1. This case turns upon the construction of Section 45 of the Indian Companies Act VI of 1882. Mr. Lamb, on the 13th April, 1886, signed a printed copy of the proposed memorandum of association of a projected company, which on the 3rd August, 1886, was registered as the 'Imperial Flour Mills Company.' On the same date, viz. the 3rd August, Mr. Lamb received a notice from the secretary of the company notifying that the company had been duly registered, and requesting him to pay the sum of Rs. 100, 'being deposit of Rs. 10 per share on shares subscribed by yon.' On the 5th August Mr. Lamb replied to the secretary: 'Yours to hand this morning. As my terms of agreement expire in the coarse of a few months, and not knowing whether I shall stay in the country, I have decided not to take up the shares for the present.' To this the secretary rejoined next day-' You have legally become a shareholder of the company when you have signed the articles and memorandum of association, and since the company is registered you cannot now withdraw your shares. On the 4th September the secretary again wrote pressing for the payment of the Rs. 100'. To this Mr. Lamb does not seem to have replied. On the 25th September the directors held their first meeting, and resolved that the' shares applied for be allotted, and application and allotment moneys be called in.' On the 1st October the secretary notified to Mr. Lamb the allotment of ten shares, and requested him to pay the overdue deposit call of Rs. 10 per share and the allotment call of Rs. 15 per share. To this Mr. Lamb replied somewhat tardily on the 11th November: 'Long before any allotment was made, I told you I should not take up the shares in my name; you may take what steps you like.' Mr. Lamp evidently thought that his repudiation of the shares on the 5th August freed him from all liability to the company.
2. The question turns entirely upon the interpretation of the section I have already mentioned, viz. Section 45 of the Companies Act VI of 1882, which defines the persons who are to be considered to be members of a company. There are two methods by which a person can become a member: (a) by signing the memorandum of association, (b) by agreeing to take shares. As regards the first point, I am relieved of the labour of investigation by a decision of this Court. In The Guzerat S. & W. Company v. Girdharlal Dalpatram I.L.R., 5 Bom., 425 Westropp, C.J., and Melvill, J., decided that the memorandum to be signed under the corresponding section of the earlier Companies Act must be the registered memorandum of association. This decision was a confirmation of an earlier decision on this point in A nandji Visram v. The Nariad S. & W. Company, Limited I.L.R. 1 Bom., 320 . The question was raised before the late Chief Justice, whether the signing of a true copy of the registered memorandum was not equivalent to signing the registered memorandum itself. The Court did not favour the contention, but gave no express decision on the point, as the document signed by the defendant in that case materially differed from the registered memorandum. Similarly, in the present case, what was set up yesterday as a duplicate or exact copy was proved to differ materially. The signatories were not the same in one instance; the shares subscribed for were not the same in another instance; one signatory was omitted altogether; the dates of subscription were not the same in many instances, and, in short, in my opinion the document was not a copy at all.
3. Now I come to the second point. The exact words of the section are important: 'Every other person, who has agreed with a Company under this Act to become a member of such Company, and whose name is entered on the register of members, shall be deemed to be a member of the Company.' In the case I have already referred to, the late Chief Justice lays it down that 'the agreement which is to bind a party must be an agreement with the company itself.' Mr. Lamb's signature on the 13th April, 1886, therefore, can, at the most, only be an application for shares to the promoters, which became by the fact of there being no withdrawal before the registration, an application to the company on the 3rd August. There could be no acceptance of this application until the company was registered on the 3rd August. Was this application accepted before or after the 5th August, when Mr. Lamb wrote that he did not want the shares at all? Now it is clear on the decisions that in ordinary cases of an application for shares there is no agreement in the absence of allotment and notice of it to the applicant: see Lindley on Partnership (4th ed.), p. 100 and p. 1372; Buckley on Companies (5th ed.), p. 54; Pellatt's Case L.R., 2 Ch. 527. In the present case, withdrawal undoubtedly preceded allotment. 'But,' says Mr. Lindley, p. 104 (4th ed.) 'acceptance may be evidenced otherwise than by an actual allotment.' Although the withdrawal in this case, preceded the allotment, I have, therefore, still the question of acceptance to examine. It was argued that the notification of registration on the 3rd August, coupled with the demand for the payment of the usual deposit, was equivalent to acceptance. The definition of what amounts to an 'acceptance of shares' is to be found in Article 8 of the company's own articles. It is as follows: 'An application signed by or on behalf of the applicant for shares in the company followed by an allotment of any shares therein shall be an acceptance of shares within the meaning of these articles; and every person who thus otherwise accept any shares and whose name is on the register shall for the purpose of these articles be a shareholder.' Has Mr. Lamb otherwise accepted the shares? Are there such special circumstances in this case as to prove a binding agreement before allotment? The only special circumstance is the letter of the 3rd August. That letter was written not by order of the directors at a meeting duly convened and composed of the proper quorum of four. It was written by the secretary after consulting separately three only of the directors, and what passed was given in evidence here by the secretary himself. 'In the case of each of the three directors,' the secretary says, 'I told him the company was now registered with the consent of all the directors, and I asked if I should send a letter to all who had signed the memorandum of association for the Rs. 10 deposit call, and he agreed.' This was clearly an irregular proceeding which would not bind the company or its subscribers in such an important matter as the application for and acceptance of shares-Howard's Case L.R., Ch., 561 . The directors did not act as a board, nor was the consent of a quorum obtained.
4. But it is not necessary to rest my decision on the irregularity and want of authority. The consent was not obtained to any application for shares, nor was there any acceptance of any particular offer to take shares. The letter itself does not amount to more than a request for the deposit on the shares applied for. That deposit is usually made before or at the time when the application is sent to the directors. But in this case there was no actual application-only a signature which became an application when the company was registered. So that the deposit had to be called in by the company. But it was only the ordinary deposit money required as a guarantee of the bona fides of an application for shares. The resolution of the Board, which is contained in the minutes of the meeting of the 25th September, puts the real meaning of the letter of the 3rd August beyond all doubt. The resolution is as follows: Resolved that the shares applied far be allotted and application and allotment moneys be called in.' It is quite clear that up to that date Mr. Lamb's application had not been made a binding agreement by acceptance. This repudiation, therefore, of the 5th August was in time, and he cannot be held liable as a shareholder of the company. The company must pay the costs, including the costs of the application for a rehearing.