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TMI Blog1935 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by 5,000 shares of Rs. 100 each. Shares of the value of rupees two lacs were applied for and issued and a sum of Rs. 1,92,000 was paid up. Shares out of the balance to the extent of Rs. 8,000 were forfeited. The present position, therefore, is this: that the paid up capital of the company is Rs. 1,92,000. A sum of Rs. 4,009 which had been paid in respect of forfeited shares was transferred to the profit and loss account. The Article of Association of the company contained the usual kind of provision entitling the company to reduce its capital. The relevant article is No. 43. It appears from the petition and from an affidavit of Motilal Lath, who is described as a Managing Director of the company, that up to 8,1st March 1920 the company made a profit of Rs. 10,026 odd, and up to 31st March 1921 the profit was Rs, 10,105 and some odd annas. The present respondent became connected with the company on 8th April 1921. It appears that he was taken into "the service of the company on or about that time. Towards the end of the year 1921, that is to say, on the 30th November of that year, the company was converted into a public company and in the following year the present respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power contained in that behalf in the Articles of Association the company by special resolution of its shareholders duly passed and confirmed at extraordinary general meetings duly convened and held on 20th January 1935 and 4th February 1935 respectively resolved: that the paid up capital of the Marwari Stores Limited be reduced from Rs. 1,92,000 divided into 1920 Ordinary Shares of Rs. 100 each to Rs. 96,000 divided into 1920 Ordinary Shared of Rs. 50 each and that such reduction be effected by cancelling the paid up capital to the extent of Rs. 69,000 which had been lost and is not represented by available assets and by reducing the nominal amounts of all the shares in the company's paid up capital from Rs. 100 to Rs. 50 per share. It appears therefore that the resolution which was passed at the meeting on 20th January 1935 was duly confirmed at the subsequent extraordinary general meeting held on 4th February 1935. A week later, namely on 11th February 1935, a petition for reduction of capital was admitted by Cunliffe, J. The petition had been verified on 7th February 1935. The 11th March 1935 was fixed as the date for hearing of the petition and directions were duly given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38-239. The relevant passage in the judgment of his Lordship is this: 'Such being the views expressed in this House without any dissent or qualification, I was surprised to hear it argued by the learned counsel for the appellants that the Court has no jurisdiction to entertain a petition for the reduction of capital unless it be proved that the capital which the company proposes to cancel is lost or unrepresented by available assets. No doubt some countenance for that proposition may be found even in cases which have occurred since the decision of this House in British and American Trustees and finance Corporation v. Couper. In In re Barrow Hamatife Steel Co., where the scheme proposed was obviously unfair to the preference share-holders and the petition was very properly dismissed, there are some expressions in the judgment of the learned Judge who decided the case which, taken apart from the context may appear to support that contention. The decision of Buckley, J., in In re Anglo-French Exploration Co., goes even further. His language, if correctly reported, seems to imply that because the Act of 1877 specified certain cases and declared that the power conferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gland had not been uniform. His own practice had been to insist on prima facie evidence of the existence of the state of facts referred to in the resolution. If no such prima face evidence were forthcoming it might well be that the special resolution had been passed under the influence of some mistake or misrepresentation as to the true facts, and it would be unfair to the minority, if not also to the majority of the shareholders, to confirm a reduction voted under such circumstances. Further, inability to produce some such evidence might well suggest want of bona fide s in the matter. If capital not really lost or unrepresented by available assets were cancelled, it might be possible thereafter, by some adjustment of the figures in the company's balance sheet, to carry the amount so cancelled to profit and loss account, and so indirectly return paid-up capital to share-holders, thus affecting the rights of creditors. He still thought therefore, that where the reduction of capital was based on the ground that capital had been lost or was unrepresented by available assets, it was, though not necessary, at any rate wise and prudent to insist on some evidence of the fact.' I have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have registered the said alleged transfers, namely 30th October 1934, the said Motilal Lath was not in Calcutta at all and could not have transferred the said shares in the manner alleged, nor could he have registered the said transfer in the books of the company on that date. The alleged deeds of transfer purporting to have been executed on 25th and 27th October 1934, by the said Motilal Lath and by the respective transferees at Calcutta are all false and fictitious and are in fraud of the company and its share-holders." No answer to that paragraph, which of course contains a very serious allegation against Motilal, is given. The latter in his affidavit in reply dated 18th March 1935 in para. 2 (d) says this; "With regard to para. 4 of the said first affidavit I state that the extraordinary general meetings were properly convened, constituted and held. All the persons present as share-holders were in fact share-holders of the company and registered as such by the company. The person who acted as the Chairman was a shareholder duly and properly elected as Chairman and the mover of the resolution was also a shareholder entitled to move the resolution which he did." And t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register of members shall be prima facie evidence of any matters by this Act directed or authorised to be inserted therein. I think that we ought to take it, in the present instance, that as no steps were taken to have, this register altered or rectified, the person? whose names appear therein were qualified shareholders and therefore entitled to take part in the meetings of 20th January and 4th February 1935. In that view of the case Goenka has wholly failed to show any cause whatsoever why the application put forward by the company for the reduction of capital should not be granted by the Court. The result is that this appeal is allowed, the order made by Cunliffe, J., is set aside, and the prayers Nos. 1 and 2 and the first part of prayer No. 3 contained in the petition of the company and affirmed by Motilal Lath on 7th February 1935 are granted. As regards costs of these proceedings, we are of opinion that as, in any event, it was necessary for the company to obtain the sanction of the Court for the reduction of the capital, the company should pay their own costs in the Court below. But we direct that the respondent must pay the costs of the appeal to the appellant company. P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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