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(1) This is an appeal under S.202 of the Indian Companies Act VII of 1913, from the order of the District Judge, Ahmedabad.

(2) The relevant fact are as follos: In the former State of Idar a private limited company called the Himatnagar Glass and Ceramic Industries Ltd. was founded. Originally, it as a private limited company but eventually it was converted into a public limited company. Just before this conversion the State of Idar purchased preference shares of the fact vale of Rs. 1,00,000 in this company and paid the full amount of the share money. Along with these shares the State also purchased ordinary shares of the value of Rs. 1,00,000. Only half of the share money had been called and, therefore, the State paid only Rs. 50,000. Thus, a balance of Rs. 50,000 as the unpaid call in respect of these shares. The State also lent Rs. 10,000 to the company partly on 5th March 1945 and partly on 6th April 1945.

(3) It would appear that this concern ran into difficulties and the Government of Idar was, therefore, desirous of getting rid of its shares. An agreement as thereupon entered into between a concern known as the M. D. Industries Ltd. of Ahmedabad and the Himatnagar Glass and Ceramic Industries Ltd. Under that agreement that former was to be appointed as the sole selling agents of the Himatnagar Glass and Ceramic Industries Ltd. In consieration of their agreeing to render financial help to the aforesaid industries it was also agreed that the M. D. Industries Ltd. were to take over all the shares which stood in the name of Idar State in the Books of the company. They were to pay an amount of Rs. 1,50,000 to the Idar State as purchase price of those shares within a certain period. They never paid this money.

Here we have the fact that the State of Idar had entered into possession of this property by virtue of the agreements of 1945 on the ground that it was a share-holder to the extent of two lakhs of rupees. After the merger the State of Bombay entered into possession of this property. It would therefore, follow that the State of Bombay intended to assert the same rights which the frmer Idar State purported to assert when it had entered into the agreemen. Those rights were based, as already stated, upon the initial fact that the State of Idar was a share-holder to the extent of Rs. 2 lakhs and in respect of which it had paid, Rs. 1,50,000 by way of share money. A balance of Rs. 50,000 was payable by the State to the company. This liability must naturally attach to the right which the State of Idar had be reason of the fact that it had paid Rs.1,50,000. Now the State of Idar could not have exercised those rights and ignored the liabilities which were attached to those rights. The State of Bombay didnot repudiate expressly any liabilities after it entered into possession of this property. It could, therefore, be said that be implication the State of Bombay accepted that liability. Apart form that the Court cannot permit a party to allow itself to take only the benefits arising out of a contract or a bargain and dispute the liabilities arising thereform. Therefore, looking at the matter either way, it would be clear that the State of Bombay as the successor State is bound by the the same obligation by which the State of Idar was bound. Alternatively it can be said that the State of Bombay cannot be allowed to assert their rights as share-holders but dispute the liabilities arising from the fact that they are the share-holders.

(10) As regards the second ground we may point out that though the agreement between the State of Idar and the M. D. Industriesd Ltd. whereunder the lattr had undertaken to take over the shares standing in the name of the State and pay for them and though there is also an agreement between the company on the one hand and the M. D. Industries on the other that the latter would pay the price of the shares to the Idar State and get the shares transfer of the shares in the name of M. D. Industries Ltd. In the absence of any such transfer we are clear that the liability of the original share-holders, i.e., the State of Idar, continued. Since the State of Idar was liable, the State of Bombay, which is the successor of the State Idar, is also liable.