- (1.) THE Kaithal Cotton and General Mills Ltd. (hereinafter called " the company ") was registered as a public company under the Indian Companies Act, on 7th of March, 1955. The commencement certificate was issued to the company on December 12, 1955. It obtained a licence from the Government of India for setting up a factory for the manufacture of textile goods. A number of financiers came forward to finance the company by purchase of the shares or by advancing loans. One of them was M/s. Pioneer and Company, the present appellant. This firm consisted of four partners, one of them being Shri A. N. Madhok. On October 3, 1957, this firm entered into an underwriting agreement with the company by which it undertook to procure subscription for the shares of the company worth Rs. two lakhs within a period of two months from the date of the agreement failing which the firm was to be allotted the unsubscribed shares and was to be deemed to be the shareholder to that extent. The partners of the firm purchased some shares in their individual names and thus became the shareholders of the company. On November 30, 1957, a meeting of the board of directors was held at which Shri A. N. Madhok presided. Thereafter on December 6, 1957, Shri Madhok sent a cheque for Rs. 3,000 to the company which was credited in his name in the books of the company. The statutory report of the company was prepared showing the affairs of the company as on December 22, 1957, and at page 2 thereof it was mentioned that Rs. 3,000 had been received from M/s. Pioneer and Company through Shri A. N. Madhok towards the share money. To consider this statutory report, a general meeting of the company was called for on February 8, 1958. Along with the notice of the meeting, a copy of the statutory report was also sent to the shareholders including the partners of the appellant-firm. This statutory report was approved in the meeting held on February 8, 1958, in which the partners of the firm were present. It has been stated by Shri A. N. Madhok that in that meeting he took objection to this statement having been made in the statutory report. But the proceedings of that meeting do not bear out his contention. Thereafter, on March 31, 1958, the amount of Rs. 3,000 was transferred to the account of the firm in the books of the company and in the meeting of the board of directors held on May 11, 1958, the following resolution was passed: "the matter regarding the allotment of shares was considered. S. Bahadur Singh told the board that the shares against the application money of Rs. 3,000 (three thousand rupees) received from Messrs. Pioneer and Co. through Shri A. N. Madhok be allotted in the name of Messrs. Pioneer and Co. Resolved unanimously that the following shares are hereby allotted to the allottees, i. e. , Messrs Pioneer and Co. . . . . and they be directed to pay the allotment money @ 25% of the normal value of the shares by the 30th day of May, 1958, in the capital of the company. "
(2.) THE intimation about the allotment of the shares was given to the appellant-firm and a demand of allotment money at the rate of 25% of the value of the shares was made which was not paid by the said firm. The position taken up by Shri A. N. Madhok is that he had given the amount of Rs. 3,000 by cheque in his personal capacity by way of a loan to the company and not towards the application money for the purchase of shares and, therefore, the allotment of shares to the appellant-firm was without any authority. The learned single judge repelled this contention on various grounds, that is, the matter had been mentioned in the statutory report, it was within the knowledge of the partners of the firm, including Shri Madhok, that the shares had been allotted to the firm on the basis of Rs. 3,000 being application money for shares of the value of Rs. 12,000, the demand for allotment money was made and still the appellant-firm or its partners did not take any proceedings for the rectification of the share register by deleting the name of the firm from the register of members. The company was ordered to be wound up by order dated September 6, 1960, of this court and it is after the winding up of the company that the appellant-firm has come forward with the plea that the allotment of shares to it was void and of no effect. The underwriting agreement has not been denied by the appellant-firm, and, according to the agreement, the firm had to procure subscription for the shares of the company of the value of Rs. two lakhs within two months failing which the shares of the value of Rs. two lakhs were to be allotted to the firm. Admittedly, the subscription to the shares of the value of Rs. two lakhs was not procured by the firm within two months. As stated above, no objection was taken to the allotment of shares of the value of Rs. 12,000 on the basis of Rs. 3,000 paid by Shri Madhok to the company by cheque dated December 6, 1957, being the application money at the rate of 25%, during the time the company continued to be a going concern. The objection to allotment of the shares has been taken after the winding-up order was passed. The underwriting agreement dated October 3, 1957, has to be treated not merely as a guarantee but as an application for allotment of so many shares as could not be applied for by the public to the extent of Rs. two lakhs through the firm, and this agreement entitled the company to allot the shares in terms of the underwriting agreement to the appellant-firm after the expiry of two months. The allotment of the shares of the value of Rs. 12,000 was thus valid and in order. The demand for the allotment money at the rate of 25% made from the appellant-firm was in accordance with the provisions of the articles of association of the company which constitute a contract between the company and the shareholders and no reason has been advanced as to why this money was not payable by the appellant-firm. The interest at the rate of 12% has also been claimed by the liquidator of the company in accordance with the provisions of the articles of association of the company and the learned single judge has allowed the interest at that rate. There is thus no infirmity in the order of the learned single judge under appeal. The appeal is dismissed with costs and the decree passed by the learned single judge is affirmed. Counsel's fee Rs. 100. Mehar Singh, C. J.
(3.) I agree.;