The Pioneer Mutual Benefit and Friend-in-need Society, Ltd. vs The Assistant Registrar of Joint Stock Companies

Stone, J.—In this matter I reserved judgment in order carefully to consider whether the new scheme fell within Wallingford v. Mutual

Society (1880) 5 A.C. 685. I had and have no doubt about the other points raised.

The first question is whether the Assistant Registrar of Joint Stock Companies has power to decline registration of any part of (a) a

memorandum, or (b) articles of a public company. It is said that in Section 82 (relating to the registration of special and extraordinary resolutions)

the words in Sub-section (1) ""who shall record the same"" are directory and leave the Registrar no option in the matter. But the same may be said

of the duties of the Registrar u/s 22 with regard to the registration of the memorandum and articles yet there can be no doubt that the Registrar of

Joint Stock Companies has a discretion to refuse to register a memorandum. As Lord Parker observed in Bowman v. Secular Society, Ltd (1917)

A.C. 406:

The Registrar fulfils a quasi-judicial function. Only by misconduct or great carelessness on the part of the Registrar could a company with objects

wholly illegal obtain registration.

But it is said that although that applies to a memorandum it does not apply to a resolution altering articles. I entirely fail to see why Section 22

relates to a. memorandum and articles and if the Registrar can in the exercise of his quasi-judicial function refuse to register a memorandum I

should think it is almost an unarguable proposition that he yet must register articles. If he can exercise his discretion with regard to articles he must

obviously be able to exercise a discretion with regard to the alteration of articles.

In this case an effort has been made to alter the articles so as to enable this company to carry on, in effect, the business of Universal Mutual Aid

and Poor Houses Association, Ltd., which company was compulsorily wound up as constituting a lottery. I will say nothing about that company.

This present company now desires to offer a somewhat different scheme to the public. Under the old scheme subscribers got the certainty of an

interest-free loan in time but the quantum of the loan and of course the time was determined by lot and cash certificates gave an equal chance.

Under the present scheme the subscriber is entitled to one loan and the chance does not increase with the number of certificates held. I have

carefully considered Wallingford v. Mutual Society (1880) 5 A.C. 685 in the light of the judgments of the Chief Justice and Cornish, J. in The

Universal Mutual Aid and Poor Houses Association, Ltd. Vs. A.D. Thoppa Naidu and Others, and in my opinion this scheme offends against

Section 294-A of the Indian Penal Code in exactly the same way as did the Universal Mutual Aid scheme. The only difference is that the present

scheme offers a prize that is not very valuable but which will probably be obtained within a reasonable time by most subscribers whereas the other

scheme offered prizes that were very valuable but which would not be drawn by the majority within a reasonable time.

It is said that there is no prize at all. In my opinion there is but really the use of the word ""prize"" is unnecessary. What the Penal Code says is

publish a proposal to do anything for the benefit of any person"". It seems to me to be clear that a loan of Rs. 1,000 on personal security is

something which a person desiring to borrow would regard as a benefit. It is true that the rate of interest is left at large but that simply means that a

trap is or may be prepared for the unwary. The obvious intention, is to offer to the public something that is attractive and the attraction is a loan on

personal security, that is held up as a benefit and that benefit is obtained by this man or that according as this man or that is fortunate in a draw.

If this were straight business whereby a money-lending association were offering to lend money to all of a class it would be quite unnecessary to

invoke the machinery of the draw. It is because the lucky person gets something more than he could get under ordinary business conditions that it is

necessary to select him by lot. Whether this sort of a scheme is one which should be encouraged or not, whether it is likely to mislead the ignorant

anxious to raise money or not is not my concern. Whether this falls within Section 294-A of the Indian Penal Code is the question I have to

consider. If it does it is certainly better to stop it at the threshold rather than to allow the company to proceed along these lines and then wind it up

as an illegal company after many thousands of people may be, have entered the scheme.

In my opinion it does offend against Section 294-A and the Assistant Registrar of Joint Stock Companies was right in refusing to register the

articles as presented to him. The motion is accordingly dismissed with taxed costs.