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Devan Singh Vs.

Minerva Films

BY: PRIYAMBADA
 Ection 11 of the Indian Contract Act, 1872 provides as to who are competent to
contract and reads as follows:

“Every person is competent to contract who is of the age of majority according to


the law to which he is subject, and who is of sound mind, and is not disqualified
from contracting by any law to which he is subject.”

Section 3 of the Majority Act, 1875 sets out the age of majority as eighteen years.
The minor lacks the capacity to contract. The reason being that the minors are
presumed to be naïve, inexperienced, and easily taken advantage of, hence some
protection is required. Contract, which obviously involves obligations on the part of
the parties to it, is one such instance.
 In Devan Singh vs Minerva Films Ltd (1956), the Punjab High Court held that
there is no legal bar to a minor becoming a member of a company by
acquiring shares (by way of transfer) provided the shares are fully paid up
and no further obligation or liability is attached to them. In this case ,
transfer of shares had been held valid as it is a fully paid up shares and
there is no mention about who had signed the transfer deed form. Further ,
this case , deals with a doctrine of indoor management and has stressed
that a minor cannot be held for further obligation or liability is attached to
them. Similarly, in S. L. Bagree v. Britannia Industries Ltd — 1980, CLB
upheld transfer in favour of a minor but silent about who has to sign the
transfer deed in case of a transfer of shares.
 As per Diwan Singh Vs Minerva Films Ltd., A minor can become a member
of a company by acquiring shares subject to the following conditions
- should be by way of transfer
- The shares are fully paid up
- No further liability is attached to the shares
 Hence a minor can become a member only by way of secondary market
and not by primary market
 Dewan singh hira singh
 Minerva films ltd.
 Minerva Ltd has received an application for transfer of 5,000 equity shares
of Rs 10 each fully paid-up in favour of one Mr Rehan. On scrutiny of the
application form it was found that Rehan is a minor.
 Under the circumstances, the following issues are considered:

1. What would be the contractual liability of a minor?


2. Whether shares can be allotted to Rehan by way of transfer?
 In case of fully-paid shares, minor's name may be admitted in the Register
of members, if he happens to acquire the same by way of transfer or
transmission. In Dewan Singh vs Minerva Films Ltd (1959) 29 Comp Cases
263 (P&H), the Punjab High Court held that there is no legal bar to a minor
becoming a member of a company by acquiring shares (by way of transfer)
provided the shares are fully paid up and no further obligation or liability is
attached to them..

 The position with respect to a minor becoming a member of a company


would be in terms of the following two circulars issued by the Department
of Company Affairs in this regard:
 In view of the above, it can be concluded that there is no objection to a
minor being admitted as a member in respect of fully-paid shares provided
he happens to acquire the same by way of transfer or transmission. Hence,
in the present case, fully paid shares can be transferred to Mr. Rehan
without any contractual liability.