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TMI Blog1968 (6) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent-company apart, from 440 shares on which they had paid the allotment and application money amounting to Rs. 25 per share. So far as the latter shares are concerned, they were called upon by the respondent to pay the balance of Rs. 75 per share, the time for which was being extended periodically. In or about March, 1952, the first petitioner sent to the first respondent a sum of (O.S.) Rs. 60,000 towards arrears of call money, which amount was adjusted by the respondent-company towards arrears of interest and part payment of call monies on shares on which these amounts were due. The board of directors at their meeting held on 4th March, 1954, further extended time for payment of cad monies up to 31 st May, 1954. The board also decided to waive interest in the case of shareholders who paid their arrears before that date and to forfeit those shares where arrears were not paid. The first petitioner, presumably on behalf of himself and the other petitioners, wrote to the first respondent on 17th April, 1954, disputing the adjustment towards interest of the amount of Rs. 60,000 sent by him and claimed that the interest ought to have been waived. Thereafter, certain corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forfeiture and confirmation of the forfeiture took place as long ago as 1954, the petitioners did not take any action till the date of filing of the petition and that, therefore, it is not a case in which the court ought to exercise its jurisdiction in directing rectification of the share register. The claim for damages was also described as absolutely untenable. In any case, the respondent averred, the petition is barred by limitation and the petitioners are not entitled to any dividend as is claimed. The learned company judge considered the two questions arising out of the averments in the petition and the counter, viz., (1) whether the forfeiture of the shares was valid, and (2) if not, whether the petitioners are entitled to damages. In considering the first question he came to the conclusion that exhibit B-3 dated 20th March, 1954, the receipt of which was denied by the first petitioner, was posted by the respondent-company and that in the ordinary course of business it must be presumed to have reached the petitioners. In view of this finding as well as on a consideration of other letters and correspondence, the learned judge held that the procedure prescribed in articles 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by ordinary post or was not received by the first petitioner. Section 53 of the Companies Act prescribes the mode of service of notices. Sub-section (2) thereof states that: "Where a document is sent by post,- (a)service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgment due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member". This provision clearly shows that the normal mode of serving is by posting the notice unless, of course, the shareholder intends it to be served in a particular v ay, for which he must deposit the costs. Apart from this, a finding of fact arrived at by the learned company judge is conclusive and cannot be assailed in an appeal under section 155(4) of the Companies Act. An appeal against a judgment or order of the company judge will only lie on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he call was made or instalment is payable, will be liable to be forfeited. 41. If the requisitions of any such notice as aforesaid are not complied with, any shares in respect of which such notice has been given may, at any time thereafter, before payment of all calls or instalments, interest and expenses, due in respect thereof, be forfeited by a resolution of the directors to the effect. Such forfeiture shall include all dividends deck red in respect of the forfeited shares and not actually paid before the forfeiture. 42. When any share shall have been so ' forfeited ' notice of the resolution shall be given to the members in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture with the date thereof, shall forthwith be made in the register". A perusal of the above articles would show that (1) before shares are forfeited the directors must have a notice served on such a member who is in default of payment of call, requiring him to pay the same together with any interest that may have accrued and all expenes that may have been incurred by the company by reason of such non-payment; (2) that the notice shall call upon the members to pay the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 12-8-0 application money, the amount required to be deposited by him at the time of the application is Rs. 5,500. The petitioners had to pay the balance of Rs. 12-8-0 per share making a total of Rs. 25 per share being the application money and allotment money, but this was not paid till nearly an year after, when an amount of Rs. 5,500 was paid on June 14, 1947. The balance of the call money on shares applied for ought "to have been paid in three instalments, the first call of Rs. 25 per share to be paid on or before 27th February, 1947, the second call of Rs. 25 per share to be paid on or before 31st August, 1947, and the third call of Rs. 25 on or before 15th April, 1948. Apart from paying the money on application and allotment, the latter of which also was paid long after the due date, the petitioners did not pay the calls on the due dates. Evidently, the company kept on extending time and in several instances the first petitioner himself, though a director of the company, was requesting for time. It is unnecessary for us to catalogue all that correspondence which has been referred to by Satyanarayana Raju J., as he then was. We will only refer to the important letters which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t further notice after that date. A sum of Rs. O.S./I-G.....................is still due from you in respect of..........shares held by you. You are, therefore, requested to pay the above amount with interest due thereon up to the date of payment on or before 31st August, 1953, failing which your shares will be treated as forfeited". This letter, exhibit B-6, was sent by registered post acknowledgment due and it was not disputed that the same was received as per acknowledgment, exhibit B-8, in which the first petitioner signed in token of his having received this letter on June 27, 1953. The original of it which has been received by him has not been produced and, therefore, it if not possible to say what is the amount stated by the company to have been due from the first petitioner and what are the number of shares in respect of which that amount was due. Inasmuch as the first petitioner is in possession of that letter and has not produced the same, we must presume that the correct amount has been demanded as being due in respect of the shares specified therein. There is no doubt that only 330 shares seem to have been fully paid for and arrears were due in respect of 1,187 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly paid after adjustment of arrears of call money and interest. In this way 1,057 shares became fully paid and arrears of call money was due in respect of 460 shares. On March 4, 1954, the board of directors including the 1st petitioner passed a resolution, exhibit P-28, in the following terms : "In pursuance of the decision of the board at the last meeting held on 12th December, 1953, the question of forfeiture of shares of those shareholders who failed to pay the call money by 31st August, 1953, vide Board's decision dated 6th June, 1953, was considered. It was decided that shares totalling 2,564 in all as per details given hereunder be and are hereby forfeited provided the call money is not paid on or before the 31st May, 1954, and the sharenolders whose shares are forfeited under this decision be informed accordingly in terms of article 42 of the articles of association of the company and, as regards waiving of interest, it was decided that in the case of those who pay call money now, they be given the same benefit as was given to one of the shareholders-vide Board's Resolution No. 8, dated December 12, 1953, i.e., the interest be waived from July 1, 1952, to August 29, 1953, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be paid and, therefore, that notice was held to be invalid. In that connection it was stated that there can be no waiver by the shareholder of his right to object to the forfeiture of his shares by the company and that even the smallest requirements should be complied with. While there can be no exception to this principle, it is difficult to contend that when the respondent had required that the amount of arrears be paid at the registered office of the company and has given the address at the top of the letter, it should be considered insufficient or that the shareholder, particularly the first petitioner, who was a director of the company, did not know where to pay the amount. The decision, however, was dissented from by a Bench of the Madras High Court consisting of Rajamannar C. J. and Raghava Rao. J. in Mahalakshmi Textile Mills Ltd. v. Meyyappa Chetliar [1949] 19 Comp. Cas. 246 . But before we deal with this case it is necessary to deal with two other cases of the Bombay High Court which were considered by the Madras High Court as also by the Calcutta High Court. In Pioneer Alkali Works Ltd. v. Amiruddin Shalebhoy Tyebji, AIR1926 Bom. 341. Taraporwala J. held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , because that criticism is only in general terms and does not attempt to show specifically how or where exactly the Chief Justice's view of Jessel, Master of the Rolls's judgment, or James I-J.'s judgment Lyttle's Iron Agency's case (supra) goes wrong. The Bench held: "It is not necessary that the persons to whom, and the place at which, the call is to be paid, should be mentioned in the resolution making the call or in the notices, making the call though these matters must be fixed by the Board, because the articles so provide. In the absence of any evidence upon the point, the court is entitled to assume that these notices were sent out by the agents of the company with the sanction of the directors, and that the directors had in fact appointed the persons and the place to whom and at which the call is to be paid. A forfeiture on non-payment of the call money cannot be attacked on the ground of any irregularity or illegality because the particulars as to its payment were not mentioned in the resolution making the call". It is apparent from these decisions that the provision relating to the time and place are not mandatory but directory and the resolution need not contain the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices have been given and the non-payment of monies on due dates entailed forfeiture according to the resolution of the board of directors, a further resolution that the shares are forfeited unless the amounts are paid on a particular date, would not amount to a prospective resolution, because the directors are entitled to forfeit the shares there and then but instead they gave effect to that decision as and from a particular date, merely to give the shareholder a facility. This cannot, in our view, be said to be a prospective resolution. In what is known as Woollaston's case (supra) a similar question was considered by Lord Justice Turner, who, at page 173, observed as follows: "By this notice, they made a plain declaration of forfeiture, to take effect upon a certain event which happened, and for three years this declara tion was treated as having taken effect and as being in force......It is not as if the directors had made a prospective declaration of forfeiture as to a class of shareholders whose calls should afterwards fall into arrear ; they were dealing with shareholders who were already in arrear ; and it could not make any material difference in the exercise of their dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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