1939 (8) TMI 23 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the register of members.
2. Declaration of applicants as directors and members of the company.
3. Validity of actions taken after January 26, 1936.

Issue-wise Detailed Analysis:

1. Rectification of the Register of Members:
The applicants sought the rectification of the register of members of Holyland Cinetone Co., Ltd., to include their names. The court acknowledged that this prayer could be granted under section 38 of the Indian Companies Act. The dispute arose from the historical facts of the company, particularly the directors' obligation to pay Rs. 2,000 each to the company. The court examined the sequence of events and the resolutions passed by the directors, including the validity of the board of managing directors' actions. It was found that the managing directors were not properly constituted as per the articles of association, making their resolutions invalid. Consequently, the demand for Rs. 2,000 from the directors was not legally binding, and the forfeiture of shares due to non-payment was also invalid. However, the court exercised its discretion and imposed a condition for rectification: the applicants must deposit Rs. 4,000 each in court by a specified date.

2. Declaration of Applicants as Directors and Members of the Company:
The applicants requested a declaration that they were still directors and members of the company. The court rejected this prayer, stating that such declarations could not be granted under the provisions of section 38 of the Indian Companies Act. The court's jurisdiction was limited to rectifying the register of members, not making declarations about directorship and membership status.

3. Validity of Actions Taken After January 26, 1936:
The applicants sought a declaration that actions taken after January 26, 1936, were void and illegal. The court did not grant this declaration, focusing instead on the rectification of the register. The court noted that the applicants had not paid the required sums, which would have qualified them as directors under section 85 of the Indian Companies Act. The court highlighted that the directors' failure to pay Rs. 4,000 each before January 26, 1936, meant they were not qualified to act as directors. This situation led to complications, as the company's actions were carried out by unqualified directors. The court suggested that the proper procedure would have been to wind up the company if the majority of directors were unwilling to proceed with the required payments.

Conclusion:
The court directed the rectification of the register of members on the condition that the applicants deposit Rs. 4,000 each in court by November 24, 1939. If the applicants failed to make the deposit, their application would be rejected. The court did not pass any order for the payment of costs, noting that both parties were to blame for the state of affairs. The judgment emphasized the importance of adhering to the provisions of the Indian Companies Act and the articles of association in corporate governance.