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TMI Blog1963 (5) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept for non-payment of calls which latter case had been expressly provided for by the statute. Appeal dismissed. - 512 OF 1961 - - - Dated:- 9-5-1963 - A.K. SARKAR, M. HIDAYATULLAH AND J. C. SHAH, JJ. S.K. Kapur, S. Murthi, P.M. Mukhi and K.K. Jain for the Appellant. H.N. Sanyal and B.P. Maheshwari for the Respondent. JUDGMENT Sarkar, J. The question in this appeal is: What is the meaning to be ascribed to the word " allotment ** occurring in section 75(1) of the Companies Act, 1956 ? That section requires a company to file a return of the allotment of its shares with the Registrar within a month of the making of the allotment. The appellant who has been accepted as a shareholder in the respondent company for the purposes of the present proceedings, complained that the company had not filed the return required by that section, and, therefore, moved the High Court at Calcutta under section 614 of the Act for an order requiring it to do so. The shares with which this case is concerned had been forfeited by the company under its articles. A reference to some of these articles is necessary before we proceed further. Article 21 of the articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich under the provisions of its articles were forfeited for non-payment of calls." The appellant contends that a return should have been filed of the reissued forfeited shares under this section. The contention of the company is that the reissue of forfeited shares does not amount to allotment of shares and, therefore, it was not required to file any return in respect of such reissued shares under the section. This contention was accepted by the learned judge of the High Court before whom the appellant's petition was first moved and also by the learned judges of the Division Bench of that court on appeal from the decision of the learned trial judge. We agree with the learned judges of the High Court that a reissue of a forfeited share is not an allotment of share within section 75(1) The word " allotment" has not been defined in the Companies Act either in our country or in England. But we think that the meaning of that word is well understood and no decision has been brought to our notice to indicate that any doubt has ever been entertained as to it. As Chitty J. put it in In re Florence Land and Public Works Co. [1885] LR. 29 Ch. D 426: What is termed ' allotment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly speaking, it is an appropriation by the directors or the managing body of the company of shares to a particular person. Lord Greene M. R. observed in In re V.G.M. Holdings Ltd. : [1942] 1 Ch. 235 ; [1942] 12 Comp Cas 254 ....it seems to me that the word purchase cannot with propriety be applied to the legal transaction under which a person, by the machinery of application and allotment, becomes a shareholder in the company; he does not purchase anything when he does that. Mr. Wyrm-Parry endeavoured heroically to establish the proposition that a share before issue was an existing article of property, flat it was an existing bundle of rights which a shareholder could properly be said to be purchasing when he acquired it by subscription in the usual way. I am quite unable to accept that view. A share is a chose in action. A chose in action implies the existence of some person entitled to the rights, which are rights in action as distinct from rights in possession, and, until the share is issued, no such person exists Putting it in a nutshell the difference between the issue of a share to a subscriber and the purchase of a share from aft existing shareholder is the difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, it has not been disputed that the company may validly forfeit shares in terms of these articles. We accept that basis and proceed on the assumption that it is correct. In the High Court at Calcutta there was a difference of opinion as to the validity of these articles but the later view is that the articles are valid. The reason for the view has thus been put in the latest case in the Calcutta High Court, namely, Calcutta Stock Exchange Association Ltd. v. S. N. Nundy and Co. [1950] 1 ILR. 1 Cal. 235 Harries C. J., dealing with the very articles with which we are concerned, observed it page 264 : "In the present case, the articles relating to forfeiture do not , in my view, offend against the provisions of the Companies Act, do not contemplate a reduction of capital or a purchase of trafficking in shares ". Now, obviously, if upon forfeiture, had ceased to exist qua shares and become merged in the unissued capital of the company, then there would have been a reduction of the capital and such a forfeiture would have been invalid. The reason why it was held that the forfeiture was valid was that on such forfeiture all that happened was that the right of the particular shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of shares forfeited for non-payment of calls. It gives rise to an argument that the Act contemplates an "allotment" of shares forfeited for non-payment of calls, for otherwise it would not be necessary to provide that returns in respect of such allotment need not be filed. It is said that that being so, the word " allotment" in section 75(1) should be understood as including the issue of shares forfeited for other reasons, for there is no reason to make any distinction between shares forfeited for non-payment of calls and those forfeited for other reasons in the present context. This argument is no doubt legitimate. But having given it our best consideration, we have come to the conclusion that it should be rejected. We think that sub-section (5) owes its origin to a confusion of ideas. Apart from it, all other provisions of the Act clearly contemplate by allotment the creation of shares out of the authorised and unappropriated capital of the company and not reissue of shares already created by allotment in the manner aforesaid, but subsequently forfeited. There would be no justification for altering the meaning of that word in any other part of the Act because of the solitary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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