Judgement

Appeal (No. 127 of 1930) from a decree of the High Court (November 20, 1929) rejecting the appellants application to remove their names from the list of contributories in the winding-up of a company in respect of certain shares.

The appellants were executors of the will of Lala Raghumal, who died on September 5, 1926, and is hereinafter referred to as " the testator." The respondents were the official liquidators of the Dehra Dun-Mussoorie Electric Tramway Co., Ld. (hereinafter referred to as "the company"), which on January 29, 1926, was ordered to be wound up.

By a verbal contract made on August 12, 1922, the terms being stated in a letter from the company dated September 13, 1922, the testator, who was already a share holder in the company, agreed to take additional shares to the face value of Rs. 1,25,000, and in consideration thereof the company agreed to place through him the orders for materials required for their tramway. In pursuance of the contract the testator, on August 12, 1922, had applied for shares of the above face value; the shares were allotted to him and he was entered in the register of shareholders in respect of them. On September 13, 1922, he paid to the company the money due on application and allotment amounting to Rs. 31,250.

The company having failed to place its orders for materials through the testator, the appellants (as his executors) claimed in the liquidation damages for breach of the contract above referred to. The claim was rejected by the High Court (Mukerji and Young JJ.) on May 14, 1929, the learned judges holding that the contract was illegal under s. 105 of the Indian Contract Act, 1913.

On July 5, 1929, the appellants made the application which gave rise to the present appeal, praying that their names should be removed from the list of contributories with regard to the shares.

The application was heard by Mukerji and Young JJ. and was rejected. The learned judges held that the application was time barred by r. 58 of the Company Rules of the Allahabad High Court, the notice referred to in r. 57 not being necessary in the circumstances of the case ; they held further that the application failed upon the merits, as there was a valid contract to take the shares, the contract by the company with regard to the materials being a separate and collateral contract, the performance of which was not made a condition to the contract to take the shares. The proceedings are reported at I. L. R. 52 A. 406.

The facts appear more fully from the judgment of the Judicial Committee.

The appeal was heard together with appeal No. 86 of 1930. The arguments relating to the present appeal, shortly stated, were as follows.

1932. June 16, 17, 20, 21. Lionel Cohen K.C. and Wallach for the appellants. The application was not time barred by r. 58 of the High Court Rules, because the period of thirty days thereby prescribed runs from the service of the notice required by r. 57, and that notice was not given. It was res judicata by the judgment of May 14, 1929, that the agreement appearing from the letter of September 13, 1922, was illegal under s. 105 of the Indian Companies Act, 1913. The judgment did not treat the agreement to order materials as severable from the agreement to take shares, nor could it be so treated ; the agreement as a whole was held illegal and void. The agreement being void, not merely voidable, the appellants were entitled to have their names taken off the list, although there was no attempt to rectify the register before the winding-up Buckley on Companies, 11th ed., p. 236 ; Baillies Case ([ 1898] 1 Ch. 110.), Indian Contract Act, 1872, s. 25. In Elkingtons Case (( 1867) L. R. 2 Ch. 511.), and other English authorities referred to by the High Court, the contract under consideration was not illegal by statute ; the ground for removal urged in those cases was merely that owing to the liquidation the company could not perform its part of the bargain.

Pritt K.C. and A. R. Thomas for the