9911796707
TMI Blog1948 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... eated by the plaintiffs as an application for the shares and was given a number, being No. 4, shown in their book containing application for and allotment of shares. The defendant acted as a director of the. plaintiffs and attended several meetings in July 1941, and he was paid Rs. 50 each on two occasions, 11th July, 1941, and 17th July, 1941. There were other meetings which he attended both in 1941 and in 1942, but owing to the adverse financial circumstances of the plaintiff's no fees were charged by or paid to any of the directors who attended the several meetings. On 15th June, 1942, the Board of Directors of the plaintiffs passed a resolution saying that "the director's 500 ordinary qualification shares applied for by the defendant be and are hereby allotted to him" and intimation of the said allotment was given by the plaintiffs to the defendant by their letter dated 22nd June, 1942. The resolution of allotment was in the ordinary course entered into the minute book of the proceedings of the meetings of the Board of Directors. On receiving this letter dated 22nd June, 1942, from the plaintiff, the defendant wrote a personal letter to Borkar a partner of the managing agents f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiffs. It was only when we come to 16th January, 1943, that we find another resolution passed by the Board of Directors of the plaintiffs that "500 ordinary shares of the face value of Rs. 5,000 are hereby allotted to the defendant and that allotment notice should be given to him." This was the allotment which was followed by a letter of allotment bearing No. 10 dated 19th January, 1943, whereby intimation of the allotment was given by the plaintiffs to the defendant. In the summary of share capital as of 19th January, 1943, which was filed by the plaintiffs with the Registrar of Companies the defendant was shown as a holder of 500 shares though, he having retired with effect from 30th October, 1942, as a director his name was not mentioned as one of the directors. After this letter of 19th January, 1943, was received by the defendant he carried on correspondence beginning with the letter dated 2nd February, 1943, in the course of which his attorneys asked for and were given inspection of the relevant documents in the custody of the plaintiffs. Nothing further transpired until we come again to 13th September, 1943, when the defendant not having paid the sum of Rs. 5,000 being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the defendant as a result thereof as the ground for forfeiture of the shares which had been allotted to the defendant and that the allotment being bad, it could not avail the plaintiffs as a handle for the forfeiture, with the result that the forfeiture dated 28th October, 1943, was in any event invalid and could not give rise to a fresh cause of action against the defendant by attracting the operation of article 43 of the articles of Association of the plaintiffs. These were the grounds which were urged by counsel for the defendant as discharging the defendant from liability in respect of the price of the shares. It was further urged that in any event by cancelling the allotment dated 15th June, 1942, the plaintiffs had accepted the position which had been taken up by the defendant in his letter dated 16th July, 1942, addressed by him to Messrs. Borkar and Co., the managing agents of the plaintiffs and apart from anything else the defendant was discharged from any liability by reason of that action of the plaintiffs. Counsel for the plaintiffs possibly realising the force of some of the contentions which were urged by counsel for the defendant adopted quite another line of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over from the defendant would certainly stand them in good stead and that is why the matter has been very strenuously and exhaustively dealt with by counsel for the plaintiffs. Counsel for the defendant has equally strenuously fought the matter and pressed the contentions on behalf of his client even though the defence of misrepresentations was not available to him (the defendant) in law. The defendant seems to have been all along nursing a grievance by reason of what Borker is alleged to have represented to him. He actually offered on 16th July, 1942, to cease acting as a director if the plaintiffs so wanted, and pressed for the cancellation of the allotment of the 500 shares to him which the plaintiffs had made on 15th June, 1942, and for the time being it appears that the plaintiffs acquiesced in that position and cancelled that allotment. The circumstances appear, however, to have been beyond the control of the plaintiffs and they seem to have thought better after the disappearance of Borkar from the scene. One Mangaram came into charge and active management of the plaintiffs after the disappearance of Borkar and he seems to have been advised to allot the shares once again to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th June, 1942, and the cancellation thereof. The authorities lay down that an allotment of shares should be made within a reasonable time and the applicant is not bound to accept the allotment after the lapse of a reasonable time: vide Indian Co-operative Navigation and Trading Company, Ltd. v. Padamsey Premji [1933] 4 Comp. Cas. 110 , where it is stated that it is an implied term in an application for shares that the offer must be accepted within a reasonable time, and, if it is not the applicant is entitled to repudiate the allotment. In this case the application, if it can be so called, was made on nth July, 1941, and the allotment was made, according to the case of the plaintiffs, on 16th January, 1943, almost 18 months after the date of the application. It cannot be argued that this lapse of time was not unreasonable and does not bring the allotment within the mischief of these authorities. The further ground which was urged by counsel for the defendant was that once an allotment was made it was not competent to the company to cancel it by any means whatever and that the plaintiffs had first made the allotment on 15th June, 1942, and having made that allotment, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner I have indicated above, the only thing which remains to consider in this connection is what is the effect of the agreement to take up the shares signed by the defendant on nth July, 1941. Does that agreement by itself entitle the plaintiffs to sustain this claim against the defendant ? As I have already stated the cause of action as it has been set out in the plaint is not based merely on this agreement by the defendant to take up the qualification shares. The cause of action is the agreement to take up these shares, the allotment of these shares and the forfeiture thereof on non-payment of the monies due in respect of the shares. It is only as a last resort that counsel for the plaintiffs has been driven to this line of attack as I have already stated. Let us, therefore, consider how far this contention of the plaintiffs can be substantiated. In connection with this argument of his, counsel for the plaintiffs relied upon several authorities consisting of decisions of the Courts in England. The first three authorities which he cited were Anglo-Austrian Printing and Publishing Union, In re; Isaac's case [1892] 2 Ch. 158 , R. Bolton Co., In re [1894] 3 Ch. 356 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been duly placed on the register of shareholder in respect of the said shares he was bound to pay for the same. The judgment of Cozens-Hardy, L.J., truly sets out the legal position. The same position has been enacted by our own section of the Indian Companies Act, viz., section 30, which defines a member as under : "(1)The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration shall be entered as members in the register of members. (2)Every other person who agrees to become a member of a company and whose name is entered in its register of members, shall be a member of the company." It is section 30, sub-section (2), which comes in for consideration so far as the defendant is concerned. Incidentally, I may observe that the very same position is set out in Palmer's Company Law, 17th Edition, at page 87. So every person who comes under the category of members under section 25 (2) is one who agrees to become a member of a company and one whose name is entered in its register of members. Here the section contemplates two things: (1) an agreement, and (2) entry on the register. An agreement alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares of the plaintiffs as an application for shares by him, and proceeded to allot the shares as on an application for shares by him, the fact remains that in the two documents which have been principally relied upon by the counsel for the plaintiffs and have been exhibited before me no specific shares have been noted against the name of the defendant as having been held by or allotted to him. If one sees the relevant provisions of the Indian Companies Act which are mandatory, they provide as under: Section 28 which lays down the nature of shares enacts in sub-section (2) that: "Each share in a company having a share capital shall be distinguished by its appropriate number." Section 29 which talks of the certificate of shares or stock lays down that: "A certificate, under the common seal of the company, specifying any shares or stock held by any member, shall be prima facie evidence of the title of the member to the shares or stock therein specified." One could not issue a certificate of shares in respect of a share merely in general. It must be a share distinguished by its appropriate number as provided in section 28 (2). A person cannot be a member under section 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance with the mandatory provisions of section 30(2), one does expect that the distinctive numbers of these shares purporting to have been allotted by the plaintiffs to the defendant should have been mentioned there. If one has regard to the other entries which are made in the book containing these exhibits, Exs. D-1 and D-2, viz., the application for and the allotment of shares and the register of shareholders and share-ledger, one finds distinctive numbers as against each and every one except the defendant in whose case no such distinctive numbers of shares have ever been given by the plaintiffs. Under these circumstances, I have come to the conclusion that the defendant did not become a member of the company in respect of these 500 shares. Even though he had agreed to take up these shares by reason of the agreement which he had signed on nth July, 1941, the condition precedent to membership which is laid down in section 30 (2), viz., that his name was to be registered in the register of members, was not satisfied as required by section 31(1), clause ( i ). That being the position, there was no liability on the defendant, as the matter stood at all relevant and material ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
