1956 (11) TMI 14 - HC - Companies Law

Memorandum and articles of association Registration of and Winding up Power of Tribunal to make calls

Summary

Issues Involved:
1. Assurance of non-payment until shares are sold.
2. Applicability of Section 186 vs. Section 187 of the Indian Companies Act, 1913.
3. Assignment of rights to the Industrial Finance Corporation.

Detailed Analysis:

1. Assurance of Non-Payment Until Shares Are Sold:

The applicant, Ramanathan Chettiar, contended that he was given an explicit assurance by A.C.K. Krishnaswami, the managing director of Link Industries Ltd., that he would not be required to pay the balance of Rs. 5 per share until he could sell about 3/4 of his holdings at a profit. This assurance was supposedly made when Chettiar took up 36,555 shares of Link Industries Ltd. in 1947. The court noted that the probabilities suggested such an assurance was given, but deemed it unnecessary to decide its binding nature on the company, the liquidator, or the Industrial Finance Corporation due to the conclusions reached on other arguments.

2. Applicability of Section 186 vs. Section 187 of the Indian Companies Act, 1913:

The applicant's counsel argued that the Official Liquidator could not recover the unpaid call money under Section 186 of the Indian Companies Act, 1913, as it explicitly excludes money payable by virtue of any call made under the Act. Instead, Section 187 should be followed, which provides the court with the power to make a call when necessary to satisfy the company's debts and liabilities during winding up. The court examined the language of Section 186(1) and the Privy Council's interpretation in Hansraj Gupta v. Official Liquidators of Dehra Dun etc. Co., which emphasized that Section 186 only applies to moneys other than those payable by virtue of a call in pursuance of the Act. The court found the liquidator's reasoning flawed and concluded that calls made by directors before winding up are indeed calls made under the Act, thus falling outside the purview of Section 186.

3. Assignment of Rights to the Industrial Finance Corporation:

The applicant argued that the right to enforce the unpaid share capital had been assigned to the Industrial Finance Corporation through a mortgage deed, making it the only entity entitled to recover the money. The court agreed, stating that the rights and remedies of the company in respect of unpaid capital had vested in the Corporation, as per Section 130 of the Transfer of Property Act. The court found no sufficient authorization in Exhibit P. 14 for the Official Liquidator to act as the Corporation's agent. Furthermore, the Corporation had decided to stay outside the winding up process, which precluded it from obtaining remedies available in a winding up.

Conclusion:

The court allowed the application, removing Ramanathan Chettiar's name from the list of contributories settled by the Official Liquidator. The order was made without prejudice to the Official Liquidator's rights to proceed under Section 187 of the Companies Act, 1913. Costs were awarded to be paid out of the estate, with an advocate's fee of Rs. 400.