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TMI Blog1956 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... of my taking the bulk of the shares on account of the non-subscription from the public, the shares will be Rs. 5 paid up only till such time as I am able to unload the of my holding in the market at a little profit. The other day when you were kind enough to call on me the subject came up for discussion and I told you about the position." This letter, it may be explained, was written by Ramanathan Chettiar to Krishnaswami in view of a notice dated 12th April, 1949, calling for a meeting of the Board of Directors to consider among other things, "the question of making a second call of Rs. 2-8-0 on the 50,000 partly paid up shares." On 18th April, 1949, Krishnaswami replied to Ramanathan Chettiar by Exhibit P. 3, in which he stated: "The subject has been included in the agenda only for consideration. I hope to meet you here before the meeting and if you insist after discussing with me, I shall withdraw the subject from the agenda." On 21st April 1949, the applicant wrote to Krishnaswami, (Exhibit P. 4) expressing his inability to attend the meeting and asking that this subject be deleted from the agenda. Exhibit P. 5, an extract from the proceedings of the meeting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mortgage deed executed in favour of the Industrial Finance Corporation, the corporation had a charge on the unpaid money and that the corporation had written on 30th January, 1954, calling upon the company to take all steps to recover all moneys from the shareholders. After stating that the sum due from the applicant was Rs. 1,82,775 he was called upon to make immediate arrangements for the payment of this money together with interest at six per cent. On 24/25th April, 1953, the Industrial Finance Corporation of India wrote to the Link Industries Ltd. drawing their attention to certain clauses of the deed of mortgage and asking them to "open a separate account with your bankers in the joint name of the company and the corporation and deposit all call money in that account. The joint account will be operated by the Madras manager of the corporation on behalf of the corporation." As already stated, the order to wind up the company was made on 8th February, 1956. On 29th June, 1956, the corporation wrote Exhibit P. 14 to the Official Liquidator informing him that "we have an English mortgage over all the freehold land, buildings, engines, plant, machinery .... and all other asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bound by those assurances. He also remarked that the Industrial Finance Corporation had also notice of this fact because in paragraph 2 of Exhibit P. 1, a letter written by the managing agents of the Link Industries Ltd., to the Industrial Finance Corporation, it is stated: "When we requested the corporation to help us with finance, we had already tried to float an issue of shares in the market and had not met with success. As you are aware the issue had to be taken up by some of our directors, and they could do so then only if we agreed not to make the shares fully paid up." The probabilities of the matter are that A.C.K. Krishnaswami did give some assurance of the kind which the applicant pleads, but in view of the conclusion I have reached on the other parts of Mr. Thyagarajan's arguments it is unnecessary for me to decide how far this assurance is binding on the company or the liquidator or the Industrial Finance Corporation. The second contention of Mr. Thyagarajan was this. In the present case what the Official Liquidator is seeking to do is to recover from the applicant the money which had been called up by the directors. He purports to act under section 186 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts to create a foundation upon which to base a claim for payment. It creates no new rights. (3) The power of the court to order payment is discretionary. It may refuse to act under the section, leaving the liquidator to sue in the name of the company and it will readily take that course in any case in which it is made apparent that the respondent under this procedure, if continued, would be deprived of some defence or answer open to him in a suit for the same moneys". It will be noticed that in this elucidation of the section their Lordships say that the money recoverable must be moneys other than those payable by virtue of a call in pursuance of this Act. The reply of the official liquidator to this objection of Mr. Thyagarajan may be summarised more or less in this way. When before the winding up supervenes the directors of a company make a call on unpaid capital it is a call made by virtue of the articles of association of the company, and not a call made in pursuance of the Act; and so, it is not covered by the words of exclusion appearing at the end of sub-section (1) of section 186. Moneys payable in pursuance of such a call are contractual debts and all contractual deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l debt were to enquire why he is bound to pay, the only answer that can be given to him is, that he is a member of the company, that a call has been made and that it is a call which the directors have a right to make under the Act. The anomaly indicated by the official liquidator is more apparent than real. Of course, in some instances the law of limitation favours the elusive debtor. If he can dodge and evade payment till limitation has actually set in and barred the remedy against him he would be better off than if he had paid when payment fell due. Section 186(1) does not create any special anomaly so far as that aspect of the matter is concerned. Besides, money cannot be recovered under section 186 of the Act when an action for it would be barred. It must be further borne in mind that even though a right of suit against a defaulting contributory on whom a call has been made by the directors has become time-barred, his statutory liability is not extinguished and can in proper cases be enforced under section 187 of the Act. It is no doubt true that under that section the court has to be satisfied that it is necessary to make a call. But then, one is entitled to proceed on the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a suit is barred cannot be collected under section 186 of the Indian Companies Act. The learned Judges in the Allahabad case could not, therefore, have intended to make an order for payment under section 150 of the Act of 1882 which corresponds to section 186 of the Act of 1913. Actually they seem to have rested their decision on section 151, and, if that is so, this decision will not help the official liquidator at all. I quote the relevant passage: "But the Act says that for the purpose of recovery the amount shall be deemed to be a debt payable at the time or respective times when calls are made, the section 151 gives a court power to make calls from persons on the list of contributories for the amount for which they are shown as liable in the list prepared by the liquidator; so that really it is not even the right of a company which is being enforced by a liquidator. It is a statutory right of the creditors of a company to enforce against the contributories of an insolvent company through the court the obligation which the shareholders took upon themselves when they originally subscribed in the event of insolvency subsequently overtaking the company." (page 350) The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th what he wants it for and, in my view, this court has not even any jurisdiction to ask the liquidator what he wants it for and still less to withhold the payment of it from him. When, of course, a liquidator comes to the court under section 187 and asks for leave to make a call after the liquidation has intervened, the position is quite different. There the court has jurisdiction and indeed it is the very object of its being brought to the court at all to consider whether the liquidator really needs the money he says he needs it or not. In that case the liquidator is making a call himself and that is a step in the liquidation over which the court has control." Now, this is a decision of a single Judge, and, with great respect, I have some difficulty in seeing how when a call is made by the directors and the money payable in pursuance thereof remains unpaid it loses its character as money payable under a call. A call can be made either before a company is ordered to be wound up or after. The only provision under which a call can be made after a winding up is ordered is section 187. All other calls must be made by the directors and if they become debts merely by reason of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tories under section 187. It was held that the suit filed by the liquidator, if looked upon as a suit to recover a contractual debt, was barred by limitation. If looked upon as a suit to realise a statutory debt created by section 156, then the suit was not maintainable because no call in respect of that liability was made by the court, and, in the absence of any such call the statutory liability could not be realised by the liquidator. There is nothing in this judgment to support the view that a call made by a company and remaining unpaid on the date of the winding up can be recovered under section 186 of the Act. The last case which I need examine is reported in In re Whitehouse and Co. [1878] 9 Ch. 595 The headnote to that case is as follows: "Where a limited company is in voluntary liquidation, a contributory cannot set off a debt due to him from the company against calls made against him either by the company before or by the liquidator after the resolution to wind up." On examination this case does not seem to support the official liquidator. On the contrary, it contains observations which are against him. The learned Judge, after quoting section 38 of the old Engli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 212 of this Act are not debts to the company, but contributions to the assets enforceable by the liquidator; (2) that such contributions include all that is unpaid on shares at the commencement of the winding up, including, therefore, calls made before, as well as calls made in the winding up; and (3) that this being so, there is no set-off under the statutes of set-off because it is the liquidator who enforces the calls, while it is not the liquidator but the company that owes the debt, and therefore to establish a set-off the person asserting it must find in the Companies Acts some provision giving a right of set-off." On this point I am inclined to agree with Mr. Thyagarajan. Section 186(1), in plain terms, says that an order may be made in respect of any amount due from a contributory "exclusive of any money payable by him or the estates by virtue of any call in pursuance of this Act." I find it difficult to say that a call made by the directors of a company is not a call made in pursuance of the Act. To get the result which the official liquidator wants, the words and figures "of section 187" must be inserted before the last three words of that sub-section. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. In Santuram Hari v. Trust of India Assurance Co. AIR 1945 Bom. 11, 13 , Chagla J. has stated: "I, therefore, hold that on the execution of the transfer of an actionable claim all the rights and remedies of the transferor vest in the transferee and the transferee alone is entitled to enforce the remedy; there is no interest left in the transferor which would entitle him to maintain a suit in respect of the actionable debt." The official liquidator sought to surmount the difficulty raised by Mr. Thyagarajan by pointing out that though the mortgage is an English mortgage, it does not totally divest the company of all legal interests in the property mortgaged, and referred to Ram Kinker Banerjee v. Satyacharan Srimani [1939] 1 NLJ 544 . It is no doubt true that by executing what is called an English mortgage the mortgagor does not divest himself of all legal interest in the property; but from this it does not follow that he is entitled to get the property into his hands or even to sue for it. The official liquidator next stated that under Exhibit P. 14 the Industrial Finance Corporation has constituted him its agent and authorised him to collect the money. I fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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