1965 (4) TMI 51 - HC - Companies Law

Summary

Issues Involved:
1. Retention of proceeds collected from past members.
2. Balance order against contributories who have not fully paid.
3. Refund of amounts collected from past members.
4. Recovery from preference shareholders.

Detailed Analysis:

1. Retention of Proceeds Collected from Past Members:
The official liquidator questioned whether he could retain the proceeds of the calls already made on the past members, even though it had been wrongly collected from them. The court examined the substantive provisions of the Companies Act, 1956, particularly Section 426, which outlines the liability of past members. The court noted that the liability of past members arises only if the existing assets plus the contributions from present members are insufficient to pay the company's debts and liabilities. Since the assets were sufficient to meet all debts and costs, there was no need for contributions from past members. Therefore, the court concluded that the retention of these proceeds was not justified.

2. Balance Order Against Contributories Who Have Not Fully Paid:
The court considered whether it could enforce the order dated September 4, 1959, further by passing a balance order against the contributories who have not paid in full or in part. Given the sufficiency of the company's assets to cover its debts and liabilities, the court found no justification for additional contributions from past members. The finality of the prior orders under Sections 473 and 483 of the Companies Act was acknowledged, but the court decided not to enforce further contributions from past members.

3. Refund of Amounts Collected from Past Members:
The court addressed whether the amount of Rs. 9,005.84 collected from past members should be refunded to them. Citing precedents such as Brett's case and In re City of London Insurance Company Ltd., the court emphasized that the liability of past members arises only after exhausting the assets and contributions of present members. Since the assets were sufficient, the court ruled that the collected amount should be refunded to the past members. The court decided to refund the available cash on hand, Rs. 3,431.93, proportionally to the past members based on their contributions.

4. Recovery from Preference Shareholders:
The official liquidator proposed recovering Rs. 7 per share from the preference shareholders to make up for the insufficient funds to refund the past members. However, the court noted that the orders dated September 4, 1959, and September 25, 1959, had become final and could not be altered. Therefore, it was not possible to order the preference shareholders to repay any portion of the capital they had received. The court did not find it necessary to take steps to recover any amount from the preference shareholders.

Conclusion:
The court concluded that the prior orders directing contributions from past members were not justified due to the sufficiency of the company's assets. Consequently, the court decided to refund the available cash to the past members proportionally and not to enforce further contributions from them. Additionally, the court ruled out recovering any amount from the preference shareholders. The costs of the application were to come out of the estate.