1961 (9) TMI 23 - HC - Companies Law

Issues Involved:
1. Maintainability of the application under Section 186 of the Indian Companies Act, 1913.
2. Distinction between claims under Sections 186 and 187 of the Indian Companies Act, 1913.
3. Scope and interpretation of Sections 186 and 187 in relation to unpaid share money and call money.
4. Applicability of statutory liability under Section 156 and its enforcement through Sections 186 and 187.

Issue-wise Detailed Analysis:

1. Maintainability of the application under Section 186 of the Indian Companies Act, 1913:

The court first addressed the maintainability of Application No. 1342 of 1956, which was filed under Section 186 of the Indian Companies Act, 1913. The official liquidator conceded that the application, though purporting to be under Section 187, was actually made under Section 186. The court emphasized that Section 186 allows the official liquidator to recover debts due to the company but excludes money payable by virtue of any call under the Act. The court concluded that the official liquidator could not use Section 186 to recover unpaid call money, as such claims fall outside the scope of Section 186. The appeal regarding the maintainability of the application under Section 186 was dismissed.

2. Distinction between claims under Sections 186 and 187 of the Indian Companies Act, 1913:

The court elaborated on the distinction between Sections 186 and 187. Section 186 provides a summary remedy for recovering debts due to the company, excluding money payable by virtue of any call under the Act. In contrast, Section 187 allows the court to make calls on contributories to satisfy the debts and liabilities of the company during winding up. The court noted that Section 187 includes both calls made by the company before winding up and calls made by the liquidator during winding up. The court emphasized that Section 187 is intended to create a fund for paying off the company's debts and expenses, while Section 186 deals with other liabilities of the contributory.

3. Scope and interpretation of Sections 186 and 187 in relation to unpaid share money and call money:

The court clarified that unpaid share money, whether called by the directors before winding up or by the liquidator during winding up, falls within the scope of Section 187. The court explained that Section 186 excludes claims for call money, which are covered by Section 187. The court cited various legal precedents to support the interpretation that Section 187 can be used to recover unpaid share money called by the company before winding up. The court rejected the argument that Section 186 should include claims for call money already demanded by the company, as this would lead to overlapping and inconsistent application of the sections.

4. Applicability of statutory liability under Section 156 and its enforcement through Sections 186 and 187:

The court discussed the statutory liability of contributories under Section 156, which requires them to contribute to the company's assets to pay its debts and liabilities. The court noted that this liability includes both calls made before winding up and calls made during winding up. The court emphasized that Section 187 provides the procedure for enforcing this statutory liability, while Section 186 deals with other contractual liabilities. The court concluded that Section 186 cannot be used to recover unpaid call money, as this would conflict with the specific exclusion in the section and the comprehensive remedy provided by Section 187.

Conclusion:

The court upheld the judgment of Balakrishna Aiyar J., dismissing the official liquidator's application under Section 186 and allowing the respondent's application to remove his name from the list of contributories. The court affirmed that unpaid share money called by the company before winding up falls within the scope of Section 187, and Section 186 cannot be used to recover such claims. The appeal was dismissed with costs.

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