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Wamanlal Chhotalal Parekh Vs. the ScIndia Steam Navigation Co. Ltd - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 18 of 1943 and Suit No. 2185 of 1940
Judge
Reported inAIR1944Bom131; (1944)46BOMLR145
AppellantWamanlal Chhotalal Parekh
RespondentThe ScIndia Steam Navigation Co. Ltd
DispositionAppeal dismissed
Excerpt:
company-shipping company-memorandum of association-objects of company- acquisition of ' personal estate and effects '-investment of money of company -purchase of bullion by company out of surplus cash-transaction not ultra vires.;defendant no. 1, a shipping company, was incorporated under the indian companies act, 1913. its memorandum of association stated the objects of the company, which were, among others, ' to acquire and deal with the property following,...plant, machinery, personal estate and effects' (clause 3(g) (3)), and ' to perform or do all or any of the following operations, acts or things,... to lend money, with or without security, and to invest money of the company in such manner (other than in the shares of this company) as the directors think fit' (clause 3(h) (7))......leonard stone, kt., c.j. 1. this is an appeal from the judgment of mr. justice chagla dated january 29, 1943, whereby he dismissed with costs the appellant's suit for a declaration and certain ancillary relief. 2. the appellant is a shareholder in the respondent company, and sues, on behalf of himself and other shareholders of the company, not only the company but the nine personal defendants who are its directors. the appellant's complaint arises out of a transaction effected at the time of the collapse of france in may 1940 whereby the respondent-company laid out twenty-five lacs of rupees in the purchase of bullion and deposited it at a bank. the appellant says that such a transaction was ultra vires the respondent-company, and accordingly it becomes necessary to examine not only the.....
Judgment:

Leonard Stone, Kt., C.J.

1. This is an appeal from the judgment of Mr. Justice Chagla dated January 29, 1943, whereby he dismissed with costs the appellant's suit for a declaration and certain ancillary relief.

2. The appellant is a shareholder in the respondent company, and sues, on behalf of himself and other shareholders of the company, not only the company but the nine personal defendants who are its directors. The appellant's complaint arises out of a transaction effected at the time of the collapse of France in May 1940 whereby the respondent-company laid out twenty-five lacs of rupees in the purchase of bullion and deposited it at a bank. The appellant says that such a transaction was ultra vires the respondent-company, and accordingly it becomes necessary to examine not only the memorandum of association of the respondent-company but also the nature of the transaction itself.

3. The company was incorporated on March 27, 1919, under the Indian Companies Act, 1913 ; it is a substantial concern, and, as its name denotes, it is concerned with shipping. Clause 3 of the memorandum of association is the objects clause. Sub-clause (a) is : ' To purchase or otherwise acquire the steamship 'Loyalty'....' Sub-clause (b) is: 'To purchase, charter, hire, build or otherwise acquire, steam and other ships or vessels, with all equipments ...' etc. Sub-clause (c) is as follows :-

(c) To buy, sell, prepare for market, and deal in coal, timber, live stock, meat, and other merchandise and produce.

Sub-clause (d) is concerned with the carrying on of certain business and Sub-clause (e) with insurance, while Sub-clause (f) makes provision for the carrying on of certain ancillary businesses, and then comes the Sub-clauses (g) and (h) on both of which the respondents rely. They are as follows :-

(g) To acquire and deal with the property following :-

(1) The business property and liabilities of any company, firm, or person carrying on any business within the objects of this company.

(2) Lands, buildings, easements and other interests in real estate.

(3) Plant, machinery, personal estate and effects.

(4) Patents, patent rights, inventions, or designs.

(5) Shares or stock or securities in or of any company or undertaking the acquisition of which may promote or advance the interests of this company.

(h) To perform or do all or any of the following operations, acts, or things :-

(1) To pay all the costs charges and expenses of the promotion and establishment of the company.

(2) To sell, let, dispose of, or grant rights over all or any property of the company.

(3) To erect buildings, plant and machinery for the purposes of the company.

(4) To manufacture plant, machinery, tools, goods and things for any of the purposes of the business of the company.

(5) To draw accept and negotiate bills of exchange, promissory notes, and other negotiable instruments.

(6) To borrow money or to receive money on deposit either without security or secured by debentures, debenture stock (perpetual or terminable), mortgage or other security charged on the undertaking or all or any of the assets of the company including uncalled capital.

(7) To lend money, with or without security, and to invest money of the company in such manner (other than in the shares of this company) as the directors think fit.

4. The remaining clauses are not material.

5. Those being the objects, it is necessary to examine what the company did, which, it is alleged, is ultra vires thoseobjects.

6. The facts sufficiently appear from paragraphs 6 and 8 of the written statement of the respondents at page 12 of the record. At the end of paragraph 6 appears this sentence :

The defendants say that the said investment was made purely out of consideration of safety and that the directors acted bona fide and considered the said investment to be in the best interests of the first defendant company.

7. In Clause (8) the following is stated :

The defendants say that the said purchases were neither speculative nor were they made with a view to make profits but they were made purely out of consideration of safety.

It. may well have been that the purchase of this bullion was a wise and prudent thing to do. There is a charge of gross negligence contained in the plaint, but there is no evidence to support it, and there appears to be no ground for any suggestion that the directors acted otherwise than in a manner which was in the best interests of the company. The question is ; Was what was done ultra vires the company or not ?

8. Before Mr. Justice Chagla the only sub-clause, to which the Judge's attention appears to have been directed, was Sub-clause (5) (h)(7), and it was urged' by the appellant that what the respondent-company had done did not come within the words 'to invest money of the company in such manner...as the directors think fit.' The learned Judge in his judgment at the foot of page 14 of the record says this :

Whether the 1st defendant company had the power to invest its funds in the purchase of gold and silver would depend upon its memorandum of association. Clause 3(h)(7) of the memorandum provides that one of the objects for which the 1st defendant company is formed is to lend money, with or without security, and to invest moneys of the company in such manner (other than in the shares of this Company) as the directors may think fit. Mr. Vasvada on behalf of the plaintiff has contended that the power to invest moneys must be construed to mean to invest moneys in shares and securities. I do not find any warrant for such a construction to be placed on the word 'invest.' 'Invest' is not a legal expression and one must consider what its ordinary natural meaning is. Murray's Oxford Dictionary defines ' invest' to mean : ' to employ (money) in the purchase of anything from which interest or profit is expected; now, especially in the purchase of property, stocks, shares, etc., in order to hold these for the sake of the interest, dividends or profits accruing from them.' Mr. Vasvada contends that you only invest moneys when you buy shares and securities, lock them up and take the dividends or interest which you realize from these shares and securities. Such a construction is quite contrary to the meaning of the word as given in the Oxford Dictionary. If a person buys commodities with the hope of making profits by sale of these commodities at a later stage, it would be as much an investment as investing moneys in shares and securities merely for the purpose of earning dividends or interest.

9. In this Court Mr. Vachha has referred us to the definition of ' invest' in Wharton's ' Law Lexicon ', which is as follows : ' Invest, to give possession : to lay out money.' He has also referred us to the case of In re Wragg : Wragg v. Palmer [1919] 2 Ch. 58. In that case Mr. Justice P.O. Lawrence, as he then was, had to construe the investment; clause in a will, which authorized the trustees to invest any moneys forming part of the trust estate in or upon such stocks funds shares securities or other investments of whatsoever nature and wheresoever as the trustees should in their absolute and uncontrolled discretion think fit, and the learned Judge states (p. 64) :

I can hardly conceive that any language could have been used which would have given a wider meaning to the word investments than the language which the testator has used in this clause. Moreover I think that the words 'and wheresoever' were rightly relied upon as at least supporting the contention that the clause contemplated that the investments might consist of immovables (such as real estate) having definite locality. Without attempting to give an exhaustive definition of the words ' invest' and ' investment' I think that the verb ' to invest' when used in an investment clause may safely be said to include as one of its meanings ' to apply money in the purchase of some property from which interest or profit is expected and which property is purchased in order to be held for the sake of the income which it will yield; whilst the noun 'investment' when used in such a clause may safely be said to include as one of its meanings ' the property in the purchase of which the money has been so applied. No doubt in many cases the context in which the word ' investments' occurs requires that this word should be confined to investments consisting of stocks shares and securities, but where the word ' investments' is used without any such context, or where, as in this case, the instrument in which it occurs expressly provides that the word is not to have any such restricted meaning, I think that it includes real estate purchased as an investment.

The definition there given is not exhaustive. We were also referred to the decision of Mr. Justice Eve in In re Sudlow : Smith v. Sudlow [1914] W.N. 424. In the will then before the Court the learned Judge had to construe an investment clause which contained the words ' any moneys liable to be invested under this my will, may remain invested as at my death,' and the question was whether a sum of 2,900 on deposit with the firm of wholesale druggists in whose employment the testator had been, and which sum on deposit produced five per cent. interest per annum, free of income-tax, and Could be withdrawn on notice varying from seven days to one month, according to the amount of deposit at the time, was an investment which the trustees were entitled to retain. The learned Judge was of opinion that the testator used the word ' invested ' in its primary and true meaning, and could not treat this money on deposit with the firm as money ' invested ' at the time of the death of the testator. In the case of In re Price : Price v. Newton [1905] 2 Ch. 55 Mr. Justice Farwell, as he then was, had to consider the meaning of the expression 'pecuniary investments' in a will, and the learned Judge says this (p. 58):

I think that no one in ordinary parlance speaking of money which he puts on deposit account at his bankers at a short call like this-ten days-taking the usual banker's interest, which is 1 per cent. below bank rate, would treat himself as making an investment, or as investing in a mode which could be intended by him as an investment to be continued after his death by his trustees ' in its present state of investment' within the meaning of those words. It is a little difficult to dogmatise about matters of this sort, and I quite feel the force of the observation that people do use the words ' invest and ' investment' nowadays in very odd collocations.

10. On the other hand, Sir Jamshedji Kanga relied on the case of In re Lewis's Will Trusts : O'Sullivan v. Robbins [1937] 1 Ch. 118 in which Mr. Justice Bennett, also construing a will, held in effect that money on deposit may be an investment. In re Price (supra) was cited in argument, but neither in the argument of counsel nor in the judgment was any reference made to Mr. Justice Eve's decision in In re Sudlow (supra). The learned Judge pointed out (p. 120) :-

There is no express authority which binds me to decide that money on deposit is not an investment. The case of In re Price : Price v. Newton turned entirely upon the context in which the words ' pecuniary investments' occurred, Money on deposit can be, in accordance with popular parlance, spoken of as invested. The money placed on deposit at the Bank and also the money placed on deposit at the Army and Navy Stores can, I think, be so spoken of as invested.

Upon the language of this particular will I have no hesitation in holding that the moneys deposited at the Bank and at the Army and Navy Stores, Ld., were investments at the date of the testator's death representing the Mortgage Debenture Redeemable Stock and that those moneys on deposit pass under the bequest.

11. In my opinion, it is difficult to reconcile the decisions in In re Sudlow and In re Lewis's Will Trusts (supra). But there is a further authority in the House of Lords in the case of Perpetual Executors and Trustees Association of Australia v. Swan [1898] A.C. 763, where dealing with the Victoria Companies Act, 1890, the Judicial Committee of the Privy Council held that the appellant-company was not authorised thereunder, or under a special Act, to invest trust moneys on deposit at interest with banks. Delivering the judgment of the Board, Lord Macnaghten points out the difference between deposting moneys with a bank and investing moneys on securities.

12. Sir Jamshedji Kanga also relied on the recent decision of the House of Lords in Perrin v. Morgan [1943] A.C. 399 and I think in substance that case, which deals with the construction which is to be put on the word ' money ' in a will, was put forward as showing that the rules of construction had been in some way relaxed in favour of giving to words a more colloquial meaning. I do not understand the House of Lords to have done any such thing. Indeed the judgment of Lord Russell of Killowen disclaims any such intention. No doubt the words 'invest' and 'investment' are sometimes used in a loose sense or, as Lord Justice Farwell puts it, 'in odd collocations'. But we have to construe a business document prepared by lawyers, and although no doubt the document is one which is laid before the public and which the public must understand, I do not think that any loose meaning is to be given to any of its terms.

13. In times of war if a man deposits his family jewels at a bank for safe custody, he cannot be said to be using them, and when at such times a company converts a part of its resources into gold and silver with the avowed intention of depositing the bullion for safe custody at its bank, it seems to me, it cannot be said to be investing its money. In both cases the object is to withdraw from hazard. The jewels and the gold are deliberately frozen into static stability, at the cost, in the one case, of deprivation of enjoyment by display, and in the other, of profit : so that when the risks of defeat are passed, the asset may be returned to use or employment in the domain of daily life. I cannot see that in a case in which safe deposit is the main spring of what was done, there is any room for that degree of activity, continuity and risk which are I think some of the characteristics of making an investment. It does not seem to me that a company can be said to make an investment or to have invested its money, when what the company has done is to change its surplus money into a commodity which it locks up in safe custody, which produces no dividend or income, and in respect of which the company hopes and intends that it will remain unscathed by the fortunes of war and the fluctuations of the market, so that at some future date the money which it represents may be profitably laid out in some form of enterprise. Such circumstances seem to me to negative the idea of making an investment in the same way as if the company had liquidated some of its assets and placed the resultant cash in its safe. It follows that in my judgment what was done in May of 1940 was not permitted by Sub-clause (3)(h)(7) of the objects clause, and if the matter had rested there. I should have been of the opinion that this appeal ought to be allowed. I have come to this conclusion with reluctance, not only because I am differing from the learned Judge in the Court below, but also because, having had the advantage of reading the judgment which my learned brother Kania is about to deliver, I am on this point differing from him also.

14. But in this Court Sir Jamshedji Kanga has argued that even if what has been done was not an investment under Sub-clause 3(h) (7), it was an acquisition and dealing with personal estate. The relevant sub-clause is Sub-clause (3)(g),. which is as follows : ' To acquire and deal with the property following :' and sub-head (3) is: 'Plant, machinery, personal estate and effects.' Neither this sub-head nor its immediate predecessor, which deals with land, is qualified by such words as ' within the objects of the company ' or ' for the purposes of the company' which are attached to some of the other sub-heads; and, in my opinion, Sub-clause 3(g) is very wide indeed. Sir Jamshedji Kanga pointed out that, in spite of the strictures of Lord Wrenbury in Cotman v. Brougham [1918] A.C. 514 the objects clause in a memorandum of association was held in that case by the House of Lords to be unimpeachable once' the certificate of registration had been given by the Registrar under the relevant section of the Companies Act, which in this case is Section 24 of the Indian Companies Act, 1913. Turning again to Sub-clause (3)(g), unquestionably the company had acquired the bullion. It dealt with it, in the first instance, by depositing it for safe custody at its bank, and recently the war situation having changed, the company has sold it. Bullion is, in my opinion, personal estate within the meaning of sub-head (3) of Sub-clause (3)(g). I cannot see that the expression 'personal estate and effects' is to be restrained or narrowed by the context from having the widest meaning ; nor, in my judgment, can these words be read ejusdem generis with plant and machinery. The words appear to be comprehensive words imported for the very purpose of making the previous catalogue unrestricted. In the result, the appeal fails, and must be dismissed.

15. But the respondents in my judgment succeed on grounds which were not raised, or argued, in the Court below. We sent for the Judge's notes in the Court below, and it appears that counsel for the respondents was not called upon to argue, though, no doubt, observations of an interlocutory character were interposed during the course of the appellant's argument, Mr. Vachha has suggested that we ought to exercise our discretion in these circumstances with regard to the costs of this appeal. But it is to be observed that this litigation was framed by the appellant along hostile lines, since, as I have already mentioned, the directors are charged with gross negligence. The parties were, therefore, at arm's length, and I do not think it was incumbent upon the respondents to draw the attention of their opponents to the clause in the memorandum, which, in my opinion, is the relevant one. Further, it was open to the appellant, if all he had desired was the determination of the construction of the objects clause in this memorandum, to have proceeded by originating summons. In these circumstances, in my opinion, the usual order as to costs must follow, and the appellant must pay the costs of this appeal.

Kania, J.

16. The plaintiff is a shareholder of the first defendant company. Defendants Nos. 2 to 10 are the directors of that company. Early in 1940 the capital of the first defendant company was increased and in May 1940, the first defendant company had a large amount in cash on hand. They further anticipated cash receipts soon thereafter. In the latter part of May 1940, Germany had overrun Holland and the Low Countries and the fall of France was apprehended. Therefore, in Bombay, amongst other parts of the world, there prevailed considerable apprehension about the safety of capital. The first defendant company, by its directors, therefore, thought of buying gold and silver. Between May 22 and 28 they bought gold worth Rs. 17,00,000 and silver worth Rs. 8,00,000 and kept the same with the Imperial Bank of India, for safe custody. The plaintiff having come to know of this action of the directors wrote to them a letter of protest on September 26. By their reply dated October 3 the directors informed the plaintiffs attorneys that the financial and international situation looked extremely uncertain and therefore the company had invested a part of the cash on hand in gold and silver. They alleged that they had power to effect such an investment. They denied the plaintiff's allegation that the purchase was of a speculative nature. Not being satisfied with this reply the plaintiff on behalf of himself and the other shareholders of the company filed this suit. He contended in the plaint that the action of the directors in purchasing speculative commodities like gold and silver was unjustified, that the directors were guilty of gross negligence and had committed a breach of trust and that the transaction was ultra vires the company. The prayers are for a declaration that the aforesaid purchase of gold and silver was ultra vires the company, for an account of the loss sustained by reason of such investment and for an injunction. The defendants filed a written statement in which they denied that the transaction was of a speculative nature. They pointed out the uncertainty prevailing when the purchase was made and denied that the same was of speculative commodities. They also denied that the purchase was made with a view to make profits. According to them the purchase was made purely out of consideration of safety and denied that the purchase was ultra vires the company. In the plaint Clause (3) of the memorandum of association was set out in extenso and reference was made to Article 115 of the articles of association. The defendants also relied or art 114.

17. It appears that when the suit reached hearing before Chagla J., it was pointed out that the gold and silver had already been sold and had resulted in a profit which was duly credited in the company's books. The plaintiff does not appear to have pressed his charges of negligence or breach of trust and only one issue was raised which contained the contention that the transaction was ultra vires the company. From the record it appears that the plaintiff's counsel relied on Clause 3(h)(7) for his contention that the transaction was ultra vires. The learned Judge held otherwise and dismissed the suit. It does not appear from the record that counsel for the defendants was called upon to argue, in any event, for any length of time.

18. It was first argued before us that if the clause in the memorandum of association was ambiguous, articles of association could be referred to, and in support of that counsel relied on The Anderson's Case (1877) 7 Ch. D. 75. In my opinion there is no question of ambiguity in this case and therefore no occasion to refer to the articles of association arises. It may be pointed out that if Articles 114 and 115 only were relied upon, they did not alter the position.

19. It was next contended that if powers which are not objects of the company are included in the memorandum they do not become objects. In support of that contention observations of Lord Wrenbury in Cotman v. Brougham [1918] A.C. 514 were relied upon. In that case the different clauses in the memorandum themselves were sufficiently wide to cover almost all kinds of transactions and the objects clause concluded with a declaration that every sub-clause should be construed as a substantive clause and not limited or restricted by reference to any other sub-clauses or by the name of the company and that none of such sub-clauses or the objects specified therein should be deemed subsidiary or auxiliary merely to the objects mentioned in the first sub-clause. Finlay L.C. in delivering the judgment, criticised the provisions of the objects mentioned in the memorandum. Lord Wrenbury after pointing out that the object of a memorandum was to delimit and identify the objects in such a plain and unambiguous manner as that the reader could identify the field of industry within which the corporate activities were to be confined, observed that the object was two-fold : firstly, the intending corporator who contemplated the investment of his capital should know within what field it was to put at risk ; and, secondly, that anyone who should deal with the company should know without reasonable doubt whether the contractual relation into which he contemplated entering with the company was one relating to a matter within its corporate objects. Lord Wrenbury then observed as follows (p. 523) :

There has grown up a pernicious practice of registering memoranda of association which, in the clause relating to objects, contain paragraph after paragraph not specifying or delimiting the proposed trade or purpose, but confusing power with purpose and indicating every class of act which the corporation is to have power to do. The practice is not one of recent growth. It was in active operation when I was a junior at the Bar. After a vain struggle I had to yield to it, contrary to my own convictions.

These observations may be useful to remember when a company has to be registered, but, as observed by all the Law Lords in the same case, for the purpose of construing whether a transaction was ultra vires or not, as the company was registered, the Court was bound to admit that it was a valid instrument. That is the effect of Section 24 of the Indian Companies Act also. The criticism therefore against the wide scope of the objects clause in the memorandum of association is not helpful to the plaintiff.

20. The question is not one of ambiguity of the meaning of the word ' investment' in Clause (3)(h)(7) of the memorandum of association. The question is what is the ordinary meaning of that word in documents of this kind. In Palmer's Company Precedents, Vol. I (15th Ed.) at p. 440, it is stated:

it was formerly not unusual to state the objects in the memorandum with utmost conciseness, and then to elaborate them in the articles ;... According to present practice, the reverse of this plan is adopted. [It is now common to insert as objects powers of the company.] No doubt in the result the objects clause of the memorandum, as now framed is in many cases unnecessarily long, and states not only what may be called the leading or primary objects, but expresslyempowers the company to do a great many things which, if not expressed, would or might be implied as reasonably incidental to the leading objects, or which may never be required. But, after all, it must be borne in mind that the objects clause of a memorandum is intended to be read and understood, and acted on not merely by lawyers, but ordinary businessmen ; and such men like to see the powers of the company expressed with fullness and in considerable detail, instead of resting in implication.

These observations indicate that in construing the objects clause of the memorandum of association there need be no regidity as well as laxity but a reasonable construction is proper. In this connection it may be useful to remember the observations of the House of Lords in the recent case of Perrin v. Morgan[1943] A.C. 399. The question in that case was in respect of the construction of a will. The bequest was of 'All monies of which I die possessed'. For years past, as is well-known, judicial opinion, differed on the question of the true meaning of the word 'money' in such cases, and particularly where it covered deposits in banks or investments in shares and securities. Lord Simon L.C. emphasized the universally recognised rule that the duty of the Court was to find out what was the intention of the testator in using the expression found in the will, having regard to the words used by him. Lord Simon further observed that the duty of the Court, in the case of an ordinary English word, which has several quite usual meanings, which differ from one another is not to assume that one out of several meanings holds the field as the correct meaning until it is ousted by some other meaning regarded as 'non legal', but to ascertain without prejudice as between various usual meanings which is the correct interpretation in the particular document. In dealing with the word before him he further observed as follows (p. 412) :-.As I have already said the word ' money' has more than one meaning, and it is in my opinion, a mistake to pick out one interpretation of the word and to call it the 'legal' meaning or the 'strict legal' meaning as if it had some superior right to prevail over another equally usual and not illegitimate meaning. The context in which the word is used is, of course, a main guide to its interpretation, but it is one thing to say that the word must be treated as having one particular meaning unless the context overrules that interpretation in favour of another, and another thing to say that ' money', since it is a word of several possible meanings, must be construed in a will in accordance with what appears to be its meaning in that document without any presumption that it bears one meaning rather than another.

21. Bearing in mind these observations I shall now proceed to consider the construction of Clause (3) (h) (7) which was discussed in the first instance at the bar and was relied upon at the trial. The verb 'invest' is stated in Wharton's Law Lexicon to mean ' to lay out money.' A similar meaning is found also in Webster's English Dictionary. In Murray's Oxford Dictionary several meanings are given in respect of this word. One of them is 'to employ (money) in the purchase of anything from which interest or profit is expected ; now, esp., in the purchase of property, stocks, shares, etc. in order to hold these for the sake of interest, dividend, or profits accruing from them '.

22. In the trial Court the learned Judge held that if a person bought commodities with the hope of making profits, by sale of those commodities at a later stage, it would be as much an investment as investing money in shares and securities merely for the purpose of earning dividends or interest. It was strongly urged before us that this view of the learned Judge cannot be supported in view of what was stated by the defendants in their written statement. It was pointed out that the defendants themselves had repudiated the suggestion that gold and silver was purchased with a view to make profits. It was therefore argued that even according to this definition, which was accepted by the trial Court, the defendants' contention must fail.

23. In the various illustrations given in Murray's Dictionary, after the abovequoted meaning of the word, one is in these terms : ' to invest capital means to turn circulating into fixed capital or less durable into more durable capital'. Moreover in addition to the above-quoted meaning the following meaning is also given to the word : ' to make an investment; to invest capital (collq.) to lay out money, to make a purchase'. That meaning of the word corresponds to what is found in Wharton and Webster. On behalf of the plaintiff it was argued that the idea of investment must carry with it the capacity to produce interest, profit or dividend, and in that connection Wragg, In re : Wragg v. Palmer [1919] 2 Ch. 58 was relied upon. That was a case of construction of a will. By Clause 10 the trustees were authorised to invest any money forming part of the trust estate in such stocks, funds, shares and securities or other investments of whatsoever nature and wheresoever as his trustees in their absolute and uncontrolled discretion thought fit with the like power of varying such investments to the intent that his trustees should have the same full and unrestricted powers of investment and transposing investments as though they were absolutely entitled thereto beneficially. The question before the Court was whether under this clause the trustees had power to invest in the purchase of real estate. In discussing the effect of the clause Lawrence J., as he then was, observed as follows (p. 64) :-.Without attempting to give an exhaustive definition of the words 'invest' and ' investment' I think that the verb ' to invest' when used in an investment clause may safely be said to include as one of its meanings ' to apply money in the purchase of some property from which interest or profit is expected and which property is purchased in order to be Held for the sake of the income which it will yield'; whilst the noun ' investment' when used in such a clause may safely be said to include as one of its meanings ' the property in the purchase of which the money has been so applied'....

The learned Judge then proceeded to discuss the contingencies in which the word 'investment' may be limited by context to investment in stocks, shares and securities. But he observed that when no reason was given for such restricted meaning, it included real estate as an investment. I' do not, think these observations help the plaintiff because in that case the Court had to consider whether the words ' investment' or ' invest' excluded the purchase of real property, and the Court was not concerned with the question whether purchase of something which did not yield interest or dividend or profit was an investment at all. It must be pointed out that the attempt was to give an inclusive definition and not an exhaustive one.

24. It was contended that if money was kept with a banker, it was not an investment as ordinarily understood. For this the plaintiff relied on the statement in Halsbury's Laws of England (Hailsham Edition), Vol. XXXIV, p. 250. In the note three cases are cited, viz. Perpetual Executors and Trustees Association of Austalia v. Swan [1898] A.C. 763 Price, In re : Price v. Newton [1905] 2 Ch. 155, and Lewis's Will Trusts, In re O'Sullivan v. Robbins [1937] 1 Ch. 118. In re Sudlow : Smith v. Sudlow [1914] W.N. 424 was also relied upon to show that money left on call by an employee with his employer before his death was not considered an investment in his will, when the employee died while in service. I do not propose to examine the cases in detail because in respect of wills it is recognised that the context is the principal thing to be looked into, and ideas about the meaning of the word 'money' will have to be reviewed in the light of the judgment in Perrin v. Morgan. I must, however, point out that in Price v. Newton the question whether interest was paid by the bank or not was considered im-material to decide the construction. In O'Sullivan v. Robbins Bennett J. had occasion to consider a clause in a will whereby the testator bequeathed certain securities '(or the investments representing the same at my death if they shall have been converted into other holdings)' to the plaintiff upon trust for the benefit of a cousin for life. One of the named securities was redeemed during the testator's lifetime, and he placed the sum so received together with other money on a deposit account with his bank and with the Army and Navy Stores, Ltd. The question arose about the ademption of the bequest and the contention was negatived. It was held that money on deposit account may be an investment. I have referred to this case because it is the latest dealing with the word ' investment'.

25. Turning next to the clause in question I must observe that I am not concerned with any general interpretation of the objects of this company. My observations in this case are limited to the question whether the individual transaction challenged in the plaint and effected under the circumstances mentioned in the written statement, and which do not appear to be disputed on the record, was ultra vires or not. The clause empowers the surplus money of the company to be lent with or without, security. It also authorises the investment of the money of the company ' in such manner (other than in the purchase of the shares of this company) as the directors think fit'. On a plain reading of this clause it is therefore clear that it does not restrict the power of the company to utilise money, as indicated therein, for any limited period. In other words there is no limit of time put on the way the company's money may be kept by the directors. It also does not in terms mention interest or profits. In my opinion, the word 'invest' used therein is not necessarily to be read with any restricted meaning. It is capable of being read, as stated in Wharton, viz. to lay out money. It is one of the meanings given in Murray also. Under the circumstances, to quote the words of Lord Simon it is wrong to call one meaning as legitimate and another illegitimate. I have already pointed out that although this is a document which may be assumed to be prepared by lawyers, it has to be referred to and used by businessmen who will have occasion to deal with the company. If the words are deliberately used in a general way, a businessman will be entitled to assume that there was no limitation to the meaning of that word and would be entitled to act on that assumption. As pointed out in Palmer that is a legitimate use which a businessman may make of the memorandum, and if that is a reasonably proper view to take, it is improper for the Court when reviewing the transaction already effected by a company to hold that it has a restricted meaning, which it does not necessarily import. In my opinion in the context in which it is used the word ' invest' is wide enough to cover the transaction impugned in this case. The directors have stated that their only idea was to keep the money of the company safe. I do not think that the word 'invest' necessarily means ' conversion of money into something which must yield a return'. That would permit a company to buy shares of a worthless company which has never paid any dividend and which has no prospect of paying one, in pre-ftrence to converting the money into something which is considered certain to appreciate in capital value in any event. The illustration given in Murray's Dictionary in my opinion very appropriately shows the meaning to be attached to the word ' invest '. ' Money ' as ordinarily understood would be currency notes or coins. If deposited in a bank in a current or fixed deposit account, in law, the transaction would be a loan. It still remains money, i.e. the value is not likely to fluctuate. When it is returned, it is again similar currency notes or coins of the same value. The illustration shows that 'invest' means the loss of the fluid character of money by the substituted thing possessing a fixity or durable character, while it lasts. From that point of view conversion of money into Government Promissory Notes, treasury bonds, shares, or immoveable property will be investment, because the converted thing ceases to be money which can pass from hand to hand without changing its value. The value thereof must vary according to the law of supply and demand. It has ceased to be fluid and has acquired a fixed or durable nature, while it retains the character of such property. The expressions investment in land, or investment in jewellery are common in India. If that is the correct view, the purchase of bullion is equally covered in the same way, and so long as gold and|or silver remain as such, they have a value in terms of money which is varying. When sold it will again acquire the character of money. Till it remains in the shape of bullion it is invested. On these grounds, therefore, in my opinion, the transaction under the circumstances is covered by Clause (3) (h) (7). There appears some force in the plaintiff's contention that, having regard to the admission of the defendants in their written statement, the consideration that bullion was purchased with a view to make a profit must be excluded. If, however, the purchase was made to prevent depreciation, it may be considered as made to prevent loss of capital.

26. Even if a different view is taken, the defendants can rely on the other sub-clauses of clause 3, and in particular on Sub-clause (g). It permits the company to 'acquire and deal' with.... ' (3) plant, machinery, personal estate and effects.' The preceding Sub-clause (2) permits the acquisition of and dealing with lands, buildings, etc. These two sub-clauses give power to the company to acquire all property, because they cover all kinds of moveable and immoveable property. The last sub-clause of Clause (g) deals with shares and stocks of particular companies only. It was argued that this clause does not permit a purchase and sale, and Clause 3(c) deals with that case. That clause provides ' to buy, sell, prepare for market and deal in coal, timber, live-stock, meat....' In my opinion, Clause (c) is not applicable in this particular case. If it was contended that the company wanted ' to deal in ' bullion, this clause may have to be considered. The words ' deal in ' suggest a repetition of transactions and not a stray transaction. In this case the defendants do not contend that the company has thought of doing business in bullion and therefore that contingency need not be considered. An individual stray transac-tion of acquisition is covered by Sub-clause (g) and the words personal estate and effects, in my opinion, are wide enough to cover bullion. It is well-known that in the personal effects of a man dying in India gold and/or silver is generally found to be his personal property and therefore gold and/or silver is legitimately included in the words ' personal estates and effects.' When the suit was filed the company had only purchased gold and silver. It had therefore only acquired bullion at the time. The sale was afterwards. Even if the sale was made before the suit was filed, the words ' deal with ' are appropriate to cover the sale in a particular stray transaction. I therefore think that, in any event, Clause (3)(g)(3) defeats the plaintiff's contention that the transaction in question, effected under the circumstances of the case, was ultra vires. The appeal must therefore fail.

27. It was argued on behalf of the plaintiff that in the trial Court the learned Judge took a view which is not upheld and the defendants did not rely on Clause (3)(g)(3) in support of their contention, and therefore they should get some relief for costs. I do not think that argument can prevail in this case. Although the plaintiff filed this as a representative suit it is not shown that any other shareholders support the plaintiff's contention. The plaintiff also did not come merely for the construction of a particular clause of the memorandum but he charged the directors with negligence and breach of trust. If the plaintiff's intention was merely to obtain from the Court opinion about the construction of a doubtful clause, it was open to him to file a friendly suit, and it was not necessary for him to make such charges. By making these charges he converted the suit into a hostile litigation, and if he fails, he must pay the usual penalty of failure in a litigation. The contention that the defendants had not relied on Clause (3)(g)(3) has no substance because the plaintiff had come to Court to challenge the transaction and the defendants were entitled to rely on any clause in the memorandum. If in the trial Court the learned Judge rejected the plaintiffs contention on the only clause on which he challenged the transaction, it does not mean that the defendants had not relied on the other sub-clauses, particularly when the plaintiff himself had quoted the whole clause in the plaint. In my opinion, therefore, the plaintiff having failed in his contention, the appeal must be dismissed with costs.


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