1962 (7) TMI 19 - HC - Companies Law

Winding up - Liability as contributories of present and post members Power of Tribunal to make calls and Winding up - Powers and duties of liquidator

Issues:
1. Maintainability of the plaintiffs' suit by the liquidators without court permission.
2. Application of the Limitation Act to the plaintiffs' suit.
3. Nature of liability of the defendant in a voluntary liquidation.
4. Requirement of preparing a list of contributories by the liquidators.
5. Conversion of contractual liability into statutory liability in liquidation proceedings.
6. Applicability of relevant articles of the Limitation Act to the case.

Analysis:

1. Maintainability of the plaintiffs' suit: The defendant contended that the liquidators should have obtained court permission to file the suit, questioning its maintainability. However, both the Munsiff of Davangere and the Civil Judge, Chitaldrug, ruled in favor of the plaintiffs, stating that in voluntary liquidation, court permission was not necessary for the liquidators to sue. They held that the liquidators had the authority to file the suit without such permission, leading to the decree in favor of the plaintiffs.

2. Application of the Limitation Act: The defendant argued that the plaintiffs' suit was barred by limitation under article 112 of the Limitation Act, considering the demand made by the directors in 1949. However, the courts held that article 112 applied only to calls made by the company, not the liquidators. They applied the residuary article 120 to the case, allowing the suit to proceed within the limitation period, ultimately leading to the decree in favor of the plaintiffs.

3. Nature of liability in voluntary liquidation: The defendant claimed that the liability arising from the unpaid share amount was contractual, not statutory, even after the voluntary liquidation. The defendant's counsel argued that the liability remained contractual, subject to article 112 of the Limitation Act. However, the court disagreed, emphasizing that in voluntary liquidation, the liability of the defendant transformed into a statutory one, as per the relevant provisions of the Indian Companies Act, leading to the dismissal of the appeal.

4. List of contributories preparation: The defendant contended that the liquidators should have prepared a list of contributories before filing the suit. However, the court held that in voluntary liquidation, the preparation of such a list was not mandatory. The absence of the list did not invalidate the proceedings or the suit initiated by the liquidators, as they had the authority to demand payment without it.

5. Conversion of liability in liquidation: The defendant argued that the liability remained contractual even after the liquidation process began. However, the court cited precedents and provisions of the Companies Act, emphasizing that the supervening event of liquidation converted the liability from contractual to statutory. This conversion altered the nature of the liability, making it subject to different provisions, ultimately affecting the limitation period and the legal basis for the suit.

6. Applicability of Limitation Act articles: The court clarified that the relevant article of the Limitation Act in this case was not article 112 but the residuary article 120. By analyzing previous judgments and legal provisions, the court determined that the nature of the liability in a liquidation scenario dictated the applicable article for determining the limitation period. The court's decision was based on the conversion of liability from contractual to statutory in the liquidation context, leading to the dismissal of the appeal.

In conclusion, the High Court of Mysore upheld the lower courts' decisions, dismissing the appeal and ordering each party to bear their own costs. The judgment clarified the maintainability of the suit by the liquidators, the application of the Limitation Act, the nature of liability in voluntary liquidation, the list of contributories requirement, the conversion of liability in liquidation proceedings, and the relevant articles of the Limitation Act applicable to the case.

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