9911796707
TMI Blog1943 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent-company, and accordingly it becomes necessary to examine not only the memorandum of association of the respondent-company but also the nature of the transaction itself. The company was incorporated on March 27, 1919, under the Indian Companies Act, 1913; it is a substantial concern, and, as its name denotes, it is concerned with shipping. Cause 3 of the memorandum of association is the objects clause. Sub-clause ( a ) is: "To purchase or otherwise acquire the steamship 'Loyalty' ." Sub-clause ( b ) is: "To purchase, charter, hire, build or otherwise acquire, steam and other ships or vessels, with all equipments . etc. " Sub-clause ( c ) is as follows: "( c ) To buy, sell, prepare for market, and deal in coal, timber-live stock, meat, and other merchandise and produce." Sub-clause ( d ) is concerned with the carrying on of certain business and sub-clause ( e ) with insurance, while sub-clause ( f ) makes provision for the carrying on of certain ancillary businesses, and then comes the sub-clauses ( g ) and ( h ) on both of which the respondents rely. They are as follows: "( g ) To acquire and deal with the property following: (1)The business proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is no evidence to support it and there appears to be no ground for any suggestion that the directors acted otherwise than in a manner which was in the best interests of the company. The question is: Was what was done ultra vires the company or not? Before Mr. Justice Chagla the only sub-clause to which the Judge's attention appears to have been directed, was sub-clause (3)( h )(7), and it: was urged by the appellant that what the respondent company had done did not come within the words "to invest money of the company in such manner . as the directors think fit." The learned Judge in his judgment at the foot of page 14 of the record says this: "Whether the 1st defendant company had the power to invest its funds in the purchase of gold and silver would depend upon its memorandum of association. Clause 3( h )(7) of the memorandum provides that one of the objects for which the 1st defendant company is formed is to lend money, with or without security, and to invest moneys of the company in such manner (other than in the shares of this Company) as the directors may think fit. Mr. Vasvada on behalf of the plaintiff has contended that the power to invest moneys must be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly money in the purchase of some property from which interest or profit is expected and which property is purchased in order to be held for the sake of the income which it will yield'; whilst the noun 'investment' when used in such a clause may safely be said to include as one of its meanings 'the property in the purchase of which the money has been so applied.' No doubt in many cases the context in which the word 'investments' occurs requires that this word should be confined to investments consisting of stocks shares and securities, but where the word 'investments' is used without any such context, or where, as in this case, the instrument in which it occurs expressly provides that the word is not to have any such restricted meaning, I think that it includes real estate purchased as an investment." The definition there given is not exhaustive. We were also referred to the decision of Mr. Justice Eve in In re Sudlow Smith v. Sudlow. [1914] W.N. 424. In the will then before the Court the learned Judge had to construe an investment clause which contained the words "any moneys liable to be invested under this my will, may remain invested as at my death," and the question was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deposit at the Army and Navy Stores can, I think, be so spoken of as invested. "Upon the language of this particular will I have no hesitation in holding that the moneys deposited at the Bank and at the Army and Navy Stores, Ltd., were investments at the date of the testator's death representing the Mortgage Debenture Redeemable Stock and that those moneys on deposit pass under the bequest." In my opinion, it is difficult to reconcile the decisions in In re Sudlow2 and In re Lewis' Will Trusts [1937] 1 Ch. 118. But there is a further authority in the House of Lords in the case of Perpetual Executors and Trustees Association of Australia v. Swan, [1898] AC 763 where dealing with the Victoria Companies Act, 1890, the Judicial Committee of the Privy Council held that the appellant-company was not authorised thereunder, or under a special Act, to invest trust moneys on deposit at interest with banks. Delivering the judgment of the Board, Lord Macnaghten points out the difference between depositing moneys with a bank and investing moneys on securities. Sir Jamshedji Kanga also relied on the recent decision of the House of Lords in Perrin v. Morgan, [1943] AC 399 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in its safe. It follows that in my judgment what was done in May of 1940 was not permitted by sub-clause (3)( h )(7) of the objects clause, and if the matter had rested there, I should have been of the opinion that this appeal ought to be allowed. I have come to this conclusion with reluctance, not only because I am differing from the learned Judge in the Court below, but also because, having had the advantage of reading the judgment which my learned brother Kania is about to deliver, I am on this joint differing from him also. But in this Court Sir Jamshedji Kanga has argued that even if what has been done was not an investment under sub-clause 3( h )(7), it was an acquisition and dealing with personal estate. The relevant sub-clause is sub-clause (3)( g ) , which is as follows: "To acquire and deal with the property following:", and sub-head (3) is: "Plant, machinery, personal estate and effects." Neither this sub head nor its immediate predecessor, which deals with land, is qualified by such words as "within the objects of the company" or "for the purposes of the company" which are attached to some of the other sub-heads; and, in my opinion, sub-clause 3( g ) is very wide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal. Kania, J. The plaintiff is a shareholder of the first defendant company. Defendants Nos. 2 to 10 are the directors of that company. Early in 1940 the capital of the first defendant company was increased and in May 1940 the first defendant company had a large amount in cash on hand. They further anticipated cash receipts soon thereafter. In the latter part of May 1940, Germany bad overrun Holland and the Low Countries and the fall of France was apprehended. Therefore in Bombay, amongst other parts of the world, there prevailed considerable apprehension about the safety of capital. The first defendant company, by its directors, therefore, thought of buying gold and silver. Between May 22 and 28 they bought gold worth Rs. 17,00,000 and silver worth Rs. 8,00,000 and kept the same with the Imperial Bank of India, for safe custody. The plaintiff having come to know of this action of the directors wrote to them a letter of protest on September 26. By their reply dated October 3 the directors informed the plaintiff's attorneys that the financial and international situation looked extremely uncertain and therefore the company had invested a part of the cash on hand in gold and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no question of ambiguity in this case and therefore no occasion to refer to the articles of association arises. It may be pointed out that if articles 114 and 115 only were relied upon, they did not alter the position. It was next contended that if powers which are not objects of the company are included in the memorandum they do not become objects. In support of that contention observations of Lord Wrenbury in Cotman v. Brougham [1918] AC 514 were relied upon. In that case the different clauses in the memorandum themselves were sufficiently wide to cover almost all kinds of transactions and the objects clause concluded with a declaration that every sub-clause should be construed as a substantive clause and not limited or restricted by reference to any other sub-clauses or by the name of the company and that none of such sub-clauses or the objects specified therein should be deemed subsidiary or auxiliary merely to the objects mentioned in the first sub-clause. Finlay, L.C., in delivering the judgment, criticised the provisions of the objects mentioned in the memorandum. Lord Wrenbury after pointing out that the object of a memorandum was to delimit and identify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut expressly empowers the company to do a great many things which, if not expressed, would or might be implied as reasonably incidental to the leading objects, or which may never be required. But, after all, it must be borne in mind that the objects clause of a memorandum is intended to be read and understood, and acted on not merely by lawyers, but ordinary businessmen; and such men like to see the powers of the company expressed with fullness and in considerable detail, instead of resting in implication". These observations indicate that in construing the objects clause of the memorandum of association there need be no rigidity as well as laxity but a reasonable construction is proper. In this connection it may be useful to remember the observations of the House of Lords in the recent case of Perrin v. Morgan [1943] AC 399. The question in that case was in respect of the construction of a will. The bequest was of "All monies of which I die possessed". For years past, as is well-known, judicial opinion differed on the question of the true meaning of the word "money" in such eases, and particularly where it covered deposits in banks or investments in shares and securities; Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodities at a later stage, it would be as much an investment as investing money in shares and securities merely for the purpose of earning dividends or interest. It was strongly urged before us that this view of the learned Judge cannot be supported in view of what was stated by the defendants in their written statement. It was pointed out that the defendants themselves had repudiated the suggestion that gold and silver was purchased with a view to make profits. It was therefore argued that even according to this definition, which was accepted by the trial Court, the defendants' contention must fail. In the various illustrations given in Murray's Dictionary, after the abovequoted meaning of the word, one is in these terms: "to invest capital means to turn circulating into fixed capital or less durable into more durable capital". Moreover in addition to the above-quoted meaning the following meaning is also given to the word; "to make an investment; to invest capital (collq.) to lay out money, to make a purchase". That meaning of the word corresponds to what is found in Wharton and Webster. On behalf of the plaintiff it was argued that the idea of investment must carry with it th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry's Laws of England (Hailsham Edition), Vol. XXXIV, page 250. In the note three cases are cited, viz., Perpetual Executors and Trustees Association of Australia v. Swan [1898] AC 763. Price, In re: Price v. Newton, [1905] 2 Ch. 55 and Lewis's Will Trusts, In re: 0'Sullivan v. Robbins [1937] 1 Ch. 118 In re Sudlow: Smith v. Sudlow [1914] WN 424 was also relied upon to show that money left on call by an employee with his employer before his death was not considered an investment in his will, when the employee died while in service. 1 do not propose to examine the cases in detail because in respect of wills it is recognised that the context is the principalthing to be locked into, and ideas about the meaning of the word "money" will have to be reviewed in the light of the judgment in Perrin v. Morgan [1898] AC 763 . I must, however, point out that in Price v, Newton [1905] 2 Ch. 55 the question whether interest was paid by the bank or not was considered immaterial to decide the construction. In O'Sullivan v. Robbiris [1905] 2 Ch. 55 Bennett, J , had occasion to consider a clause in a will whereby the testator bequeathed certain securities "(or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Palmer that is a legitimate use which a businessman may make of the memorandum, and if that is a. reasonably proper view to take, it is improper for the Court when reviewing the transaction already effected by a company to hold that it has a restricted meaning, which it does not necessarily import. In my opinion in the context in which it is used the word "invest" is wide enought to cover the transaction impugned in this case. The directors have stated that their only idea was to keep the money of the company safe. I do not think that the word "invest" necessarily means "conversion of money into something which must yield a return". That would permit a company to buy shares of a worthless company which has never paid any dividend and which has no prospect of paying one, in preference to converting the money into something which is considered certain to appreciate in capital value in any event. The illustration given in Murray's Dictionary in my opinion very appropriately shows the meaning to be attached to the word "invest". "Money" as ordinarily understood would be currency notes or coins. If deposited in a bank in a current or fixed deposit account, in law, the transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stock, meat .." In my opinion, clause ( c ) is not applicable in this particular case. If it was contended that the company wanted "to deal in" bullion, this clause may have to be considered. The words "deal in" suggest a repetition of transactions and not a stray transaction. In this case the defendants do not contend that the company has thought of doing business in bullion and therefore that contingency need not be considered. An individual stray transaction of acquisition is covered by sub-clause ( g ) and the words personal estate and effects, in my opinion, are wide enough to cover bullion. It is well-known that in the personal effects of a man dying in India gold and/or silver is generally found to be his personal property and therefore gold and/or silver is legitimately included in the words "personal estate and effects." When the suit was filed the Company had only purchased gold and silver. It had therefore only acquired bullion at the time. The sale was afterwards. Even if the sale was made before the suit was filed, the words "deal with" are appropriate to cover the sale in a particular stray transaction. I therefore think that, in any event, clause ( 3 )( g )(3) def ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
