9911796707
TMI Blog1961 (10) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... of Industries and Commerce, Department of Company Law Administration. The material facts which led up to this petition may be briefly stated. The Biochemical and Synthetic Products Limited (hereinafter referred to as "the company") was registered as a public limited company under the provisions of the Companies Act on May 27, 1943. The office of the company is situated at Sanatnagar, Hyderabad. The objects of the company as set out in its memorandum of association are to manufacture and deal in all kinds of harmones, ferments, vitamins, synthetic chemicals, biological products and other drugs. The authorised capital of the company is Rs. 15,00,000 (O.S.) divided into 1,50,000 ordinary shares of Rs. 10 (O.S.) each. In or about 1943 all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 1956. By their letter, dated December 7, 1957, the company notified the Registrar of Companies about the completion of the sale transaction. On September 3, 1958, the second respondent intimated the company as follows: "With reference to your letter dated the 7th December 1957, addressed to the Registrar of Companies, Andhra Pradesh, I am directed to state that the reallotment of 42,413 forfeited shares at a discount, not having been made in accordance with the provisions of section 79(2) of the Companies Act, 1956, was void. No dividend can, therefore, be legally paid on these reallotted shares. The holders of these shares cannot also exercise any voting rights in respect of them." In the communication, dated February 1, 1959, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotment or issue within the meaning of section 79 of the Companies Act, as all the 1,50,000 shares had been fully issued at par even in 1943 and that it was a sale and disposal of forfeited shares governed by article 32 of Table A of Schedule L which was within the powers of the board of directors who were entitled to dispose of them on such terms and in such manner as they thought fit, and that the sale is, therefore, quite in order and valid. Mr. N.S. Raghavan, the learned Principal Government Pleader, on the other hand has contended that the transaction amounted to a reallotment of forfeited shares at a discount, which not having been made in accordance with the provisions of section 79(2) is void. The question for determination is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res shall contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus. If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees." Admittedly, the company sold 42,413 shares of the face value of Rs. 10 (O.S.) each, in respect of which Rs. 8 (O.S.) alone was paid and the balance of Rs. 2 (O.S.) was due on each share at Rs. 1-4-0 allowing a discount of annas 12 per share. It is to be observed that the company purported to reallot those shares as fully paid up shares. As pointed out by the Earl of Halsbu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be liable only for the unpaid capital in respect of the forfeited shares. In the present case, the directors purported to reallot the forfeited shares as fully paid up shares on payment of a sum of Rs. 1-4-0 per share. The result is that the company has suffered a loss of Rs. 0-12-0 on each of these shares. It is, therefore, plain enough that the shares were issued at a discount and this was done without the sanction of the court as required by section 79 of the Companies Act. Under section 79(3) of the Act there is an embargo on the company re-issuing the shares at a discount without obtaining the necessary permission of the court. Sri Rajarama Iyer relied upon article 32 in Table A as validating the transaction. The said art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of the shares. This is a sale of the shares credited with so much paid upon them. It is not an issue of shares. It does not come within the principle which forbids the issue of shares at a discount, and the transaction is not contrary to the principles of the Companies Acts." (Italics mine). The ratio of the decision is that the company could deal with the shares as partly paid up to an extent not exceeding the amount which had been paid up on each at the time of the forfeiture. The decision lays emphasis on the fact that where it is proposed to sell the shares in such a way that the company will in the result get the full amount of the shares, the transaction does not amount to the issue of shares at a discount. From the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
