1. This is an appeal from a decision of Mr. Justice Coutts Trotter that an allotment by the appellant company of a fully paid up share to a debenture-holder in exchange for his debenture pursuant to a condition in the debenture is an allotment of a share 'as fully paid up otherwise than in cash' within the meaning of Section 104(1)(b) of the Indian Companies Act, 1913. The debenture-deed provides ' The registered holder hereof shall, while the same remains in force and upon giving previous notice in writing, be entitled to surrender this debenture and receive in consideration thereof one fully paid ordinary share of Es. 100 of the Company part of or ranking pari passu with the ordinary shares of the original capital. Upon the surrender of this debenture under this condition the holder will not be entitled to proportionate interest thereon and the ordinary share so allotted in exchange shall rank for dividend from and after the half year in which the registration is made.' I agree entirely with the learned Judge in holding that the share allotted in these circumstances was allotted as fully paid up otherwise than in cash and therefore came within the provisions of Section 104(1)(b) of the Act.
2. It has been argued before us that because the debenture-holder originally paid Rs. 100 in cash for his debenture the share in the company which was allotted to him some years afterwards should be regarded as paid up in cash. What the debenture-holder got for his Rs. 100 was a debenture and all the rights which a debenture-holder has, and he enjoyed those rights for a number of years and afterwards parted with those rights pursuant to the provision in the debenture-deed and acquired a share in consideration of his surrender of the debenture-deed, so that he acquired the share, as stated in the clause itself, in exchange for the debenture. Speaking for myself I fail altogether to see how that can be said to be a case in which the share was allotted to him as fully paid up in cash. It seems to me that it was allotted to him as expressly stated not for cash but in consideration of the surrender of his debenture and the rights which he held under it. There is admittedly no case in the books upon Section 25 of the English Companies Act 1867 or the more recent sections, which precisely covers this point. But I am glad to see that the same view is taken by Sir Francis Palmer with regard to a clause in the debenture which is practically in the same terms, in Part III of 11th Edition of his Company Precedents, Form 44 at page 297. I do not think it necessary to go through the cases which have been cited before us many of which are dealt with by the learned Judge in his judgment. The present case is clearly distinguishable from Spargo's case (1873) L.R. 8 Ch. App. 407 where money was actually due by the Company to the person (the vendor to the Company) to whom the share was allotted. Here the debenture has not yet become payable to the allottee and therefore there is nothing which can be made the subject of a set-off. It is, I think, clear upon the authorities that in a case like this there must be a debt actually due and owing by the Company to make the doctrine of Spargo's case (1873) L.R. 8 Ch. App. 407 applicable. It is also unnecessary to consider whether there must also be a debt immediately due and payable by the company to the allottee. In Ferrao's case (1874) L.R. 9 Ch. App. 355 it was held that this is not necessary. It does, however, appear abundantly clear that to apply the doctrine there must be a debt immediately due and payable by the Company to the allottee. For these reasons, I think the appeal fails and must be dismissed with costs.
3. I agree.