# l'aljibfo Muljibhai Sofleji v. Slllt1 o/JJomff.v - **Citation:** [1964] 3 S.C.R. 698 - **Court:** Supreme Court of India - **Decided:** 1964 - **Case number:** Civil Appeal No. 512 of 1961 - **Bench:** A. K. Sarkar, M. Hidayatullah, J. C. Shah - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/l-aljibfo-muljibhai-sofleji-v-slllt1-o-jjomff-v-3017 - **Pages:** 12 ## Headnote Oompany-.Allotmenl of iliaru-Forfeiture of ahar......- Forftiletl. •haru reiaauetl.-lf jilinv of relurn compul1ory-Tli.• Oompaniu .Act, 19ti6 (I of 1966), •· 75. ~, :, The respondent-company did not file any return of the re-issued forfeited 1hares under•• 75 (I) of the Act arid there-. fore the appellant·shareholdar moved the High Court for an: order requiring it to do 10. • f, · · , Held that the wo.rd1 "allotment of shares" have been iiled ili·.;'15:to lndi~te ch• lll"Catloa of 11uifc. by appropriation out 3 S.C.R. SUPREME COURT REPORTS 699 of the unappropriated share capital to a particular person. When a share is jforteited and re-issued it is not allotment in the sense of appropriation of share out of the authorised and unappropriated capital so as to bring the !hares into existence. A re-issue of a forfeited share is not an allotment of share within the meaning of s. 75 ( 1) but a sale and that being so, no question of filing any return in 1espect ol such re-issue arise•. 11' rt Florene. Land and P·ublic Works Company, (1885) L. R. 29 Ch. D. 421; Mosely v. Knffyfontain Min<& Limitti., (1911) I L. R. C;1. 73; Th. Calcutta cltock Exchang« A"ooiation Lid. v. 8, N. Nundy & Go., (1950) 1 I. L. R. Cal. 235; Na•<&h Chandra Sanyal v. Ramani Kant<1 Ray, (1945)2 I.L.R. Cal. 105; Morris•n v. Trust.ea tic. Insuranct Corporation, (1899) 68 L.J. Ch. 11, discussed. In rt V. G. M. HoUJings, Limited (1942) I Ch. D. 235, disapproved. Htld further that sub-s. (5) of s. 75 has been enacted as ""' abunda11ti cautela, that is to say, to prevent any argument being raised that a return has to be filed of the re-issued shares forfited for non-payment of cal11. C!VIL APPELLATE JURISDICTION: Civil Appeal No. 512 of 1961. Appeal by special leave from the judgment and order dated August LS, 1959, of the Calcutta High Court in Appeal from Original Order No. 106 of 1957. S. K. Kapur, S. Murtki, P. M. Kukhi and K. K. Jain, for the appellant. H. N. Sanyal, Solicitor-General of India and B. P. MaheBhwari, for the respondent. 1963. May 9. The Judgment of the Court was delivered by . ~ABKAR J.-!he question in this appeal is, what 11 the meamng to be ascribed to the word ~~allotment" occurring in.s. 75 (1) of the Companies /96J Sri Gopal Jain . & c.,.pany v. Calcutta Stack Ex,htJn6e AsJociati,M.r, J,l(.. . Sar/llJIJ 196J Sri <'.pal Jala• & Cimjla1' v. Ca/tu/l'J Sto..·• E1t:Mn11 Associ!Jli011 1.14. 700 SUPREME COURT REPORTS [1964] VOL. Act, 1956? That section requires a compny to file a return of the allotment of its shares with the Registrar within a month of the making of the allotment. The appellant who has been accepted as a shareholder in the respondent Company for the purposes of the present proceedings, complained that the Company had not filed the return required by that section. and therefore, moved the High Court at Calcutta under s. 614 of the Act for an order requiring it to do so. The shares with which this case is concerned had been forfeited by the Company under its articles. A reference to some of these articles is necessary before we proceed further. Article 21 of the Articles of Association of the Company authorised its Committee to expel or suspend a member in certain events. The present is not a case involving an exercise of power under this articte. Articles 22, 24 and 27 are in these terms : Article 22 : "Any member who has been declared a defaulter by reason of his failure to fulfil any engagement between qimself and any other member or members and who fails to fulfil such engagement within six months from the date upon whit.;h he has been so declared defaulter shall at the expiration of such period of six calendar months automatically cease to be a member." Article 24 : "Upon any member ceasing to be a member under the provisions of article 22 hereof and upon any resolution being passed by the Committee expelling any member under the provisions of Article 21 heareof or upon any member being adjudicated insolvent the 1hare held by su ## Text 1963 l'aljibfo Muljibhai Sofleji v. Slllt1 o/JJomff.v MadhoJka1 J. 1969 M•J 9. 69s·· SUPREME COURT REPORTS [1964) VOL; of1950 disappeared. Moreover, siuce s. 41 of the Central Act provided thl\t a Corporation shall be deemed to be a local authority within the meaning Motor Vehicles Act, 1939, and not within the mean' ing of any other . law, the provisions of s. 29 of the Bombay Act could in ·no circumstan·ces be said to survive. In view of all this the learned Attorney· General did not press his argument on the point further. In our view the acquisition impugned in this case having been made for the benefit of a Corporation, though for a public purpose, is bad because no part of the compensation is to come out of public revenues and the provisions of Part VII of the Land Acquisition Act have not been complied with. We, therefore, allow the appeals and decree the suits of the appellants with costs in all the courts. Appeals allowed. SRI GOPAL JALAN & COMPANY "· CALCUTT A STOCK EXCHANGE ASSOCIATION LTD. (A. K. SARKAR, M. HIDAYATULLAH and J. C. SHAH JJ.) Oompany-.Allotmenl of iliaru-Forfeiture of ahar......- Forftiletl. •haru reiaauetl.-lf jilinv of relurn compul1ory-Tli.• Oompaniu .Act, 19ti6 (I of 1966), •· 75. ~, :, The respondent-company did not file any return of the re-issued forfeited 1hares under•• 75 (I) of the Act arid there-. fore the appellant·shareholdar moved the High Court for an: order requiring it to do 10. • f, · · , Held that the wo.rd1 "allotment of shares" have been iiled ili·.;'15:to lndi~te ch• lll"Catloa of 11uifc. by appropriation out 3 S.C.R. SUPREME COURT REPORTS 699 of the unappropriated share capital to a particular person. When a share is jforteited and re-issued it is not allotment in the sense of appropriation of share out of the authorised and unappropriated capital so as to bring the !hares into existence. A re-issue of a forfeited share is not an allotment of share within the meaning of s. 75 ( 1) but a sale and that being so, no question of filing any return in 1espect ol such re-issue arise•. 11' rt Florene. Land and P·ublic Works Company, (1885) L. R. 29 Ch. D. 421; Mosely v. Knffyfontain Min<& Limitti., (1911) I L. R. C;1. 73; Th. Calcutta cltock Exchang« A"ooiation Lid. v. 8, N. Nundy & Go., (1950) 1 I. L. R. Cal. 235; Na•<&h Chandra Sanyal v. Ramani Kant<1 Ray, (1945)2 I.L.R. Cal. 105; Morris•n v. Trust.ea tic. Insuranct Corporation, (1899) 68 L.J. Ch. 11, discussed. In rt V. G. M. HoUJings, Limited (1942) I Ch. D. 235, disapproved. Htld further that sub-s. (5) of s. 75 has been enacted as ""' abunda11ti cautela, that is to say, to prevent any argument being raised that a return has to be filed of the re-issued shares forfited for non-payment of cal11. C!VIL APPELLATE JURISDICTION: Civil Appeal No. 512 of 1961. Appeal by special leave from the judgment and order dated August LS, 1959, of the Calcutta High Court in Appeal from Original Order No. 106 of 1957. S. K. Kapur, S. Murtki, P. M. Kukhi and K. K. Jain, for the appellant. H. N. Sanyal, Solicitor-General of India and B. P. MaheBhwari, for the respondent. 1963. May 9. The Judgment of the Court was delivered by . ~ABKAR J.-!he question in this appeal is, what 11 the meamng to be ascribed to the word ~~allotment" occurring in.s. 75 (1) of the Companies /96J Sri Gopal Jain . & c.,.pany v. Calcutta Stack Ex,htJn6e AsJociati,M.r, J,l(.. . Sar/llJIJ 196J Sri <'.pal Jala• & Cimjla1' v. Ca/tu/l'J Sto..·• E1t:Mn11 Associ!Jli011 1.14. 700 SUPREME COURT REPORTS [1964] VOL. Act, 1956? That section requires a compny to file a return of the allotment of its shares with the Registrar within a month of the making of the allotment. The appellant who has been accepted as a shareholder in the respondent Company for the purposes of the present proceedings, complained that the Company had not filed the return required by that section. and therefore, moved the High Court at Calcutta under s. 614 of the Act for an order requiring it to do so. The shares with which this case is concerned had been forfeited by the Company under its articles. A reference to some of these articles is necessary before we proceed further. Article 21 of the Articles of Association of the Company authorised its Committee to expel or suspend a member in certain events. The present is not a case involving an exercise of power under this articte. Articles 22, 24 and 27 are in these terms : Article 22 : "Any member who has been declared a defaulter by reason of his failure to fulfil any engagement between qimself and any other member or members and who fails to fulfil such engagement within six months from the date upon whit.;h he has been so declared defaulter shall at the expiration of such period of six calendar months automatically cease to be a member." Article 24 : "Upon any member ceasing to be a member under the provisions of article 22 hereof and upon any resolution being passed by the Committee expelling any member under the provisions of Article 21 heareof or upon any member being adjudicated insolvent the 1hare held by such member shall ipso facto be forfeited." A.rticle 27:"Any share so forfeited shall be deemed. to be the property of the Association, 3 S.C.R. SUPREME COURT REPORTS 701 and the Committee shall sell, re-allot and otherwise dispose of the same in such manner to the best advantage for the satisfaction of all debts which may then be due and owing either to the Association or any of its members arising out or transactions or dealings in stocks and shares." The appellant's contention is that the Company from time to time forfeited various shares under these articles and it appeared from its balance sheet that ~eventy of such forfeited shares had been reissued at a nominal face value of Rs. 1,000/- but no return of such re-issue of the forfeited shares had been filed by the Company. The Company in its affidavit in answer to the petition admitted these facts. It was also said that these forfeited shares had been issued for much larger sums but nothing turns on that in this case. Now s. 75, so far as material for our purposes, is as follows : 8. 75. (1) Whenever a Company having a share capital makes any allotment of its shares, the company shall, within one month thereafter,- x (a) file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupatiom of the allottees, and the amount, if any, paid or due and payable on each share; x x x x (5) Nothing in this section shall apply to the issue an:l allotment by a company of shares g,; C•>'ll Jalu & Com(Jan7 •• C•ln1'lt1 ~taet Etdlantt tl•socia1iDll Lid. S.rur J, 196J Sri Gopol Jal•• ·· & Gompa•7 v. CalcuttrJ Stock E#t111ange Associats'on v . Ltd. Sa1kar /. 702 SUPREME COURT RBPORTS[l964)VOi.. which under the provisions of its articles we1·e forfeited for non-payment of calls. The appellant contends that a return should have been filed of the re-issued forfeited shares under this section. The contention of the Company is that the re-issue of forfeited shares does not amount to allotment of shares and, therefore, it was not required to file any return in respect of such re-issued shares under the section. This contention was accepted by the learned Judge of the Bigh Court before whom the appellant's petition was first moved and also by the learned Judges of the Division Bench of that Court on appeal from the decision of the learned trial' Judge. We agree with the learned Judges of the High Court that a re-issue of a forfeited share is not an alloment of share withins. 75(1). The word "alloment" has not been defined in the Companies Act either in our country or in England. But we think th:it the meaning of that word is well understood and no decision has been brought to our notice to indicate that any doubt has ever been entertained as to it. As Chitty J. put it in In re Florence Land and P.ublic Works Company(') (p.426). "What is termed 'allotment' is generally neither more nor less than the acceptance by the company of the offer to take shares. To take the common case, the offer is to take a certain number of shares, or such a less nu~ ber of shares as may be allotted. That offer is accepted bv the allotment either of the total number mentioned in the offer or a less number, to be taken by the person who made the offer. This constitutes a binding contract to take that number according to the offer and acceptance. To my mind there is no magic whatever in the term 'allotment' as used in these circumstances. It is said that the allotment is an appropriation of a specific number of shares. It tlJ (1885) L.R. 29, Cb. D. 421. 3 S.C.R. SUPREME COURT REPORTS 703 . . is an appropriation, not or specific shares, but of a certain number of shares." The process described by Chitty J. is very familiar in Company law. Under the Act, a com· pany having share capital is required to state in its memorandum the amount of that capital and the division thereof into shares of a fixed amount: see s. 13(4). This is what is called the authorised capi· tal of the company. Then the Company proceeds to issue the shares depending on the condition of the market. That only means inviting appli· cations for these shares. When the applications · are received, it accepts them and this is what is gene· rally called allotment. No doubt there may be an allotment of shares without an application but no instance exists where that word is used to describe a transaction whereby .one · becomes a share-holder otherwise than by appropriation to him of a share out of the previously unappropriated share capital. So Farwell L. J. said in Mosely v. Kof!yfonlain Mines Limited (' ). "As regards the construction or these particular articles it is plain that the words 'creation', 'issue', and 'a1lotment' are used with the three different meanings familiar to business people as well as to lawyers. There are three steps with regard to new capital; first; it is created; till it is created the capital does not exist at all. When it is created it may remain unissued for years, as indeed it was here; the market did not allow of a favourable opportunity of placing it. When it is issued it may . be issued on such terms as appear for the moment expe· dient. Next comes allotment. To take the words of StirlingJ. in Spihel v. Ohinese Oorporation, 80 L.T. 347, 351, he says: 'What is an allotment of shares ! Broadly speaking, it is an appropriation by the direc· tors or the managing body of the company of shares to a particular person'." Lord Greene M.R. observed in lnre V. G •.. M. Holdings, Limited, ('), "it ieems to (I) (1911) I,l.,'R, Cll. 73, 84. (2) (19*2) I Ch, D, 255. Sri C./Jo/ '"''" /JI ComponJ v. C./eulla Sloe& E"e/un&ee AsJoeiatioa .Ltd. . Sorkv I. - - . 196J ~ri GofJlll Joi .. & C•mP•"7 •• , Calt11 tlo Slo ! Att""'11l' Assoi·iG.t1on Ltd. '704 SUPREME COURT REPORTS (1004] VOL me that the word 'purchase' cannot with propriety be applied to the legal transaction under which a person, by the machinery of application and allot· me~t, becomes a shareholder in the company. He does not purchase anything when he does that. Mr. Wynn Parry endeavoured heroically to establish the proposition that a !ihare before issue was an existing article of property, that it was an existing bundle of rights which a shareholder could properly be said to be purchasing when he acquired it by subscription in the usual way. I am unable to accept that view. A share is a chose in action. A chose in action imp· lies the existence of some person entitled to the rights in action as distinct from rights in possession, and, until the share is issurd,. no such person exists. Put· ting it in a nutshell, the difference between the issue of a share to a subscriber and the purchase of a share from an existing share holder is the difference between creation and the transfer of a chose in action." It is beyond doubt from the authorities to which we have earlier referred, and there are many more which could be cited to show the same position, that in Company law 'allotms:nt' means the appropriation out of the previously unappropriated capital of a company, of a certain number of shares to a person. Till such allotment the shares do not exist as auch. It is on allotment in this sense that the shares come into existence. Learned counsel for the appellant has not been able to cite any case where the word 'allot· ment' has been used to describe a transaction with regard to an existing share, that is, a share previously, brought into existence by appropriation to a person out of the authorished capital. In every case the words 'allotment of shares' have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person. We find no reason why the word 'allotment' ins. 75 should have a different sense. It is ·said that sub"•· (ti) of s. 75 furnishe1·1uch a reason. We will 3 s.a.R. SUPREME COURT REPORTS 705 deal with that argument later. Our attention has not been drawn to any other provision in our Companies Act which would support the contention that the Act includes within the word 'allotment' a transaction with a share after it has been first crea~ ted by appropriation out of the authorised share capital to a particular individual. As the learned Judges of the Hi~h Court pointed out, s. 75 ocr:urs in Part III of the Act which deals with "Prospectus And Allotment, And Other Matters Relating To Issue Of Shares Or Debentures". Sections 69 to 75 are classed under the sub-heading 'Allotment' and the only kind of allotment that is dealt with in these sections is the appropriation of shares to individuals out of the unappropriated share capital of the company. In these circumstances it would be impossible to give to the word 'allotment' in s. 75(1) a different meaning. Now it is quite clear that when a share is forfeited and re-issued it is not allotment in the sense of appropriation of share out of the authorished and unappropriated capital so as to bring the shares into existence. In the present case both sides proceeded on the basis that the articles of the company dealing with forfeiture of shares which we have earlier set out are valid articles. ln other words, it has not been disputed that the Company may validly forfeit shares in terms of those articles. We accept that basis and proceed on the assumption that it is correct. In the High Court at Calcutta there was a difference of opinion as to the validity of these articles but the later view is that the articles are valid. The reason for the view has thus been put in the latest case in the Calcutta High Court, namely, the Calcutta Stoalc Exchange Association Umited v. 8. N. Nundy med Company ('). Harries C. J. dealing with the very articles with which we are concerned observed at p. 264, "In the presrnt case, the Articles relating to forfeiture do not, in my view, offend against the (I} (1950) I I.L.R. Cal. 235. \ 196! Sri c • .-h/•61 ~ v. Caltk llJteha11 A.iJociJiio11 Ltd. -- 708 SUPREME COURT REPORTS [1964] vor.. the solitary provision occurring in sub-s. (5) of s. 75 The Companies Act in force before the Act . of 1956 was the Act of 1913. Section 104 (1) of that Act corresponded to s. 75 (1) of the present Act. In 1936 there were large amendments made in the 1913 Act. Prior to these amendments there was no provision in s. l 04 of the Act of 191~ corresponding to sub-s. (5) ofs. 75ofthe present Act. Therefore, upto 1936 there was no reason to contend that the word "allotment" ins. 104 (1) could at all include the re-issue of a forfeited share. The 1936 amendment added sub-s. (4) to s. 104 and t11at sub-section contained provision similar to sub-s. (5) ofs. 75 of the present Act. We do not think that it could be legitimately contended that by the amendment of 1936 the meaning of the word "allotment" in s.104 (1) was altered. That being so, the word "allotment" in s. 75 (1) must be understood without reference ot sub-s. ( 5) in the same wav as that word in · s. 104 (l) had to be understood without reference tci sub-s.(4) of that section. It is safer to rearl sub-s. (5) of s. 75 as having been enacted ex abundanti cautela, that is to say, to prevent any argument being raised that a return has to be filed of the re-issued shares forfeited for non-payment of calls. We also agree with the view expressed in the High Court that the reason why only forfeiture for non-payment of calls was mention· edins.104(4)oftheActofl!H3 ands.75 (5)ofthe present Act is that there has a 1 ways been a great deal of doubt as will appear from the difference of opinion · in the Calcutta High Court to which we have earlier referred, as to whether there can be any forfeiture of shares except for non-payment of calls which latter case had been expressly provided for hy the statute. The other cases of forfeiture had apparently not been mentioned because if they had been it could have been legitimately argued that the legislature con~ide red such forfeiture valid and the legislature did not want to iive support to that argument. 3 S.C.R. SUPREME COURT REPORTS 709 We think for these reasons that the appeal fails and we dismiss it with costs. Appeal diamiaeed. BOMBAY GAS CO. LTD v. GOP AL BHIV A & ORS. (P. B. GAJENDRAGADKAR, K. N. WANOHOO and K. C. DAB Gul'TA JJ.) lnduatrial Di1pule-Applicatiom under •· 330 (2) lo claim certain benefits uw.ler an Award-Scope oJ s. 330 (2)- 0ategorie• of workera entitled to beneji'8-Limitation for ·application• under•· 330 (2)-Wkether Payment of Wagea A.cl or art. 181 of Limitation Act applicable-lndualrial Diaputes Act, 1947 (14 of 1947), a. 330 (2j. Petitions were filed by sixteen respondents under s. 330(2) of the Industrial Disputes Act, 1947, claiming certain benefits under an award made by an Indus•rial Tribunal. The prayer was to compute the benefits in terms of money and direct the appellant to pay the same to them. Many objections were raised by the appollant but these were rejected by the Labour Court which accepted the claim of the respondents and directed the appellant to pay to the respondents the respective amounts specified against their names in the award. Tbe appelJant came to this Court by special leave. The contentions raised by the appellant before this Court were that the award, on which the claim was based, was without jurisdiction and hence the Labour Court should have refused to implement it; that in order to get benefit, the workers must show that they actu.dly worked on all Sundays in the year before September, 1948; and that as the claims of the respondents were belated, those should not have been awarded. Held that the Labour Court would have been justified in refusing to Implement the award if it was satisfied that the / ! 19Q Sri c.,.1 i.1 .. s Comp,., y, Calculla Si.el Ex.U.11 AuacialiMI /.I,. s.,,., I. 1963 M,, 10.