TMI Blog1957 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Its case is that the company has from time to time forfeited 70 shares of Rs. 1,000 each extinguishing the liability in respect of share capital paid up therein and that out of the said forfeited shares 65 had been originally issued for consideration other than cash and 5 for cash consideration. It also asserts that the said forfeited shares were re-issued by the company as fully paid up shares for cash consideration of Rs. 1,000 each. It refers to the last balance sheet of the 30th September, 1955, in support of its contentions. The main point of the applicant's case is that the said 70 shares forfeited by the company were not forfeited for non-payment of calls and therefore both under section 104 of the old Indian Companies Act, 1913, as well as under section 75 of the Companies Act, 1956, it is obligatory upon the Calcutta Stock Exchange Association Ltd. to file a return of allotment of the said shares with the Registrar of Joint Stock Companies. That is the only point for decision in this application and is the only point argued on behalf of the applicant. Section 75 of the Companies Act, 1956, provides : "(1) Whenever a company having a share capital makes any allotme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground of non-payment of calls but on other grounds the return of allotments of shares issued in the place of the forfeited shares must be filed under section 75 of the Act. The argument on behalf of the applicant is based on the principle expressio unius esl exclusio alterius. It is argued that because section 75 (5) of the Companies Act, 1956, includes only the case of forfeiture of shares for non-payment of calls, it should, therefore, on the basis of the above principle be held that Parliament must have impliedly legislated that in other cases of forfeiture of shares on grounds other than nonpayment of calls a return of the allotments in respect of such forfeitures must be made under section 75 of the Act. The present application, therefore, is made under section 614 of the Companies Act, 1956, which provides that any member or creditor of a company or the Registrar can make an application to this court compelling the company to make good such default. The applicant in this case still claims to be a member although its membership hangs by a very uncertain thread which might snap by the decision of two pending suits the result of which might be that under article 22 it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state here, however, that the application which the applicant has made is not in respect of his share but with respect to 70 other forfeited shares on similar grounds and which were not for non-payment of calls. There is no decision in India directly on this particular point. It is, therefore, a case of first impression. The judicial maxim of interpretation that to exclude one by name is to include all that is not covered by that name has got many limitations. A specific exception may be construed as an implied inclusion of all that is not covered by the specific exception. But it is a rule of construction. This rule has many exceptions. Lord Campbell enjoined great caution in Saunders v. Evans 8 HLC 721 at 729 in the application of this principle and said that it was not of universal application. In the application of this principle to statutes the learned editor of the eleventh edition of Broom's Legal Maxims at page 452 utters the same caution and observes: "The sages of the law, according to Plowden, have ever been guided in the construction of statutes by the intention of the Legislature, which they have always taken according to the necessity of the matter and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e doctrine therefore of expressio unius est exclusio alterius cannot, in my opinion, be applied to this case. I have come to the conclusion that the return of allotment mentioned in section 75 of the Companies Act of 1956 does not cover the case of forfeiture where shares are re-issued after forfeiture and this is so in all cases of forfeiture, be they for non-payment of calls or on other grounds. The provision contained in section 75(5) of the Companies Act is a provision ex abundanti cautelae. No such provision as section 75(5) of the Companies Act, 1956, occurs in the corresponding section 53 of the English Companies Act, 1948. The English practice without such a provision such as section 75(5) of our Companies Act does not indicate that where shares are re-issued after forfeiture they are included in the return of allotment under section 52 of the English Companies Act. Company law in India has toed the line of English law on this point. In fact, there was no such provision as the present section 75(5) of the Companies Act, 1956, on the Indian statute book until the year 1936. No previous Indian Companies Act including the famous one of 1913 contained any such provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords "makes any allotment of its shares" in section 75(1) of the Companies Act, 1956, by construing the word "allotment". Allotment as such has not been defined in the Companies Act. In the jurisprudence of company law as I understand it, allotment of shares has a special technical meaning. It means, in my opinion, division of the entire share capital into definite shares, each of particular value and also of different classes and an assignment of such shares singly or numerously to different persons. The central core of the word "allotment" is the notion of a "lot". The true meaning of the word "allot" must, therefore, be first the creation of lots of shares and then the division of them into value and classes and, lastly, allocation of them individually or numerously to particular applicant or applicants. The word "allotment", from this point of view, is inappropriate to describe the act of forfeiture of one or more existing individual shares and re-issue of such share or shares to other persons. That, to my mind, is not a case of allotment at all but a case of re-issue of individual shares already within the structure of share capital as provided in the articles of association. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Exchange Association Ltd. v. S.M. Nandy ILR [1950] 1 Cal. 235 at 270-71 : "When a share is forfeited what happens is that the right of the particular shareholder to hold the share and his interest in it are taken away and not that the share itself as a unit of the share capital or an interest representing the money paid upon it is extinguished. If it is extinguished at all, it is extinguished only in the character of being a share held by a particular shareholder, i.e., his interest in the company measured by a sum of money and made up of various rights and liabilities as explained by Farwell J. in Borland's Trustee v. Steel Brothers Co. Ltd. [1901] 1 Ch. 279 But the share itself is a result of the share capital and as an issuable part thereof remains." In Nicol's case ( supra ) the observations of Chitty L.J. are quoted with approval in Palmer's Company Precedents, Part I, 15th Edition, at page 42, where the learned Lord Justice said, "To my mind there is no magic whatever in the term 'allotment' as used in these circumstances. It is said that the allotment is an appropriation of a specific number of shares. It is an appropriation, not of specific shares, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, among what allottees and for what consideration. That is why Palmer describes the object of these returns to show the position of the company with regard to its issued shares. But in the case of shares already issued but subsequently forfeited and thereafter re-issued in place thereof, the structure of the company's share capital is not altered at all, and it is enough that the annual return shows the total number of shares of each class forfeited and the total amount paid, if any, on shares forfeited. Re-issue of shares in lieu of forfeited shares does not alter the quality or the structure of the issue of share capital of the company. All that it means is that the original holder whose share is forfeited is no longer the holder of the share that is re-issued in lieu of the forfeited share. To show the change of the personality of the shareholder is not in my view the object of the return under section 75(1) of the Companies Act, because the object as I have said, adopting Palmer's view, is to show the structure of share capital of the company in respect of its issued shares. The utility and occasion of filing returns of forfeited shares under section 75(1) of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support the construction then there is no scope left for doubt on the point of construction. This interpretation is again fortified by the articles of association of the respondent company in the present case. The most relevant article on this point is article 27 which provides: "Any shares so forfeited shall be deemed to be the property of the Association and the Committee shall sell, re-allot and otherwise dispose of the same in such manner as to the best advantage for the satisfaction of all debts which may then be due and owing either to the Association or any of its members arising out of transactions or dealings in stocks and shares." It is not without significance that this article does not use the word "allot" but uses the word "re-allot" and I am therefore satisfied that section 75(1) of the Companies Act, 1956, applying to allotments cannot in any event apply to "re-allotment" in this context of the article. These provisions make it clear that the company cannot swallow the share forfeited and retain it. These provisions indicate that the company must part with the forfeited share. Therefore it is not really a case of allotment at all but essentially and substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta Stock Exchange Association is a valuable status which entitles a member to do business involving large sums of money and in so doing a member may have to incur huge liabilities. It is therefore quite in the fitness of things that the share should be sold at the market value and if the share is highly appreciated it is better to sell it at such price, for by so selling it would be possible to liquidate the large liabilities of the particular member whose share is being forfeited out of the sale proceeds of such share. Then it was argued that the balance, if any, is being appropriated by the respondent company without being given back to the person whose share was sold. Formerly, I am told that the practice was uncertain and the surplus left out of the sale proceeds after meeting the obligations was paid back to the person whose share was forfeited. But then by a decision of this court that practice was stopped. That decision is Shamchand Nandy v. Calcutta Stock Exchange Association Ltd. ILR [1945] 2 Cal. 313 , where the learned Judge in deciding the case observed at page 331 of the report: "Payment over of the surplus sale proceeds of a forfeited share to the expelled memb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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