Case: M/S. Ram Chand And Sons Sugar Mills Pvt. Ltd Vs. Kanhaya Lal Bhargava &amp; Ors

2. Kanhaya Lal Bhargawa, the Ist respondent, filed a suit on April 27, 1962, in the Court of the Subordinate Judge, First Class, Delhi, against Messrs Ram Chand & Sons Sugar Mills Private Limited, the appellant, and one Ram Sarup for the recovery of a sum of Rs. 45,112.94. Pending the suit, on October 27, 1964, the Ist respondent filed an application in the said Court under O. XI, R. 21, of the Code, read with O.XXIX, R. 3, thereof, for striking off the defence or in the alternative for directing Jugal Kishore, a director of the Appellant-company, to appear in Court on December 14, 1964. On December 3, 1964, the Court made an order therein directing the said Jugal Kishore to be present in Court on December 14, 1964. to answer material questions relating to the suit. The appellant took a number of adjournments to produce the said Jugal Kishore on the ground that the latter was ill. On February 3, 1965, the Court gave the appellant a final opportunity to produce the said Jugal Kishore. Even so, the appellant took two more adjournments to produce him, but did not do so on the ground that he was ill. Finally on February 25, 1965, the Court issued a notice to the Ist defendant, appellant herein, to show cause why his defence should not be struck off. On March 16, 1965, after hearing the arguments the Court held that Jugal Kishore had failed to comply with the orders of the Court and was presistent in his default in spite of chances given to him; and on that finding, it struck off the defence of the appellant. The High Court, on revision, held that Jugal Kishore did not appear in Court inspite of orders to that effect and that the learned Subordinate Judge had jurisdiction to strike out the defence of the appellant. It further negatived the contention of the appellant that it was not in its power to compel Jugal Kishore to appear in Court on the ground that he was the director of the company and was under its control and, therefore, the appellant company could not be heared to say that one of the directors did not obey the orders of the Court. Hence the present appeal.

Court's reasoning:
Having regard to the said decisions, the scope of the inherent power of a Court under Section 151 of the Code may be defined thus: The inherent power of a Court is in addition to and complementary to the powers expressly conferred under the Code. But that power will not be exercised if its exercise is insconsistent with, or comes into conflict with, any of the powers expressly or by necessary implication conferred by the other provisions of the Code. If there are express provisions exhaustively covering a particular topic, they give rise to a necessary implication than no power shall be exercised in respect of the said topic otherwise than in the manner prescribed by the said provisions. Whatever limitations are imposed by construction on the provisions of Section 151 of the Code, they do not control the undoubted power of the Court conferred under Section 151 of the Code to make a suitable order to prevent the abuse of the process of the CourtNo doubt under these provisions particular penalties have been provided for specific defaults. For certain defaults, the relevant Orders provide for making an ex parte decree or for striking out the defence. But it does not follow from these provisions that because no such consequential provision is found in O.XXIX, the Court is helpless against recalcitrant plaintiff or defen-dant who happens to be a company. There is nothing in O. XXIX of the Code which, expressly or by necessary implication, precludes the exercise of the inherent power of the Court under s. 151 of the Code. We are, therefore, of the opinion that in a case of default made by a director who failed to appear in Court when he was so required under O. XXIX, r. 3, of the Code the Court can make a suitable consequential order under Section 151 of the Code as may be necessary for ends of justice or to prevent to abuse of the process of the CourtWe are satisfied, as the courts below were, Jugal Kishore, the director of the appellant company, purposely for one reason or other, defied the orders of the Court on the pretext of illness and had certainly abused the process of the Court. The learned Subordinate Judge would have been well within his rights to take suitable action against him, but neither of the courts found that the appellant was responsible or instrumental for the director not attending the Court. Unless, there is a finding of collusion between the appellant and the director in that the former prevented the latter from appearing in Court, we find it difficult to make the company constructively liable for the default of one of its directors. Many situations may be visualized when one of the directors may not obey the directions of the company or its boards of directors or may be even working against its interests9. It cannot be disputed that a company and the directors of the company are different legal personalities. The company derives its powers from the memorandum of association. Some of powers are delegated to the directors. For certain purposes they are said to be trustees and for some others to be the agents or managers of the company. It is not necessary in this case to define the exact relationship to a director qua the company. The acts of the directors within the powers conferred on them may be binding on the company. But their acts outside the said powers will not bind the company. It is not possible to hold that the director in refusing to respond to the notice given by the Court was acting within the scope of the powers conferred on him. He is only liable for his acts and not the company. If it was established that the company was guilty of abuse of the process of the Court by preventing the director from attending the Court, the Court would have been justified in striking off the defence. But no such finding was given by the courts below.