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TMI Blog1947 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... .Krishna Narain. 5.T.C. Jaini. 6.Chaudhury Mohammad Ismail. 7.Sikhar Chand Jaini. 8.H.N. Kitchlu. The number of shares taken by Raja Jagat Kumar, as noted opposite his name in the memorandum of association, was 1500. Besides Raja Jagat Kumar, all the other promoters belonged to Lucknow, where the company had its head office. The Raja was a young man whose estate was being managed by the Court of Wards. It was released from the superintendence of the Court of Wards in January, 1933. Raja Jagat Kumar signed the company's articles of association also, and the number of shares taken by him as noted there was 1500, as in the memorandum of association. No money was paid by Raja Jagat Kumar in respect of these shares till his death which occurred on 8th March, 1934, within a year of coming into existence of the company ; nor does it appear that any shares were formally allotted to him. It appears that on the assumption of the superintendence of the estate of Raja Jagat Kumar by the Court of Wards, the usual notice under section 17 of the Act was published in the Gazette. In response to this notice, the company intimated to the Collector of Moradabad that the Raja held 1500 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otment of shares was made to the Raja, and that the notice of the call in respect of which the suit was brought was bad in law. It was further pleaded that even if the Raja be held to have purchased any shares in the plaintiff company, they were surrendered by the Collector after the Raja's death and the surrender was accepted by the company. That a call in respect of Rs. 12-8-0 per share could not be made and that the proceedings relating to the company going into liquidation were not legal as the necessary formalities required by law were not complied with and accordingly the present liquidator had no right to institute the suit. The liability to pay interest was denied. It was also pleaded that the suit was barred under section 20 of the Court of Wards Act. Two other pleas namely that the suit was barred by the law of limitation and that a fraud was practised upon Raja Jagat Kumar in inducing him to put his signature to the memorandum of association of the company, were also raised. It is, however, unnecessary to consider these pleas as they were not pressed in appeal. The learned Civil Judge of Malihabad, by whom the case was heard, framed the following issues: 1.( a )Did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue 4 were raised before us in appeal. It was contended that the plaintiff-respondent had failed to prove that Raja Jagat Kumar signed the memorandum and the articles of association, or that he agreed to take 1500 shares (The judgment after referring to the evidence concludes as follows:) We hold that Raja Jagat Kumar Singh signed the memorandum of association as also the articles of association and agreed to take 1500 shares. That he had consented to become a director is not a point in controversy between the parties. Lengthy arguments were addressed to us on the provisions of section 24 of the Indian Companies Act and considerable time was devoted to a discussion of Peel's case [1867] 2 Ch D 674. In view of the finding of fact at which we have arrived, it is unnecessary to examine in detail either section 24 of the Indian Companies Act or the dicta laid down in Peel's case ( supra ). We may, however, point out that by section 6(3) in the case of a company limited by shares, each subscriber is required to write opposite his name the number of shares he takes. We find that in the memorandum of association of the company to which this appeal relates (Exhibit 2/P.W. 1) the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument is without substance. A subscriber of the memorandum of association of a company is deemed under section 30 of the Act to have agreed to become a member of the company, and on the registration of the company the Act requires that his name shall be entered in the register of members. section 30 of our Act corresponds to section 25 of the English Companies Act of 1929 and to section 24 of the English Companies Act of 1908. It was held by Lindley, M.R., in Alexander v. Automatic Telephone Company [1900] 2 Ch D. 56 that subscribers to the memorandum of association of a company limited by shares are liable, bat only liable by virtue of their subscription to pay up the amount of their shares as and when called up. A subscriber of a memorandum of association becomes by section 23 (The Master of Rolls was dealing with the Act of 1862) a member in respect of the number of shares subscribed by him without any further application by him or allotment o shares to him. Every such subscriber becomes a member ipso facto on the incorporation of the company, and liable as the holder of whatever number of shares he has subscribed for. Section 30 of our Act is the same as section 25 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made, but also release of uncalled capital on the shares held by him. This is not permitted by law. Under our law it is not open to a share holder to surrender the shares held by him, or to the company to accept the surrender, unless the act of the company can be brought within the rules relating to the forfeiture of shares. That a surrender of shares amounts to a reduction of capital which is unlawful, unless sanctioned by the Court, was laid down by Cozens-Hardy, L.J., in Bellerby v. Rowland and Marwood's Steamship Co., Ltd. [1902] 2 Ch D. 14 , where it was held that a surrender of shares in a limited company, the company releasing the share holder from further liability in respect of the shares, is equivalent to a purchase of the shares by the company and is there fore illegal and null and void, on the principle of Trevor v. Whiteworth [1887] 12 App Cas 409 . Under section 55 of our Act the share capital of a company limited by shares can be reduced only if so authorised by its articles, and subject to confirmation by the Court. To reduce the share capital of the company in violation of the provisions of section 55, unless it is done in conformity with some other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re clear that the requirements of the section were met by the affidavit sworn by Jagannath. The last point raised related to interest. Article 27 of the articles of association reads thus : "If the sum payable in respect of any call or instalment be not paid before or on the day appointed for payment thereof the holder for the time being of the share in respect of which such call or instalment shall be due shall be liable to pay interest for the same at such rate as the directors may determine not exceeding 12 per cent, per annum from the day appointed for payment thereof to the time of actual payment." There is no evidence, however, that the directors fixed any rate in the present instance. By the plaint, interest at the rate of 12 per cent, per annum "as provided in the articles of association" was claimed from the date of notice, 27th August, 1938, and the whole of it was decreed by the lower Court. Interest can be claimed t y a creditor, (1) under a contract, (2) under a statute, or (3) on the grounds of usage (See Deputy Commissioner, Kheri v. Dr. Ram Kumar Saxena [1941] ILR 16 Luck 701) . It was held by their Lordships of the judicial Committee in Bengal Nagpur R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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