DHANRAJ KESHRIMAL JHALANI Vs. HHWADIA

JUDGEMENT

(1.) This is an appeal from a decision of Mr. Justice Kania. The official liquidator of the Rutlam Bombay United Spinning and Weaving Co. Ltd. (in liquidation) applied to the Judge in winding- up to settle the list of contributories of the company and to include therein the name of the present appellant as the holder of 450 shares. The learned Judge made the order asked for, and from that order this appeal is brought.

(2.) [His Lordship Bet out the facts of the case, and then proceeded.] The claim of the company is a startling one. In the most formal manner the company purported to forfeit the appellant's shares, and thereby to terminate the contractual relations between the company and the appellant, and for some two years they acted upon the view that the forfeiture was valid. They now seek to set aside the forfeiture, and to restore the contractual relations between the company and the appellant, on the basis of their own, default in carrying out the forfeiture. It is clear that if the forfeiture took effect, the company cannot reinstate the appellant as a shareholder without his consent, see Larkworthy's Case [1903] 1 Ch. 711; but the ground on which the company put their case, and the only ground on which, in my opinion, it can be put, is this : A forfeiture of shares, which involves reduction of the company's capital, can only bo carried out under the articles of association of the company where a call has been validly made, and that call has not boon paid; in the present case no call was validly made; the forfeiture was, therefore, outside the powers of the company and invalid, and the appellant has in fact never ceased to be a shareholder of the company.

(3.) The first and principal question which we have to determine on this appeal is whether the second and third calls were validly made, and for that purpose it is necessary to look at the articles of association. The material articles, which appear to be founded on Palmer's Company Precedents, are Articles 18, 19, 20 and 24, which are in the following terms :- 18. The Directors may from time to time make such calls as they think fit upon the members in respect of all moneys unpaid on the shares held by them respectively, and not by the conditions of allotment thereof made payable at fixed times and each member shall pay the amount of every call so made on him to the persons and at the times and places appointed by the Directors. A call may be made payable by instalmants. 19. A call shall bo deemed to have been made at the time when the resolution of the Directors authorising such call was passed. 20. Seven days notice of any call shall be given specifying the time and place of payment, and to whom such call shall bo paid. 24. 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, servo 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.