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1952 (12) TMI 22 - SC - Companies LawWhether the company had by the conduct of its two members abandoned its right to challenge the forfeiture? Whether the form of the order could not be supported as one validly made under section 38 of the Indian Companies Act? Held that:- In our opinion there is no evidence of abandonment of the company's right to challenge the validity of the purported forfeiture he mills had also reduced its capital by having the face value of the 84,000 shares which had been issued reduced by repaying to the shareholders ₹ 5 in respect of each of those shares. There were, however, 16,000 unissued shares of ₹ 10 each which were not affected by the reduction. While, therefore, it was clearly impossible for the court to direct that the company should be replaced on the register in respect of its original shares, the court could, under section 38, give notice to the persons to whom the shares had been re-allotted or those claiming under them and make them parties to the proceedings and then make an appropriate order for rectification and, if necessary, also direct the mills to pay damages under that section. Principle to the present application under article 181. If article 181 applies then time began to run after the company came to know of its right to sue. It is not alleged that the company had any knowledge of the forfeiture between the 5th September, 1941, when the resolution of forfeiture was passed and the 9th September, 1941, when the company became defunct. After the last mentioned date and up to the 16th February, 1945, the company stood dissolved and no knowledge or notice can be imputed to the company during this period. Therefore, the company must be deemed to have come to know of its cause of action after it came to life again and the present application was certainly made well within three years after that event happened on the 16th February, 1945. If article 181 does not apply then the only article that can apply by analogy is article 120 and the application is also within time. In either view this application cannot be thrown out as barred by limitation. The result, therefore, is that this appeal must succeed. We set aside the judgment and decree of the High Court in appeal and restore the order of the trial court.
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