1952 (9) TMI 30 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the register of shareholders.
2. Validity and sufficiency of the notice of repudiation.
3. Requirement of legal proceedings following repudiation.
4. Impact of liquidation on the right to avoid allotment.
5. Liability of shareholders post-liquidation.

Issue-wise Detailed Analysis:

1. Rectification of the Register of Shareholders:
The applicant sought the rectification of the register of shareholders of the respondent company by excluding her name in respect of 100 ordinary shares and also for rectification of the list of contributories by omitting her name. The applicant had applied for 100 shares, paid Rs. 250, and was allotted the shares by a resolution of the directors on September 3, 1946. She repudiated the contract on September 13, 1946, but did not provide grounds until January 3, 1947. The statutory meeting of the company was held on March 12, 1947, and no proceedings were taken by the applicant until the present chamber summons.

2. Validity and Sufficiency of the Notice of Repudiation:
The court examined whether the applicant's notice of repudiation was sufficient. It was contended that the notice given on September 13, 1946, was ineffective as it did not state the grounds for repudiation. However, the court held that a party entitled to avoid a contract is not bound to give reasons for doing so and can support the repudiation on any other ground in subsequent proceedings. The court referenced the case of *National Motor Mail Coach Company, Limited, In re: Anstis' and McLean's Claims*, where a notice of repudiation without grounds was deemed valid.

3. Requirement of Legal Proceedings Following Repudiation:
The court addressed whether notice of repudiation must be followed by legal proceedings to rectify the register. The section does not explicitly require such proceedings, but English case law, which the Indian Companies Act mirrors, suggests that prompt legal action is necessary. The court cited *Taite's case, In re*, and *First National Reinsurance Company v. Greenfield*, which established that mere notice of repudiation is insufficient without subsequent legal action. The court emphasized that legal proceedings must be taken promptly to avoid the allotment effectively.

4. Impact of Liquidation on the Right to Avoid Allotment:
The court considered the effect of the company's liquidation on the applicant's right to avoid the allotment. It was noted that different principles apply once a company is in liquidation. The court referenced *C.C.W. Ltd. v. Labanya Mohan* and *First National Reinsurance Company v. Greenfield*, indicating that delay in taking proceedings can affect creditors' rights once liquidation begins. The court concluded that after liquidation, the rights of third parties come into existence, and a shareholder cannot seek rectification of the register.

5. Liability of Shareholders Post-Liquidation:
The court discussed the liability of shareholders under section 156 of the Indian Companies Act, which states that every present and past member is liable to contribute to the company's assets in the event of winding up. The court referenced *Hansraj Gupta v. M.P. Asthana*, where it was held that liability arises from being on the register, not from the original contract. The court concluded that the applicant's liability is ex lege, and she cannot escape it by avoiding the contract post-liquidation.

Conclusion:
The court dismissed the summons, stating that the applicant, having come to court for avoidance of the contract under section 102 after liquidation and almost six years after the notice of repudiation, is not entitled to have the register rectified or her name deleted from the list of contributories. The summons was dismissed with costs to be taxed, and counsel was certified.