Estoppel by conduct bars directors who assented to a share allotment from later challenging its validity.

Directors who attended, participated in and repeatedly approved a unanimous board resolution and subsequent minutes and balance-sheets are estopped from disputing an allotment of preference shares made to adjust amounts due to them; the court applied principles of assent and acquiescence to hold the plaintiffs bound and denied their recovery. The allotment made in discharge of debts under an articles power was held not to fall within the statutory pre-emptive offer regime for increases of subscribed capital; even if defective, such allotment is voidable only by aggrieved shareholders who were not parties to the allotment, not by participating directors.

---

---

Issues: (i) Whether the plaintiffs (directors) can question the allotment of seven preference shares made on March 10, 1967, where they attended and participated in the unanimous board resolution and subsequently approved minutes and balance-sheets; (ii) Whether the allotment of preference shares on March 10, 1967, contravened Section 81 of the Companies Act, 1956.

Issue (i): Whether the plaintiffs can question the allotment of shares made on March 10, 1967.

Analysis: The minutes of the board meeting of March 10, 1967, record a unanimous resolution allotting preference shares and identify the share numbers allotted to the plaintiffs. Under Section 194 of the Companies Act, 1956, minutes are evidence of the proceedings. The plaintiffs attended the meeting, did not dispute the existence of the resolution, participated in subsequent meetings that confirmed the minutes, and approved balance-sheets showing the allotted shares. Their conduct constituted assent to and confirmation of the allotment. Authorities on acquiescence and approval of company administration support that a participant who repeatedly approves minutes and accounts cannot later repudiate a transaction to which they were party.

Conclusion: The plaintiffs are bound by the unanimous allotment of preference shares and cannot recover the sum already adjusted against those shares; decision in favour of the appellant on this issue.

Issue (ii): Whether the allotment contravened Section 81 of the Companies Act, 1956.

Analysis: Clause 6 of the articles authorised directors to allot shares in payment or part payment for services or property in special circumstances. The allotment effected was to adjust amounts due to directors/creditors and was not an increase of subscribed capital by offering shares to the public. Section 81 applies to offers to existing shareholders on increase of capital and does not extend to allotments made to creditors in discharge of debts under a specific articles power. Even if Section 81 were held to be offended, such allotment would be voidable only at the instance of shareholders aggrieved by non-offer, not by a shareholder who accepted or participated in the allotment.

Conclusion: The allotment did not contravene Section 81 of the Companies Act, 1956; decision in favour of the appellant on this issue.

Final Conclusion: The lower appellate court's judgment is set aside; the trial court's decrees are restored and the second appeals are allowed, resulting in the appellant's success on the substantive issues decided.

Ratio Decidendi: Where directors who are creditors participate in and assent to a unanimous board resolution allotting shares in discharge of dues, and subsequently approve minutes and accounts recording that allotment, they are estopped from later repudiating the allotment; such allotments to adjust debts are not within Section 81 of the Companies Act, 1956, which governs offers on increase of subscribed capital.

---