1933 (12) TMI 25 - Commissioner - Companies Law

Winding up - Liability as contributories of present and post members, Shares Power, to issue of at discount and Company Membership of

Issues Involved:
1. Settlement of a list of contributories under section 184 of the Companies Act.
2. Liability of signatories to the memorandum of association.
3. Defense of Ladharam regarding payment of share money.
4. Objections raised by other opponents regarding misrepresentation, non-allotment of shares, repudiation of liability, and lack of awareness of article 79.

Detailed Analysis:

1. Settlement of a List of Contributories:
The application under section 184 of the Companies Act was for the settlement of a list of contributories of "The Makran Coast Steam Navigation Co., Ltd.," now in liquidation. The company was established by two inexperienced youths, Raghunath and Dattatraya Sonalker, and had a share capital of rupees one lac divided into 10,000 shares. The managing agents were Messrs. Sonalker & Co. The company's memorandum and articles of association were signed by 12 persons, with 10 of them listed as the first directors.

2. Liability of Signatories to the Memorandum of Association:
The court held that the signatories to the memorandum of association become the first members of the company from the date of incorporation. They are deemed to have agreed to become members and are liable for the shares they agreed to purchase. The court referenced Halsbury's Laws of England and several case laws, including Drummond's case and In re Machine Exchange Co. Ltd., to support this position. It was emphasized that neither the entry in the register nor the allotment of shares is a condition precedent for their liability.

3. Defense of Ladharam Regarding Payment of Share Money:
Ladharam claimed he had paid the amount due by him, but the court found that he never paid Rs. 1,000 as share money to the managing agents or any authorized person. The court noted that while Ladharam had advanced some money to the Sonalker brothers, this did not constitute payment for the shares.

4. Objections Raised by Other Opponents:
- Misrepresentation and Fraud: The opponents argued they were induced to buy shares through misrepresentation and fraud, believing the Sonalker brothers were experienced business men and that one of the objectors, Mr. Wazirmal, would be made a partner in the managing agents' business. The court found no substance in these objections, noting that even if fraud and misrepresentation were established, it would not affect their liability as contributories in the winding up of the company.

- Non-Allotment of Shares: The opponents contended that no shares were allotted to them, and thus they were not liable. The court dismissed this argument, stating that a subscriber to the memorandum irrevocably agrees to take the shares unless all share capital is allotted to others. The court cited Bellerby v. Rowland and Marwood's Steamship Co., Ltd., to emphasize that a valid surrender of shares is not possible without the court's sanction.

- Repudiation of Liability: The opponents argued that they repudiated their liability and their repudiation was accepted. The court found no evidence to support this claim and held that they remained liable for the shares.

- Lack of Awareness of Article 79: The opponents claimed they were unaware of the provisions of article 79 of the articles of association. The court ruled that ignorance of the articles' provisions does not exempt them from liability.

Conclusion:
The court directed that the names of all signatories to the memorandum of association be entered as contributories. The objections raised by the opponents were found to be without merit. The official liquidator was awarded costs from certain opponents, with specific exemptions noted for costs related to the commission.

This judgment underscores the binding nature of the memorandum of association and the irrevocable liability of its signatories to pay for the shares they agreed to purchase, regardless of subsequent developments or claims of misrepresentation.

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