JUDGMENT Harries, C.J. - This is an appeal from a judgment and order of Sinha J. dated September 10, 1948, directing that the share register of the Appellant company be rectified by showing therein the name of the Respondent as the holder of share No. 145. 2. The Appellant company was incorporated in the year 1923 to acquire and take over the assets and liabilities of an unincorporated association known as the Calcutta Stock Exchange Association. The company was incorporated in order to conduct the affairs of the Stock Exchange founded by that association, to facilitate the transaction of business on such Stock Exchange and to make rules and bye-laws regulating the conditions upon which business on the Stock Exchange should be transacted and governing the conduct of persons transacting the same. 3. The authorised capital of the company is three lakhs of rupees divided into 300 shares of Rs. 1,000 each. All the shares are fully paid and the Respondent was the owner of one fully paid share No. 145. He was a member of the Stock Exchange and carried on business as dealer and broker in stocks and shares at 7, Lyons Range, Calcutta. 4. It appears that between February 16, 1944, and May 31, 1944, the Respondent sold to a firm of stock and share brokers, Messrs. A. Ray & Co., a number of shares in different companies. The Respondent was unable to deliver some of these shares to the purchasers and Messrs. A. Ray & Co., who were also members of the Stock Exchange, reported the matter to the Appellant company. The company authorised Messrs. A. Ray & Co., to buy shares in the market in place of those which the Respondent had failed to deliver and the company further ordered the Respondent to pay to Messrs. A. Ray & Co. the difference between the rates at which Messrs. A. Ray & Co. had eventually purchased the shares and the contract rates. Messrs. A. Ray & Co. bought shares pursuant to the directions given to them by the company and claimed from the Respondent a sum of Rs. 6,971-4-0 as the difference between the rates at which the shares were purchased and the contract rates. It appears that the Respondent had also failed to perform his obligations towards other firms or persons who were members of the Stock Exchange. 5. The Respondent failed to pay Messrs. 6,971-4-0 as the difference between the rates at which the shares were purchased and the contract rates. It appears that the Respondent had also failed to perform his obligations towards other firms or persons who were members of the Stock Exchange. 5. The Respondent failed to pay Messrs. A. Ray & Co., the said sum of Rs. 6,971-4 and in due course the company passed a resolution suspending the Respondent from membership of the Stock Exchange. 6. On January 31, 1945, the Respondent instituted a suit in this Court against the company for a declaration that the order of suspension was illegal and ultra vires and that the Respondent was still a member of the company. This suit was dismissed by a single Judge on July 4, 1947, and, on May 4, 1948, an appeal from that decree was dismissed. It appears that that decree has now become final. 7. In the month of May, 1948, notice was given to the Respondent that the case of Messrs. A. Ray & Co. would be placed in the agenda of the next meeting of the disciplinary committee of the association and, on May 17, 1948, the Respondent was informed by a letter from the company that he had been expelled from membership of the company and that his share No. 145 had been forfeited to the company. The company then called for tenders for purchase of the forfeited share in the company. On May 19, 1948, the Respondent wrote to the company, calling upon it to restore his name to the share register by showing that he was the holder of share No. 145 in the company. The company failed to rectify the register and, on May 21, 1948, a notice was taken out claiming a rectification of the same. 8. The matter eventually came before Sinha J., who held that the forfeiture of this share was illegal and, therefore, the Respondent was still the holder thereof. He thereupon ordered a rectification of the register and it is from that decision that the present appeal has been preferred. 9. It is not now contended that the Respondent's suspension and ultimate expulsion from the association was illegal as a Bench of this Court has upheld the decision of the learned single judge dismissing the Plaintiff's suit for a declaration that such suspension was illegal. 9. It is not now contended that the Respondent's suspension and ultimate expulsion from the association was illegal as a Bench of this Court has upheld the decision of the learned single judge dismissing the Plaintiff's suit for a declaration that such suspension was illegal. What the Respondent, however, contended in the Court below was that the company had no right whatsoever to forfeit his share and that the forfeiture claimed was illegal and wholly null and void. 10. Before Sinha J. it was contended on behalf of the Respondent that the order of forfeiture was void by reason of the fact that the Articles of Association authorising the same were invalid, as the forfeiture contemplated in those Articles involved a reduction of capital without the approval of a court and also involved a trafficking in the shares of the company. It was further contended that only one form of forfeiture was permissible under the Indian Companies Act and that was forfeiture of a share not fully paid up for non-payment of a call. All other forms of forfeiture, it was urged, were unauthorised by the Act and illegal. 11. On behalf of the Appellant it was contended that forfeiture generally was recognised by the Companies Act and that there was no provision in the Act which made such forfeiture illegal. It was further contended that the forfeiture in the circumstances of the present case involved neither a reduction of capital, nor a trafficking in shares and, therefore, was legal. 12. In the view of Sinha J., all forms of forfeiture inevitably involves a reduction of capital, though one form of forfeiture was valid, namely, forfeiture for non-payment of call. In the view of Sinha J., that form of forfeiture, though it involves a reduction of capital, was authorised by the Act, but as no other form was so authorised, forfeitures other than those for non-payment of calls were illegal and void. He further held that, in the circumstances of this case, the Article permitting forfeiture and re-sale in fact permitted trafficking in shares and, therefore, was ultra vires and could not be enforced. It appears that the company was restrained at an early stage of these proceedings from selling the share and the share still remains unsold. 13. He further held that, in the circumstances of this case, the Article permitting forfeiture and re-sale in fact permitted trafficking in shares and, therefore, was ultra vires and could not be enforced. It appears that the company was restrained at an early stage of these proceedings from selling the share and the share still remains unsold. 13. Before discussing the various contentions put forward on behalf of the parties before this Bench, it will be necessary shortly to set out the relevant provisions contained in the Articles of Association of the company. 14. The Memorandum of Association states that the capital of the company was rupees three lakhs divided into 300 shares of Rs. 1,000 each with powers to increase or reduce the capital for the time being. The objects of the company are set out at length, but I have already summarised the main objects stated in the memorandum and it is unnecessary to repeat them. 15. In Article 1 of the Articles, a "member" is defined as any individual or firm registered in the register as the owner of one or more share in the association. 16. By Article 2 the regulations contained in Table A in the first schedule to the Indian Companies Act shall not apply to the company. 17. Article 4 provides that none of the funds of the association shall be employed in the purchase of, or lent on the security of, shares of the company. 18. It is, therefore, clear from the Articles themselves that the company were forbidden to purchase their own shares. 19. Article 19 provides that all shares are to be fully paid up or credited as fully paid up on allotment. 20. Articles 21 to 30 and Article 34 deal with the right to suspend and expel a member and to forfeit his shares. 19. Article 19 provides that all shares are to be fully paid up or credited as fully paid up on allotment. 20. Articles 21 to 30 and Article 34 deal with the right to suspend and expel a member and to forfeit his shares. Article 21 empowers the committee of the association to expel or suspend any member in certain events and, among those events are, where a member refuses to abide by the decision of the committee in any matter, which under the Articles or bye-laws for the time being in force is made subject to a reference to the committee and in cases where a member commits a breach of such Articles or bye-laws or is guilty of any improper conduct, the proviso to this Article makes it necessary that the expulsion of a member must be passed by a majority consisting of not less than two-thirds of the members of the committee at a meeting specially convened for that purpose. 21. Article 22 provides that any member, who has been declared a defaulter by reason of his failure to fulfil any engagement between himself and any other member or members and who fails to fulfil such engagement within six months from the dale upon which he has been so declared a defaulter shall, at the expiration of such period of six months, automatically cease to be a member. 22. It is to be observed that the bye-laws provide that any member who shall fail to fulfil any engagement between himself and another member or members may be declared a defaulter by the committee and on such declaration his name is to be posted as a defaulter on the notice board of the Association. 23. Article 23 empowers the committee to suspend a member pending consideration of a resolution for his expulsion and, whilst so suspended, a member cannot exercise any of the privileges of membership. 24. Article 24 provides that, upon any resolution being passed by the committee expelling a member, the share held by such member shall be ipso facto forfeited. 25. Article 26 requires notice to be given to any person who has been expelled and his share thereby forfeited and an entry of the forfeiture must be made in the register. 26. Then follows two most important Articles which, I think, should be set out in extensor : 27. 25. Article 26 requires notice to be given to any person who has been expelled and his share thereby forfeited and an entry of the forfeiture must be made in the register. 26. Then follows two most important Articles which, I think, should be set out in extensor : 27. Any share so forfeited shall be deemed to be the property of the association, and the committee shall sell, re-allot, and otherwise dispose of the same in such manner to the best advantage for the satisfaction of all debts which may then be due and owing either to the association or any of its members arising out of transactions or dealings in stocks and shares. 28. Any member whose share has been so forfeited shall, notwithstanding, be liable to pay and shall forthwith pay to the association all moneys owing by the member to the association at the time of the forfeiture together with interest thereon, from the time of forfeiture until payment at 12 per cent. per annum, and the committee may enforce payment thereof, without any deduction or allowance for the value of the share at the time of forfeiture. 27. Article 34 provides that upon a sale after forfeiture the committee should cause the purchaser's name to be entered in the register in respect of the shares sold. 28. Article 90(20) empowers the company to make bye-laws governing the relationship between members of the association and Article 92 requires the association to make the requisite annual returns in accordance with Section 32 of the Indian Companies Act. 29. Article 97 requires the company to draft its balance-sheet in the form marked F in the third schedule to the Indian Companies Act or as near thereto as circumstances will permit. 30. Sir Asoka Roy, on behalf of the Appellants, contended before us that the decision of Sinha J. was erroneous and that a decision of Das J. in the case of Naresh Chandra Sanyal v. Ramani Kanta Ray I. L. R. [1945] Cal. 105 in which he held that a forfeiture of a share in this company in precisely similar circumstances was valid, should be preferred to that of Sinha J. and followed. He argued that the forfeiture which occurred in the present case did not result in a reduction of capital and could not be held to be illegal on that ground. 105 in which he held that a forfeiture of a share in this company in precisely similar circumstances was valid, should be preferred to that of Sinha J. and followed. He argued that the forfeiture which occurred in the present case did not result in a reduction of capital and could not be held to be illegal on that ground. He further contended that even if the share was sold after forfeiture, such a transaction could never amount to trafficking in the company's shares. Lastly, he contended that the Companies Act recognised forfeiture generally and, that being so, it must be held that the forfeiture in the present case was authorised by the Companies Act and was, therefore, valid. The points made by Sir Asoka Roy were the grounds for the decision of Das J. in the earlier case which I have mentioned and which I shall have to deal later in this judgment. 31. On behalf of the Respondents, it was urged that all forms of forfeiture necessarily involved a reduction of capital. The Indian Companies Act only recognised one form of forfeiture, namely, forfeiture for non-payment of calls. Though that form of forfeiture involved a reduction of capital it was permissible and the inevitable reduction of capital did not require the approval of the court. It was further contended that, in the circumstances of this case, the Articles permitting the disposal of the shares were clearly ultra vires, as such disposal would amount to trafficking. 32. Before dealing with the contentions put forward on behalf of the parties, I should like to deal with a preliminary matter raised by Sir Asoka Roy. He contended that it was not open for Sinha J. in this case to arrive at the decision at which he did. Sir Asoka Roy argued that, as there was an earlier decision of a single Judge sitting on the Original Side upon this very question, Sinha J. should have followed it and left it to an Appeal Bench to decide whether that view was correct or not. Sir Asoka Roy contended that there was a special reason in this case why the earlier decision of Das J. should have been followed, because that decision was a considered one and the judgment delivered was most elaborate and exhaustive. Sir Asoka Roy contended that there was a special reason in this case why the earlier decision of Das J. should have been followed, because that decision was a considered one and the judgment delivered was most elaborate and exhaustive. Reliance was placed upon observations made in two cases in this Court, namely, Chaitram Rambilas v. Bridhichand Kesrichand I. L. R. (1915) Cal. 1140. and Virjiban Dass Moolji v. Biseswar Lal Hargovind I. L. R. (1920) Cal. 69. In the former case, Jenkins C. J. was of opinion that a single Judge, sitting on the Original Side, was bound to follow an earlier decision of a single Judge, sitting on that side. In the latter case Asutosh Mookerjee J. explained these observations of Jenkins C. J. In the view of Mookerjee J., who was a member of the Bench in the earlier case, it was not intended to lay down any hard and fast rule and, according to Mookerjee J., the true rule was that a learned Judge on the Original Side should follow an earlier decision of a single Judge unless he was convinced that that earlier decision was erroneous. Normally, I think, a single Judge should follow an earlier decision of a single Judge on the Original Side. He should not too readily differ from such a decision, but if it is established to his satisfaction that the earlier decision is clearly erroneous, or, in other words, he is convinced that it is wrong, then it appears to me that he may well differ; otherwise a decision which may even be manifestly wrong may remain for years as a precedent. In the present case it is clear that Sinha J. was convinced that the earlier decision of Das J. was erroneous and, therefore, I am unable to say that he was wrong in differing from it. 33. I shall now deal with the first argument of Sir Asoka Roy that the forfeiture in the present case neither involved a reduction of capital, nor did it amount to a trafficking in shares. 34. As I have stated earlier, the Articles of the company in this case permitted the company to reduce its share capital, but it is clear that it could not do so without the confirmation of the Court-see Section 55 of the Indian Companies Act. 34. As I have stated earlier, the Articles of the company in this case permitted the company to reduce its share capital, but it is clear that it could not do so without the confirmation of the Court-see Section 55 of the Indian Companies Act. Further, it is clear that if the transaction in the present case amounted to a purchase by the company of its own shares, the consequent reduction of capital effected would require the sanction of the Court which of course was not asked for or obtained in' this case-see Section 54A of the Indian Companies Act. It is, therefore, clear that, if the forfeiture contemplated by the Articles in this case involved a reduction of capital or was in effect a purchase by the company of its own shares, the forfeiture would be invalid without the sanction of the Court. 35. As I have stated earlier, Sinha J. was of opinion that all forms of forfeiture inevitably involved a reduction of capital. English courts have always treated forfeiture and surrender as similar and it would appear to follow that, in Sinha J's view, all surrender of shares by shareholders to the company would also involve a reduction of capital. 36. In Sinha J's opinion, a reduction of capital inevitably followed, because when a share reverted to the company it was ipso facto extinguished. He pointed out that a company could not own one of its own shares and that, I think, is clear, for obviously a company could not demand payment of a dividend from itself to itself or be liable to itself for payment of such. If a company could hold shares, it could hold a share not fully paid up and it would, therefore, become liable to itself upon a call. A share from its very value, it was said, cannot be owned by a company. Farwell J. in the case of Borland's Trustee v. Steel Brothers & Co., Limited [1901] 1 Ch. 279 defined a share in the following terms : A share, according to the Plaintiff's argument, is a sum of money which is dealt with in a particular manner by what are called for the purpose of argument executory limitations. To my mind it is nothing of the sort. 279 defined a share in the following terms : A share, according to the Plaintiff's argument, is a sum of money which is dealt with in a particular manner by what are called for the purpose of argument executory limitations. To my mind it is nothing of the sort. A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with Section 16 of the Companies Act, 1862. The contract contained in the Articles of Association is one of the original incidents of the share. A share is not a sum of money settled in the way suggested, but is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount. That view seems to me to be supported by the authority of New London and Brazilian Bank v. Brocklebank (1882) 21 Ch. D. 302. 37. It is to be observed that this definition was approved of by Romer L. J. in the case of In re Sir William Thomas Paulin. In re Percy Crossman [1935] 1 K. B. 26. As that is the nature of a share it would, according to Sinha J., be extinguished the moment it came into the hands of the company. 38. A share is, by reason of Section 28 of the Indian Companies Act, moveable property transferable in the manner provided for by the Articles of Association. It is also within the definition of the term "goods" as defined in the Sale of Goods Act. That, however, would not mean that a share of a company, reverting to the company, would not be extinguished in the hands of the company. 39. In the present case, Article 27 of the Articles of Association provided that the company was bound to sell or re-allot any share forfeited, but even so, it was contended by the Respondents that the share would, on forfeiture, belong to the company, even though for a very short space of time. 39. In the present case, Article 27 of the Articles of Association provided that the company was bound to sell or re-allot any share forfeited, but even so, it was contended by the Respondents that the share would, on forfeiture, belong to the company, even though for a very short space of time. Once it came into the hands of the company, it would, it was argued, be automatically extinguished and could, therefore, never be re-sold or re-allotted as provided by the Articles. 40. It will be observed that by the Article 27 of the Articles of Association it is not provided that a share, on forfeiture, shall be the property of the company. What is said is that any share forfeited shall be deemed to be the property of the company. The forfeiture contemplated, therefore, is not forfeiture in the true sense of the word, making a share the property of the company. When it is said that a share will be deemed to be the property of the company on forfeiture it means that in fact it is not the property of the company, but will be so regarded for the purpose of the Article. This Article 27 then provides that the share which is to be deemed to be the property of the company shall be sold, re-allotted or otherwise disposed of in order to liquidate certain debts. What the Article contemplates is that the share should never be the property of the company, but that the company should have a right to sell it and apply the proceeds in accordance with the terms of the Article. I am not suggesting that Article 27 constitutes the company an agent for the shareholder, but it does contemplate a form of forfeiture which merely involved the finding of a new shareholder in place of the old. 41. Further, it is to be observed that the forfeiture contemplated in Articles 27 and 28 of the Articles of Association of the company does not per se extinguish the liability of the defaulting shareholder. That, I think, is made clear from the terms of Article 28. It is true that by Article 27 the company must apply the proceeds of the sale in a certain manner, but that is different from the act of forfeiture itself discharging the liability of the defaulting shareholder wholly or in part. 42. That, I think, is made clear from the terms of Article 28. It is true that by Article 27 the company must apply the proceeds of the sale in a certain manner, but that is different from the act of forfeiture itself discharging the liability of the defaulting shareholder wholly or in part. 42. According to Sir Asoka Roy, the forfeiture in the present case could not possibly involve a reduction of capital. Nothing was paid for the share either directly or indirectly. Had the act of forfeiture resulted in a reduction of the liability of the defaulting shareholder, Sir Asoka Roy conceded, it might be said that the capital had thereby been reduced as it would have been reduced if the transaction amounted to a purchase of the share. However, the forfeiture involved no payment by the company or a reduction in any liability to the company. That being so, he urged that no question of a reduction of capital could arise. He further stressed that the company, by reason of Article 27, was bound to sell or re-allot the share and that the terms of the Article forbade the company retaining the share. Sir Asoka Roy conceded that if, after a forfeiture, the share was retained with a view to cancellation or extinction that might amount to a reduction of capital, but where the Article required the company to sell or re-allot in any event, the share would continue to exist and the share capital would remain unattested. According to Sir Asoka Roy, the effect of the re-sale of the share would be to leave the capital of the company unaffected and any surplus proceeds, after satisfying the debts of the defaulting shareholder, would be an addition to the assets of the company. 43. Sinha J. placed great reliance upon a decision of Eve J. in the case of Hopkinson v. Mortimer, Harley & Co., Limited [1917] 1 Ch. 646. By Article 22 of the Articles of Association of that company, it was provided that the company shall have a first and paramount lien upon all the shares registered in the name of each member for the debts, liabilities and engagements of such member. Article 23 provided that the board might sell the shares for the purpose of enforcing the lien, and might also, by a resolution to that effect, forfeit the shares subject to a lien. Article 23 provided that the board might sell the shares for the purpose of enforcing the lien, and might also, by a resolution to that effect, forfeit the shares subject to a lien. The holder of fully paid shares brought an action against the company and its directors asking for a declaration, in effect, that his fully paid shares were not subject to the power of forfeiture for debts on the ground that it was ultra vires and illegal. Eve J. held that under this power the forfeiture for debts due from a member generally, as distinct from those due from him as a contributory, would amount to an illegal reduction of capital. He further held that the lien being an equitable charge in the nature of a mortgage the power to forfeit the Plaintiff's shares, on his failure to redeem on a seven day's notice, was a clog on the equity of redemption and as such invalid and ultra vires and the Plaintiff was, therefore, entitled to the declaration claimed. 44. It is to be observed that the later reason given by Eve J. was sufficient to dispose of the case and, therefore, it might be said that his observation that the power of forfeiture would amount to an illegal reduction of capital was unnecessary and, therefore, obiter. At page 653 Eve J. observed : I pass on to the question whether forfeiture under this power would or would not result in an illegal reduction of capital. It is true that the assumption and exercise of a power of forfeiture by a joint stock company has long been recognised as reasonable, and indeed in some circumstances as almost necessary, and that the reduction brought about by the exercise of such a power is not inconsistent with the implied statutory prohibition against the reduction of capital. It is to be presumed, as contended for by Mr. Gore-Browne, that the legislature, in framing Section 26 of the Act of 1862 and Article 17 to 22 of Table A, had in mind the decision in such cases asSparks v. Liverpool Waterworks Proprietors (1807) 13 Ves. It is to be presumed, as contended for by Mr. Gore-Browne, that the legislature, in framing Section 26 of the Act of 1862 and Article 17 to 22 of Table A, had in mind the decision in such cases asSparks v. Liverpool Waterworks Proprietors (1807) 13 Ves. 428: 33 E. R. 354 and Clark and Chapman v. Hart (1858) 6 H. L. C. 633: 10 E. R. 1443 and appreciated that a right of forfeiture for non-payment of calls and contributions had long been recognised as the only effective way of preventing co-adventurers from making default in performing their engagements; but I do not think it follows from anything to be found in the Act or in any reported case that the reduction of capital brought about by means of a forfeiture for non payment of debts due from a member generally, as distinct from debts due from him as a contributory, is legalised without being sanctioned by the court. Even if the forfeiture is made without any part of the value of the shares being set off against the debt, the capital is reduced by the amount paid upon the forfeited shares, and if on the other hand the debt is partially or wholly satisfied the transaction involves not only the same reduction, but what is equivalent to an actual payment by the company ; and how can this operation be said to be anything but a purchase by the company of its own shares ? 45. From these observations it is clear that Eve J. was of opinion that the forfeiture in the case of Hopkinson v. Mortimer, Harley & Co., Limited (supra) would involve a reduction of capital, whether the act of forfeiture satisfied the debt in whole or in part or not. As I have already said, if the act of forfeiture satisfied a debt of the shareholder, the transaction would amount to a purchase of the share of the company and would clearly amount to a reduction of capital and would offend against Section 54A of the Companies Act. In Hopkinson's case the forfeiture was exercised to enforce a lien and, therefore, the act of forfeiture itself extinguished the shareholder's debt to the company wholly or in part. In Hopkinson's case the forfeiture was exercised to enforce a lien and, therefore, the act of forfeiture itself extinguished the shareholder's debt to the company wholly or in part. There can be no doubt, therefore, that upon the facts of that case it must be held that it was rightly decided, but I have grave doubts as to whether the general proposition laid down by Eve J. is supported by authority. When he laid down a general proposition that all forms of forfeiture other than forfeiture for non-payment of calls involved a reduction of capital requiring the approval of the court, Eve J. was going further then was necessary for the decision of the case, and, therefore, this general observation might well be regarded as obiter. Further, it is by no means certain whether the learned Judge intended to lay down any general proposition, because at p. 655 be observed : I am not saying that a power to forfeit a contributory's shares for non-payment of debts generally is an invalid power to be inserted in the Articles of a company registered under the Companies Acts, but In re Dunlop (1882) 21 Ch. D. 583 is no authority for saying it is a valid one. 46. By this observation it would appear that it was never the intention of the learned Judge to lay down any general rule that forfeiture whether in enforcement of a lien or otherwise necessarily involved an illegal reduction of capital. 47. Sinha J., as I have said, relied upon this case for the general proposition that all forms of forfeiture involved a reduction of capital, though one form, namely, forfeiture for non-payment of calls was authorised by statute, and, therefore, the consequent reduction of capital did not require the approval of the court. Hopkinson's case does support this view, but in my judgment that case should be read in the light of its particular facts and I think there can be no doubt that on these particular facts it was rightly decided. It should not, however, be regarded as a clear authority for the proposition that forfeiture otherwise than in enforcement of a lien necessarily involved illegal reduction of capital. It should not, however, be regarded as a clear authority for the proposition that forfeiture otherwise than in enforcement of a lien necessarily involved illegal reduction of capital. That was the view of Das J. who dealt with Hopkinson's case at length in the judgment in Naresh Chandra Sanyal v. Ramani Kanta Ray (supra), and I respectfully agree with the criticisms by Das J. of the decision of Eve J. in Hopkinson's case. 48. Sinha J. was also greatly influenced by a dictum of a very eminent English Lord Justice, Cozens-Hardy L. J., in the case of Belleroy v. Rowland & Marwood's Steamship Co. Limited [1902] 2 Ch. 14 .. After dealing with the facts in that case, the learned Lord Justice observed at p. 32 : It is not necessary, in my view, for the purpose of the present case to go beyond this. But a careful consideration of the speeches of Lord Macnaghten and Lord Watson in Trevor v. Whitworth (1887) 12 AC 409 and British and American Trustee and Finance Corporation v. Couper [1894] A. C. 399 has satisfied me that the real objection to a surrender of spares does not lie in the fact that money has been paid by the company to acquire the shares. The objection is founded on a larger proposition. A company cannot be a shareholder in itself. Every surrender of shares, whether fully paid up or not, involves a reduction of capital, which is unlawful, except when sanctioned by the court under the Companies Acts of 1867 and 1877. Forfeiture is a statutory exception, and is the only exception. For I regard surrender, under circumstances which would justify a forfeiture, as merely equivalent to a forfeiture. 49. The forfeiture which the learned Lord Justice refers to as a statutory exception is the forfeiture for non-payment of calls. It is, therefore, clear that, in the view of the learned Lord Justice, all surrenders or forfeitures other than for non-payment of calls involved a reduction of capital and would be void and illegal without the approval of the Court. 50. It is clear from the opening words of this dictum that it is obiter, but nevertheless the observations of a Judge of the eminence of Cozens-Hardy L. J. deserve great respect. 50. It is clear from the opening words of this dictum that it is obiter, but nevertheless the observations of a Judge of the eminence of Cozens-Hardy L. J. deserve great respect. In Sinha J.'s view, these observations of the learned Lord Justice were supported by earlier authority of the English Courts, but according to Sir Asoka Roy the., earlier decisions of the English Courts, so far from supporting these observations, clearly showed that the dictum was erroneous and should, therefore, not be followed. Cozens-Hardy L. J. expressly referred to the speeches of Lord Macnaghten and Lord Watson in Trevor v. Whitworth (supra) and British and American Trustee and Finance Corporation v. Couper (supra) and in his view the speeches of those two learned Lords lay down the rule that forfeiture or surrender generally involved a reduction of capital. It will, therefore, be necessary to consider the earlier decisions of the English Courts and in particular the speeches of the learned Lords referred to by Cozens-Hardy L. J. 51. The earliest English case relied upon in later cases is Teasdals's case (1873) L. R. 9 Ch. 54. In that case two thousand 10 shares in a company had been issued, of which 901 (called X shares) had been fully paid-up, and of the other 1,099 (called A shares) 2 10s. per share had been paid. Special resolutions were duly passed that the X shares should be cancelled, and two shares of 10 each, with 5 per share paid thereon, given in lieu of each, and that the A shares should be cancelled and one share of 10, with 5 paid, be given in lieu of every two of them. These resolutions were assented to by all the shareholders and duly registered, and the shareholders generally accepted, in lieu of their old shares, shares (which were called in the proceedings B shares) with 5 each paid. Teasdale, a holder of A shares, having thus accepted B shares, sold and transferred them, and in the annual lists sent to the Registrar was treated as having then ceased to be a member. About seven years after the passing of the resolutions, the company was ordered to be wound up, and the liquidator placed on the list of contributories the name of Mr. About seven years after the passing of the resolutions, the company was ordered to be wound up, and the liquidator placed on the list of contributories the name of Mr. T., and also the names of all the other persons who at the passing of the resolutions were holders of A shares, as well as the names of the persons who had become holders of the B shares given in lieu of them: it was held by the Court of appeal that Teasdale's name must be removed from the list, for that the resolutions ought to be construed not as purporting to oblige all the shareholders to accept B shares in lieu of their old shares, but only as empowering the directors to effect such exchange with all shareholders who wished it, and that so construed the resolutions were not ultra vires but were effectual as special resolutions altering the Articles of Association, and that a surrender of the old shares made in pursuance of them was valid. 52. It is clear that in this case the company accepted surrender of shares and it was held that the surrender was valid. The Articles were construed as giving power to the directors to accept surrender of old shares and issue new shares in their stead. It is to be observed that at the time of these transactions there was no provision of law requiring the approval of the court for reduction of capital. It was never suggested, however, that the transactions in question involved a reduction of capital and the case is certainly an authority for the proposition that the acceptance of a surrender of shares in lieu of other shares would not ipso facto extinguish the shares so surrendered. It was pointed out by James L. J. that the effect of these transactions was really to increase the capital of the company and that could never have been so if the surrendered shares were automatically extinguished the moment they came into the hands of the company as suggested by the Respondents in this case. 53. The next English case is Hope v. International Financial Society (1876) 4 Ch. D. 327. 53. The next English case is Hope v. International Financial Society (1876) 4 Ch. D. 327. In that case a company, having 150,000 shares issued and half paid up, passed a special resolution that the directors should have power to apply the company's assets in purchasing, from any shareholders willing to sell, any number of shares not exceeding 100,000; and that such shares should not he re-issued by the directors without the authority of a general meeting. The company had no power under its Memorandum of Association or Articles to purchase or deal in its own shares or accept surrender. It was held by the Court of appeal, affirming the decision of Bacon, V. C., that the scheme was ultra vires and invalid, being either an attempt to reduce the capital of the company without complying with the provisions of the Companies Act, 1867, Sections 9 to 13, or else a trafficking in the shares of the company which was not authorised by the memorandum of association. 54. There was also a clause in the Articles of Association providing that the shares of any shareholder who directly or indirectly commenced or threatened any action, suit or other proceeding against the company or the directors should be forfeited on payment to him of the full market value: it was held that this clause was invalid as contrary to public policy as by it the shareholders were in effect forbidden to move the court. 55. In this case Teasdale's case (supra) was referred to and the actual decision was approved of, though James L. J. pointed out that his earlier view expressed in the judgment in Teasdale's case, that the power to purchase shares by a company would be good, could not be sustained. Teasdale's case was distinguished, because it was pointed out that in that case there was no reduction of capital, but on the contrary the capital was Increased, whereas in Hope's case the effect of the purchase of shares by the company was an actual reduction of capital Brett L. J., at p. 340, pointed out that if the shares were purchased with an intention to re-issue, that would amount to a trafficking in shares, but if it was not intended to re-issue the shares purchased, then in his view the amount of capital represented by those shares was necessarily extinguished. Brett L. J. then made the following observation: It is true to say that the mere power to accept a surrender or a mere power of forfeiture does not alter the Memorandum of Association, because it is only accepting a surrender from one shareholder for the purpose of procuring another shareholder, or forfeiting the shares of one shareholder for the purpose of obtaining another shareholder; the amount of capital issuable, or which the company has power to issue, is not modified at all. 56. This last observation of Brett L. J. does, I think, cover the case now before us. On a true reading of Articles 27 and 28 of the Articles of Association the forfeiture here is forfeiture of the share of one shareholder for the purpose of obtaining another shareholder. In the view of Brett L. J. such a forfeiture did not effect a reduction of capital and was not a trafficking in shares. 57. The next case of importance is In re Dronfield Silkstone Coal Company (1880) 17 Ch. D. 76 in which it was held by Jessel M. R. that a power given in the Articles of Association of a company to purchase its own shares was illegal. This decision was reversed by the Court of appeal, but in a later decision of the House of Lords, Trevor v. Whitworth (1887) AC 409, to which reference will be made later, the view of the Court of appeal was disapproved of and the reasoning of Jessel M. R. was affirmed. The learned Master of the Rolls at p. 84 referred with approval to what James L. J. had said in the case ofHope v. International Financial Society (1870) 4 Ch. D. 327. In that case James L. J. had said : We have been referred to several cases in which a power to accept surrender of shares, and the more common case of a power to declare a forfeiture of shares and to deal with those forfeited, have been held to be good. 58. It would appear that the learned Master of the Rolls did not hold the view that forfeiture or surrender inevitably involved a reduction of capital, though he held that purchasing shares would involve such a reduction, or that the transaction would amount to trafficking in shares if the shares were bought and then re-sold. 59. 58. It would appear that the learned Master of the Rolls did not hold the view that forfeiture or surrender inevitably involved a reduction of capital, though he held that purchasing shares would involve such a reduction, or that the transaction would amount to trafficking in shares if the shares were bought and then re-sold. 59. The question of the effect of a purchase of shares was again considered by the House of Lords in the well known case of Trevor v. Whitworth (supra). The Articles of Association of the company concerned, which was a company carrying on a manufacturing business, authorised the company to purchase its own shares. The company having gone into liquidation, a former shareholder made a claim against the company for the balance of the price of his shares sold by him to the company before the liquidation and not wholly paid for. The House of Lords, reversing the decision of the Court of appeal, held that such a company had no power under the Companies Acts to purchase its own shares, and that the purchase was, therefore, ultra vires, and the claim for the balance of the purchase price failed. 60. This case concerns the purchase of shares. But there are observations of the learned Lords from which it can be inferred that their Lordships did not regard surrender or forfeiture of shares as on the same footing as a purchase of them. Lord Herschell was clearly of opinion that on the facts of that case the transaction amounted to a trafficking in shares, because the shares were purchased with a view to re-sale. He was also of opinion that, if the company retained the shares so purchased, the capital would be reduced. At p. 417 he observed: It is urged that the views I have expressed are inconsistent with the forfeiture and surrender of shares in a company. I do not think so. The forfeiture of shares is distinctly recognised by the Companies Act, and by the Articles contained in the schedule, which in the absence of other provisions regulate the management of a limited liability company. It does not involve any payment by the company and it presumably exonerates from future liability those who have shown themselves unable to contribute what is due from them to the capital of the company. Surrender no doubt stands on a different footing. It does not involve any payment by the company and it presumably exonerates from future liability those who have shown themselves unable to contribute what is due from them to the capital of the company. Surrender no doubt stands on a different footing. But it also does not involve any payment out of the funds of the company. If the surrender were made in consideration of any such payment, it would be neither more nor less than a sale, and open to the same objections. If it were accepted in a case when the company were in a position to forfeit the shares, the transaction would seem to me perfectly valid. There may be other cases in which a surrender would be legitimate. As to these I would repeat what was said by the late Master of the Rolls in In re Dronfield & c. Co. (1880) 17 Ch. D. 76: "It is not for me to say what the limits of surrender are which are allowable under the Act, because each case as it arises must be decided upon its own merits. 61. Lord Watson was also of opinion that the transaction involved in that case either amounted to a reduction of capital or a trafficking in shares. At p. 424 he draws a distinction between purchase and forfeiture and surrender. He observed : When a share is forfeited or surrendered, the amount which has been paid upon it remains with the company, the shareholder being relieved of liability for future calls, whilst the share itself reverts to the company, bears no dividend, and may be re-issued. When shares are purchased at par, and transferred to the company, the result is very different. The amount paid up on the shares is returned to the shareholder ; and in the event of the company continuing to hold the shares (as in the present case) is permanently withdrawn from its trading capital. It appears to me that, as the late Master of the Rolls pointed out in In re Dronfield Silkstone Coal Company (supra), it is inconsistent with the essential nature of a company that it should become a member of itself. It cannot be registered as a shareholder to the effect of becoming a debtor to itself for calls, or of being placed on the list of contributories in its own liquidation. 62. It cannot be registered as a shareholder to the effect of becoming a debtor to itself for calls, or of being placed on the list of contributories in its own liquidation. 62. At p. 428 Lord Watson again refers to the difference between purchase and surrender or forfeiture. He observes : If the shares are purchased with the view of being re-sold, that is simply a speculation with the funds of the company. If they are purchased with the view of their being retained by the company, that is a permanent withdrawal of the money invested in them from the trading capital of the company. I do not agree with Cotton L. J. in thinking that if such a transaction is invalid no forfeiture or surrender could be supported. When shares are forfeited or surrendered and not re-issued, that affects only the nominal amount of the shares so far as unpaid ; when they are bought and not re-issued that diminishes the paid-up as well as the nominal capital. 63. It will be seen from this observation that Lord Watson drew a clear distinction between the purchase of shares and their surrender or forfeiture. Lord Macnaghten also dealt with the distinction between the purchase of shares and forfeiture and surrender. At page 438 he observed : One word with regard to powers of forfeiture and surrender of shares, which were referred to in argument as affording some support to the views of the Respondents. Forfeiture is contemplated by the Act of 1862 ; it is mentioned in Section 26; every company is to return to the registrar of joint stock companies once a year "the total amount of shares forfeited". There can be no question as to the power of a company in a proper case to forfeit shares. Surrender of shares stands on a different footing. It is not mentioned in the Companies Acts, but I conceive there can be no objection to the surrender of shares which are liable to forfeiture. A surrender of shares in return for money paid by the company is a sale, and open to the same objections as a sale, whatever expression may be used to describe or disguise the transaction. 64. A surrender of shares in return for money paid by the company is a sale, and open to the same objections as a sale, whatever expression may be used to describe or disguise the transaction. 64. In discussing the case of Trevor v. Whitworth, Sinha J. expressed the view that the distinction drawn by their Lordships between the purchase of shares and the forfeiture or surrender of shares must be confined to the difference between purchasing shares and the surrender or forfeiture of shares for non-payment of calls. In his view their Lordships in their speeches intended merely to draw a distinction between the purchasing of shares and the forfeiture or surrender in one case and one case only. It is true that the learned Lords do refer to forfeiture for non-payment of calls. But it appears to me that they did so because that form of forfeiture was expressly provided for in Table A of the Companies Act then in force and was referred to in Section 26 of that Act. I do not think that their Lordships intended only to draw a distinction between purchase and forfeiture in one case and one case only. It appears to me that they were drawing a distinction between purchase and surrender or forfeiture where such could be validly made. The distinction which they drew is that whereas in a purchase the shares are paid for and that the capital is reduced, in a proper case of surrender or forfeiture nothing is paid and, therefore, neither the nominal nor the subscribed capital is affected. It is to be observed that in no speech in this case is it suggested that when a share is forfeited or surrendered to the company, it is immediately extinguished when the share comes into the hands of the company. In fact their Lordships assume that the share does exist when acquired by the company. How could a transaction be a trafficking in shares if the company purchased shares with a view to re-sale? According to the contention of Mr. Atul Gupta there would be nothing to re-sell, because the share would be extinguished the moment it came into the hands of the company. How could a transaction be a trafficking in shares if the company purchased shares with a view to re-sale? According to the contention of Mr. Atul Gupta there would be nothing to re-sell, because the share would be extinguished the moment it came into the hands of the company. But their Lordships in Trevor v. Whitworth clearly assumed that the share continued to exist and could be re-sold and that such a transaction would be trafficking or speculating in the shares of the company. Similarly, a share surrendered or forfeited must be regarded us still existing and, therefore, capable of re-sale or re-allotment. 65. The next case which must be considered is the case of In re Denver Hotel. Company [1893] 1 Ch. 495. In that case Denver Hotel Company Limited was formed for the purpose of purchasing the Windsor Hotel in Denver and of carrying on business as hotel proprietors. The capital of the company was 1,30,000, divided into 26,000 shares of 5 each. The company purchased the Windsor Hotel and successfully carried on business. Later, they took a lease of a second hotel called the Metropole Hotel and the capital of the company was increased by the creation of 5,000 new shares of 5 each. The company had also issued debentures amounting to 75,000. It appears that the Managing Director, one Mr. Bush, exceeded the expenditure prescribed by the board for fitting and furnishing the Metropole Hotel which was consequently worked at a loss. Later, it was agreed between the company and Mr. Bush that, in consideration of 3,000 to be paid by Mr. Bush and of his taking upon himself the obligations under the lease of the Metropole Hotel and in further consideration of his surrendering his shares to the company (which should thereupon be extinguished), the company would sell him the lease and goodwill and furniture and stores of the Metropole Hotel. A resolution for reducing the capital was passed at a general meeting as a special resolution. A petition was presented for confirmation of the resolution by the Court and North J. refused to sanction the reduction of capital on the ground that the sanction involved the payment off of capital to some only of the shareholders and that he had no power to sanction such a transaction. A petition was presented for confirmation of the resolution by the Court and North J. refused to sanction the reduction of capital on the ground that the sanction involved the payment off of capital to some only of the shareholders and that he had no power to sanction such a transaction. On appeal the Court of appeal reversed the decision of North J., holding that the transaction amounted to a surrender which was a pure gain to the company. 66. At p. 505 Lindley L. J. observed : The aid of the court is not wanted to sanction the transaction, except so far as the company desires to treat the shares when surrendered as permanently extinguished. Unless the capital is formally reduced the surrendered shares may be again issued; they will still be part of the company's nominal capital, and so affect the nominal rate of dividend. The company will not want so large a nominal capital if the transaction is carried out. 67. Later at p. 506 he observed : The cases upon reduction of capital are not in a satisfactory state ; but none of them conflict with our present decision, having regard to the peculiar facts with which we have to deal. 68. It is to be observed that in this case the surrendered shares were to be extinguished and, therefore, the transaction would amount to a reduction of capital and, therefore, needed sanction. The Court, however, was clearly of opinion that the shares surrendered could have been re-issued and if such had occurred, there would be no need to ask for the Court's approval, because no reduction of capital would be effected. It is true that the Court was dealing with a case where it was intended that the surrendered shares should be extinguished. Nevertheless it is clear from the judgment of Lindley L. J. that the Court regarded a surrender of shares with a view to re-issue as perfectly valid arid not amounting to a reduction of capital. It is true that there was no necessity for the Court to deal with the effect of a surrender and re-issue, but nevertheless they did deal with the matter and contrasted the case of surrender and re-issue with the case of surrender and extinction of the shares. It is true that there was no necessity for the Court to deal with the effect of a surrender and re-issue, but nevertheless they did deal with the matter and contrasted the case of surrender and re-issue with the case of surrender and extinction of the shares. Nowhere in this case is it suggested that, unless there was an intention to extinguish the shares, the shares would be extinguished the moment they came into the hands of the company. 69. Lindley L. J. also observed that if the transaction in question amounted to a sale of the shares, the Court could not sanction the consequent reduction of capital. The learned Lord Justice observed : If this transaction really was a purchase by the company of its own shares from one shareholder only, we are of opinion that the Court could not sanction it. 70. This view was held to be erroneous by the House of Lords in British and American Trustee and Finance Corporation v. Couper [1894] A. C. 399. However, it is to be observed that their Lordships in no way disapproved of the actual decision that if the transaction amounted to a surrender, there would be no reduction of capital unless it was intended to extinguish the surrendered shares. It is to be observed that at p. 410 Lord "Watson, however, doubted that the alleged surrender in In re Denver Hotel Company's case was a real surrender. At p. 410 he observed : I see no reason to doubt that the Court of appeal arrived at a just conclusion in In re Denver Hotel Company (supra) although I am by no means satisfied that the surrender made in that case was one which the company could lawfully accept without the sanction of the Court. In Trevor v. Whitworth (supra), Lord Macnaghten said (p. 438): "I conceive that there can be no objection to the surrender of shares which are liable to forfeiture. A surrender of shares in return for money paid by the company is a sale, and open to the same objections as a sale, whatever expression may be used to describe or disguise the transaction". A surrender of shares in return for money paid by the company is a sale, and open to the same objections as a sale, whatever expression may be used to describe or disguise the transaction". I concur in that opinion ; and I do not think the transaction ceases to be a sale in substance, when the surrender of his share forms, not the whole, but part only, of the consideration given by a shareholder in exchange for an asset of the company. 71. It is clear, therefore, that, though Lord Watson doubted whether the surrender in question in In re Denver Hotel Company's case was a true surrender, he did not question the basis of the decision, namely, the difference between a surrender and a sale. 72. The question of surrender was again considered in Bellerby v. Rowland & Marwood Steamship Co., Ltd. [1902] 2 Ch. 14. In that case the company was incorporated with a capital of 2,75,000, divided into 25,000 shares of 11 each. The Articles empowered the directors to accept from a member the surrender of shares or any part thereof. The company suffered loss owing to the depressed condition of the shipping trade and the directors agreed to bear this loss between them and with the object of relieving the company from loss. It was arranged that each of the directors would surrender to the company a certain number of shares in the company. At that time 10 per share had been paid up and 1 per share remained uncalled. The transaction was duly confirmed and the directors executed a deed poll by which they declared that they had respectively surrendered the shares identified by the number on the register. Thereafter the business of the company became more prosperous and an action was brought against the company, by three surviving shareholders and directors who had surrendered the shares and the executors of two of them who had died, for a declaration that the surrender was ultra vires the company and inoperative. It is to be observed that it was a term of the surrender by the directors that the company were not to enforce payment against the surrenderors of the 1 per share remaining unpaid. 73. The Court of appeal held that the transaction was in fact a purchase of the shares by the company and, therefore, amounted to an unlawful reduction of capital. 73. The Court of appeal held that the transaction was in fact a purchase of the shares by the company and, therefore, amounted to an unlawful reduction of capital. The Court held that the transaction in effect fell within the principle laid down in Trevor v. Whitworth and, therefore, the agreement with the directors was invalid. 74. It is to be observed that it was in this case that Cozens Hardy L. J. observed that all surrenders or forfeitures of shares involved a reduction of capital and that the only form of forfeiture or surrender permissible was that authorised by the Companies Act, namely, forfeiture for non-payment of calls. I have already set out the observations of the learned Lord Justice at length and I need not repeat the same here. 75. The decision in this case is not helpful, because it was held that the transaction amounted to a sale, though called a surrender. Consideration moved from the company to the shareholder in return for the surrender of the shares. In the case before us there is no question of any consideration moving from the company. Nothing at all passed from the company to the shareholder and therefore the case is clearly distinguishable. However, Stirling L. J. and Cozens Hardy L. J. appear to have thought that forfeiture of shares for non-payment of calls could only be justified because reference is made to such farm of forfeiture in the' Companies Act. The two Lord Justices appear to have taken the view that all forms of surrender or forfeiture necessarily involved a reduction of capital, though one form permitted such a redaction without the approval of the court. It is to be observed that in an earlier case of Eichbaum v. City of Chicago Grain Elevators' Limited [1891] 3 Ch. 459, Stirling L. J., when he was a Puisne Judge, had followed Teasdale's case and had held that a pure surrender did not involve a reduction of capital. In the case of Bellarby, Stirling L. J. doubted his earlier decision and stated that had he been aware of the fact that at the time Teasdale's case was decided there was no provision in the company law requiring the approval of the court for a reduction of capital, he would not have decided Eichbaum's case in the way in which he did. It is to be observed, however, that the absence of any provision in the company law requiring the approval of the court for a reduction of capital did not affect the decision of Teasdale's case because it was held that the transaction in that case, so far from reducing the capital, actually increased it. 76. The last case which falls to be considered is the case of Rowell v. John Rowell & Sons, Limited [1912] 2 Ch. 609. Pursuant to Articles of Association and a special resolution, the holders of 6 per cent. fully-paid preference shares surrendered the same to the company in exchange for fully-paid 5 per cent. preference shares, and a contract in writing was duly filed with the Registrar of Joint Stock Companies, pursuant to Section 25 of the Companies Act, 1867. The surrendered shares were not cancelled, but were subject to be re-issued by the company. It was held by Warrington J. that the surrender did not involve any reduction in capital and was, therefore, valid. It was further held that the transaction did not amount to a purchase by the company of its own shares. 77. In this case the shareholders surrendered to the company 6 per cent. fully-paid preference shares which they held in exchange for certain fully-paid 5 per cent. preference shares and the 6 per cent. preference shares so surrendered could be re-issued by the company. It was urged that the transaction was in effect a sale by the 6 per cent. preference shareholders of their shares to the company, but Warrington J. held that the transaction was not a sale. In his view it was a surrender of the 6 per cent. preference shares to the company and, as it was not the intention of the company to cancel or extinguish the shares, the transaction did not amount to a reduction of capital and was, therefore, valid. Dealing with the earlier authorities, Warrington J. observed at p. 620 : The consideration which impresses me, however, is that I have before me an actual decision of the Court of appeal in Teasdale's case, and an actual decision of a Court of co-ordinate jurisdiction with myself in Eichbaum v. City of Chicago Grain Elevators, and am I at liberty to treat those two cases as overruled as the result of this dictum of Cozens-Hardy L.J. in Bellarby v. Rowland & Marwood's Steamship Co. ? That is a question upon which I fuel very considerable difficulty ; and I feel also this further difficulty, that while a surrender of fully-paid shares means, of course, a reduction of capital if the shares are surrendered upon terms which do not permit their re-issue, in the present case the shares are surrendered upon terms which do permit their re-issue, and, with all respect, I really fail to see how in that case there is any reduction of capital at all. The capital of the company remains as it was, 2500 6 per cent. preference shares, with an addition of the 3000 5 per cent. preference shares created in 1896. It is perfectly true that the company have not up to the present time re-issued the 2500 shares, and it may be that they could not re-issue them without the consent of the 5 per cent. preference shareholders. That question does not arise. The shares are there ready to be issued, still forming part of the capital, and it would not require any resolution of the company to increase its capital in order to enable them to reissue those shares. It seems to me, therefore, that, if the re-issue of these shares would not require any resolution for an increase of capital, there was in fact no reduction of capital in accepting the surrender coupled with the power of reissuing these shares. The generality of the proposition, therefore, on which Cozens-Hardy L. J. founds his dictum as to the invalidity of every surrender of shares, except where it takes the place of a forfeiture, seems to me to be a matter of some doubt, because he is clearly referring in his judgment to surrenders which involve reduction, and not to surrenders which do not involve reduction. The net result is that I have here, as in Teasdale's case, a surrender which in my opinion does not involve any reduction of capital, and I have on that point the express decision of the Court of appeal and also the decision of Stirling J. in favour of its validity. Against that I have the dictum of Cozens-Hardy L. J., which I really think was not directed to the class of surrenders with which I have to deal, but to surrenders which do involve a reduction of capital. 78. Against that I have the dictum of Cozens-Hardy L. J., which I really think was not directed to the class of surrenders with which I have to deal, but to surrenders which do involve a reduction of capital. 78. In my view it is clear from these English authorities that there is no sound basis for the dictum of Cozens-Hardy L. J. in Bellerby's case that all forms of surrender or forfeiture involve a reduction of capital. The English Courts have always treated a surrender as similar to forfeiture and have held that a surrender would be valid in circumstances in which a forfeiture would be valid. In particular, Teasdale's case, Denver Hotel Company's case, and Rowell's case clearly show that a surrender does not involve a reduction of capital where the shares could be re-issued. It is only when there is an intention to extinguish or cancel the shares that a surrender would amount to a reduction of capital. Similarly, it appears to me that where it is intended that a forfeited share should be re-issued, then there is no reduction of capital, though the capital would be reduced if the Articles of a company provided for the cancellation or extinction of a forfeited share. 79. In the case which we are now considering, the Articles contemplate the re-issue or re-sale of the forfeited share. In fact the provision in Article 27 of the Articles of Association is mandatory. The committee shall re-sell or re-allot the shares. The company cannot validly retain it for the purpose of cancellation or extinction. That being so, it appears to me that the trend of English authority is to the effect that such a transaction does not amount to a reduction of capital and is therefore, valid. In my view the general observations made by Eve J. in Hopkinson's case cannot be supported. The forfeiture in that particular case extinguished the contributory's debt and might, therefore, be regarded as on the same footing as a purchase of the share. But it appears to me that the case is no authority for the proposition that where there is a pure surrender or forfeiture and where nothing is given by the company or no advantage received by the contributory, such would amount to a reduction of capital. 80. But it appears to me that the case is no authority for the proposition that where there is a pure surrender or forfeiture and where nothing is given by the company or no advantage received by the contributory, such would amount to a reduction of capital. 80. The effect of forfeiture was considered by Panckridge J. in the case of Surajmall Mohta v. Ballabhdas Mohta. I. L. R (1935). Cal. 531. In that case the case of Hopkinson was relied upon in argument and Panckridge J. was clearly of opinion that the decision of Eve J. must be confined to cases where the act of forfeiture ipso facto discharged the shareholder's liability, e.g., where the company had a lien on the shares. At p. 533 Panckridge J. observed : In my opinion, in this case these considerations do not arise, because the association did not attempt to enforce their lien by sale, but purported to act under quite different powers, which came into operation on certain events happening which had nothing to do with the registered share held by the shareholder. If the association had been purporting to exercise the lien given thorn under Article 31 then the legality and extent of Article 33 would become matters for consideration. But as things stand, in my opinion, the question does not arise. The distinction between Articles authorising forfeiture and Articles providing for a lien is recognised in In re Bolton. Ex parte North British Artificial Silk, Limited [1930] 2 Ch. 48. 81. Panckridge J. was not asked to consider whether forfeiture in circumstances such as the present, that is, not in enforcement of the lien, would amount to a reduction of capital. The point never seems to have been argued. But it is clear that in Panckridge J.'s opinion Hopkinson's case was only an authority that a forfeiture in enforcement of a lien amounted to a reduction of capital. 82. The other Indian case upon this question is Naresh Chandra Sanyal v. Ramani Kanta Ray. This is the decision of Das J. to which I have already made reference and deals with the actual Articles of Association with which we are concerned in the present case. His view was that a forfeiture under Article 27 did not effect a reduction of capital and did not, therefore, require the approval of the Court. This is the decision of Das J. to which I have already made reference and deals with the actual Articles of Association with which we are concerned in the present case. His view was that a forfeiture under Article 27 did not effect a reduction of capital and did not, therefore, require the approval of the Court. In my view, the decision in Naresh Chandra Sanyal v. Ramani Kanta Roy on this point is right, and must be affirmed. 83. Sinha J. was also of opinion that the transaction in the present case amounted to a trafficking in shares and Mr. Atul Gupta on behalf of the Respondents strongly urged that contention before us. In my view, the transaction can never amount to a trafficking in shares. It is true that Article 27 contemplates that the shares forfeited should be sold or re-allotted, but that does not amount to a trafficking in shares. Trafficking in shares involves using the company's assets in speculating in shares in itself. If a company buys one of its own shares and sells it, then clearly it is trafficking in its own shares. But if it acquires the shares without giving anything for it and then re-sells it under powers given by the Articles of Association then it appears to me that it cannot amount to trafficking. There are observations in the cases to which I have already made reference to this question of trafficking in shares and in all the cases what the learned Judges visualised was an acquisition of a share for consideration and then a re-sale. In such a case the company is employing its assets for a purpose not authorised and can, therefore, in truth be said to be trafficking in its shares. 84. Mr. Atul Gupta also contended that by the terms of Article 27 the company were not bound to sell the share which they forfeited. I have already set out the Article in extenso and it seems to me clear that the company are bound to sell or re-allot the share. The relevant words are "Any share so forfeited shall "be deemed to be the property of the Association, and the "committee shall sell, re-allot, and otherwise dispose of the "same in such manner to the best advantage for the satisfaction "of all debts etc." Mr. The relevant words are "Any share so forfeited shall "be deemed to be the property of the Association, and the "committee shall sell, re-allot, and otherwise dispose of the "same in such manner to the best advantage for the satisfaction "of all debts etc." Mr. Atul Gupta concedes that the company could sell or re-allot a share but he urges that they are given another power, namely, "otherwise dispose of the same in such "manner to the best advantage for the satisfaction of all debts." That power otherwise to dispose of the same gives, according to Mr. Gupta, the company power to retain the share and extinguish it or cancel it. That being so, he urges that the Article is clearly ultra vires, as it contemplates an unlawful reduction of capital. 85. In my view, Article 27 cannot be construed so as to give the company power to retain the share. "The committee shall sell, "re-allot and otherwise dispose of the same in such manner to "the best advantage for the satisfaction of all debts". It appears to me that these words contemplate that the committee must dispose of the share. In other words, they must part with it. The words "otherwise dispose of the same" are not appropriate to cover retention of the share for extinction or cancellation. Mr. Gupta's argument is that if extinction or cancellation of the share was the best way of dealing with it for the satisfaction of all debts, then the company could so retain it. In my view, the words "otherwise dispose of the "same" must be construed as referring to the words "sell or "reallot". What the Article means is that on forfeiture, the company must part with the share in the most advantageous manner possible. It would not be disposing of the share if it retained it. A person in possession of any article cannot be said to dispose of it by merely allowing it to rot and be destroyed. Disposing must mean some actual act of a person ridding himself of the ownership or custody of the article. He does not dispose of the article by merely allowing it to be destroyed as a result of no act of his. 86. Mr. Gupta then argued that, in any event, the Articles 27 and 28 in particular clearly permitted trafficking in the shares of the company. He does not dispose of the article by merely allowing it to be destroyed as a result of no act of his. 86. Mr. Gupta then argued that, in any event, the Articles 27 and 28 in particular clearly permitted trafficking in the shares of the company. But, in my view, there is nothing in these Articles which contemplates trafficking. The forfeited share referred to in Article 27 is a share forfeited under the previous Article Nos. 21 to 26. In no case is the liability of the contributory wiped out as the result of the forfeiture and in no case does any consideration move from the company to the contributory. The company merely re-sells a share which it has obtained by the act of forfeiture. No assets or capital of the company have been employed in acquiring a share and its mere sale cannot amount to trafficking. As I have stated earlier, all the English authorities confine trafficking in shares to the acquisition of shares, and their sale thereafter, in other words speculating in their own shares. Articles 27 and 28 do not contemplate any such transaction. 87. It was argued in the second place by Sir Asoka Roy that the forfeiture in this case was lawful because it was a form of forfeiture actually contemplated by the Companies Act. This was also the view of Das J. in Naresh Chandra Sanyal v. Ramani Kanta Ray (supra). 88. There is no section in either the Indian or the English Companies Act permitting forfeiture, but the word "forfeiture" appears in Section 32(2)(g) of the Indian Act. That section provides for certain lists which have to be kept and Sub-section (2) deals with what is to be included in the list of members of the company. Amongst other matters which have to be stated is the total number of shares forfeited. The word "forfeited" is used without any qualification whatsoever and would of course be wide enough to cover forfeiture in this case which was for failure to comply with the instructions of the committee of the association. 89. The word again appears in Forms E and F of the third schedule of the Indian Act. Form E is the form setting out the summary of share capital and the shares of a limited company. 89. The word again appears in Forms E and F of the third schedule of the Indian Act. Form E is the form setting out the summary of share capital and the shares of a limited company. In that summary the company is required to set out inter alia the total amount (if any) paid on shares forfeited and the aggregate number of shares forfeited must also be stated. Again, the word "forfeiture" is used generally without any qualification whatsoever. 90. Form F of Schedule III is a form of balance-sheet and Article 97(1) of the Articles of Association of this company requires the balance sheet to be in the form of Table F. Under the general heading "Capital and Liabilities" appears the sub-heading "Subscribed Capital" and in the form it is stated that there must be added to the subscribed capital any shares forfeited. Again, the word "forfeited" is used without any qualification. 91. The other reference to "forfeiture" appears in Table A which of course is the specimen Articles of Association of a company set out in the Act itself. Section 17 of the Indian Companies Act provides that there may, in the case of a company limited by shares, be registered with the Memorandum, Articles of Association signed by the subscribers to the Memorandum and prescribing regulations for the company. Sub-section (2) of that section provides that the Articles of Association of a company may adopt all or any of the regulations contained in Table A in the first schedule and shall in any event be deemed to contain regulations identical with or to the same effect as certain named regulations. It will be seen that no company is bound to adopt Table A as its Articles of Association and in fact the Stock Exchange Company made Table A inapplicable by Article 2 of their Articles. 92. Articles 24 to 30 of Table A deal with forfeiture of shares, but the Articles are confined to the case of forfeiture for non-payment of a call. There are no Articles dealing with forfeiture for any other reason. 93. Though, as I have stated, forfeiture is not expressly permitted by any section of the Indian or the English Companies Act, it is clear from the sections, forms and Articles to which I have made reference, that at least one form of forfeiture is recognised. There are no Articles dealing with forfeiture for any other reason. 93. Though, as I have stated, forfeiture is not expressly permitted by any section of the Indian or the English Companies Act, it is clear from the sections, forms and Articles to which I have made reference, that at least one form of forfeiture is recognised. In the view of Sinha J., the effect of Section 32(2)(g) and the forms and Articles is to make one form of forfeiture and one form only permissible. In his view the fact that no other form of forfeiture is provided for in the Articles shows that no other form of forfeiture is authorised by the Act. 94. The view of Das J. in Naresh Chandra Sanyal v. Ramani Kanta Ray was that Section 32(2)(g) and Forms E and F of the Indian Act contemplated forfeiture generally. It is true that the Articles only provided for forfeiture for non-payment of calls, but in the view of Das J. the Articles were nothing more than examples of what could and should be inserted in the Articles of Association of a company. No company is bound to adopt Table A, though they must make provision for certain matters dealt with in certain Articles in that table. The Articles relating to forfeiture in Table A are not required to be reproduced in the Articles of a company. 95. I do not think that it can be said that because Table A contains provisions relating to one form of forfeiture only, the Act contemplated only that form. Table A contains specimen Articles of Association and it must be remembered that the early Companies Acts were in the main concerned with companies which had come into existence for mercantile purposes. Trading companies would hardly require the right to forfeit shares for anything except non-payment of calls and it appears to me that these Articles relating to forfeiture which appear in the specimen Articles of the earliest English Acts were so inserted because forfeiture for non-payment of calls was the only form of forfeiture really required to be given to an ordinary trading company. The present form of forfeiture is not usual and would be wholly unnecessary in a trading company, though absolutely essential to an association like the Stock Exchange Association. The present form of forfeiture is not usual and would be wholly unnecessary in a trading company, though absolutely essential to an association like the Stock Exchange Association. The committee of the Stock Exchange Association must be given powers to enforce their rules and regulations and unless the form of forfeiture given for a failure to comply with their instructions is permissible, the Stock Exchange Company would continue to have expelled and defaulting members as members of the company, a situation which might well become intolerable. 96. In my view, Das J. was right in holding that the Indian as well as the English Acts contemplated forfeiture generally and that Articles 24 to 30 of Table A are only intended to be examples of rules relating to forfeiture which may be inserted in the articles of association. 97. Sinha J. has pointed out in his judgment that observations were constantly made in the earlier English authorities on the form of forfeiture for non-payment of calls. That form of forfeiture is referred to by Lords Herschell, Watson and Macnaghten in Trevor v. Whitworth (supra). There is no doubt that the learned Lords did say that forfeiture for non-payment of calls was authorised by the English Acts by reason of the sections, Tables and Articles corresponding to Section 32(2)(g), Forms E' and F of the third schedule, and Table A of the Indian Act. I do not think, however, that their Lordships meant that no other form of forfeiture was permissible. When they were referring to forfeiture for non-payment of calls, they were merely referring to the common case of forfeiture which was actually provided for in the Act. In Trevor v. Whitworth Lord Herschell at page 417 observed that the forfeiture of shares was recognised by the Companies Act and then proceeded to give the reason. He stated: It does not involve any payment by the company, and it presumably exonerates from future liability those who have shown themselves unable to contribute what is due from them to the capital of the company. Surrender no doubt stands on a different footing. But it also does not involve any payment out of the funds of the company. If the surrender were made in consideration of any such payment it would be neither more nor less than a sale, and open to the same objections 98. Surrender no doubt stands on a different footing. But it also does not involve any payment out of the funds of the company. If the surrender were made in consideration of any such payment it would be neither more nor less than a sale, and open to the same objections 98. It is true that Lord Herschell had in mind forfeiture for non-payment of calls. But the reason which he gives for distinguishing forfeiture from purchase is applicable to all forms of forfeiture and to all forms of real surrender. The reason why a distinction is made is that neither forfeiture nor true surrender involves any payment by the company and exonerates the contributory from future liability. 99. Lord Macnaghten at p. 438 seems to refer to the powers of forfeiture generally in an observation quoted earlier in this judgment. He observed: One word with regard to powers of forfeiture and surrender of shares, which were referred to in argument as affording some support to the views of the Respondents. Forfeiture is contemplated by the Act of 1862 ; it is mentioned in Section 26 ; every company is to return to the registrar of joint stock companies once a year "the total amount of share forfeited". There can be no question as to the power of a company in a proper case to forfeit shares. Surrender of shares stands on a different footing. It is not mentioned in the Companies Acts, but I conceive there can be no objection to the surrender of shares which are liable to forfeiture. 100. In this passage of his speech, Lord Macnaghten undoubtedly deals with forfeiture generally and was of opinion that a company in a proper case had power to forfeit shares. Sinha J.'s view was that the words "in a proper case" really meant in the case of non-payment of calls only. But I do not think that such meaning can be given to the statement by the learned Lord. What Lord Macnaghten apparently meant was that if the forfeiture did not offend against the provisions of the Companies Act or the general law of the land, then such a right could be validly exercised by a company. 101. But I do not think that such meaning can be given to the statement by the learned Lord. What Lord Macnaghten apparently meant was that if the forfeiture did not offend against the provisions of the Companies Act or the general law of the land, then such a right could be validly exercised by a company. 101. If the reason for permitting forfeiture for non-payment of calls was the fact that the company obtained the share without paying for it or without giving up their rights against the contributory and thus effecting no reduction of capital I see no reason why forfeiture for other reasons should not be equally valid if the company paid nothing or gave up no right, because the transaction would not result in a reduction of capital. Of course, if all forms of forfeiture or surrender inevitably involved reduction of capital, then the view of Sinha J. might well be right that one form of forfeiture and one form of forfeiture only is authorised by the Act. But for the reason which I have already given I am satisfied that forfeiture does not inevitably result in a reduction of capital, though it might, as for example, in the case of forfeiture to enforce a lien such as occurred in Hopkinson's case. It appears to me that all the English cases have proceeded upon the footing that if surrender and likewise forfeiture resulted in a reduction of capital, then it was void unless approved of by the court. But if no reduction of capital resulted as in Teasdale's case then the surrender was valid and, according to the English authorities, if a surrender is valid, a forfeiture would be valid in similar circumstances. 102. Though I accept the view of Das J., that the Indian Companies Act recognises forfeiture generally and that Articles 24 to 30 of Table A are merely specimen Articles relating to one form of forfeiture, nevertheless it must be held that the reference to forfeiture would not necessarily make all forms of forfeiture legal and valid. The Articles might offend the provisions of the Companies Act such as providing for a form of forfeiture which would reduce capital or they might offend against the general law. The Articles might, for example, be contrary to public policy as was the Article under consideration in Hope's case (supra). The Articles might offend the provisions of the Companies Act such as providing for a form of forfeiture which would reduce capital or they might offend against the general law. The Articles might, for example, be contrary to public policy as was the Article under consideration in Hope's case (supra). In that case an Article provided that the company should have power to forfeit the shares of any shareholder who brought proceedings against the company. In the Court of appeal, counsel for the company endeavoured to rely on this Article. But it is clear from an observation of James L. J. during the argument that the Court would not even listen to the argument because the Article was clearly contrary to public policy as it prevented a shareholder approaching the courts of the land. 103. If, however, the form of forfeiture provided by the Articles of Association does not offend against either the provisions of the Companies Act or the law of the land, I see nothing in the Companies Act which makes such a forfeiture invalid or unlawful. In the present case, the Articles relating to forfeiture do not, in my view, offend against the provisions of the Companies Act, as they do not contemplate a reduction of capital or a purchase of shares or a trafficking in shares. The Articles are clearly not contrary to public policy and, that being so, they relate to a form of forfeiture contemplated by the Indian Companies Act and are, therefore, intra vires and the forfeiture is valid. 104. Mr. Atul Gupta, however, pointed out that there is another provision in the Indian Companies Act which suggests that forfeiture for non-payment of calls stands on a different footing from other forms of forfeiture. He referred to Section 104 of the Indian Companies Act, which deals with returns as to allotments and a recent amendment has added Sub-section (4) to the section which is in these terms : Nothing in this section shall apply to the issue and allotment by a company of shares which under the provisions of its Articles were forfeited for non-payment of calls. 105. Presumably, if other forms of forfeiture are permissible, the allotment of shares, which had been forfeited for such other causes, would have to be included in the returns. 106. Mr. 105. Presumably, if other forms of forfeiture are permissible, the allotment of shares, which had been forfeited for such other causes, would have to be included in the returns. 106. Mr. Gupta strongly urged that the reason why Sub-section (4) is confined to shares forfeited for non-payment of calls is that that is the only form of forfeiture permitted by the Act. It certainly is the only form of forfeiture referred to in the Articles in Table A and it appears to me that that was probably the reason why Sub-section (4) is confined to cases of forfeiture for non-payment of calls. It may well be that the possibility of forfeiture for other reasons was not in the mind of the draftsman. On the other hand, it might be that the draftsman felt that there was some special reason why shares forfeited for non-payment of calls need not be included in this return though it is somewhat difficult to understand what such reason could be. I do not think, however, it can be inferred, because Sub-section (4) does not require the inclusion of shares re-allotted after forfeiture for non-payment of calls, all other forms of forfeiture are impliedly forbidden by the Act. 107. In my judgment, the forfeiture in this case cannot be impugned either as involving a purchase of shares, a reduction of capital or trafficking in shares. In my view, this form of forfeiture is not forbidden by the Companies Act, and there is nothing in the Articles which can offend against the general law. That being so, the forfeiture should, in my view, have been held to be valid and the application for rectification of the register made by expelled member should have been dismissed. 108. In the result, therefore, this appeal must be allowed and the judgment and order of the Court below are set aside and the Respondent's application for rectification of the register is dismissed with costs in this Court and in the Court below. Certified for two counsel. 109. Chakravartti J. I agree entirely, but in view of the importance and difficulty of the subject, I would like to add a few observations. 110. Forfeiture of shares, as such, is nowhere forbidden by the Indian Companies Act, but on the other hand one form of it, forfeiture for non-payment of calls, is expressly recognised. Certified for two counsel. 109. Chakravartti J. I agree entirely, but in view of the importance and difficulty of the subject, I would like to add a few observations. 110. Forfeiture of shares, as such, is nowhere forbidden by the Indian Companies Act, but on the other hand one form of it, forfeiture for non-payment of calls, is expressly recognised. There is no reason for saying, and it cannot be said, because a particular form of forfeiture is expressly recognised by the Act, all other forms are impliedly forbidden. Indeed, the reference to forfeiture in Section 32(2)(g) is perfectly general. If, therefore, a certain form of forfeiture is to be held invalid, it can be so held only for the reason that, although there is no express bar, the transaction would offend against some provision of the Companies Act or some fundamental concept of company Law. 111. The argument in the present case was and, as the reported cases show, has always been-that all forms of forfeiture involve reduction of capital and, therefore, if a certain form was outside the class expressly authorised by the Act, it would be invalid, if made by a company merely by virtue of its Articles of Association and without the sanction of the Court. It was added that even if the forfeited share was required by the Articles to be re-issued and on such re-issue the amount of the reduced capital was restored, still, during the intermediate period between the forfeiture and the re-issue, the company would come to hold one of its own shares, particularly in a case like the present where, under the relevant Article, the forfeited share was to be "deemed to be the property" of the company. A company holding its own shares, it was pointed out, was an impossible notion. It was said lastly that where, as in the present case, the proceeds of the disposal of the forfeited share were to be applied to the satisfaction of the debts of the shareholder owing to the company, the transaction was in effect a purchase of the share and thus forbidden by Section 54A(1) of the Act and such forfeiture for the purpose of a re-allotment or sale was also trafficking by the company in its own shares. The forfeiture was thus trebly bad. 112. The forfeiture was thus trebly bad. 112. The question is by no means free from difficulty and the difficulty has been increased by the condition of the authorities to which more than one English Judge had occasion to refer. The position under the English and the Indian Acts being practically the same, the English authorities cannot be disregarded, hut are, on the other hand, the only guides, it' assistance is to be sought from decided cases. The cases, however, belong to different periods and, if I may say so, without presumptuousness, appear to reflect a gradual development of ideas, in the course of which opinions expressed by a Judge have on occasions been revised by himself. To reconcile them all is not possible. The argument before us proceeded by reference to decided cases and naturally ranged over a wide field, as the various forms of forfeiture and surrender dealt with in the cases came all to be discussed. It seems to me, however, that in view of the condition of the authorities it will make for comparative simplicity if we confine ourselves to the particular facts of the present case. 113. The questions to be considered are (1) whether the forfeiture in the present case involved reduction of capital, (ii) whether it amounted to a purchase by the company of its own shares and (iii) whether it involved trafficking. 114. As I have already stated, no inference can be drawn from the fact that the Companies Act does not expressly authorise forfeiture of shares other than forfeiture for non-payment of calls. The Act has primarily trading companies in view and the provision it makes for forfeiture of shares or for their sale in enforcement of a lien is intended to secure to companies easy and effective means of realising their dues from their members so that they may not be embarrassed in their trading operations by their money being held up by defaulting shareholders. The object is to make the company's money available to it by compulsion, if it will not be paid voluntarily. The object is to make the company's money available to it by compulsion, if it will not be paid voluntarily. The framers of the Act, I apprehend, never had in mind the case of a company exercising the power of forfeiture against its members as a penalty for misconduct or as a means of enforcing payment of debts which one member owed to another, such as is contemplated by the Articles of Association in the present case. They were concerned with a scheme for the efficient working of a trading company and for self-guarding the company's money, the means of trade. It is for that reason, I think, that the Act does not expressly provide for other forms of forfeiture. Yet, if forfeiture of shares, as a disciplinary measure or as a means of enforcing payment of debts generally, be not contrary to the provisions of the Companies Act, it cannot be held to be forbidden. In one of the cases noticed by my Lord where the Articles provided for forfeiture of shares if a member brought, or threatened to bring, an action against the company, the provision was held to be invalid, not because it was not warranted- by the Companies Act, but because it was against public policy. 115. The three questions raised in the argument must, therefore, be considered on their merits and only if the answer to all or any of them be in the affirmative can it be held that the power of forfeiture assumed by the Articles is invalid. 116. The cases have all been reviewed by my Lord and there is nothing which I can usefully add to his exhaustive survey. I shall only try to examine the consequences of a forfeiture by reference to facts and see if they involve any of the results alleged. 117. First, as to reduction of capital. The cardinal fact to remember in that connection, it seems to me, is that the shares in the present case are all fully paid up. Whether upon a forfeiture of a share of that character, the capital of the company is reduced, will appear if one examines what happens when a share is forfeited. 118. The position may best be illustrated by taking a concrete example. I shall take a company having an authorised capital of Rs. 50,000 divided into 5000 shares of Rs. Whether upon a forfeiture of a share of that character, the capital of the company is reduced, will appear if one examines what happens when a share is forfeited. 118. The position may best be illustrated by taking a concrete example. I shall take a company having an authorised capital of Rs. 50,000 divided into 5000 shares of Rs. 10 each and a subscribed capital of Rs. 20,000 of which Rs. 12,000 have been paid up. That means that 2000 shares have been taken up by the public and Rs. 6 has been paid on each share. If at that time a share held by a certain share-holder is forfeited, the position which immediately results is as follows. The nominal, that is to say, the authorised capital is not in any way affected, for the existence of that capital does not depend on the component shares being actually held by anybody. But the subscribed capital is affected, because one of the subscribed shares having been forfeited and, there being at the time no subscriber or holder of that share, the subscribed capital is reduced to Rs. 19,990. In other words, the position at the time is that not 2000 but 1999 shares stand subscribed. But what happens to the forfeited share itself and the money paid on it? In the summary of the company's share capital, prepared u/s 32 of the Act and in Form E, the money paid on the forfeited share must be included, although it is to be shown under a separate heading. The point to notice is that, in the illustration I have chosen, the sum of Rs. 6 received on account of the forfeited share, remains a part of the company's paid up capital and cannot be dealt with as profits. But if the share is not re-issued, there is no longer any source from which the company can get the balance of Rs. 4 which remained unpaid on the share and, actually both the subscribed and the paid up capital are affected, not by reduction of Rs. 6, but by loss of Rs. 4. It is' this Rs. 4 which the creditors of the company had a right to look to and of which they are deprived and the real reduction of capital is only to that extent. 6, but by loss of Rs. 4. It is' this Rs. 4 which the creditors of the company had a right to look to and of which they are deprived and the real reduction of capital is only to that extent. For the same reason, if the company goes into liquidation after the forfeiture of a partly paid up share but before its re-issue, the capital would stand reduced by the amount of the unpaid calls. 119. Suppose now that the company re-issue the share. It can do so in four ways, according to its choice and as circumstance permit. It can issue the share at par and in that event it gets from the new share-holder the whole of the Rs. 10 payable on the share. As soon as that money comes in, it must be credited to the paid-up capital account and that being done and the full value of the share being received and placed where it should be, the company may then transfer the Rs. 6 received from the previous shareholder and held in the forfeited share account, to its profits account. It makes a profit of that Rs. 6. The company may also re-issue the share at a premium if it is possible to do so and, in that event too, the result, so far as the capital is concerned, is precisely the same. Only, the company makes a larger profit, since it can appropriate to its profits account both the sum of Rs. 6 and the amount of excess over the face value of the share which it gets by the re-issue. But even if the share can be issued at a premium, the company is not bound to do so and can issue it at par with the result already stated, and, even if the share can be issued at par, the company may give the new shareholder credit for the amount already received and take from him only the balance due on the share. In the latter case, the company makes no profit. If that course is adopted, the amount of Rs. 6 in the illustration chosen, will simply be transferred to the paid up capital account and the amount of Rs. 4 received from the new share-holder, will also be credited there. 120. In the latter case, the company makes no profit. If that course is adopted, the amount of Rs. 6 in the illustration chosen, will simply be transferred to the paid up capital account and the amount of Rs. 4 received from the new share-holder, will also be credited there. 120. But the company may find that the share cannot be re-issued at par and may have to issue it at a discount. It may be, for example, that only Rs. 8 can be got on the share. In that event, on the share being re-issued on receipt of Rs. 8, the company must allot Rs. 4 to the capital account, making up with the Rs. C already held, the full value of Rs. 10 and appropriating only Rs. 4 towards profits. The sum of Rs. 6 will be transferred from the forfeited share account to the paid-up capital account proper. In such case too, neither the subscribed nor the paid up capital will be affected to the prejudice of creditors. They will be affected only if no buyer can be found for the share or if the price, which can be obtained on the share, is less than even Rs. 4, the sum required to make the face value of the share. 121. It will appear from the above analysis of what happens on the forfeiture of a share that in the case of fully paid-up shares, no question of reduction of capital can arise from mere forfeiture. It is true that upon forfeiture, the forfeited share must be taken out of the subscribed shares, the subscriber having ceased to exist, but the full value of the share will remain a part of the paid up capital, although under a special name, whether the share be re-issued or not. If the share be re-issued, the company may make a profit or may not, but whether the share is to be issued at par or at a premium or at a discount, the amount previously received on the share which is its full value, cannot in any circumstances, be in jeopardy. If the share be re-issued, the company may make a profit or may not, but whether the share is to be issued at par or at a premium or at a discount, the amount previously received on the share which is its full value, cannot in any circumstances, be in jeopardy. That must remain intact, being transferred to the paid-up capital account proper upon the re-issue of the share, whether wholly from the proceeds of the re-issue or partly from there and partly from the amount already held, according to the price fetched, the company taking as profits the difference between the previous receipt plus the price obtained by the re-issue and the face value of the share, whatever it may be. If the share cannot be or is not re-issued, the amount standing in the forfeited share account remains there, but it is still a part of the capital. Only if the share is cancelled or extinguished will the capital be reduced. 122. I may point out that according to Form F, prescribed by Section 132 of the Act, in showing the subscribed capital of a company in the balance sheet, the amount paid on the forfeited shares must be added, which is another indication that it remains a part of the capital. In the case of fully paid-up shares, therefore, even the subscribed capital is not realty affected by a forfeiture, the issued capital the subscribed capital and the paid up capital being the same. 123. The first argument of the Respondent that a forfeiture of a share in the present case would cause reduction of capital must, therefore, fail. This appears to have been recognised in Hopkinson v. Mortimer, Harley & Co., Limited [1917] 1 Ch. 646 when it was said that a reduction of capital brought about by the forfeiture of fully-paid shares would inflict no injury on creditors or contributories, but, in so far as it was held that a reduction of capital would nevertheless occur and that "even if the forfeiture is made without any part of the value of the share being set off against the debt, the capital is reduced by the amount paid up on the forfeited shares," that is to say, a reduction of capital would occur upon mere forfeiture, I am unable to agree that the view taken was correct. 124. Mr. 124. Mr. Justice Eve, however, also observed that the procedure was "for other reasons illegal" and he referred to the consequences of the value of the share being brought into account with the defaulting member. In substance, he referred to what has come to be known in the literature on the subject as the "dilemma", viz., either the share is extinguished and there is a reduction of capital or if the company deals with it in the manner laid down in the Articles, like those of the present case, the dealing involves a purchase of a share of itself and trafficking in its shares. 125. There cannot, I think, be any question of the share being extinguished, at any rate under the terms of the Articles in the present case. When a share is forfeited what happens is that the right of the particular shareholder to hold the share and his interest in it are taken away and not that the share itself, as a unit of the share capital or an interest representing the money paid upon it, is extinguished. If it is extinguished at all, it is extinguished only in the character of being a share held by a particular share-holder, i.e. his interest in the company measured by a sum of money and made up of various rights and liabilities, as explained by Farwell J. in Borland's Trustee v. Steel Brothers & Co., Limited [1901] 1 Ch. 279. But the share itself, as a unit of the share capital and as an issuable part thereof, remains. It "reverts to the company, bears no dividend and "may be re-issued". Apart from that position under the general law, the Articles of Association in the present case contain a mandatory provision that the company shall sell, re-allot or otherwise dispose of a forfeited share. I need not deal with the argument that the company may extinguish the share by way of disposing of it "otherwise". My Lord had dealt with it sufficiently and I would only point out that the phrase "may be otherwise disposed of" occurs also in Article 27 of Table A where it is surely not contemplated that the share may be extinguished. The possibility that a reduction of capital may be caused by the forfeited share being extinguished, must, therefore, be ruled out. 126. The possibility that a reduction of capital may be caused by the forfeited share being extinguished, must, therefore, be ruled out. 126. But if the company, on forfeiting the share, must dispose of it and apply the proceeds in the manner laid down in the Articles, does it, where it forfeits, in effect buy the share and traffic in it? This is the more difficult part of the question and the difficulty arises from the apparently inconsistent character of the relevant Articles. The answer to the question must be determined by the effect of Articles 27, 28 and 29. Article 29 provides that the forfeiture of a share will involve the extinction of all rights and interests of the shareholder in the share, except only such "as by these Articles expressly saved". Article 28 provides that a member whose share is forfeited shall, notwithstanding the forfeiture, be liable to pay all monies owing to the association and the committee may enforce the payment thereof without any deduction or allowance for the value of the share at the time of the forfeiture. Article 27 provides that the forfeited share "shall be deemed to be the property of "the association", and the committee shall sell, re-allot or otherwise dispose of it for the satisfaction of all debts which may be due and owing either to the association or to any of its members. Prima facie, it seems that the provision that the forfeited share shall be deemed to be the property of the association is inconsistent with the provision that the proceeds of its disposal shall be applied to the satisfaction of the debts of the share-holder and that the' latter provision is also inconsistent with the provision that upon the forfeiture of a share, all rights and interests therein of the shareholder concerned shall be extinguished. The provisions contained in the Articles are a somewhat curious amalgam of provisions usually made for enforcement of a lien and provisions for forfeiture, pure and simple. It is when a company's lien on a share for debts owing by a member is enforced by its sale that the proceeds are applied for satisfaction of the debts. When a share is forfeited, the share-holder gets no benefit from its sale or re-issue, for his interest in the share ceased with the sale. It is when a company's lien on a share for debts owing by a member is enforced by its sale that the proceeds are applied for satisfaction of the debts. When a share is forfeited, the share-holder gets no benefit from its sale or re-issue, for his interest in the share ceased with the sale. The Articles in the present case speak on the one hand of forfeiture and of the extinction of the share-holder's rights and on the other hand direct that the proceeds of the re-disposal of the share shall be applied to the satisfaction of debts, owing not only to the association but also to any of the members. I have a shrewd suspicion that the Articles were framed in that form in order to avoid the effect of Hopkinson v. Mortimer, Harley & Co., Limited (supra). 127. The Articles in Hopkinson v. Mortimer, Hurley & Co., Limited, did not provide that, if a share was forfeited, the holder of the share would nevertheless remain liable for all debts owing to the company. Eve J., accordingly, held that, if the effect of the forfeiture was that the debts were partially or wholly satisfied, the transaction would involve not only reduction of capital but also what was equivalent to an actual payment by the company and, therefore, a purchase by the company of its own shares. In order to avoid that consequence, Article 28 in the present case provides that, notwithstanding the forfeiture of a share, the share-holder shall remain liable for all debts owing to the association and shall be entitled to no deduction on account of the value of the share. Eve J. decided in the second place that a power of forfeiture in enforcement of a lien would operate as a clog on the share-holder's equity of redemption and was, therefore, invalid. That difficulty is sought to be met in the present case in two ways. The power of forfeiture is not attached to the lien as in Hopkinson's case but is assumed as an independent power; and, in spite of the forfeiture, the share-holder is given some benefit of the proceeds of re-allotment or sale, for which there was no like provision in Hopkinson's case. The power of forfeiture is not attached to the lien as in Hopkinson's case but is assumed as an independent power; and, in spite of the forfeiture, the share-holder is given some benefit of the proceeds of re-allotment or sale, for which there was no like provision in Hopkinson's case. In spite of the last provision, what the Articles contemplate is not sale in enforcement of a lien, for they do not provide for payment of the surplus, if any, to the share-holder and provide, on the other hand, for payment of debts due to other members, with which the usual lien of a company on the shares in the hands of its share-holders has no concern. Lastly, in Hopkinson's case, there was no obligation on the company, if it forfeited a share, to sell or re-allot it. Such an obligation is imposed in the present case and thereby the possibility of extinction of the share is excluded. 128. However apparently confused the Articles may seem to be, the question is whether the power of forfeiture under them, as they stand, is bad for the reasons alleged. That forfeiture, by itself, would not cause a reduction of capital, has been shown. There is no purchase of the share either. The company pays nothing for the share out of its funds. There is no release of the share-holder from any liability and no total or partial satisfaction of his debts by the forfeiture and, therefore, there is no round for saying, as there was in Hopkinson's case, that the company pays for the share by taking it in satisfaction of the debts and so there are both a return of capital and a purchase, Under Article 28, the share-holder remains liable for his debts to the association, as before the forfeiture, and gets no credit for the value of the share. There is thus no payment, either in cash or by adjustment of accounts. Nor does the provision that the proceeds of a sale or re-allotment shall be applied to the satisfaction of the debts make the transaction of forfeiture a purchase, for, if a creditor causes a sale of some property of his debtor for realising the debt, he does not thereby purchase the property. But does the company, in any event, come to hold the share or own it as an asset, whether it purchases it or not ? But does the company, in any event, come to hold the share or own it as an asset, whether it purchases it or not ? It is true that the share is forfeited and Article 27 provides that the forfeited share "shall be deemed to "be the property of the association". But that provision itself shows that the share does not in fact become the property of the company, but is only to be deemed to be so for purposes of disposal. The Article means that, when by the forfeiture of a share the interest of the share-holder therein has ceased to exist, the share, as a unit of the share capital, shall revert to the company and be at its disposal for the purpose of sale or re-allotment. It does nothing more than state the normal effect of a forfeiture. It was said that a share must have an owner and, when the ownership of the holder was extinguished by forfeiture, it must necessarily come to be owned by the company, thus making the company the holder of one of its own shares, or, if it did not come to belong to the company, it would be without an owner which was impossible. That argument, it seems to me, involves a misconception. The objection that a share must have an owner applies only when the share is regarded as the interest of a particular share-holder in the sense explained by Farwell J. and has no application to a share, when it is only a unit of the share capital, with no holder attached to it. Similarly, the objection that a company cannot hold one of its own shares is relevant only when the company comes to own it as a share-holder, but has no application when the share is only under the control of the company as a company for the purpose of being offered for subscription. In my view, the provision that a forfeited share shall be deemed to be the property of the association read in the light of the other provision that the company must sell or re-allot it only means that the subscriber for the share having disappeared, the share is again at the disposal of the company as a share, of which there is, for the time being, no holder, but the company must re-issue it and find another holder by sale or re-allotment. There is no question of the share being the property of the company in the sense of being held by it as a share-holder. 129. Lastly, does the transaction envisaged by the Articles amount to trafficking in shares? I can see no trafficking. Trafficking, as my Lord has explained, has always been understood to involve purchase for the purpose of re-sale, and companies, it has been held, cannot be allowed to speculate and deal in their shares in that form. But what the association does in the present case is only that it" disposes of share which has come under its control otherwise than by purchase and, to use the phrase which has often been used, merely finds another share-holder for the share which, by forfeiture, has lost its previous holder. It is true that, under the Articles, it must apply the proceeds of the sale or re-allotment to the satisfaction of the debts due from the previous share-holder to itself and to other members, but that provision does not make the transaction a purchase and a re-sale. There is no real inconsistency between Articles 28 and 29 on the one hand and Article 27 on the other. The liability of the share-holder for his debts to the association subsists in full under Article 28 and is to be computed without any deduction or allowance on account of the value of the forfeited share. Under Article 29, the rights of the share-holder are extinguished by the forfeiture, but the same Article contains a saving clause which preserves rights "expressly "saved". It seems to me that, while the title of the share-holder is extinguished without any payment being made or credit being given to him on account of the forfeited share, he is nevertheless given certain subsequent rights by the saving clause, and the proceeds of the sale or re-allotment are applied to the satisfaction of his debts under Article 27 by virtue of the rights, so saved. That, however, is done without conceding in any way his title to the share after the forfeiture and the payment is a voluntary payment which the association binds itself to make out of its own monies. That, however, is done without conceding in any way his title to the share after the forfeiture and the payment is a voluntary payment which the association binds itself to make out of its own monies. It cannot be said that there is trafficking, because what the association in fact does is that it takes the share in lieu of the debts, thus in effect purchasing it, and then pays itself by selling the share, making a profit of the surplus, if any. Under Article 28, the association may enforce payment of all debts owed to it by the share-holder notwithstanding the forfeiture, and if it does so, the share-holder cannot resist it on the ground that it must look to the proceeds of the share for satisfaction of the debts. There is thus no consideration for the forfeiture. The obligation under Article 27, again, is an obligation to apply the proceeds of sale or re-allotment not merely to the satisfaction of the debts due to the association, but also to the satisfaction of debts due to other members. This obligation is clearly unconnected with the incidents of the forfeiture itself, but is a concession, which has been converted into a duty, to be made subsequently upon the disposal of the forfeited share and to which the share-holder has, by virtue of the Articles, a separate and an independent right. But the association, instead of trafficking in the share, binds itself to pay the share-holder's debts to other members as well out of monies which may come to belong to it from a disposal of the share and which, but for the obligation undertaken by Article 27, it would not be bound to apply even to the satisfaction of its own dues. 130. The value of the share is thus not credited against the debts due to the company. The question asked by Eve J. "If the "value of the shares is not to be credited against the debt, how is "the company to deal in its capital account with the amount paid "on the shares?" is easily answered. The shares are fully paid. The question asked by Eve J. "If the "value of the shares is not to be credited against the debt, how is "the company to deal in its capital account with the amount paid "on the shares?" is easily answered. The shares are fully paid. On the forfeited share being resold or re-allotted, at a premium or at par, an amount equal to the face value of the share will be credited from the proceeds to the paid-up capital account and the same amount, previously received on the share and held on the forfeited share account, will be transferred to the profits. This will be merely an operation in book-keeping and, in effect, the company will have in its hands the whole amount of the proceeds of the share as its profits. If it applies the proceeds to the satisfaction of the share-holder's debts, due whether to itself or to other members, it will be applying its profits and not capital; and if it retains the surplus, if any, it will retain its own money and the retention will not be more blameworthy than in a case of forfeiture for non-payment of calls. 131. In my view, the present case stands clear of the decision in Hopkinson v. Mortimer, Harley & Co., Limited (supra), except as regards the view taken as to reduction of capital, which, in my opinion, is not correct; and I agree with my Lord that the forfeiture cannot be impugned on any of the grounds urged and ought to be upheld. If the Articles providing for forfeiture do not offend against any provisions of the Companies Act, nor involve any consequence contrary to the accepted concepts of company law, there is no reason why they should not be valid and enforceable as terms of a contract between the company and its share-holders.