Case: R.D. Goyal  Vs. Reliance Inds.Ltd

shares could be called a consumer? In CIT vs. Standard Vacuum Oil Co. while defining shares, this Court observed: "A share is not a sum of money; it represents an interest - by a sum of money and made up of diverse rights contained in the contract evidenced by the articles of association of the Company". 31. Therefore, it is after allotment, rights may arise as per the contract (Article of Association of Company). But certainly not before allotment. At that stage, he is only a prospective investor (sic in) future goods..." 29. Furthermore, as noticed, hereinbefore, the expression "goods", underwent an amendment in the year 1991. The relevant notes on clauses as contained in the Statement of Objects and Reasons of the Monopolies and Restrictive Trade Practices (Amendment) Bill, 1991 (Bill No. 198 of 1991) speaks thus:- "Clause 2 seeks to enlarge the definition of "goods" by including issue of shares before allotment. The scope of the definition of "service" is also being enlarged by including chit-fund. An explanation has also been added that any deals in real estate shall be deemed to be included in "service". 30. It is, therefore, evident that the said amendment is not explanatory or clarificatory in nature. By reason thereof, the definition of goods was sought to be enlarged which will have prospective operation. The very fact that the Parliament in its wisdom sought to enlarge the definition of goods by including the issue of shares by allotment as also the service is a clear point to the fact that thereby the mischief which was existing in the said provision was sought to be remedied.31. It is, therefore, axiomatic that before the said definition of "goods" was amended, the matter relating to issue of shares before allotment was not included therein. 32. In Shree Gopal Paper Mills Ltd. vs. Commissioner of Income-tax, Central Calcutta (1967) 37 Comp. Cas 240), the question which fell for consideration before a Bench of the Calcutta High Court was the meaning and scope of words "share", "issue of share" vis-a-vis "bonus share" issued to them. The Calcutta High Court noticed the decision of this Court in Shri Gopal Jalan & Co. vs. Calcutta Stock Exchange Association Ltd. (1963) 33 Comp. Cas. 862) wherein it was held that allotment of share means appropriation of unissued shares to a specified number of persons. It was further held that issue of shares is something distinct from allotment and is subsequent act whereby the title of the allottee becomes complete. 33. The matter thence came up before this Court in Shree Gopal Paper Mills Ltd. vs. Commissioner of Income-tax, Central Calcutta (1970) 77 I.T.R. 543). It was held by the High Court that a share cannot be held to have been issued unless a share certificate is given to the concerned person. This Court, however, disagreed with the view of the High Court only to the aforementioned extent. It was noticed: "... The words "allot" and "distribute" found in clause (b) of the resolution do not carry the matter further. Their meaning should be gathered from the context in which they were used. Clauses (b) and (c) of the resolution must be read harmoniously with clause (a). The word "allotment" has not been defined in the Companies Act. The meaning of the word "allot" or "allotment" will have to be gathered from the context in which those words are used. This court considered the meaning of the word "allotment" in Sri Gopal Jalan and Co. vs. Calcutta Stock Exchange Association Ltd. Therein, it referred to a large number of English decisions which have considered the meaning of that word. In that decision this Court referred to the observations of Chitty J. in In re Florence Land and Public Works Co.:"To my mind there is no magic whatever in the term "allotment" as used in these circumstances. It is said that the allotment is an appropriation of a specific number of shares. It is an appropriation, not of specific shares, but of a certain number of shares". In Sri Gopal Jalans case Sarkar J (as he then was) quoted with approval the following passage from Farwell L.J. in Mosley vs. Koffyfontain Mines Ltd.: "As regards the construction of these particular articles, it is plain that the words "creation", "issue" and "allotment" are used with three different meanings familiar to business people as well as to lawyers. There are three steps with regard to new capital; first, it is created; till it is created the capital does not exist at all. When it is created it may remain unissued for years, as indeed it was here; the market did not allow of a favourable opportunity of placing it. When it is issued it may be issued on such terms as appear for the moment expedient. Next comes allotment. To take the words of Sterling J. in Spitzel vs. Chinese Corporation, he says; "What is an allotment of shares. Broadly speaking, it is an appropriation by the directors or the managing body of the company of shares to a particular person". After examining the various decisions, Sarkar J. observed: "It is beyond doubt from the authorities to which we have earlier referred, and there are many more which could be cited to show the same position, that in company law "allotment" means the appropriation out of the previously unappropriated capital of a company, of a certain number of shares to a person. Till such allotment the shares do not exist as such. It is on allotment in this sense that the shares come into existence..." 34. In view of the aforementioned authoritative pronouncement of this Court it must be held that shares pending allotment in view of the provisions of law as thence existed could not be said to be goods.35. For the aforementioned reasons, it is not necessary to go into the other questions raised at the Bar.36. For the views, we have taken, the judgment of the Commission cannot be found fault with.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. Debentures, as ordinarily understood, in our considered view, would not come within the purview of definition of goods as it is simply an instrument of acknowledgement of debt by the company whereby undertakes to pay the amount covered by it and till then it undertakes further to pay interest thereon to the debenture-holders.It is true that when there exists a statutory definition in respect of an expression, the dictionary meaning thereof cannot be applied. It is also true that when a statutory definition uses the word "includes", it provides an extended meaning thereto but it is equally well-settled that the words are required to be construed in terms of the legislative intent.18. It is furthermore a well-settled principle of law that if the words are general and not precise, their interpretations are to be restricted to the fitness of matter.In the instant case, the action on the part of the company, in our opinion, does not involve any sale of goods or rendition of any service.It is, therefore, evident that the said amendment is not explanatory or clarificatory in nature. By reason thereof, the definition of goods was sought to be enlarged which will have prospective operation. The very fact that the Parliament in its wisdom sought to enlarge the definition of goods by including the issue of shares by allotment as also the service is a clear point to the fact that thereby the mischief which was existing in the said provision was sought to be remedied.31. It is, therefore, axiomatic that before the said definition of "goods" was amended, the matter relating to issue of shares before allotment was not included therein.In view of the aforementioned authoritative pronouncement of this Court it must be held that shares pending allotment in view of the provisions of law as thence existed could not be said to be goods.35. For the aforementioned reasons, it is not necessary to go into the other questions raised at the Bar.36. For the views, we have taken, the judgment of the Commission cannot be found fault with.