1969 (11) TMI 47 - HC - Companies Law

Power to pay certain commissions and prohibition of payment of all other commissions discounts etc.

Summary

Issues:
1. Validity of the allotment of shares to the appellant-firm.
2. Interpretation of the underwriting agreement.
3. Obligation to pay allotment money.
4. Claim for interest by the liquidator.

Detailed Analysis:

1. Validity of the allotment of shares to the appellant-firm:
The case involved a dispute regarding the allotment of shares to the appellant-firm based on an underwriting agreement. The appellant-firm contended that the allotment was unauthorized as the amount paid was a loan and not for share purchase. However, the court found that the statutory report mentioned the payment, and the partners were aware of the allotment. The court held that the allotment was valid and in order, especially since no objection was raised during the company's operation.

2. Interpretation of the underwriting agreement:
The underwriting agreement signed by the appellant-firm obligated them to procure subscriptions for shares worth a specific amount within a set period. Failure to do so would result in the firm being allotted the unsubscribed shares. As the firm failed to meet the subscription target, the court considered the agreement not just as a guarantee but as an application for shares. The court upheld the validity of the allotment based on this agreement.

3. Obligation to pay allotment money:
Following the allotment of shares, the appellant-firm was required to pay the allotment money at a specified rate. Despite receiving a demand for payment, the firm did not comply. The court noted that the demand for allotment money was in line with the company's articles of association, constituting a binding contract between the company and shareholders. The court found no valid reason for the firm's non-payment, affirming the obligation to pay.

4. Claim for interest by the liquidator:
The liquidator of the company claimed interest at a specified rate, as per the company's articles of association. The court upheld the liquidator's claim for interest at the stated rate, considering it legitimate under the company's regulations. The court affirmed the decision of the learned single judge, dismissing the appeal and ordering the appellant-firm to cover the costs. The judgment was based on the interpretation of the underwriting agreement, the validity of the share allotment, the obligation to pay allotment money, and the claim for interest by the liquidator.