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Synemodelux Limited by Its Managing Director M.P. Nayagam Vs. K. Vannamuthu Pillai - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1939Mad498; (1939)1MLJ534
AppellantSynemodelux Limited by Its Managing Director M.P. Nayagam
RespondentK. Vannamuthu Pillai
Excerpt:
- .....9 passed on the 21st of december, 1936. that runs as follows:this meeting allots hereby the 517 shares subscribed for by the signatories and the names of the signatories may be entered in the register of members.2. mr. rangaswami aiyangar also refers to the prospectus which was published later in which there is a statement on page 1 that 517 shares to the value of rs. 12,925 have already been subscribed for by the signatories to the memorandum and allotted, and on pages 6 and 7 of the prospectus, the number of shares taken by each of the signatories to the memorandum is set out. these however are not sufficient to show that on the 21st of december, 1936, there was any 'allotment' of shares to the defendant. it is provided in section 28, sub-section (2) of the companies act that each.....
Judgment:

Burn, J.

1. In my opinion the dismissal of the suit by the learned Subordinate Judge was correct. The defendant subscribed for 20 shares in the memorandum of association and therefore by Section 30, Sub-section (1) of the Companies Act, he must be deemed to have agreed to become a member of the company, and on registration of the company, his name must be entered as a member in the register of members. The fatal defect, in my opinion, in the plaintiff's case is that the 20 shares for which the defendant subscribed were not validly allotted to him. It is no doubt true, - as Mr. Rangaswami Aiyangar for the petitioner contends, that in the case of a person who subscribes to the memorandum of association, no separate application for shares is necessary, but I find: nowhere any authority for the view that no express allotment of shares is necessary in order to give rise to a liability to pay up the value of the shares. The learned Advocate for the petitioner refers me to Resolution No. 9 passed on the 21st of December, 1936. That runs as follows:

This meeting allots hereby the 517 shares subscribed for by the signatories and the names of the signatories may be entered in the register of members.

2. Mr. Rangaswami Aiyangar also refers to the prospectus which was published later in which there is a statement on page 1 that 517 shares to the value of Rs. 12,925 have already been subscribed for by the signatories to the memorandum and allotted, and on pages 6 and 7 of the prospectus, the number of shares taken by each of the signatories to the memorandum is set out. These however are not sufficient to show that on the 21st of December, 1936, there was any 'allotment' of shares to the defendant. It is provided in Section 28, Sub-section (2) of the Companies Act that each share in a company having a share capital shall be distinguished by its appropriate1 number and by Section 31, Sub-section (1), every company is required to keep a register of members in which the following particulars are to be entered:

the names and addresses and the occupations, if any, of the members, in the case of a company having a share capital, a statement of the shares held by each member, distinguishing each by its number, and of the amount paid or agreed to be considered as paid on the shares of each member.

3. Now, it appears from the notice sent to the defendant by the plaintiff on the 8th of March, 1937, informing him that his shares had been forfeited that the shares of which he was registered as owner were shares numbered from 121 to 140. But the learned Counsel for the petitioner is not able to show me any resolution in the Minutes Book of the Board of Directors allotting shares numbered 121 to 140 to the defendant. I have looked through the book and there is no record of any such resolution. It is not necessary, in my opinion, to go so far as the learned Subordinate Judge has gone and to say that the defendant's liability to pay for the shares cannot arise till liquidation proceedings are started. But it is, in my opinion, clear that his liability has not yet arisen because the shares have not been validly allotted to him and consequently no valid notice of allotment has been given to him. It is not necessary to consider the allegation that the defendant's shares have been forfeited. I do not understand the plaintiff as having contended that the defendant's liability to pay the value of the shares arises on forfeiture.

4. The dismissal of the suit was, in my opinion, correct and therefore this petition is dismissed with costs.


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