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1. Declaration of a transaction of shares under section 79 of the Companies Act. Analysis: The case involved a petition under rule 9 of the Companies (Court) Rules, 1959, seeking a declaration that a transaction of shares is not affected by section 79 of the Companies Act. The petitioner, a company, had forfeited 42,413 shares in 1955, which were later re-issued and allotted to the managing agents at a discounted price. The legality of this transaction was challenged by the government, stating it contravened section 79(2) of the Companies Act. The main contention was whether the sale of forfeited shares to the managing agents constituted a reallotment or issue within the meaning of section 79. The section prohibits issuing shares at a discount, except under specific conditions. The company purported to reallot the forfeited shares as fully paid-up shares, resulting in a loss per share. This action was deemed to be issuing shares at a discount without court sanction, as required by the Act. The petitioner relied on Article 32 in Table A of the Companies Act, which allows the board to dispose of forfeited shares as they see fit. However, a precedent cited by the petitioner was distinguished as it involved a sale where the company would receive the full nominal amount of the shares, unlike in the present case where a discount was applied. The court held that the transaction did not fall within the scope of the precedent and concluded that the reallotment of shares was void under section 79(2) of the Companies Act. In light of the above analysis, the court dismissed the petition, ruling that the reallotment of shares was not in compliance with the provisions of section 79(2) of the Companies Act. The petitioner's argument that the transaction was valid under Article 32 was rejected, and the court held that the shares were issued at a discount without court permission, rendering the transaction void.
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