060-NLR-NLR-V-19-THE-CEYLONESE-UNION-COMPANY-v.-VYRAMUTTAN.pdf
( 260 ')
■ Pfeaent : Shaw A.C.J. and De Sampayo J.
THE CEYLONESE UNION COMPANY v. VYBAMUTTAN.
343—D. Q. Colombo, 42,741.
Joint stock company—Application for share—No payment made at timeof application—Is allotment invalid'!
According to the articles of association of a joint stock companya shareholder had to pay Bs. 50 on application. The defendantsent a written application ftir one share (of Bs. 1,000,) bnt he didnot pay any sum to the company either on application or there-after.
Held, that the fact that the defendant did not pay the amountdue on application for the • share did not make the allotment tohim invalid. The company was entitled to recover from theapplicant the amount due on account of the share after allotment.
'r^“’ HE facts are set out if*7the judgment.
Samarawickreme, for appellant.
J. de Saram, for respondent.
Gur. adv. Quit.
s
.September 27, 1916. Shaw A.C.J.—
The plaintiff. company sued the defendant for Bs. 1,000, moneypayable on an application by the defendant, and on the allotment tohim of a share in the company, and for the cplls made thereon, andfor interest on the amount due since demand for payment.
The company was incorporated in July, 1912, and on November13, 1912, the defendant made written application to -the directorsfor a share to be allotted to him.
There was considerable delay in the allotment, which was, how-. ever, made and notified to the defendant on November 19, 1913‘.
• Notwithstanding the delay, the defendant did not repudiate theallotment, and the Judge has found that he acquiesced in it, andspecifically promised the secretary of the company to pay the-amount due in respect of the share. Although repeated requestswere made to him for payment, he never suggested that the moneywas not due from him until July 10, 1915.
The District Judge has given judgment for the plaintiff companyTor the amount claimed, and the defendant has appealed.
Only one point was taken in support of the appeal, namely, thatiin consequence of the defendant not having paid the amount due
( 251 )
on bis application for the share, the allotment to him was invalidby reason of the provisions contained in section 85 of the EnglishCompanies (Consolidation) Act, 1908.
In my opinion this section has no application whatever to thisIsland. It contains provisions, re-enacted from section 4 of theEnglish Companies Act, 1900, specifying when directors mayproceed to allotment of shares on the first allotment of sharesoffered to the public for subscription, and, for the purpose of ensuringthat a company shall not go to allotment unless a sufficient amountof share capital is subscribed, enacts that no allotment shall be madeunless either the whole share capital offered for subscription, or theminimum amount which is fixed by the memorandum or articlesof association, has been subscribed for, and sub-section (3) providesthat the amount payable on application for each share be not lessthan five per centum of the nominal amount of the share.
Ordinance No. 22 of 1866 provides “In all questions or issueswhich may hereafter arise or which may have to be decided in this'
Colony with respect to the law ofjoint stock companies,
the law to be administered shall be the same as would be
administered in England in the like case, at the correspondingperiod, if such question or issue had arisen or had to be decided inEngland, unless in any case other provision is or shall be made byany Ordinance now in force in this Colony or hereafter to beenacted.”
1 need not discuss whether, in view of the Joint Stock Companies-Ordinance, 1861, and numerous amending Ordinances, the EnglishCompanies Acts have any application at all to this Islknd, becausesection 18 of the Ordinance of 1861 specifically deals with thequestion as to when a company may proceed to allotment, andprovides that it may do so “ so soon as a certificate of incorporationhas been granted.” Section 85 of the English Act cannot, therefore,in any event apply.
Even if the English provisions did apply, they would for severalreasons afford no defence to the present action. I need only referto one, namely, that by section 86 of the English Act an allotmentmade by a company to an applicant in contravention of the pro-visions of section 85 is not void, but voidable only, at the instanceof the applicant, within one month after the holding of the statutorymeeting of the company, and not later. No attempt to repudiatethe allotment was made in the present case until July, 1915.
I would dismiss the appeal, with costs.
De Sampayo J.—
I am of the same opinion. After the plaintiff company wasincorporated, and before it proceeded to allotment, the defendanton November 3, 1912, applied-lor a Rs. 1,000 share. According to-the articles a shareholder had to pay Rs. 50 on application and*
me.
Shaw A.C Jv
The •CeyloneseUnion Com-pany v.Vyramuttan
(252)
1916. Rs. 100 on allotment, and the balance Bs. 850 on calls. TheDe Sampavo defendant in his written application puiported to transmit Rs. 150,J. being the amount payable on application and on allotment, but hedid not actually so transmit the money or pay it afterwards, and noCeylonese share was allotted to him when the company made the first allot-pany v. meat. The first statutory meeting of the company took place onVyramuttan July 12, 1918, and the directors on November 10, 1913, allotted tothe defendant one share on his original application and placed hisname in the register of shareholders, notice of such allotment beinggiven to the defendant; subsequently the company would appearto have made calls to the full extent of the value of the shares.Although demands were, from time to time made of him for thepayment of the amount due on the share, the defendant did not.make any payment, and the plaintiff company now . sues the defend-ant for the whole amount. The District Judge has found on the■evidence, not only that notice of allotment and of calls were dulygiven to defendant, but that, so far from repudiating the allotmentof the share, he ratified it by promising to pay for it.
The only point pressed in appeal on. behalf of the defendant isthat the allotment was bad, as no deposit had been made on applica-tion. . This contention is entirely based on the provisions of section'85 (1) of the English Companies Act of 1908. Our law with regardto joint stock companies is contained in the Ordinance No. 4 of1861.. The later Ordinance, No. 22 of 1886, no doubt provides thatin all questions or issues which may have to be decided in Ceylonwith ' respect to joint stock companies the law to be administeredshall be the law of England for the time being, unless other provi-sion is or shall be made by any local Ordinance. But it is difficultin particular cases to adopt the English law to local circumstances,especially where the same machinery for applying it does not existhere. But until some comprehensive law relating to companiesis passed locally, we must, when any question is not covered by anyprovision in our Ordinance, decide the same as far as possible byreference to the English law. Section 18 of our Ordinance, how-ever, provides for a company going into allotment as soon as acertificate of incorporation has been granted, and therefore section85 (1) of .the English Act does not appear to apply. Moreover, itis quite clear that the provision of the English Act has no furtherpurpose than to prevent companies from going to allotment withouta certain proportion at least of the capital being paid in, and inorder to secure this object section 85 (1) enacts that no allotmentshall be made of any share capital of a company, unless a certainamount of capital has been subscribed “ and the sum payable on
application has been paid to and received by the company.”
As between the applicant and the company, the allotment, withoutcomplying with this condition, is not void, but is declared by section36 to be voidable, at the instance of the applicant, within one month
t. 368 )
:after the holding of the statutory meeting of the company, and notlater. The defendant in this case did not at any time take proceed-ings to have the allotment to him of a share avoided. It may,perhaps, be argued that, as the defendant applied for a share beforethe plaintiff company went to allotment, his application was not■available for any subsequent allotment. I do not think, however,that this is a valid defence. The principle stated at page 105 ofPalmer’s Company haw (8th edition) appears to me applicable. It isthere observed, on the authority of two English cases, that allotmentAnd notice after incorporation in response to an application issufficient to constitute a complete contract, inasmuch as in sucha case the application operates as a continuing offer and matureson acceptance into a contract.
I therefore agree that this appeal should be dismissed with costs.
Appeal dismissed.
♦
1916.
De SampavoJ.
The
CeyloneseUnion Com-pany v.
Vyramuttan