RAMANBHAI M NILKANTH Vs. GHASHIRAM LADLIPRASAD

JUDGEMENT

(1.) I think that the applicant s case in respect of the 100 preference shares cannot be distinguished in any essential from Roger s case (In re Universal Banking Company (1868) L.R. 3 Ch. 633). There Rogers desired to become the local agent of the Company and was told by the Company s Agent that before being so appointed he must take up 100 shares. He accordingly applied for 100 shares, the Agent at the same time writing to the Directors and stating the condition. Presently Rogers found that he was unable to pay the deposits and in consequence the Directors declined to appoint him local agent. Upon these facts it was held that there had been a conditional application, and if the allotment had likewise been conditional the condition had not been fulfilled; and if it had been unconditional, then there was no agreement between the parties. Sir William Page Wood L.J. said that to constitute a binding agreement of this kind there must be an application, an allotmeat and notice of allotment, and that where of course the application was conditional and known to be conditional at the time it reached the Directors, they were not at liberty to allot unconditionally so as to make a binding agreement by which the applicant became a member of the Company. In this judgment of the Lord Justice I do not find the word " precedent" used as qualifying "condition" ; and I very much doubt whether where the condition is regarded not from the point of time at which it is made (for there it must in every case of this kind be strictly a condition precedent) but from the time when its fulfilment is expected, no very clear line of distinction can be drawn and maintained between a condition precedent and a condition subsequent. To take two cases at random, case already referred to and Fisher s case (In re Sounthport and West Lancashire Banking Company (1885) 31 Ch. D. 120, it will be found that in both the fulfilment of the condition appears to have been expected after the allotment was made. Yet in the first case it was held that Rogers had not agreed to become a member of the Company because the condition was not fulfilled; while in the other case it was held that the condition upon which Fisher agreed to take the shares was a condition subsequent, and before the Company was called on to fulfil it, it had gone into liquidation and became incapable of doing so. The Court there entertained no doubt but that Fisher had agreed to become a member of the Company and that the non-fulfilment of the condition subsequent did not absolve him from being called upon as a contributory when the Company went into liquidation. Probably the best criterion is that suggested, I think, by Lord Cairns in Elkington s case (1867) L.R. 2 Ch. 511 that in all cases of this kind where a condition is in dispute the Court should look at the intention of the party applying for the shares and decide whether it was his intention to agree at the time he made the application to become a member of the Company in proesenti or only in future after the condition had been fulfilled. Applying that tost to the facts before us, I have no doubt that it was not the intention of the applicant here to become a member of the opponent Company until he had been appointed their cashier in Lucknow. His case briefly is that he agreed with one Teluram, who was acting as agent for the Company in Lucknow, to take up 100 preference shares on condition that the Company would appoint him their cashier in the new branch they then contemplated opening in Lucknow. It is true that there is no evidence that that condition was communicated to the Directors of the Company in Ahmedabad along with the applicant s application for 100 shares. These shares appear to have been duly allotted to him on the 5th of December 1910 ; and it is really a question of fact whether the Directors were aware, at the time of the allotment, of the condition annexed to the application. I think that their letters of the 10th and 15th of December show very clearly that they were. The full agreement was, as alleged by the applicant, that he was to take up 400 preference shares in all and upon doing so was to be appointed cashier in Lucknow. In fact he only applied for 100 shares and the letter of the 10th of December from the Directors shows that they were fully aware of the agreement entered into between the applicant and Teluram. For they there call upon him to take up the remaining 300 shares. Five days later it is clear that they had received some communication from him intimating that he was not in a position to take up this block. They thereupon wrote on the 15th of December in rather vague language thus:-"We have written to our Manager to settle the matter in the best interest both of yourself and the* bank, We trust a satisfactory arrangement will be arrived at . The application for 100 shares had been accompanied by the Rs. 5 per share application deposit required by the Rules. There is no evidence to show that if 100 shares were actually allotted upon what terms they were allotted or whether the further Rs. 15 per share on allotment was demanded from the applicant. It is certain, however, that he never paid it.

(2.) Thus matters stood, and on the applicant s allegation he was entitled to assume that the proposed agreement had fallen through until April 1911 when Teluram wrote to him, saying that he had sold him 100 shares in the ordinary course acting as the agent for the opponent Bank, just as he might have sold them to any other member of the public, and calling upon him to pay Rs. 4,500. Now, the terms upon which these preference shares were issued were : Rs. 5 on application, Rs. 15 on allotment and Rs. 10 a month for three months. It thus becomes apparent that the sum of Rs. 4, 500 demanded by Teluram in April 1911 might have been due upon the 100 shares or might have represented the allotment payment on 400 shares. However that may be, on the 3rd of May, the applicant wrote repudiating all liability whatever for the 100 shares and demanding his application deposit back. Then, on the 8th of July 1911, the Directors of the Bank wrote to the applicant informing him that all these arrangements were now to be deemed cancelled.

(3.) Such are the facts before us relating to these 100 preference shares. Upon those facts I entertain no doubt but that the Directors of the Bank were well aware on the 5th of December 1910 that the application for the 100 preference shares was conditional in the manner now alleged by the applicant. I have felt some doubt and difficulty upon one point, and one point only, and that is whether this application for 100 shares can be separated from the agreement as a whole which was to take up 400 shares as the price of being appointed cashier of the Lucknow Branch. It is arguable of course that it can, and that it must, be treated as an entirely unconditioned application. I think, however, that the letters written by the opponent Bank on the 10th and 15th of December show clearly that this never was the understanding of the parties themselves. And in matters of this kind the chief object of the Court should be to got at the truth of the matter as to what was in the mind of the contracting parties and so do as far as possible justice between them under the law. I take it that this application for 100 shares out of 400 shares was merely in the nature of an instalment, or perhaps earnest money binding the contract which afterwards fell through. I think the whole course of subsequent dealings between the parties evidenced by the correspondence, to which I have referred, shows that this too was the understanding of the opponent Bank and that by July 1911 they had given up all idea of compelling the applicant to complete his agreement or hold him bound by the instalment application, as I call it, for 100 shares which had been received and the allotment apparently made by the 5th of December 1910. Thus, then, I should come to the same conclusion upon this part of the case as the Court in England came to in Rogers case, namely, that the applicant did not intend to agree to become a member of the Company in proesenti as from the 5th of December 1910. He is, therefore, in my opinion, entitled to be struck off the register of preference share-holders and cannot be called upon as a contributory on that account.