1975 (5) TMI 48 - HC - Companies Law

Company Membership of, Registers, etc., to be Evidence, Winding up Settlement of list of contributories and application of assets

Issues Involved:
1. Validity of the application for the allotment of 50,000 shares.
2. Accompaniment of the application with the requisite application money.
3. Validity and communication of the allotment of 50,000 shares.
4. Effect of the resolution dated February 28, 1963, canceling the allotment of 50,000 shares.
5. Estoppel from seeking remedy by way of rectification due to acquiescence or delay.
6. Liability of respondent No. 4.
7. Relief.

Detailed Analysis:

Issue 1: Validity of the Application for the Allotment of 50,000 Shares
The court examined whether there was a valid application for the allotment of 50,000 shares. The petitioner claimed he only applied for 500 shares and not 50,000, and that the application form for 50,000 shares was filled in without his knowledge or concurrence. The court noted that the application form for 50,000 shares was suspicious and not accompanied by any cheque for Rs. 5 lakhs. Consequently, the court found that there was no valid application for the allotment of 50,000 shares.

Issue 2: Accompaniment of the Application with the Requisite Application Money
The court found that the application for 50,000 shares was not accompanied by the requisite application money. The petitioner had only submitted a cheque for Rs. 5,000 for 500 shares, which was cashed. There was no evidence of a cheque for Rs. 5 lakhs being submitted or cashed. Therefore, the application for 50,000 shares was not accompanied by the requisite application money.

Issue 3: Validity and Communication of the Allotment of 50,000 Shares
The court held that there was no valid allotment of 50,000 shares to the petitioner, as there was no evidence of the allotment being communicated to him. The court emphasized that a valid contract requires an offer and acceptance, which was absent in this case. The petitioner was not informed about the allotment of 50,000 shares, and therefore, there was no concluded contract regarding these shares.

Issue 4: Effect of the Resolution Dated February 28, 1963, Canceling the Allotment of 50,000 Shares
The court noted that the resolution dated February 28, 1963, canceling the allotment of 50,000 shares, was irrelevant because the petition for winding up had been filed earlier, on January 15, 1963. The court cited legal precedents to support the view that rectification of the register of members can be carried out without a court order if the company recognizes the right to rectification.

Issue 5: Estoppel from Seeking Remedy by Way of Rectification due to Acquiescence or Delay
The court found that no estoppel could be pleaded against the petitioner because there was no valid allotment of 50,000 shares. The petitioner was not barred from seeking rectification due to acquiescence or delay, as there was no concluded contract for the 50,000 shares.

Issue 6: Liability of Respondent No. 4
The court noted that this issue was not argued before it and saw no relevance of this question in the present petition. Therefore, no liability was established for respondent No. 4.

Issue 7: Relief
The court directed that the register of members should be rectified to show that the petitioner did not subscribe for 50,000 paid-up equity shares but was allotted only 500 paid-up shares. The official liquidator was directed not to place the petitioner on the list of contributories for the 50,000 shares. The petition was accepted without costs.

Conclusion:
The court concluded that there was no valid application, allotment, or communication regarding the 50,000 shares. The petitioner was entitled to the relief sought, and the register of members should be rectified accordingly. The court also suggested that stricter provisions concerning the allotment of shares should be considered to prevent such issues in the future.

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