1. This suit is filed by 16 plaintiffs as sharesholders of the 1st defendant company on their own behalf as well as on behalf of all other shareholders of the 1st defendant company, except defendants Nos. 2 to 12. According to the plaint, the 1st defendant company was incorporated on July 13, 1946, for carrying on business of aerial transport, and by the company's memorandum dated July 12, 1946, the capital of the 1st defendant company was two crores of rupees dividend into twenty lacs ordinary shares of Rs. 10 each.
2. In paragraph 2 of the plaint, it is stated that in June 15, 1946, the 1st defendant company issued forms of application for shares of the 1st defendant company to certain share- brokers named in the paragraph 'with the intention that the forms may be used by members of the public for applying for shares'. It is then stated that the same were issued without any prospectus and that the 1st defendant company had not at that time even filed a statement in lieu of prospectus with the Registrar of Joint Stock Companies. The applicants for the shares forwarded Rs. 2-8-0 per share with their applications as application moneys in respect of the shares.
3. It is stated thereafter that on July 20, 1946, the capital structure of the company was altered from two crores of rupees consisting of twenty lacs ordinary shares of Rs. 10 each to two crores of rupees divided into four lacs preference shares and sixteen lacs ordinary shares of Rs. 10 each; that a general meeting of the shareholders was purported to be held on July 20, 1946, where a special resolution was passed which altered the capital structure as stated above.
4. It is thereafter averred that on September 3, 1946, the 1st defendant company filed with the Registrar of Joint Stock Companies a statement in lieu of prospectus dated September 3, 1946, and the same was registered on or about September 7, 1946, and that the 1st defendant company thereafter flied with the Registrar another statement in lieu of prospectus dated September 14, 1946, and that the said statements in lieu of prospectus have not been properly filled up. In connection with this, is may be pointed out straigh that these statements made are inaccurate as evidenced from the evidence of the Registrar who was examined on behalf of the plaintiffs, who deposed that as a matter of fact the first statement was filed on September 2, and in fact the office raised an objection which objection was overruled by him on September 7, 1946, so that the statement in lieu of prospectus was in fact presented on September 3, 1946, as appearing on the face thereof, and the second statement in lieu of prospectus had to be filed, inasmuch as there was an omission in the first statement as regards the minimum subscription.
5. Thereafter the plaint states that between September 3, and September 5, 1946, the 1st defendant company made allotment of its shares to the applicants including the plaintiffs and intimations thereof were sent out from September 10 to September 12, 1946, calling upon the applicants to pay a further sum of Rs. 2-8-0 per share as allotment moneys.
6. Thereafter in paragraph 7 it is stated that one M.H. Gandhi presented a liquidation petition on March 27, 1948, in this court, being I.C. No. 36 of 1948 praying for the winding up of the 1st defendant company on the ground set out in that paragraph. Thereafter in paragraphs 9 and 10 they sent out certain circumstances under which there was a change in the board of directors and allegations were made that the shareholders were defrauded as regards certain meetings held of the shareholders of the company, that, therefore, the directors named therein were not properly appointed. This allegation is made for the purpose of obtaining an injunction restraining the company from making nay further call through the directors who had issued the notice dated August 18, 1948, to its shareholders who had not paid the allotment moneys on the first call, calling upon them to pay the amounts with interest and threatened to forfeit the shares, if the amounts were not paid in. In paragraph 13 the plaintiffs say that they have filed this suit on behalf of the shareholders, excepting defendants Nos. 2 to 12 and applied and obtained an ex parte order under Order I, rule 8, and turned this into a representative suit. Thereafter in paragraph 14 they submit that the five directors appointed on May 24, 1948, were appointed under an invalid resolution, and inasmuch as they were not validly appointed, they had no right to issue the notice calling upon the shareholders to pay up the moneys on the first call, and they further submit that the making of the second call pending the liquidation proceedings was not bona fide, and therefore, asked for an injuction.
7. The injuction was granted.
8. Defendants Nos. 2 to 12 have not appeared and defended this action, but the action is defended by the official liquidator who was appointed under the petition referred to in the plaint.
9. Before I proceed to draw attention to the issues in the suit, a short narration of dates and events which are not disputed is necessary. As stated by me above, this company was incorporated on July 13, 1946, and applications from the plaintiffs and other intending shareholders were received between July 16, 1946, and August 22, 1946. On July, 20, 1946, a special resolution for increasing the capital and altering the capital structure was duly passed and the same was filed with the Registrar of Joint Stock Companies on July 30, 1946. As appearing from Exhibit Q, the company obtained the Consent of the Examiner of Capital Issues on August 30, 1946, as appearing from Exhibit C. The return of allotments was filed on October 3, 1946 (Exhibit D). In the month of October, 1946, most of the plaintiffs paid allotment moneys, as indicated by Exhibit H, and share certificates were duly issued on December 3, 1946. The company made the first call on February 6, 1947. It appears that thereafter on March 27, 1948, a petition for the winding up of the company was duly filed, and almost five months thereafter, on August 16, 1948, the plaintiffs filed the presents suit. The order for winding up of the first defendant company was made by the court on February 9, 1949, the plaintiffs in this suit took no further steps at all, and inasmuch as they had already obtained an ex parte order restraining the first defendant company from making demands on them, and it was not until the liquidator sent repeated reminders to the Prothonotary, that on October 10, 1949, the plaintiffs were compelled to ask for and obtain leave of the court to continue the suit against the liquidator.
10. Reverting shortly again to the plaint, it is necessary to draw attention to the allegations in the plaint and the reliefs asked for. The first is, that on July 15 the first defendant company issued forms for applications to certain share-brokers with the intention that the said forms may be used by the members of the public for applying, and that at that time the first defendant company had not filed the statement in lieu of prospectus with the Registrar of Companies. The second allegation is that the said statement in lieu of prospectus was altered and the statement in lieu of prospectus had not been properly filled up. The allegation against the directors as regards their misconduct subsequently are not germane to the issues raised before me, inasmuch as they bear on the question of injuction which was obtained by the plaintiffs. Then the prayers are as follows: First, that it may be declared that the said allotment of shares of the first defendant company to the plaintiffs and the said class of shareholders represented by them in invalid, or in the alternative, the said class of shareholders are entitled to avoid the same. Then prayer (b) asks that the names of the plaintiffs and the class of shareholders may be removed from the register of members of the first defendant company, and ask for a consequential rectification of the share register of the first defendant company. Prayer (c) asks that the first defendant company be ordered and decreed to refund to the plaintiffs and to the said class of shareholders all the amounts respectively paid by them to the first defendant company.
11. In the light of these allegations, a written statement was filed by the liquidator, inasmuch as leave was obtained to continue the suit against him. The contentions raised by the official liquidator are that the suit is bad for misjoinder of plaintiffs and causes of action. Alternatively, he contends that the plaintiffs are not entitled to file a representative suit.
12. The official liquidator of the company admits that the capital structure of the company was altered as mentioned in the plaint. Thereafter he states that the statement in lieu of prospectus was duly sent to the Registrar on September 3, but inasmuch as the amount of minimum subscription was not mentioned in that statement, a new statement was field on September 5, 1946. Paragraphs 13, 14 and 15 of the plaint are traversed, and it is further contended that inasmuch as the winding up petition was filed on March 27 and the final order was made on February 9, 1949, the plaintiffs have no cause of action against the official liquidator and are not entitled to maintain this suit. As regards the allotment of shares, it is said the plaintiffs are estopped by laches and acquiescence from avoiding the contracts.
13. Numerous issues were raised, namely, 16 issues, but the main issues are, issue No. 1 - whether the suit is bad for misjoinder of the plaintiffs and causes of action, issue No. 2 - whether the plaintiffs are entitled to file a representative suit as alleged in paragraph 13 of the plaint, and issue No. 9 which runs as follows:
Whether the plaintiffs, and the class of shareholders are entitled to have their names removed from the register of members of the first defendant company, as alleged in paragraph 13 of the plaint?
14. During the course of arguments, and as arguments shaped, it became necessary to raise a further issue, which I have done, and which I will nominate as 8(A), as follows:
Whether the contravention of Section 96 (2) and Section 98 of the Indian Companies Act by the first defendant company makes the contracts void in the eye of the law?
15. The evidence led in this suit consists mainly of documents exhibited, over which there is no controversy at all, and the plaintiffs have led the evidence of certain shareholders amongst the plaintiffs and certain brokers for the purpose of establishing their case.
16. Before I deal with the issues as set out by me above, it is necessary in the light of the arguments advanced and the constructions placed on certain sections that are necessary for the purpose of dealing with the issues and the arguments advanced. Section 38 of the Indian Companies Act refers to the rectification of the register of a joint stock company, namely, where the name of any person is fraudulently or without sufficient cause entered in or omitted from the register, or where default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, then, in either of these cases, parties may apply to the court for rectification of the register. Under Section 83 it is mandatory for every company to maintain minutes of general meetings and of its directors and the same to be entered in the books kept for the purpose. Under sub-section (2) every such minutes shall be evidence of the proceedings, and under sub-section (3) until the contrary is proved, every general meeting shall be deemed to have been duly called and held and all proceedings had thereat to have been duly called an held and all proceedings had threat to has been duly had and the proceedings deemed to be valid. In this connection, one must remember that under Section 240 of the same Act, where any company is being wound up, all documents of the company and of the liquidators shall, as between the contributors of the company, be prima facie evidence of the truth of all matters purporting to be therein recorded. These sections indicate that certain presumptions have to be made that the documents are duly and properly entered, unless the contrary is shown, in other words, unless the plaintiffs proof to the contrary. The reason for that will be found in the following two sections, namely, Section 30(2) whereunder every shareholder whose name is entered in the register of members shall be a member of the company. That is, he is a member until he proves otherwise. Under Section 40 of the Indian Companies ACt,. the register of members shall be prima facie evidence of any matters by this Act directed or authorised to be inserted therein.
17. The other sections that bear directly on the issues involved in these proceedings are as follows:- Section 93 prescribes the specific requirements as regards the particulars of a prospectus where a prospectus is filed. Then comes the section which is most discussed in these proceedings, and that is, Section 96(2) of the Indian Companies Act, and it runs as follows:-
'It shall not be lawful to issue any form of application for the shares in or debentures of a company unless the form is issued with a prospectus which complies with requirements of Section 93.'
18. Then comes Section 98 which deals with the obligations of a company where no prospectus is issued, and it says that where no prospectus is issued, is shall not allot any of the shares, unless before the first allotment there has been field with the Registrar a statement in lieu of prospectus signed by every person who is named therein as a director, or by his agent authorised n writing to do so containing the particulars. Section 101 refers to restrictions as to allotment, and it says that no allotment shall be made of any share capital of a company offered to the public, unless the minimum amount which is stated has been raised by the issue of share capital in order to provide the sums specified under sub-section (2) had been subscribed, and the sum of at least 5 per cent. thereof has been paid to or received in cash by the company.
19. Then comes Section 102, which talks of the fact that an allotment made by a company to an applicant in contravention of the provisions of Sections 98 and 101 shall be voidable at the instance of the applicant within one month after the holding of the statutory meeting of the company. It may be noted here that at one time Section 102 only contained Section 101 as the section when non-compliance with which would make the contract voidable, and it was only in 1936 that Section 98 was included. So that prior to 1936 the contravention of the provisions of Section 98 was not dealt with under Section 102.
20. Before dealing with the issue in the suit, I may clear the ground by making certain observations which will shorten the discussion on the different issues. It is apparent that it is nowhere alleged in the plaint that this contract, which is a voidable contract, has bene avoided by the plaintiffs or any other members of the class of shareholders they represent by the due notice. As regards the invalidity of the allotment, no clear submissions appears, except that a reference is made in paragraph 5, that the statements in lieu of prospectus have not been properly filled up, and in paragraph 6, that the company made allotments between September 3, and September 5. It is further contended that the first defendant company after the date of the said applications, materially altered its capital structure, and, therefore the statements in lieu of prospectus are materially incorrect. Thereafter, it is alleged, that the plaintiffs and the class of shareholders are therefore entitled to avoid the allotments and have their names removed, but it is nowhere pleaded that there has been any notice of recession of the contracts, which the plaintiffs are entitled to. In the prayers it is said that the allotment is invalid, or in the alternative, the shareholders are entitled to avoid the same.
21. I may dispose of this first point by referring to the case of Blair Open Hearth Furnace Company Limited, In re where it was laid down that where if a statement in lieu of prospectus has bene filed and the Registrar has given a certificate, the company can proceed to allotment notwithstanding that the statement contains misstatements and omissions. The meaning of Section 82 of the English Act is that where no prospectus is issued an applicant for shares shall be able to inspect some document having a similar object; and any applicant who applies for shares on the faith of a filed statement has the same individual right of recession in the case of misstatement or omission which he would have had if he had relied n a prospectus. The requirements of Section 82 about proceeding to an allotment are satisfied by the mere filling of the statement, whether the particulars are or are not sufficiently supplied and the allotment is not vitiated by their want of accuracy. I may say that in this case before me, all the allotments have been between September 3 and 9, and thereafter, and the statement was filed on September 3. LORD COZENS-HARDY M.R. in delivering the judgment of the Court of Appeal, in construing the statute, remarked at page 403:
'I think that when once a statement is left with the registrar and has been filed by him, a statement not illustory, but a statement which in form, so far as the official can see, is complete or reasonably complete - because I do not mean to say that every `i' should be dotted and `t' crossed but substantially complete - when that has been done, the registrar has no means of testing or examining or questioning the truth of the answers to those questions, and there is an end of the matter; the condition has been fulfilled which entitles the company to carry on the business, to exercise borrowing powers, and to allot shares.'
22. He came to that conclusion, although dealing with the facts of the case, he remarked at page 405:
'I will not go through the inaccuracy, to say the least, of the amount paid or intended to be paid to the promoters, because in my view that does not really affect the decision in this case, but I cannot part with it without saying that I think this statement is as inaccurate and lacking in frankness and fullness as any such statement could very well be. But as a matter of form it is satisfactory; it purports to be an answer to the various questions; it is signed by the proper people who were to sign it according to the Legislature; and that having been done, I cannot bring myself to believe that the effect of the Act of Parliament, in the absence of any provision similar to that which is found in prospectus cases, is that the whole thing, the allotment of shares and everything done by the company, perhaps for years afterwards, should be absolutely null and void. I think that is not the effect of the statute.'
23. He agreed with the view of WARRINGTON J. and added at page 406:
'However wrong the answer in the statement may be, however careless, to use no stronger would, the directors may have been, that did not of itself and in the absence of any false representation made to any individual application render all the allotments mere waste paper of such a nature that no liability could be imposed upon the allottee.'
24. The above reasoning is supported by the observations of JESSEL M.R. in Hull and County Bank In re: Burgess's case, where it has been held that a shareholder in a company, who has been induced to apply for shares by fraudulent misrepresentations contained in the promoters' prospectus, is not entitled after the winding up to rescind his contract to take the shares, even if the assets in the hands of the liquidators are sufficient to pay in full the whole liabilities of the company together with the costs of the winding up. The observations of JESSEL M.R. during the arguments of counsel are pertinent where he remarked at page 509:
'The doctrine is that after the company is wound up it ceases to exists,and rescission is impossible. There are then only creditors and co-contributories and no company, and that is the meaning of LORD CAIRNS' observations in Houldsworth v. City of Glasgow Bank.'
25. This case adopted this proposition by relying upon the conclusion of LORD CAIRNS in the case of Tennent v. City of Glasgow Bank, where LORD CAIRNS observed at page 621:
'It is too late, after winding up has commenced, to rescind a contract for shares on the ground of fraud. This, no doubt, is on the ground stated by the Lord President, that innocent third parties have acquired rights which would be defeated by rescission.'
26. In these circumstances, Mr. Khambatta on behalf of the plaintiffs was unable to press the question that there was any avoidance of the contract, or that this was a voidable contract avoided by the plaintiffs at any stage, and not having pressed that, he proceeded to base his arguments mainly on the construction of Section 96(2) of the Indian Companies Act. This is the issue round which the main controversy between the two parties had revolved, and I shall come to it directly, but before doing so, I may point out certain facts on which the plaintiffs rely. First of all, they rely on this, that in reading this section one must remember that according to the plaintiffs these forms were issued by the company prior to the filing of the statement in lieu of prospectus and contrary to the provisions of Section 96, for which they rely on this, that the statement if lieu of prospectus is delivered on September 3, and taken on file on September 7. I have already indicated the inaccuracy of this statement in the light of the evidence of the Registrar, but it is, however, contended that the forms of applications were issued on July 15, 1946, and they were issued to the public by the company, and that on one of the statements in lieu of prospectus, instead of there being the signature of Sir Allagappa Chettiar, there is the rubber stamp of Sir Allagappa Chettiar's signature. This latter point would fall under Section 98, and would infringe only Section 98, which would in turn make the contract voidable under Section 102. But as I have indicated above there are no grounds for showing that any of the plaintiffs, or any member of contract within a month after the statutory meeting of the company was held, so that the only point now before me is whether these application forms were issued by the company prior to the filing of the statement in lieu of prospectus, and contrary to the provisions of Section 96 of the Indian Companies Act. It is on this point that a considerable body of oral evidence was led by the plaintiffs. Before referring to the evidence, one must turn to the averments in this connection. To my mind, there is no averment to the effect that these application forms were issued by the company or by any authority vested for that purpose by the company in any officer under any particular resolution. The plaint itself says as follows:- On or about July 15, 1946, the first defendant company issued printed forms of application for shares to certain brokers X Y Z with the intention that the said forms may be used by the members of the public for applying for shares, and that these application forms were issued before the statement in lieu of prospectus was filed. There is no clear allegation that these were issued by the company to the public. For this purpose, several witness were examined, and I shall very shortly deal with their evidence. The first is witness Chimanlal Patni. He said that the company was going to issue only ordinary shares. He says that he did receive certificates from the company in connection with the 250 shares, and adds, 'As far as I know the capital structure of the company was not changed thereafter.' I may state at once that every share certificate bears on the face of it the change of the capital structure of the company, and nobody had challenged that. This was done by a special resolution of July 20, 1946, long prior to the issue of the certificates which on the face of them show the capital structure of the company. The witness was unable to produce the allotment letter sent to him. This is the evidence of the 11th plaintiff in the suit. Then came the 1st plaintiff in the suit, one Mansukhlal Vora. He said that he asked his broker Lallbhai to get shares, as the defendant company was inviting subscriptions and that Lallbhai told him that the public was subscribing to the shares of this company and he should do so, if he desired. He could not produce the share certificate, because he said he did not get any, and had not applied for any as there was trouble in connection with the company. He says that he has filed a suit to recover his money, and he did not attend the meeting of the shareholders of the company as a shareholder, but as a member of the public, and he is asking for nothing else, except recovery of his moneys. This is important to bear in mind when one goes to the issue as regards the representative nature of the suit and as regards the multiplicity of parties and causes of action.
27. Then comes the most important plaintiff, Murzban Commissariat. He was much more emphatic and to the point. He said that he was introduced to one Natverlal Dalal, a sharebroker, by a mutual friend and that sharebroker told him that he had been engaged by the first defendant company to distribute forms of applications for shares. This broker has not been called to corroborate the statement of the plaintiff. This is the whole of his evidence germance to the issues in these proceedings.
28. Then comes one Rasiklal Somabhai Vakil, who is a sharebroker trading in the name of Lallbhai Hirachand, and his evidence is relied upon with great emphasis by the plaintiffs. He says that he was employed to have the shares of the Jupiter Airways subscribed from amongst his clients by the company itself, and the company had supplied him with printed application forms, and that he was paid his brokerage. He had to admit that other brokers who also obtained subscriptions to the shares were paid exactly the same commission, and that is in accordance with the practice in Dalal Street, and all brokers would put their names in stamp on the applications sent through them. Then in further examination, he had to retrace this by saying that the brokers employed by the company would get a quarter per cent. more than the others. He admitted that there was a share mania, and that in those days clients obliged brokers by putting business in the hands of brokers. It is important to note that he was asked in cross-examination who on behalf of the company gave him the application forms, and he said, he could not remember that, and if he ran short of forms, he could get them from any other broker, and supply them to any other broker who ran short of the forms. He said he was engaged on behalf of the Jupiter Airways by Sir Allagappa Chettiar. This is the strongest evidence the plaintiffs could rely upon. The last witness is the broker Bhogilal Vithalji Bhansali. I did not like this witness's demeanor in the witness box at all. He had come deliberately to put forward a certain case and for an obvious reason. He said in July, 1946, Sir Allagappa Chettiar had meet him, whose sub-broker he was, and gave him information and also gave him certain forms saying that the witness should obtain subscription from among his clientele. Out of the 112 applications, he said he knew only 18 personally, but this witness had himself subscribed to 1000 shares in his own name, 1000 shares in the name of his wife and 900 shares in the name of the third party, making in all 2,900 shares. He said he had not received the shares certificates as he had not paid anything more than the application moneys. He has filed a suit against this company for his brokerage and obtained an ex parte decree. He said he had met Sir Allagappa Chettiar's sub-brokers Balu Chettiar who assured him that in spite of the allotment and the notice of the call, his moneys would be returned.
29. Now, taking this evidence at its highest, what does it come to? Does it come to this that the company had in fact issued application forms to the public? The highest is that Sir Allagappa Chettiar distributed these forms to certain brokers for obtaining subscription 'from their clients'. There is no evidence before me that the company had issued any circular in this connection to the public, and no resolution had been produced to show that such forms were issued by the company. Nor is there any advertisement produced before me showing any invitation for applications from the public, as it would be normal for a company to do. The fact that the brokers were keen and some of the clients were keen in purchasing these shares as soon as they could, and the fact that the brokers come into possession of application forms does not lead to the inference that there was a public invitation by the issuing of these application forms by the company. The burden is heavily on the plaintiffs, and to my mind, they have failed to discharge this burden. On the facts themselves, therefore, it cannot be said that the company had issued any invitation to the public.
30. Now, taking issue No. 8(A) first, it has been argued by Mr. Khambatta that inasmuch as Section 96(2) says that it is not lawful to issue any form of application for shares unless it is issued with the prospectus complying with the requirements of Section 93, and any person acts in contravention of the provisions of this sub-section, is liable to a fine. Therefore, the issuing of these forms makes the contract void, inasmuch as Section 96 contemplates a counterpart of what follows, namely, allotment, and that, if the first part, namely, and the sequel to it cannot follow, namely, any allotment or acceptance of the offer, namely the offer being unlawful, it must not be divorced from what follows, namely, a contract by allotment, and, therefore, there is no contract, and, in other words, the contract is void. The answer to that depends on the construction of this section together with a reading of the other relevant sections. Section 96, as it stands, makes the issuing of such a form prior to the issuing of a prospectus, and in compliance with the requirements of Section 93, not lawful. Then it imposes f certain penalty on a person who acts in contravention of the provisions. It must be remembered that this section is headed 'Management and Administration', Part IV of the Act, and it is a provision for the regulation of the procedure of issuing shares by a company. It has no bearing on an act of an outsider or a third party, and the only consequence this section contemplates is a penalty on the offending official. In this connection one may look at Sections 98 and 101. Section 98 contemplates obligations of companies where no prospectus is issued at all, and Section 101 refers to restrictions as to allotment. Now, in connection with this section, Section 98 clearly contemplates a position where the company allots shares or debentures without issuing a prospectus, and Section 101 also lays down that there shall be no allotment of any shares capital of the company offered to the public, unless certain conditions are complied with. None the less, under Section 102 of the Indian Companies ACt, it is said, when an allotment is made by the company to an applicant in contravention of this provision, that contract shall be voidable at the instance of the applicant within one month after the statutory meeting of the company is held and not later. A contract is concluded between the applicant and the company by the tender of the application and allotment of the shares. Therefore, it is clear that a contract can be made although the company has not issued a prospectus and in contravention of the express provisions of Section 98. The fact that the Legislature talks of a voidable contract clearly shows there is a contract that can be completed despite the provisions of Sections 98 and 101. The Legislature has not included Section 96 in Section 102, and it is argued by Mr. Khambatta on this basis that it is not included, because the contract is deemed to be void, in other words, no contract between the parties. I cannot accept this reasoning, because Section 96 itself has no application whatever to the formation of a contract. The application forms may be issued before any prospectus is out, or before any statement in lieu of prospectus is filed, and they may not be used at all by any party, and yet the offence would be committed within the provisions of Section 96. On the other hand no application forms may be issued by the company, and yet the offer may be made by a party on a piece of paper or a note paper. I see nothing in the provisions of the Act which would prevent a contract being formed by such an application being made before the issued of a prospectus, or the filing of the statement, and acceptance thereof after the filing of the statement. Therefore, to my mind, Section 96 is only a provision for the due compliance with certain conditions to be observed by the management if floating a public limited company, and had no bearing on the contractual relationship between the intending shareholder and the company. The offer is accompanied by allotment moneys which is the consideration, and under Section 23, every agreement of which the object or consideration in unlawful is void, but there is no question here of the object or consideration per se being unlawful at all, and unless the Legislature in express terms restricts the freedom of contract, a contract which is valid and complied with the provisions of the Indian Contract Act is a completed and a legal contract. In these circumstances, I a, unable to accept the contention of Mrs. Khambatta that Section 96 (2), if infringed, makes the contract between a shareholder and a company unlawful. In fact such a construction would lead to an absurd position, because if this were held to be so, and if the company had issued application forms contrary to Section 96, and subsequently the promoters came to realise that they had issued these forms prior to the filing of the statement in lieu of prospectus, and the contract was void, they would also be entitled to rest their rights on this, and if they found that the coal mine they were dealing with became a gold mine, they could contend that there is no contract in existence and the shareholders had no rights. This is an instance at one extreme. On the other hand, if the company was a successful company and this defect was found, a shareholder who wants to waive any irregularity in a good investment company would not be able to do so, because, if the contract is void, he has no contractual rights whatever against that company. In these circumstances, I am not prepared to accept that on a proper construction of this section by implication, the Legislature intended that contracts entered into through application forms issued before the filing of the prospectus, invalidated any contract with the company, and that there was no acceptance of the offer on the allotment of the shares.
31. This disposes of issue No. 8(A) which is the most important issue in these proceedings and on the same considerations issue No. 9 is also disposed of.
32. The only two other issues which remain for consideration are issues Nos. 1 and 2. In connection with issues No. 1 it is obvious that there is not the same claim made by the parties, because the dates of allotment and the dates of call moneys, apart from the dates of application, would distinguish one shareholder's case from another, namely, whether the application was after the filing of the statement of before. The dates of allotment would also be different, and the payment of call moneys would also be different. In these circumstances, inasmuch as I have held that the contract is a valid contract, and may be a voidable one or not, the question in each case would raise the question of laches and acquiescence, in other words, estoppel in connection with each of the parties, and therefore, the efficacy of each contract would depend upon different facts and different conduct of parties, vis-a-vis the company, and the conduct of the company qua each shareholder. Besides it would arise the question on the nature of the objection taken by the shareholder, and whether that shareholder had waived it or not. In those circumstances, clearly to my mind, a glance at Exhibit H will show that the facts of each case would have to be differently approached and analysed, and, therefore, this is not a suit which can be brought under the provision of Order I, rule 1. The same reasoning applies as regards the second issue, namely, the question of a representative suit under Order I, rule 8. Identical interest cannot possibly be pleaded, and different considerations would apply to each of the plaintiffs, apart from the other shareholders, as appearing from Exhibit H. In fact, in certain cases, there are transferees, (see Exhibits 5 and 6), and, therefore, how can be plaintiffs' relief be applicable or allowed to the transfers? In fact, it is apparent that another suit is pending by certain shareholders, which was on my board immediately after this suit, and for a similar relief.
33. In considering the questions under issues Nos. 1 and 2, I put it to Mr. Khambatta how a court could at all pass a monetary decree where there are different parties with different claims? I can understand where there is none general declaration alone in which all the plaintiffs are interested. But where there is a money decree, how could the court pass a decree which could be drawn up by the Prothonotary giving monetary relief to each of the shareholders, unless a claim, which is a liquidated claim, is placed before the court, and the only answer that Mr. Khambatta could make to this was that that was a serious difficulty which may be met by reference to the Commissioner for Taking Accounts.
34. There is only one further point which may be referred to, and which I have already referred to shortly, and which I may refer to again, namely, as regards the change in capital structure. I have already referred to the resolution of July 20, Exhibit F, which was duly filed, but a reference to Exhibit O may also be made, and in these circumstances, to my mind, there is no substance in this allegation. The capital structure was changed at the end of July, 1946, and the share scrips issued on December 3, 1946, clearly indicate on the face of them what the capital structure of the company was, and there is no evidence whatever before the court that any single shareholder lodged any protest against that position.
35. The suit stands dismissed with costs. The costs of the suit to include the costs of the notice of motion and the chamber summons. Interim injunction to stand dissolved.
36. Suit dismissed.