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Abdul Karim Babu Khan and ors. Vs. Sirpur Paper Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAndhra Pradesh High Court
Decided On
Case NumberO.S. Appeal No. 2 of 1963
Judge
Reported in[1969]39CompCas33(AP)
ActsCompanies Act, 1956 - Sections 53 and 155(4); Code of Civil Procedure (CPC) , 1908 - Sections 100
AppellantAbdul Karim Babu Khan and ors.
RespondentSirpur Paper Mills Ltd.
Appellant AdvocateT. Ananta Babu and ;Chalapathi Rao, Advs.
Respondent AdvocateJ.V. Suryanarayana Rao, Adv. for ;D. Narasaraju, Adv.
DispositionAppeal dismissed
Excerpt:
company - forfeiture - sections 53 and 155 (4) of companies act, 1956 and section 100 of code of civil procedure, 1908 - petitioner holder of shares in respondent company - amount sent to respondent towards arrears of call money which was adjusted towards arrears of interest - contended waiver of interest - cheques sent towards arrears of call money - notice sent to petitioner informing forfeiture of other shares - amount of cheques returned - matter raised before company judge - contentions raised by petitioner firstly that notice to be sent by registered post and denied receipt of notice - secondly that procedure prescribed under articles 39 to 42 not complied - section 53 (2) states that normal mode of serving is by posting notice unless shareholder intends it to be served in.....jaganmohan reddy, c.j. 1. this is an appeal against the judgment of satyanarayana raju j. (as he then was) dismissing the application of the appellants made under section 155 of the companies act praying, inter alia, that this honourable court:(a) direct the rectification of the register of members of the first respondent-company by re-entering the names of abdul karim babu khan, bashiruddin babu khan and sharfuddin babu khan as the holders of shares nos. 103326 to 103765 in the register. (b) grant a decree for rs. 40,000 as damages against the first respondent in favour of the petitioners and the second respondent (who was subsequently transposed as the third petitioner). (c) for costs. 2. the allegation of the petitioners is that they were the holders of 1,840 shares in the.....
Judgment:

Jaganmohan Reddy, C.J.

1. This is an appeal against the judgment of Satyanarayana Raju J. (as he then was) dismissing the application of the appellants made under Section 155 of the Companies Act praying, inter alia, that this honourable court:

(a) direct the rectification of the register of members of the first respondent-company by re-entering the names of Abdul Karim Babu Khan, Bashiruddin Babu Khan and Sharfuddin Babu Khan as the holders of shares Nos. 103326 to 103765 in the register.

(b) grant a decree for Rs. 40,000 as damages against the first respondent in favour of the petitioners and the second respondent (who was subsequently transposed as the third petitioner).

(c) for costs.

2. The allegation of the petitioners is that they were the holders of 1,840 shares in the respondent-company apart from 440 shares on which they had paid the allotment and application money amounting to Rs. 25 per share. So far as the latter shares are concerned, they were called upon by the respondent to pay the balance of Rs. 75 per share, the time for which was being extended periodically. In or about March, 1952, the first petitioner sent to the first respondent a sum of (O.S.) Rs. 60,000 towards arrears of call money, which amount was adjusted by the respondent-company towards arrears of interest and part payment of call monies on shares on which these amounts were due. The board of directors at their meeting held on 4th March, 1954, further extended time for payment of call monies up to 31st May, 1954. The board also decided to waive interest in the case of shareholders who paid their arrears before that date and to forfeit those shares where arrears were not paid.

3. The first petitioner, presumably on behalf of himself and the other petitioners, wrote to the first respondent on 17th April, 1954, disputing the adjustment towards interest of the amount of Rs. 60,000 sent by him and claimed that the interest ought to have been waived. Thereafter, certain correspondence ensued between the petitioners and the first respondent and by a letter purported to be dated 26th May, 1954, the first petitioner sent a cheque for Rs. 16,086-4-0 towards the arrears of call money. As this amount had not fully discharged the arrears of call, he sent another cheque for Rs. 13,241-12-9 on 11th June, 1954, under protest. The company acknowledged the receipt of both these cheques and informed the first petitioner that the amounts were kept under suspense. On 1st June, 1954, the first petitioner says he received a notice informing him that the 440 shares stood forfeited as on 1st June, 1954. With this letter the amounts of the two cheques were returned.

4. The petitioner alleged that the forfeiture was illegal because (1) the procedure prescribed in Articles 39 - 42 of the articles of association of the company was not complied with ; (2) that since they sustained damage by reason of this illegal forfeiture they are entitled to recover the sum of Rs. 40,000.In so far as the first point is concerned, it was urged before Satyanarayana Raju J. that the notice required to be sent by the respondent-company, in accordance with Article 40 of the articles of association, was not sent to the petitioners or, at any rate, it was not received by them ; (2) even if it was received, the particulars as prescribed in Article 41 have not been furnished nor was he intimated the place at which the amounts had to be paid. The company in its counter stated that the petitioners have been in default in respect of 440 shares now claimed by the petitioners and in spite ofseveral opportunities being given and time being extended they did not pay the amounts ; that the allegation that they are not liable to pay interest is untenable having regard to Article 34 of the articles of association under which a shareholder is liable to pay interest at 9% per annum from the date appointed for the call money or instalments till the date of actual payment; as such the petitioners were bound to pay interest on the arrears of call money unless specifically exempted by a proper resolution passed by the board of directors; and that the board of directors in fact did condone the payment of interest for a particular period and, even after the condonation, interest which accrued on the arrears of call monies was due from the petitioners. It was further averred that, though the forfeiture and confirmation of the forfeiture took place as long ago as 1954, the petitioners did not take any action till the date of filing of the petition and that, therefore, it is not a case in which the court ought to exercise its jurisdiction in directing rectification of the share register. The claim for damages was also described as absolutely untenable. In any case, the respondent averred, the petition is barred by limitation and the petitioners are not entitled to any dividend as is claimed.

5. The learned company judge considered the two questions arising out of the averments in the petition and the counter, viz., (1) whether the forfeiture of the shares was valid, and (2) if not, whether the petitioners are entitled to damages.

6. In considering the first question he came to the conclusion that exhibit B-3 dated 20th March, 1954, the receipt of which was denied by the first petitioner, was posted by the respondent-company and that in the ordinary course of business it must be presumed to have reached the petitioners. In view of this finding as well as on a consideration of other letters and correspondence, the learned judge held that the procedure prescribed in Articles 39 - 42 was complied with and that the petitioners, notwithstanding time being extended till 31st May, 1954, did not pay the amount by that date but had only paid a part of the arrears on 2nd June, 1954, after the expiry of the period specified and not in full. In this view, he dismissed the petition.

7. Before us the learned advocate for the appellants reiterated the same contentions and had strenuously urged that exhibit B-3 was not issued on the date it is purported to have been issued and must have been subsequently got up. He relied upon the difference in the ink in exhibit B-5 of the entry pertaining to the subject of the letter which states that it is in respect of extension of time while the letter which is purported to have been issued under that entry deals with forfeiture of shares. This contention, it may be stated, was urged before the learned company judge and was rejected not only on a perusal of the entry but also on a consideration of the evidence of R. W. 1, an assistant in the share department of the company.

8. We have also inspected the register, exhibit B-5. While, no doubt, the ink in the entry is different in some columns, there can be no question that the entry was made at the time when it was purported to have been made. The subsequent entries which are not challenged come according to the time and serial number which itself shows that no entry was left blank for the purposes of subsequently bringing into existence some other letter--an allegation which has not been made and in our view would be farfetched if it had been. A perusal of exhibit B-3 would show that it is an office copy of a pro forma issued to all the defaulting shareholders in which they were informed that their shares will stand forfeited if the amount was not paid by 31st August, 1954. The fact that time was given till 31st August, 1954, might have been considered by the respondent-company in making an entry in the despatch register as an extension of time. No significance, in our view, can be attached to this entry as negativing the despatch of the letter.

9. It was contended that, if exhibit B-3 was in fact issued, it should have been sent by registered post as indeed the other letters of similar purport were sent previously by registered post. While it is true that this letter was sent by ordinary post, this by itself cannot justify a conclusion that the letter was not sent by ordinary post or was not received by the first petitioner. Section 53 of the Companies Act prescribes the mode of service of notices. Sub-section (2) thereof states that:

' Where a document is sent by post,-- (a) service thereof shall be deemed to be effected by properly addressing,prepaying and posting a letter containing the document, provided that wherea member has intimated to the company in advance that documents shouldbe sent to him under a certificate of posting or by registered post with orwithout acknowledgment due and has deposited with the company a sumsufficient to defray the expenses of doing so, service of the document shallnot be deemed to be effected unless it is sent in the manner intimated bythe member. '

10. This provision clearly shows that the normal mode of serving is by posting the notice unless, of course, the shareholder intends it to be served in a particular way, for which he must deposit the costs.

11. Apart from this, a finding of fact arrived at by the learned company judge is conclusive and cannot be assailed in an appeal under Section 155(4) of the Companies Act. An appeal against a judgment or order of the company judge will only lie on the grounds mentioned in Section 100 of the Code of Civil Procedure. It is not disputed that the grounds upon which an appeal will lie under Section 100, Civil Procedure Code, could only be in respect of a decision being contrary to law or to some usage having the force of law ; or the decision having failed to determine some material issue of law orusage having the force of law ; or a substantial error or defect in procedure provided by the code or by any other law for the time being in force which may possibly have produced an error or defect in the decision of the case upon the merits. The grounds upon which an appeal lies under Section 100 do not, therefore, admit of a finding of fact being reversed unless that finding can be challenged under any of the grounds enumerated above. We are, therefore, clear in our minds that the finding that a letter in terms of exhibit B-3 was sent by the respondent-company and that the same was received or at least presumed to have been received by the petitioners, cannot be interfered with and we accordingly hold that exhibit B-3 was in fact received by the petitioners. We are also fortified in this conclusion by the subsequent letter written by the first petitioner to the respondent-company which indicates that he must have had knowledge of the contents of the letter.

12. The second contention of the learned advocate for the petitioners is that, even assuming that exhibit B-3 has been served, the procedure prescribed in Articles 39 - 42 has not been complied with. In order to understand this contention, it is necessary to give below the contents of the articles :

' 39. If any member fails to pay any call or instalment on or before the day appointed for the payment of the same, the directors may at any time thereafter, during such time as the call or instalment remains unpaid, serve a notice on such member requiring him to pay the same, together with any interest that may have accrued, and all expenses that may have been incurred by the company, by reason of such non-payment.

40. The notice shall name a day not being less than fourteen days from the date of the notice, and a place, or places, on and at which such call or instalment and interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time and at the place appointed, the shares, in respect of which the call was made or instalment is payable, will be liable to be forfeited.

41. If the requisitions of any such notice as aforesaid are not complied with, any shares in respect of which such notice has been given may, at any time thereafter, before payment of all calls or instalments, interest and expenses, due in respect thereof, be forfeited by a resolution of the directors to the effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

42. When any share shall have been so 'forfeited' notice of the resolution shall be given to the members in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture with the date thereof, shall forthwith be made in the register.'

13. A perusal of the above articles would show that (1) before shares are forfeited the directors must have a notice served on such a member whois in default of payment of call, requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the company by reason of such non-payment; (2) that the notice shall call upon the members to pay the amounts due as aforesaid at a specified place and on a date not less than 14 days from the date of notice ; (3) that the notice will further state that on default of payment at or before the time and at the place appointed all shares in respect of which call was made or instalment was payable will be liable to be forfeited ; (4) if after receipt of the notice there is non-compliance with the requisitions thereof, viz., arrears of calls or of instalments or interest or expenses have not been paid, the shares, in respect of which default has taken place, will be forfeited by a resolution of the directors. On such forfeiture the dividends declared in respect of the forfeited shares and not actually paid before the forfeiture will also be deemed to be forfeited ; (5) when any shares have been so forfeited notice of the resolution shall be given to the member in whose name they stood immediately prior to the forfeiture.

14. The question now before us is whether these terms have been complied with by the respondent-company. We may at the very outset state that the procedure prescribed for forfeiting shares has to be strictly complied with inasmuch as not only a shareholder is deprived of his right in the participation of the capital of the company but, in so far as the creditors of the company are concerned, any forfeiture would mean reduction in the capital by which they are likely to be adversely affected. For these reasons it has been uniformly held by the highest courts that the requirements prescribed by the articles of association of the company must be strictly adhered to. But, even so, there are certain matters relating to service of notice, fixing of time and place of payment of arrears which have been held to be directory, while mandatory provisions are those relating to the intimation that arrears of call, interest and expenses are due and of the amounts which have been paid.

15. The history of the call and the arrears which remain unpaid by the petitioners-appellants is a long one. The respondent-company had decided in 1946 to increase its capital and for every one share held by the shareholder the directors decided to allot two new shares. In terms of the resolution, the petitioners were entitled to 1,517 shares. The petitioners applied for these shares on February 27, 1946, by paying Rs. 5,600, though we think this is a mistake for Rs. 5,500 as at the rate of Rs. 12-8-0 application money, the amount required to be deposited by him at the time of the application is Rs. 5,500. The petitioners had to pay the balance of Rs. 12-8-0 per share making a total of Rs. 25 per share being the application money and allotment money, but this was not paid till nearly an year after, when an amount of Rs. 5,500 was paid on June 14, 1947. The balance ofthe call money on shares applied for ought to have been paid in three instalments, the first call of Rs. 25 per share to be paid on or before 27th February, 1947, the second call of Rs. 25 per share to be paid on or before 31st August, 1947, and the third call of Rs. 25 on or before 15th April, 1948. Apart from paying the money on application and allotment, the latter of which also was paid long after the due date, the petitioners did not pay the calls on the due dates. Evidently, the company kept on extending time and in several instances the first petitioner himself, though a director of the company, was requesting for time. It is unnecessary for us to catalogue all that correspondence which has been referred to by Satyanarayana Raju J., as he then was. We will only refer to the important letters which throw light upon the entire transaction.

16. On 18th December, 1950, the respondent wrote exhibit 6 to the first petitioner in continuation of a previous letter dated 21st October, 1950, drawing attention to the fact that a sum of (O.S.) Rs. 1,13,775 is due from him and the members of his family in respect of 1,517 shares and that also a sum of Rs. 1,633-14-4 is outstanding as interest on delayed payment of the allotment money besides interest payable on calls in arrears. After setting out these facts, the first petitioner was asked to arrange for payment of the dues on or before 31st December, 1950, which is the last date for payment of the call money as decided by the board of directors. He was also informed that the dividends amounting to Rs. 4,606 payable to him on his personal and joint holdings will be adjusted against the dues arid the dividend warrants would be sent for discharge. In reply to this letter, the first petitioner on 2nd January, 1951, informed the respondent-company that large amounts were due to him from parties and as soon as he could collect them, he would pay them to the company. In the meanwhile he sent a cheque for Rs. 20,394. The first petitioner requested that this amount together with the sum of Rs. 4,606, being the dividend payable to him on his personal and joint account, amounting to Rs. 25,000 be adjusted towards the arrears. No objection was raised in this letter that no interest was due by him in respect of not only allotment money but also arrears of call. The respondent-company by their letter dated 17/18th April, 1951, informed the first petitioner that the sum of Rs. 25,000 was adjusted making 272 shares fully paid as per details given thereunder which included Rs. 6,800 each in respect of the first, second and third calls and Rs. 4,538-12-6 towards interest on calls. In this way Rs. 24,938-12-6 was adjusted and the balance of Rs. 61-3-6 was kept in suspense account. Subsequently reminders were sent for payment of arrears on other shares but nothing was paid till he received the notice, exhibit B-6, dated 25th June, 1953, in the following terms:

' The directors, at their meeting held on 6th June, 1953, have decided to extend the time for payment of arrears of call money, up to 31st August,1953, as a last and final concession and that the shares in respect of which there are arrears thereafter be treated as forfeited without further notice after that date.A sum of Rs. O.S./I.G...............,.....is still due from you in respect of.........shares held by you. You are, therefore, requested to pay the aboveamount with interest due thereon up to the date of payment on or before 31st August, 1953, failing which your shares will be treated as forfeited.'

17. This letter, exhibit B-6, was sent by registered post acknowledgment due and it was not disputed that the same was received as per acknowledgment, exhibit B-8, in which the first petitioner signed in token of his having received this letter on June 27, 1953. The original of it which has been received by him has not been produced and, therefore, it is not possible to say what is the amount stated by the company to have been due from the first petitioner and what are the number of shares in respect of which that amount was due. Inasmuch as the first petitioner is in possession of that letter and has not produced the same, we must presume that the correct amount has been demanded as being due in respect of the shares specified therein. There is no doubt that only 330 shares seem to have been fully paid for and arrears were due in respect of 1,187 shares. When the arrears were not paid, the board of directors at their meeting held on 12th December, 1953, at which evidently the first petitioner was not present, passed the following resolution, exhibit 26 :

' It was reported that in pursuance of the board's resolution passed in the meeting dated 6th June, 1953, certain shareholders failed to pay the call money by 31st August, 1953, and as directed by the resolution their shares stood forfeited after the 31st August, 1953. The board discussed the matter and deferred decision on confirmation of the forfeiture of the shares to the next meeting.'

18. It may be pointed out that earlier resolutions, exhibits P-24 and P-25, dated 27th December, 1952, and 6th June, 1953, respectively, to which the first petitioner was a party, show that not only a resolution as required by Article 40 of the articles of association was passed directing notices to be served on the shareholders who are in arrears that if they do not pay on or before 31st August, 1953, their shares are liable to be forfeited but also a resolution was passed that the time for payment was extended till 31st August, 1953, as a last and final concession and that the shares be treated as forfeited thereafter, without further notice and the shareholders be informed accordingly. The constituted attorneys were authorised to take necessary action in this behalf. It is pursuant to these resolutions that exhibit B-6 was issued. On receipt of this notice, on default of payment of arrears, the shares could be treated as forfeited, but the company deferred decision. Subsequently, however, the first petitioner by his letter dated 2nd March, 1954 (exhibit P-27), sent a sum of (H.S.) Rs. 60,000 received by the company on April 6, 1954, and requested that this sum might be credited towards the call moneys on their shares. The balance, it was stated, was being arranged and will be sent shortly. While sending this amount the first petitioner wrote as follows:

' I am paying the arrears of calls on the express understanding that you would kindly and justifiably waive the entire interest charged by you on our arrears of call moneys as has been waived by the company in other cases and more particularly in consideration of the peculiar circumstances I have been undergoing all these years of which you are well aware.'

19. This amount of Rs. 60,000 made a further number of 727 shares fully paid after adjustment of arrears of call money and interest. In this way 1,057 shares became fully paid and arrears of call money was due in respect of 460 shares. On March 4, 1954, the board of directors including the 1st petitioner passed a resolution, exhibit P-28, in the following terms :

' In pursuance of the decision of the board at the last meeting held on 12th December, 1953, the question of forfeiture of shares of those shareholders who failed to pay the call money by 31st August, 1953, vide Board's decision dated 6th June, 1953, was considered. It was decided that shares totalling 2,564 in all as per details given hereunder be and are hereby forfeited provided the call money is not paid on or before the 31st May, 1954, and the shareholders whose shares are forfeited under this decision be informed accordingly in terms of Article 42 of the articles of association of the company and, as regards waiving of interest, it was decided that in the case of those who pay call money now, they be given the same benefit as was given to one of the shareholders--vide Board's Resolution No. 8, dated December 12, 1953, i.e., the interest be waived from July 1, 1952, to August 29, 1953, and that interest be collected from them thereafter till the date of payment.'

20. Pursuant to this resolution exhibit B-3 was issued, the issue and receipt of which we have already held to have been proved.

21. This correspondence read together with the board's resolutions clearly establishes that the appellants were informed of the arrears due from them in respect of shares held by them. They were further informed of the interest which they would be liable to pay. Whenever money was paid the same was adjusted towards arrears of call and interest and the petitioners were informed of these facts, except on the last occasion and even on that occasion no protest was made that interest was illegally demanded or adjusted but only that it should be waived which is more in the nature of a request for favour to be shown than a challenge to the legality of the action taken by the respondent.

22. Mr. Chalapathi Rao contends that exhibit B-3 did not show the amount due or the interest due, nor did it indicate the place where the amount should be paid. We have already stated that in the earlier notices the amount due in respect of calls was clearly set out and also the petitioners were informed that they would be liable to interest, which, even without that intimation, under the articles of association, they were bound to pay unless the board of directors exonerated them, which is not the case even according to the petitioners. Exhibit B-3, it may be stated, was a notice intimating forfeiture of shares and, therefore, it was not necessary to set out therein the amount due or the shares in respect of which that amount was due. In so far as the place of payment is concerned, it was clearly stated that the amount should be paid in the registered office of the company, the address of which was given at the very beginning of the letter head.

23. Relying on a decision of a single judge of the Calcutta High Court in In re Bengal Electric Lamp Works, [1942] 12 Comp. Cas. 238., the learned advocate for the petitioners contends that the address given in the letter should be stated to be the registered office and, since that was not stated, the forfeiture is illegal because the shareholder has not been told where the amount should be paid. It may be stated that in that case Lort Williams J. was considering the question of a defect in a notice where it omitted to state the expenses which were required to be paid and, therefore, that notice was held to be invalid. In that connection it was stated that there can be no waiver by the shareholder of his right to object to the forfeiture of his shares by the company and that even the smallest requirements should be complied with. While there can be no exception to this principle, it is difficult to contend that when the respondent had required that the amount of arrears be paid at the registered office of the company and has given the address at the top of the letter, it should be, considered insufficient or that the shareholder, particularly the first petitioner, who was a director of the company, did not know where to pay the amount.

24. The decision, however, was dissented from by a Bench of the Madras High Court consisting of Rajamannar C. J. and Raghava Rao. J. in Mahalakshmi Textile Mills Ltd. v. Meyyappa Chettiar, [1949] 19 Comp. Cas. 246.. But before we deal with this case, it is necessary to deal with two other cases of the Bombay High Court which were considered by the Madras High Court as also by the Calcutta High Court. In Pioneer Alkali Works Ltd. v. Amiruddin Shalebhoy Tyebji, A.I.R. 1926 Bom. 341., Taraporwala J. held that the directors in their resolution must indicate the time and place of payment of arrears and, if that is not done, a notice issued pursuant to a resolution which did not specify these particulars is bad. This decision was disapproved by a Bench of the same High Courtin Dhanraj Keshrimal Jhalani v. H.H. Wadia, [1933] 3 Comp. Cas. 462, 468, 469, A.I.R. 1933 Bom. 80., where Beaumont C. J., after an exhaustive review of the case law in Johnson v. Little's Iron Agency, [1877] 5 Ch. D. 687., held that it is not necessary for a resolution making the call to specify the time for payment or the person to whom or the place where the call is to be made nor is it necessary to have a formal resolution of the directors specifying the person to whom and the place where a call is to be made when the agents sign in the notice of calls ' by order of the board ' as there is the presumption that the agents act properly and even if such a resolution is necessary it is a matter which the parties can waive. While referring to the observation of Lord Esher, Master of the Rolls, in In re Cawley & Co., [1889] 42 Ch. D, 209. that he takes it to be of the very essence of the call that the time and place for payment should be determined, Beaumont C. J. observes at page 83:

' If the learned Master of the Rolls intended to say that whatever the articles might provide no resolution for a call could be valid, which did not specify the time and place of payment, his opinion seems to me to be directly at variance with the previous decisions quoted, and I respectfully dissent from it. '

25. After making these observations he referred to Pioneer Alkali Works v. Amiruddin Shalebhoy, A.I.R. 1926 Bom. 341. and said it was distinguishable and, at any rate, he observed:

' The judgment seems to me open to the same criticism as the judgment under appeal, namely, that it attaches to the articles falling for construction a meaning other than they naturally bear in deference to a decision upon articles differently worded.'

26. These observations were criticised by Lort Williams J. in In re Bengal Electric Lamp Works Ltd.'s case, [1942] 12 Comp. Cas. 238.. But, as pointed out by Raghava Rao J., delivering the judgment of the Bench in Mahalakshmi Textile Mills Ltd. v. Meyappa Chettiar, [1949] 2 M.L. J. 133, [1949] 19 Comp. Cas. 246.;, the criticism directed against the observations of Beaumont C.J. by Lort Williams J. was not correct, because that criticism is only in general terms and does not attempt to show specifically how or where exactly the Chief Justice's view of Jessel, Master of the Rolls's judgment, or James L J.'s judgment in Johnson v. Lyttle's Iron Agency goes wrong. The Bench held :

' It is not necessary that the persons to whom, and the place at which, the call is to be paid, should be mentioned in the resolution making the call or in the notices, making the call though these matters must be fixed by the Board, because the articles so provide, In the absence of any evidence upon the point, the court is entitled to assume that these notices were sent out bythe agents of the company with the sanction of the directors, and that the directors had in fact appointed the persons and the place to whom and at which the call is to be paid. A forfeiture on non-payment of the call money cannot be attacked on the ground of any irregularity or illegality because the particulars as to its payment were not mentioned in the resolution making the call.'

27. It is apparent from these decisions that the provision relating to the time and place are not mandatory but directory and the resolution need not contain the particulars as long as a company has directed the issue of the same by its authorised agents, giving necessary particulars, viz., time and place at which the payment should be made.

28. In In re North Hallenbeagle Mining Company, [1867] 2 Ch. App. 321. the question whether the issue of notice of forfeiture was mandatory or directory was considered. Sir H.M. Cairns L.J. observed at page 328 :

' The question seems to me to be this--Is that provision (23rd Clause I 'where any share has been so declared to be forfeited, notice of such forfeiture shall be given to such shareholder') what I may term a mandatory or directory provision, the convenience of which is obvious; or is it a statement of something which is of the essence of the forfeiture, and without which a good forfeiture cannot take place In the first place, the words I have read do not make the notice expressly of the essence of the forfeiture. They are merely, in form at all events, directory words. But, in the next place, there is this very remarkable circumstance, that the notice which is there to be given is spoken of as a notice of forfeiture which has actually taken place. Moreover, the forfeiture is clearly, on that clause, to date, not from the giving of any notice, but from a resolution of the directors declaring a forfeiture.'

29. At page 329 he further observed :

'These circumstances lead me to the conclusion that the clause which I have read is simply directory, and that neither the company, nor anybody representing the company, could set up as a bar to the validity of the forfeiture the circumstance that no notice had been given under this clause.'

30. In any case the resolutions to which we have referred have stated the time of payment and also authorised the constituted attorneys to give notice and this notice fixed the place of payment, and thus all the requirements, in our view, have been complied with.

31. It is again contended that the resolution of the board of directors of 4th March, 1954, is a prospective resolution and, therefore, a further resolution was necessary to forfeit the shares. What is meant by a prospective resolution has not been stated by the learned advocate. As we understand a prospective resolution, it is a resolution forfeiting shares in respect of thecalls which have not yet fallen due. But where arrears have fallen due and several demands have been made and forfeiture notices have been given and the non-payment of monies on due dates entailed forfeiture according to the resolution of the board of directors, a further resolution that the shares are forfeited unless the amounts are paid on a particular date, would not amount to a prospective resolution, because the directors are entitled to forfeit the shares there and then but instead they gave effect to that decision as and from a particular date, merely to give the shareholder a facility. This cannot, in our view, be said to be a prospective resolution.

32. In what is known as Woollaston's case, [1859] 45 E.R. 169. a similar question was considered by Lord Justice Turner, who, at page 173, observed as follows:

y this notice, they made a plain declaration of forfeiture, to take effect upon a certain event which happened, and for three years this declaration was treated as having taken effect and as being in force......It is not asif the directors had made a prospective declaration of forfeiture as to a class of shareholders whose calls should afterwards fall into arrear; they were dealing with shareholders who were already in arrear; and it could not make any material difference in the exercise of their discretion as to forfeiture, whether they waited till the expiration of the twenty-one days from the notice before declaring it, or declared it conditionally before sending the notice. The directors had power to declare a forfeiture in the events which happened, they clearly intended that there should be a forfeiture, and, though their mode of declaring it may have been not strictly regular, the variation appears to me to be one of form and not of substance.'

33. In Our view the requirements of Articles 39 - 42 have been fully complied with and, even apart from it, if there be any defect of any of the requirements, even that has been satisfied, in that the first petitioner, being a director of the company, took part in every resolution of the board dealing with the forfeiture of his shares; not only was he a party to the resolution in respect of a number of shares to be forfeited but also the details thereof, which seem to have been considered by the board at the time of the resolution, as they specifically referred to ' as per details given below'.

34. The learned advocate states that the requirements relating to the forfeiture cannot be waived, but we have the high authority of their Lordships of the Privy Council in Jones v. North Vancouver Land and Improvement Company, [1910] A.C. 317., where one of the plaintiffs, the husband of a shareholder (wife) who was a director of a company had himself seconded a resolution for forfeiture of the shares of his wife along with others of which notice was given to the wife at the address at which both have lived and of which knowledge was imputed to his wife. It was held that the plaintiffs, viz., the husband and wife had by their conduct disentitled themselves to the relief prayed for; thatthe notice fulfilled all the requirements of the Canadian Companies Act; and that any objections to the absence of due formalities in the service on the husband of acts to which he was a party, and to the illegality of the allotment, calls and forfeiture of the shares due to technical irregularities in the original appointment of the husband and others as directors, must be disallowed. Their Lordships observed at page 328 :

' The principles laid down in Prendergast v. Turton and by Lord Lyndhurst on the appeal, and in the line of cases which followed it, fortunately it would seem, in the interest of that honesty and fair dealing which ought to regulate the conduct of commercial affairs and the management of companies such as this, are strong enough to defeat such mischievous designs. These authorities show that the plaintiffs must in this case be held to have by their own conduct disentitled themselves to the relief they pray for.'

35. In the view we have taken there are no merits in this appeal and it is accordingly dismissed with costs.


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