Forfeited shares cannot be reissued as fully paid at a discount without complying with statutory conditions.

Reissue of forfeited shares at less than the unpaid balance, while treating them as fully paid up, was treated as an issue at a discount and fell within the statutory prohibition in section 79 of the Companies Act. The articles could permit sale of forfeited shares on terms the board considered fit, but that power could not override the requirement of court sanction for a discounted issue. The document states that such a transaction is outside the permissible sale of partly paid forfeited shares and attracts the mischief prevented by section 79.

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Issues: Whether the reallotment of forfeited shares at a price below face value, treating them as fully paid up, contravened section 79 of the Companies Act and was therefore void.

Analysis: The shares had been forfeited after part payment of the amount due on them. They were thereafter reissued to the managing agents at a price lower than the unpaid balance and were purported to be treated as fully paid up. Such a reissue resulted in the company receiving less than the nominal amount of the shares and amounted in substance to an issue of shares at a discount. Section 79 permits issue at a discount only in accordance with its conditions, including sanction of the court. The board power under Article 32 of Table A to sell forfeited shares on such terms as it thought fit could not override the statutory restriction. The transaction therefore fell outside the permissible sale of forfeited partly paid shares and within the mischief prohibited by section 79.

Conclusion: The reallotment was void for non-compliance with section 79(2) of the Companies Act, and the petition failed.

Ratio Decidendi: A forfeited share may be sold on terms permitted by the articles only so long as the company is not thereby issuing shares at a discount or evading the statutory requirement of court sanction.

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