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TMI Blog1961 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd., which is now under liquidation, was incorporated in 1946. On August 13, 1947, the company issued 50,000 shares of the nominal value of Rs. 10 each. The respondent subscribed for 36,555 shares and paid to the company at the time of the application and allotment a sum of Rs. 5 for each share. The balance of share money was payable under the articles of association on a call being made therefor by the directors. But no call was made till the year 1953. On July 27, 1949, the company had to borrow a sum of Rs. five lakhs from the Industrial Finance Corporation of India, for the purpose of its business. To secure the amount advanced by the corporation, the company executed a deed of English mortgage, securing its properties as well as the uncalled share money due from its members. It will be convenient at this stage to refer to the relevant portions of the document : "This indenture made on the 27th day of July 1949,....the company hereby grants, assigns and transfers and assures unto the Corporation all and singular the freehold land, buildings and premises described in the schedule hereunder written and all and singular the engines, machinery (whether fixed or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining uncalled amount from its shareholders in two instalments of Rs. 2-8-0 per share, the first instalment being payable by October 31, 1953, and the next within a month thereafter. A notice was issued to the respondent on April 29, 1953, calling upon him to pay a sum of Rs. 1,82,755 in respect of 36,555 shares held by him. The respondent repudiated his liability. Further correspondence followed between the parties. But, before the controversy could be settled, the company was directed to be wound up by an order of this court dated February 8, 1956, in O.P. No. 157 of 1955. After the liquidator took charge of the affairs of the company, he settled a list of the contributories. The respondent was shown in the list as due to the company in a sum of Rs. 1,82,775. The respondent thereupon filed Application No. 1598 of 1956 for deleting his name from the list of contributories. His case was that, at the time when he agreed to take up 36,555 shares, it was agreed between him and the then managing agents of the company that the uncalled share amount should not be demanded of him till he was able to unload three-fourth of his holding in the market at a profit. He also contended that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company are (1) the subscribers to the memorandum of the company, and (2) persons who agreed to become members of the company and whose name is entered in the register of members of the company. Section 40 states that the register of members shall be prima facie evidence in respect of matters which are directed to be contained or inserted therein. Section 31 provides for the maintenance of the register of members. Therefore, if a person's name is found in the registers of the company, it would be prima facie evidence that he is a present member of the company liable to contribute in respect of the unpaid share money. Section 184 deals with the list of contributories. It will be the duty of the liquidator, after he is appointed, to prepare a list of contributories from the share register and other documents available to him. After the list is prepared, section 184 provides for settlement of the list by the court. The list will show the names and other particulars relating to the contributory, the number of shares held by him and the amount which he is liable to contribute. The importance of the list of contributories lies in this, namely, that a call for contribution for unpaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That would mean that the uncalled share money would be a debt due by the shareholder to the company, although by reason of the call not having been made, it had not become payable. A mortgage executed by the company, securing the unpaid share money, will, therefore, amount to an assignment of the future calls that may be made by it in favour of the mortgagee. The creation of a security over actionable claim of that kind could only be by way of assignment under section 130 of the Transfer of Property Act. The fact that the right of the company in regard to the unpaid shares has been assigned, cannot alter the real character of the transaction, namely, that such assignment was intended only by way of security the assignor's right to redeem would subsist till it is put an end to or barred. The mortgagee, in case his claim is otherwise satisfied, will have to reconvey the same; if his claim is satisfied out of a portion of the call money, he will have to pay the balance to the company and till then he will be in the position of a trustee for the company in regard to the surplus. The transaction being by way of an English mortgage, the company will have a legal right in the equity of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the first time on the company going into liquidation. It is merely the ripening of that liability which the contributory undertook when he became a member. The liquidator, no doubt, is bound to distribute what belongs to the company in the manner prescribed by the Act. But, after all, the question is. what does belong to the company ? What are its assets or its property?. That must depend on what dispositions have been made, and what charges have been validly created while the company acting within its powers was free to deal as it pleased with its own." The question in the two cases arose as to the validity of a charge created by the company before its liquidation. After liquidation supervened, a contention was raised that the liquidator was entitled to receive the entire call money, without any obligation to pay the charge-holder, for the benefit of the simple money creditors. It was held in those cases that the mortgage or charge continued to be valid even after winding up. The observations referred to above show clearly that the liquidator would be entitled to an interest in the unpaid call money. If so much is certain, the next step is easy. The liquidator in whom such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the transferee alone was entitled to enforce the remedy as there was no interest left in the transferor which would entitle him to maintain a suit. The learned judge quoted with approval the following observations of Lord Esher M.R. in Read v. Brown [1889] 22 QBD 128, 132 : "The debt is transferred to the assignee and becomes as though it had been his from the beginning ; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name." We do not at all doubt that, where a mortgage is created over an actionable claim the transaction is, in form, an assignment of the actionable claim itself, and the assignee would be the person entitled to file a suit. But the question is whether that rule would apply in all its rigour regardless of the nature of the subject-matter of the mortgage. The rule was not applied by this court in the case of pledges (vide Official Assignee, Madras v. Khimsura ILR [1941] Mad. 378. In Diayadaru Chandrasekaralingam v. Nagabhushanam [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary the receiver in the action may be empowered to use the liquidator's name to get in the call." Sadler v. Worley [1894] 2 Ch. D. 170, 175, 177, was a case where a debenture created a floating charge of all property of the company, present and future, including uncalled capital. The company was wound up, and a question arose as to the form in which judgment was to be entered in the mortgagee's (debenture-holder's) action for foreclosure. Kekewich J. observed : "But these are the assets of a company, and some of them cannot be realised except by the exercise of powers which are vested by statute and articles of association in the company itself as represented by directors or liquidator. To take the most extreme and most embarrassing item, how can there be foreclosure of uncalled capital ? It cannot be vested in the mortgagee, and the extreme limit of his right must be to have the power of calling on the directors or liquidator to exercise their power on his behalf. This sounds somewhat anomalous. But it must be remembered that a mortgage of uncalled capital can be effectually made; and the decisions sanctioning that would be idle if they did not also sanction the real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company, if it is a going concern to call in the unpaid share money and pay the mortgagee, or in case the company has been directed to be wound up, to ask the liquidator to call in those moneys. Mr. Thyagarajan, however, contends that the principle of these cases could be applied only to a case where there has been no call by the directors of the share money prior to the winding up, there being unpaid share money to be called for the first time after liquidation, and that a case like the present, where the call had been made by the directors, would stand on a different footing, inasmuch as such call money had become a debt payable by the shareholder. In Official Receiver, Link Industries v. Ramanathan Chettiar [1962] 32 Comp. Cas. 381 , we have held that there could be no distinction in regard to the claim against the contributory, whether the call had been made by the directors anterior to the winding up or whether such call was made for the first time by liquidator after winding up. We can see no distinction in principle between the two cases so far as the right of the official liquidator to call in the unpaid share moneys is concerned, particularly in the view , we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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