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TMI Blog1957 (8) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the last ground was not true and that the fact is that each one of the appellants did subscribe to the memorandum of association of the company. The learned counsel appearing for the appellants points out that in fact at the hearing before the learned trial Judge, it was conceded on behalf of the appellants that each had subscribed to the memorandum. On the other two grounds, the learned trial Judge has found that one of the appellants, Babu Lal, attended the meetings of the directors of the company even after incorporation and so did the other two appellants. That was because he thought that the company had probably been registered before April 10, 1949, but the fact is that it was registered on May 5, 1949, as is clear from the evidence of John Albert, O.W. 1, A clerk of the office of the Registrar, Joint Stock Companies, Delhi. So that the other two appellants are not shown to have attended any meeting of the board of directors of the company after the incorporation of the company. In any case, the learned trial Judge has further found that the name of each of the appellants appears in the register of the company as its member and after the winding up the liability a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me members of the company and they along with others, who become members of it subsequently, form a body corporate. The statutory provision thus makes the subscribers members of the company on its incorporation. Again in section 6 of the same Act, sub-sections (2) and (3) read thus: "6. In the case of a company limited by shares (1)the memorandum shall state (2)no subscriber of the memorandum shall take less than one share; (3)each subscriber shall write opposite to his name the number of the shares he takes." This obviously means that if subscribing to the memorandum, the subscriber must take at least one share and write opposite his name the number of shares he takes, in other words, he takes up the share or shares by subscribing to the memorandum and becomes shareholder of the company immediately on incorporation. It follows that in his case no separate application is necessary for the allotment of shares and it would appear that no formal allotment is necessary either, for he has already taken up the share or shares. This is the obvious effect of these statutory provisions. There is evidently no substance in the argument on behalf of the appellants that an applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscribers is necessary in order to give rise to liability to pay the value of the share. It appears, though it is not very clear from the judgment itself, that it was a suit for recovery of the value of shares, and it was in such a suit that the learned Judge made this observation. It was not a case of winding up of a company in the course of which a list of contributories of the company was to be settled. This distinguishes the case from the present case and also the two cases already referred to above. On consideration of the provisions of sections 6 and 23(2) of the Indian Companies Act, 1913, and the two English cases already cited, the conclusion is clear that a subscriber to the memorandum of association of a company on the registration and incorporation of the company, becomes a member of it and takes the share or shares stated by him against his name in the memorandum and that is the effect of those statutory provisions. On the second question the dictum of the Privy Council in Hansraj Gupta and Others v. N.P. Asthana [1932] 2 Comp. Cas. 548 is conclusive. In that case the contract of the company with the shareholder was that the shareholder had agreed to take cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the company that is dated some time in April, 1949. The company was actually registered on May 5, 1949. A resolution of the company was passed on January 2, 1950, according to which formally shares were allotted to directors. It cannot be that all this was without the knowledge of the appellants. The company went into liquidation some time in April, 1950. The names of the appellants have been in the register of the members of the company and before the winding up not one of them took any proceeding to have the register rectified and his name removed therefrom. After the winding up the situation has altered, the rights of third persons have come in and the liability of the appellants arises under the law and not only under the contract, as pointed out by their Lordships of the Privy Council. However the learned counsel for the appellants has referred to In re International Society of Auctioneers and Valuers [1898] 1 Ch. 110 , and has contended that in the present case also there was no contract between the company and the appellants as was in that case. In that case a person had been led to subscribe to the membership of a society under a misunderstanding that he was in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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