KANDURI LAKSHMIAH CHETTY Vs. ADONI ELECTRIC SUPPLY CO LTDBY MANAGING AGENTS TRRAO AND COBY PARTNER AND DIRECTOR, NVEMBU

JUDGEMENT

(1.) These three appeals arise out of different suits filed in the Court of the District Judge of Bellary. The cause of action was the same in each case and as the actions were tried together the trial Court dealt with them in one judgment. It will be convenient to adopt the same course here.

(2.) We will first state the facts in Appeal No. 137 of 1942. The plaintiff is a limited liability company. It was registered on 3 November 1932 with a nominal capital of Rs. 300,000 divided into 3000 shares of Rs. 100 each. The object for which the company was formed was the supply of electricity to the town of Adoni. The appellant signed the memorandum of association as a subscriber for 50 shares, but the articles of association do not state the date on which a subscriber has to make payment. In Alexander V/s. Automatic Telephone Co. (1900) 2 ch. D. 56 the Court of Appeal held that, in the absence of any special agreement or article requiring a subscriber of the memorandum of association of a company to make some payment on application or allotment, nothing is payable by him in respect of his shares until a call is ? made upon him. On 20 September 1935 the company wrote to the appellant demanding payment of Rs. 25 per share as money due on application and Rs. 25 per share as money due on allotment. One month's time was given for the payment. The demand was not complied with. On 9 October 1937 the company made a call of 25 per cent. to be paid on 10 November 1937 and on 3 August 1938, made another call for the payment of the balance by 11 September 1938. These calls were not met. On 4 October 1939 the company gave notice of forfeiture of the appellant's shares, and he was informed that unless he paid what was owing by him in respect of the 50 shares with interest at six per cent before 31 October, his shares would be forfeited. Art. 63 of the articles of association gives the company the power of forfeiting shares for the non-payment of calls or instalments. This notice was ignored and on 27 December 1939 the directors passed a resolution forfeiting the appellant's shares. On 4 November 1940, the suit out of which this appeal arises was filed. The appellant advanced numerous pleas in defence. Inter alia he alleged that he had been induced to sign the memorandum of association as the result of fraud practised by the promoter of the company, that the suit was barred by the law of limitation and that in any event the forfeiture of his shares was unlawful as the requirements of the articles of association had not been complied with. The District Judge found against the appellant on all the issues. Consequently, he passed a decree for Rs. 5000 due on the shares with interest at six per cent from the date of suit. In his memorandum of appeal the appellant raised all the contentions to be found in his written statement, but the only contention which has been pressed at the hearing of the appeal is the one that the forfeiture of the shares was unlawful. The company has filed a memorandum of cross-objections as it contends that the learned District Judge erred in not allowing interest from the date of the respective calls.

(3.) The contention that the forfeiture was in. valid is well founded. Art. 62 of the articles of association states that the notice shall name a day (not being less than 14 days from the date of the notice) and a place or places on and at which the call or instalment and interest and expenses are to be paid. The notice issued to the appellant did not state where the payment should be made and did not correctly state the dates on which the calls were to be met. For the purpose of calculating interest it was necessary that correct dates should be stated. In Johnson V/s. Lyttle's Iron Agency (1877) 5 ch. D. 687 the Court of Appeal held that a forfeiture was invalid where the notice claimed interest from the date of the call, instead of from the date fixed for payment. In that ease James L. J. observed: It was the established rule of the Court of Chancery and of the Courts of Common Law that no forfeiture of property could be made unless every condition precedent had been strictly and literally complied with. A very little inaccuracy is as fatal as the greatest. Here the notice is inaccurate. It is therefore bad and the forfeiture is invalid.