1957 (8) TMI 16 - HC - Companies Law

Summary

Issues Involved:
1. Subscription to the memorandum of association.
2. Necessity of application and allotment of shares.
3. Liability of members upon winding up.
4. Relevance of misstatements to the Registrar of Joint Stock Companies.

Detailed Analysis:

1. Subscription to the Memorandum of Association:
The appellants sought exclusion from the list of contributories on the grounds that they never applied for the allotment of shares, did not pay any amount for such an application, and did not subscribe to the memorandum of association. The trial judge found that the appellants did subscribe to the memorandum of association, a fact conceded by the appellants during the hearing.

2. Necessity of Application and Allotment of Shares:
The appellants argued that subscription to the memorandum of association is merely an application for allotment of shares and since no shares were allotted within a reasonable time, no liability was fixed on them. The court referred to Section 23 of the Indian Companies Act, 1913, which states that subscribers of the memorandum become members of the company upon its incorporation. Additionally, Section 6 mandates that subscribers must take at least one share. Thus, the court concluded that no separate application or formal allotment is necessary for subscribers to become shareholders.

3. Liability of Members Upon Winding Up:
The court emphasized that the liability of members arises from their inclusion in the register of the company, not necessarily from any contract. Citing the Privy Council's dictum in Hansraj Gupta and Others v. N.P. Asthana, the court noted that once a company is wound up, the liability of members is absolute and flows from their registration as shareholders. The appellants, having been directors and subscribers to the memorandum, did not take any steps to rectify the register before the winding up. Consequently, their liability arose under the law, not just under the contract.

4. Relevance of Misstatements to the Registrar of Joint Stock Companies:
The appellants mentioned a misstatement by a director in an affidavit to the Registrar, claiming that all directors had subscribed to the shares. The trial judge found this irrelevant to the case, and the appellants failed to explain its relevance during the arguments. The court concluded that this misstatement did not affect the merits of the case.

Conclusion:
Each appellant, being a subscriber to the memorandum of association and a member on the company's register at the time of winding up, is rightly included in the list of contributories. No substantial grounds were presented for removing their names from the list. The appeals were dismissed with costs.