Statutory deposit requirement invalidates share allotment where required application deposit was not paid, leaving allotment and directorship void.

Validity of allotment turned on whether assent was unconditional and the statutory payment on application was made; the HC found the plaintiffs' application forms were annexures to a letter making assent conditional and that conditions remained unfulfilled when the directors proceeded, and no payment accompanied the applications. Applying the statutory rule that a minimum payment on application is required for post first allotments, the court treated an allotment made without the requisite payment as invalid. The court granted declaratory relief and rectification of the register, holding the plaintiffs were not shareholders or directors.

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Issues: Whether the allotment of 100 shares to the plaintiffs and their appointment as directors was valid, having regard to alleged misrepresentations, unfulfilled conditions in the letter dated 14 April 1931, and non-payment of the amount required on application under Section 101(3) of the Indian Companies Act.

Analysis: The Court examined the sequence of communications and found that the plaintiffs' application forms were forwarded only as enclosures to the letter dated 14 April 1931 which expressly made the plaintiffs' assent conditional on the fulfilment of specified terms by the Chairman and the Directors. The Chairman's reply dated 18 April 1931 showed that the conditions had not been fulfilled by 16 April 1931 when the Directors proceeded with allotment and appointments. Further, it was common ground that no money was forwarded with the applications despite the forms falsely stating a deposit; Section 101(3) requires that the amount payable on application be not less than 5% of the nominal amount of the share, and Sub section (3) applies to allotments after the first allotment. The Court held that an allotment made without payment of at least 5% of the nominal value is invalid. The Court also considered the plaintiffs' prayer for declaratory relief and rectification of the register, finding that in the circumstances the declaratory form of relief and rectification were appropriate and not barred.

Conclusion: The allotment and appointments were invalid; the plaintiffs are not shareholders or directors of the company and the appeal is dismissed.

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