OFFICIAL LIQUIDATOR, U. P. OIL MILLS CO. LTD. v JAMNA PRASAD

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OFFICIAL LIQUIDATOR, U. P. OIL MILLS CO. LTD. v JAMNA PRASAD

Petitioner: U.P. Oil Mills Co. Ltd.

Respondent: Jamna Prasad

Decided By: Allahabad High Court

Citation: AIR 1933 All 334

Judges: Sri Lal Gopal Mukherji, Acting Chief Justice and Mr. Justice Young

INTRODUCTION

A Subscriber implies to any individual who buys into the share of the company when the company is fused. They are the principal investors of the company known as the shareholder. The subtleties of supporters are referenced in the MOA and AOA of the company. Consequently, they are otherwise called the supporters of the memorandum of association. The memorandum and articles of the association are the main records for the arrangement of the company and for its working from that point. It characterizes the extent of exercises of the organization and its motivation of joining.

This case is important in the field of company law as it states that a person who subscribes to the memorandum of a company is deemed to have agreed to become members of the company only because of their having signed the memorandum.

FACTS

·     In the present case an application is filed on behalf of the petitioner while requesting the opposite party of the case namely Jamna Prasad to bring on the record.

·        On 19th June 1920 Jagmohan Prasad signed a MOA with the company.

·         He died without paying any amount towards the share of the company.

·      The joint family of the defendant is now liable to pay the amount of calls on behalf of the deceased as they make a joint family with him, as asked by the petitioner of the case.

·      It was also alleged by the petitioner that the respondent has bought the shares for the benefit of the joint family which makes them liable to pay the asked amount of calls.

·     Ram Lakhan, minor son of the deceased has filed two written statements along with answers from other members of the joint family.

·         As per the written statement filed by the parties in reply, it is to be noted by the court that Swarth Ram under whose name the firm is registered has 7 sons and the deceased was one of the sons.

·         Out of 7 sons two died without any issue of the shares. Which makes it clear that the respondent party consists of the remaining five sons who are liable to pay the call amount of shares.

·         To defend the above mentioned point it was raised by the nephew of the deceased that he never was the head of the family who can take any discussions in the favour or benefit of the family and they do not believe that he had signed the MOA of the company.

·         Supporting the statement of his cousins, the son of the deceased also denied the signing of the MOA.

ISSUES

·         That whether deceased actually made any purchase of the shares of the petitioner’s company through MOA.

·         That whether the purchase was made for the benefit of the joint family.

·         That whether the purchase binds other members of the family along with the son of the deceased.

JUDGEMENT

In this case, the court has held that the moment the person signs the memorandum of the company he is considered to be a member of the company.

If it is the case of Hindu Joint Family where the person who has subscribed for the share but without paying the call amount the person died then in those cases the son of the deceased is made the subscriber of the shares that the deceased father has subscribed for and is liable to pay the amount of call as per the administration rules.

ANALYSIS

The present case was analyzed by the court in parts where in the first part the court discussed the liability of the nephew of the deceased along with the other member of the family to pay the amount of the shares, while in the other half the court has talked about the liability of the son where the father has failed to pay his part after his death.

While discussing Part I of the case, the court has brought up the nephew of the deceased on record and has analyzed the liability of the joint family in those situations where the act of the head of the family was taken for the benefit of the family. While analyzing the same it was seen that the deceased was not the eldest son of the family. At the time the case was on hearing three out of seven brothers were alive. Munni Lal was the head of the family who was dealing with the factory affairs of the family from Jagdishpur while the other brothers used to manage the work from Agra.

It was proved before the court that the deceased signed the MOA of the company but he did not sign it as the owner of the Swarath Ram Ramsaran Ram owner. It was also cleared before the court of law that he is not more than a member of a Hindu joint family. All these points make it clear that the act of calling for the shares of the company was not for the benefit of the family.

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All these facts which were presented before the court make it clear that the nephew of the deceased was not liable to be brought on the record. This plea of the petitioner was dismissed by the court.

Later half of the case was discussed by the court where the court had covered up Part II of the case to see the liability of the son for the act of the deceased father. It was already noted by the court that the deceased was the owner of 151 shares of the value of Rs. 100 each. This statement was recorded by examining Shiam Lal that he attested MOA in the presence of the executant.

As indicated by section 160 of the Indian Companies Act, the son of the deceased is obligated as a legitimate agent of Jagmohan Ram as a contributory “in the course of administration.” This implies that so particularly as far as the deceased may have passed on the hand on hand of discrete property, that property in the possession of his child, Ram Lakhan, is obligated as demonstrated in section 160 of the Indian Companies Act. It is, notwithstanding, contended that not just the separate or self-procured property of the deceased is responsible, yet in addition, the portion of Ram Lakhan in the family property is obligated to pay Jagmohan Ram’s obligation on account of the devout obligation of Ram Lakhan to pay such debt.

Now another point that was analyzed by the court was regarding the share of Ram Lakhan, the son of the deceased, held in the joint family which is liable to be paid as the debt of his deceased father. To analyze this point, the court has referred to the Hindu law provisions: – “A child is obligated to pay his dad’s obligation, out of the family property comprising of his shares and the portion of the dad, the property which was in the dad’s hand in the lifetime of the dad. It’s anything but a total articulation of the law to say that a Hindu child will undoubtedly pay his dad’s obligation due to a devout commitment to that impact. If that is not the case then the son of a Hindu family is expected to pay the debts of his father through his personal earning which is not a law.”

This is the reason why the doctrine of pious was created to resolve contention between two important blood-related persons that will undoubtedly emerge in a family comprising of a dad and his son. The main position was that, in the case of family property, a child by his simple birth got a share which was equivalent to the portion of the dad. Under this suggestion of law, the property in the possession of the dad isn’t the outright property of the dad. That along these lines, he can’t use that property for the payment of his debt. While the other situation is where the father is the head of the family. He claims the whole property which he oversees, albeit, lawfully, he and his son have equivalent shares in the property. On the strength of this property and its credit, the dad manages the fair everywhere and causes obligations. If the dad can’t collect any cash on the credit of the joint family property, the outcome would presumably be that by and large support of the children and the family would get outlandish: for there would be no credit on the lookout and no one would loan cash or arrangements to the dad since they would have no cure or a helpless cure against the dad.

To change between these clashing situations which are likely to occur in the case of a Hindu Joint family teaching was created that it is the devout obligation of the son to pay the dad’s obligation, out of the whole family property, including the portions of the son, furnished the obligation isn’t spoiled with immorality.

After analyzing the applicability of the Hindu law rules in case of repayment of the debt by the son and bringing the doctrine of pious obligation, it is to be concluded that this doctrine will come into the picture only in those situations where the family consists of only the father and son. But this will change the whole picture where a Hindu Joint family comes into existence; in such a situation it will be considered that one of the members of the family is under debt. If all connections are affected, that connection would essentially take the property appended one of the groups of the joint family and put it into the guardianship of the court. All things considered, the debt holder’s offer, so joined, might be sold. Yet, the portion of the son whose father is under debt would not be at risk to be sold. The property of the person who is under debt may offer to pay his obligation that can be sold through the mediation of the court. Where the debtor isn’t himself the head of a family comprising of himself and his son, he can’t sell any bit, of the family property, even his share, to pay his debt.

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In the case of Balgobind Das v. Narain Lal, the court was of similar view as described above that “In the event that there be no connection in the lifetime of the debtor, his interest would pass by survivorship to the leftover individuals from the family, and the creditor of the same would be with no remedy at all.” Another such issue was raised by in front of the Lordship of the Privy Council in the case of Binda Prasad v. Raj Ballabh where the court has discussed the issue which was previously discussed by the authority in the case of Brij Narain v. Mangal Prasad in this case, the actual issue which was discussed by the court was in regards to the mortgage but the provision of Hindu law in regards to the payment of debts was discussed.

In both the cases, the court has tried to discuss two different points which add on to two different perspectives which are likely to be seen in a Hindu joint family dispute. The law that was set down was that the managing coparcener could neither distance the family property nor trouble the home in his ability as a director except for motivations behind the need. While the second point which was taken into consideration by the court is where the supervisor is a dad and the family comprises of a dad and son, the dad has more noteworthy forces, thus long as the obligation caused by the dad isn’t unethical, the entire bequest of the family (comprising of the dad and the son) is at risk to be taken in execution procedures upon a declaration for the instalment of that debt.

In the present case, the second half of the above-mentioned case is not applicable and while seeing the first half of the case the court was of the view that the risk of son will be just to the degree of the separate or self-gained property (which didn’t converge in the joint family domain) in the possession of Ram Lakhan. We appropriately conclude that the risk of Ram Lakhan is just to the degree of the property to what section 160 of the Indian Companies Act applies, specifically the different property of Jagmohan Ram in which no other individual had any interest in the lifetime of Jagmohan Ram

Now the other point which the court needs to analyze is whether Jagmohan Ram was a member of the company, to which it was seen that Jagmohan Ram by his demise didn’t turn into a past part inside the importance of section 156(1)(i). Having kicked the bucket, he was unable to keep on being an individual from the company, however, his bequest kept on being at risk. No authority had been delivered before the court to show that by simple demise an individual from an organization turns into a “past member” inside the importance of section 156 of the Indian Companies Act. Section 156 deals with the instance of a party who has lawfully left behind his offers. The court therefore held that Jagmohan Ram’s son is obligated to be put on the list of contributors.

To talk about whether the deceased was a member of the company or not: Section 30 of the Indian Companies Act says that the subscribers of the MOA of a company “will be considered to have consented to become individuals from the organization.” This section of the Companies Act has been deciphered in a few cases in this Court and different courts and it has been held that the words “will be considered to have consented to become individuals from/the company” imply that the subscribers of the MOA are to be treated as having become individuals from the company by the reality of the membership. This view was taken in the case of the Union Bank, Allahabad, and also in the case of J.H. Chandler and Co. No decided case in a struggle with these specialists has been delivered the Court held that by simply buying in to the update of affiliation Jagmohan Ram turned into an individual from the company.

CONCLUSION

This case is important as it makes it clear the point that once a person signs for the MOA of a company that person is considered to be a member of the family and failure of payment of shares cannot be considered as the reason for not considering someone as the member of the company.

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