1959 (9) TMI 29 - HC - Companies Law

Shares warrants and entries in register of members, Winding up Delivery of property to liquidator and Power of Tribunal to make calls

Issues Involved:
1. Liability of the State of Bombay for unpaid call money.
2. Legal effect of the 1945 agreement on the liability for unpaid calls.
3. Whether the State of Bombay was a contributory settled on the list of contributories.
4. Limitation period for the liquidator's claim for unpaid call money.
5. Entitlement of the liquidator to claim interest on unpaid call money.
6. Liability of the State of Bombay to pay rent for the company's properties.

Detailed Analysis:

1. Liability of the State of Bombay for Unpaid Call Money:
The court examined whether the State of Bombay was liable for unpaid call money initially owed by the State of Idar. The court concluded that the State of Bombay, as the successor state, implicitly accepted the liabilities of the State of Idar by taking possession of the property and asserting rights as shareholders. The court noted that a successor state cannot accept the benefits of a contract without also accepting its liabilities.

2. Legal Effect of the 1945 Agreement on Liability for Unpaid Calls:
The court addressed the argument that the 1945 agreement between the State of Idar and M.D. Industries Ltd. absolved the State of Idar from paying the call money. The court found that since there was no transfer of shares to M.D. Industries Ltd., the liability of the original shareholders, i.e., the State of Idar, continued. Consequently, the State of Bombay, as the successor state, was also liable.

3. Whether the State of Bombay was a Contributory Settled on the List of Contributories:
The court addressed the argument that the State of Bombay was not settled on the list of contributories. The court noted that this point was not raised in the lower court or in the memorandum of appeal and thus did not permit it to be raised at this stage. The court held that the State of Bombay must be regarded as a contributory.

4. Limitation Period for the Liquidator's Claim for Unpaid Call Money:
The court examined whether the liquidator's claim was barred by time under Article 112 of the Limitation Act, which requires suits to be instituted within three years from when the call money is payable. The court found that the liquidator's application was not based on the resolution of August 4, 1946, which called for only Rs. 25,000, but rather on the total unpaid call money of Rs. 50,000. Therefore, the claim was not time-barred under Section 186 of the Companies Act.

5. Entitlement of the Liquidator to Claim Interest on Unpaid Call Money:
The court found that in the absence of a provision in the Companies Act and a demand for interest in the liquidator's letter, it was not competent for the court to award interest against the State. Consequently, the direction to pay interest at 9% was set aside.

6. Liability of the State of Bombay to Pay Rent for the Company's Properties:
The court considered whether the State of Bombay was liable to pay rent for the company's properties under Section 185 of the Companies Act. The court concluded that there was no provision in Section 185 to require a contributory to pay rent. The court also noted that the Civil Supplies Department, being a limb of the State, did not constitute a separate entity from which rent could be collected. Therefore, the direction to pay rent was set aside.

Conclusion:
The court modified the lower court's order by deleting the directions requiring the State to pay Rs. 50,000 with interest and rent. The appeal was partly allowed, and the cross-objections were dismissed. Each party was directed to bear its own costs of the appeal, with the respondent paying the costs of the cross-objections to the appellant.

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