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TMI Blog1940 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... d Pramode Ranjan and his widow, the seventh defendant, Brajasundari. In addition, two limited companies have been made defendants, Rai Harendra Lal Ray Bahadur Estates Limited, incorporated on September 25, 1930 and Haralal Harendra Lal Ray Estates Limited, incorporated on October 15, 1936. Both these companies were brought into being by a method originally devised by Sir Francis Palmer, a spirited account of which by its only begetter is to be found in Palmer's Company Precedents, 15th Ed., Part I, at p. 911: -- Some years ago a very convenient mode of converting a business into a company was devised by the author. It involved the execution of a deed called Articles of Association , which embodied the provisions as well of a memorandum as of articles of association, and constituted a common law joint stock company, consisting of not less than seven nor more than twenty members. This company then passed a resolution for registration under Part VII of the Act of 1862, as a company limited by shares, and in due course a certificate of incorporation was issued, and in the result the company obtained incorporation in a simple and satisfactory manner, free from some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies described in the schedules. By the operative part, the donor, subject to the conditions thereinafter contained, transfers to the donees fractional shares in the immoveable properties described in the schedule, the result being that, a, 290/300 share is retained by the donor, the remaining 10/300 share being distributed among the various donees. The deed concludes with a proviso to the effect if any donee refuses to join in the partnership or company by executing the articles of association and consenting to the registration thereof as a company limited by shares, then and in such an event the share of such donee will stand revoked and revert back to the donor. 4. The articles of association are also dated September 23, 1930. The parties are the same as those in the deed with the addition Mr. S.K. Chaudhuri, a solicitor. The recitals state that the Rays are jointly seized and possessed of the properties mentioned in the schedule in the shares set out in the Deed of Gift, and that they for the better management of the properties have determined to form themselves into a partnership or joint stock company; also that on the formation of the said partnership the donor and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and various acts of oppression are charged. The second prayer of the plaint is for a declaration that Samarendra was not, and is not, the adopted son of the plaintiff's deceased husband. On the basis that there had been no adoption, the plaintiff also asked for a declaration that she was entitled to a one-fourth share of Harendra's estate and for partition and consequential reliefs. To this, if the adoption were set aside, she would, it is admitted, be, entitled, as the widow of Harendra's predeceased son, by virtue of the recent statutory amendments of the Hindu law with regard to such matters. 10. By the terms of settlement filed on February 15, 1939, the validity of the adoption was acknowledged, and it was also declared that the plaintiff and Rabindra were each entitled to a two annas share in Harendra's estate, the plaintiff's estate in her share being that of a Hindu widow, devolving upon Rabindra after the plaintiff's death. 11. It was further agreed that Rabindra should make certain Payments to the plaintiff in respect of which his share was charged. 12. On November 24, 1939, amendments were made in the plaint with a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds-- I arrive at that conclusion for the same reasons which have been given by the Lord Justice. I turn to Part I, and I find that that deals with the registration and incorporation of companies and associations under this Act, and I find a particular mode in which seven persons may come together for the purpose of incorporation under the Act. Then s. 6 provides that any seven or more persons associated for any lawful purpose may (and I omit certain words) form an incorporated company with or without limited liability, and then the words which I have omitted define the mode in which they may do it. They may do it by subscribing their names to a memorandum of association, and otherwise complying with the requisitions of this Act in respect of registration. Now, I take that to imply a negative; I take it to imply this, that if they desire to form an incorporated company under the Act, they must do it in the method there prescribed, and consequently that they cannot lawfully in any other way enter into a combination or association or company for the mere purpose of obtaining incorporation as a company under the Act. I have said mere purpose of obtaining incorporation, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of registration, and of matters precedent and incidental thereto, have been complied with, and that the association is a company authorised to be registered and duly registered under the Act. Mr. Banerjee would limit the application of s. 24(1) to companies registered under Part I of the Act. The Advocate-General contends that the operation of s. 24(1) is not limited in the manner suggested, and that if it is so limited, s. 266 (ii) which is one of the sections in Part VIII, applies. That section provides that when a company is registered in pursuance of that part all the provisions of the Act shall apply to the company (subject to certain exceptions) in such manner and in all respects as if it had been formed under the Act. The sub-section, it is argued, has the effect of attracting the provisions of s. 24(1) to companies registered under Part VIII. 21. In my opinion, s. 24(1) applies proprio vigore. 22. The Advocate-General has traced the course of the English and the Indian legislation. In the Companies Act, 1862, there are two sections--s. 18 and s. 192. Section 18 inter alia provides that a certificate of incorporation of any company given by the Regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey had to deal with --a case in which they had to adjudicate on an application for a mandamns to compel the registration of that particular partnership as a company under Part VII: their minds were not directed towards, nor could it have been in any way relevant in that case to have invited them to consider still the to determine, the position and status of a partnership formed, it may be with the object or, if you will, for the mere purpose of registration, and actually registered under Part VII. The plaintiff here is inviting me to hold that the logical conclusion to be drawn from the opinions there expressed is that the registration of all such partnerships or associations is void, and of no effect with this deplorable result, that scores of important industrial and trading concerns which have for years past been carrying on business as companies incorporated with limited liability have never in fact been so incorporated but have remained throughout partnerships with unlimited liability and became illegal so soon as their members exceeded twenty in member. I think I should be doing wholly wrong were I to impute to the language of the Lords Justices any such far reaching consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able property, a registered instrument is required by s. 54 or s. 123 of the Transfer of Property Act, as the, case may be. 30. To this argument, s. 263 of the Indian Companies Act seems to furnish a conclusive answer. That section provides that all property moveable and immoveable, as may belong to or be vested in a company, on the date of its registration in pursuance of Part VIII, shall on registration, pass to and vest in the company as incorporated under the. Act for all the, estate and interest of the company therein. 31. It will be observed that the section is mandatory and does not require the statutory transfer provided thereby to be accompanied by a registered document. 32. The next point taken is that, if there was a partnership, it had no partnership property which was brought into the partnership stock within the meaning of s. 14 of the Partnership Act, Again, it is argued that, for the partners to make their respective fractional shares the property of the partnership, it, was necessary for each party to transfer his share by registered instrument to himself and the other partners. 33. Now, this is a question which I have had to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 36. It is said that my decision would have been in the opposite sense if my attention has been drawn to Cavander v. Bulteel (1873) L.R. 9 Ch. App. 79. In that case the plaintiff and one Bewley held an immoveable property as tenants in common; by articles of partnership the property was made partnership property and used for the business purposes of a firm consisting of them both. Bewley mortgaged his undivided interest in the immoveable property to the defendants, and the question was whether the defendant's mortgage must be postponed to the claims of the creditors of the firm. 37. The Lords Justices decided that the defendants' claim must be postponed, as they had notice when they took the mortgage that the property was in the possession of the firm. 38. The argument, as I understand it, is that the case shows that the property had not effectively become partnership assets because the legal estates remained in Bewley, who had mortgaged it to the defendants, whose claim would have been perfectly good, had it not been that they took the mortgage with constructive notice of the equitable claim of the partnership. I have given consideration to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partners was the conversion of the partnerships into the limited companies, and to describe an association for this purpose as a business is surely not in accordance with the generally accepted use of that term. Indeed the documents by the addition of the words or Joint Stock Company to the word partnership appear to recognize the possible inapplicability of the description partnership. 45. It is true that in the recitals that precede the articles the signatories are described as having started the said business of partnership or joint stock company at a date considerably anterior to the articles, but this is obviously incorrect, because until the execution of the deeds of gift and settlement there was no property which the respective partners were to bring into partnership stock. 46. However, I do not think that as regards the question at present under consideration the point is of importance, though it may become necessary hereafter to decide how far if at all the provisions of the partnership Act apply to the associations that transformed themselves into limited companies. On the general question as to the legality of the associations, I think tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the minor's benefit. Although in terms a condition subsequent, the condition, in this case, is in substance a condition precedent, for it is a condition of the gift that its subject matter should be made assets of the limited company which it was intended to form. 53. The minor donees had no interest in the property apart from the deed of gift, since Harendra, being governed by the Bengal School of Hindu law, could dispose of his property as he wished by transfer inter vivos or by will. It was clearly for the minors' benefit that the gift should be accepted and the condition fulfilled whereby the minors' share passed to the company, the minors receiving a proportionate interest in the company's stock. 54. It I am right, this alone disposes of the attack against the second company. I, also, feel there is considerable force in the submission of the Advocate-General that the present plaintiff claiming as she does through an adult donee and an adult signatory of the articles, who has acted under them and who was at one time a director of the companies, is not in a position to impeach the transactions. 55. The question of minority was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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