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Issues:
- Allegations of misrepresentation leading to the purchase of shares and directorship in a bank. - Dispute over the validity of the contract due to conditions mentioned in a letter. - Application of Section 101 of the Indian Companies Act regarding the allotment of shares. - Maintainability of a suit for a declaratory relief. Analysis: The case involved a dispute where the plaintiffs alleged they were induced to purchase shares and become directors of a bank based on misrepresentations by the bank's officials. The plaintiffs claimed that certain conditions mentioned in a letter were not fulfilled, making the allotment of shares irregular and ultra vires. The defendants, on the other hand, argued that the plaintiffs' offer to purchase shares was unconditional and that the terms in the letter were to be fulfilled after becoming shareholders and directors of the bank. The trial court initially decreed in favor of the plaintiffs, leading to an appeal by the bank's liquidator and chairman. The main contention in the appeal was whether the contract for the allotment of shares was valid despite the conditions mentioned in the letter. The appellants argued that the applications for shares and their acceptance constituted a valid contract, and the terms in the letter did not invalidate this contract. However, it was found that the conditions in the letter were not fulfilled by the bank officials before the allotment of shares, rendering the allotment invalid. Regarding the application of Section 101 of the Indian Companies Act, it was clarified that the section applies to all allotments of shares, whether during the company's formation or subsequently. Any allotment made without the applicant paying at least 5% of the nominal share value is considered invalid. In this case, as the plaintiffs did not pay any money with their share applications, the allotment was deemed invalid under the law. Lastly, the issue of the suit's maintainability for declaratory relief was addressed. It was argued that since no money was paid by the plaintiffs, a request to rectify the register of the company by removing their names from the list of shareholders would only result in nominal relief. However, the court found that in the circumstances of the case, the plaintiffs had substantially sought all the relief they were entitled to, justifying the declaratory suit. In conclusion, the appeal was dismissed, and the appellants were ordered to pay the costs of the plaintiffs-respondents, upholding the trial court's decision in favor of the plaintiffs.
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