his right over the goods until he repays the debt.

Similarly in the present case as the shares of the company is pledged to UP Government, the
company temporarily loses its rights over the shares and hence it cannot claim its right of becoming
a requisitionist on the basis of such share.

3
1 All ER 22 1951

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 BALKRISHAN GUPTA AND ORS. v. SWADESHI POLYTEX LTD. AND ANR.

PRAYER

Wherefore, in the light of facts of the case, issues raised, arguments advanced and authorities cited,
the respondents humbly pray before the High Court of Madhya Pradesh to;

1. Entertain the appeal.

And/or pass any other order in favour of the Appellent that it may deem fit in the light of
justice, equity, and good conscience.
All of which is most humbly prayed.

Place: Delhi Counsel for Appellant

Date: April 4th 2016 Mahua dutta

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