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TMI Blog1962 (10) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... member of the public offered to take them. By another resolution Rajagopal allotted to himself 406 shares and allotted to his wife 160 shares. In the first instance he paid a sum of eight annas for each share. Thus Rajagopal became possessed of 501 shares of this company. As the time of the formation of the company the petitioner Rajagopal constituted himself as chairman of the board. As the affairs of the company were far from satisfactory the Superintendent of Insurance presented a petition, O.P. No. 26 of 1948 on 23rd March, 1948, in the District Court, Salem, to liquidate the company on the ground that there has been a technical defect in the finances of the company and it failed to implement, within the time fixed for the purpose, the proposals suggested to it, viz ., either write down the policy contracts for putting the company on a sound financial basis and prevent the company from working at a deficit, by which is meant reducing the amount payable on the insured amounts under each policy or bringing about a revised premium table increasing the premium payable in respect of the several policies so that the company might not work at a loss in deficit in working the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was given to all the contributories till 1st June, 1954. As no payment was made by Rajagopal and others the official liquidator filed an application, LA. No. 343 of 1954, under section 187 and section 246(2) of the Companies Act and sections 91(2) and 92(12) of the Insurance Act praying for an order directing the contributories set out in the schedule to the affidavit to pay the unpaid share amounts noted against each as due and payable within two weeks from the date of the order or within four days of sir vice of the order of the court. An order was made accordingly on 15th July, 1954, by the District Judge, Salem. In pursuance of the direction made by the District Judge notice was served upon V. Rajagopal calling upon him to pay the amount due and payable by him to the company. As V. Rajagopal did not pay the amount, the official liquidator began to execute the order passed, by the District Judge, Salem, under section 190 of the Companies Act. It was only then that V. Rajagopal filed an application along with four others for stay of further proceedings in regard to "the calling up of the unpaid share capital. That application was numbered as I.A. No. 389 of 1954. It was alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by registered post on 9th April, 1954, separately and that in addition a notice by ordinary post was sent to the first petitioner, that in that notice it was specifically mentioned that the court had granted special leave to make a call on the contributories and that the payment had to be made on or before 1st June, 1954, and a copy of the order was attached to each of the said notices, and that the petitioner did not do anything to have the proceedings set aside. It was further stated in the affidavit of the liquidator that he filed I. A. No. 343 of 1954, requesting the court to direct the contributories to pay the unpaid share amounts and when the application was ordered on 15th July, 1954, once again the official liquidator sent a fourth notice to the petitioner and that the petitioner had admitted that he received this notice. The official liquidator, therefore, contended that it was not open to the petitioner to avoid payment of the money due to the company in respect of the shares held by him, as he did not take proceedings to delete his name from the list of contributories even though he knew fully well that his name was in the list. When the petition filed by Rajagopal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner Rajagopal is entitled to file an application either for rectification of the share register or for rectification of the list of contributories. It is proved beyond doubt that his name has been included in the list of contributories as early as on 14th May, 1952. Till he filed the present application he did not file an application of this nature to delete his name from the list of contributories. There was a delay of seven years in making these applications. He was aware that he is possessed of 501 shares of the company. He himself allotted 406 shares to himself by resolution passed by the company on the 30th March, 1948. He himself applied to the Controller of Insurance on 3rd June, 1948, to validate the irregularities in the allotment of shares. In effect the Controller of Insurance recognised this allotment (see exhibit B-5). Soon after the 406 shares were allotted to him, his name was placed in the share register of the company. He is holding himself to the public that he is possessed of 501 shares of the company which is made up of the shares that were originally allotted to him and those allotted to him subsequently. When there is a provision for him to apply to the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o answer for the contributory against the claim of the company to say that, although his name appears on the register, he is not liable, because the allotment to him was void ... and in the absence of rectification of the register by an application by him under section 38 soon after he comes to know that his name is entered in the register of members fraudulently or without sufficient cause, his liability becomes absolute under section 156 of the Act, all the more so when winding up also has supervened. When a person allows his name to remain on the register, without having it removed promptly ... he will be liable on the doctrine of holding over." Emphasis has been laid by Panchapakesa Aiyar J., who delivered the judgment of the Bench, on the fact that even a delay of a fortnight has been held to be fatal and he observed that the delay in the case before him was more than three years and the circumstances set up were shaky. The Bench agreed with the conclusion of Gentle J. in the case referred to above. The same view was expressed by a Bench of the Bombay High Court in Mahomed Akbar v. Official Liquidator [1950] 20 Comp. Cas. 26 , and by a Bench of the Allahabad High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Boyle [1885] 52 LT 501, it was held that an application for rectification would not lie after the winding-up order was passed and the rights of innocent third parties, the creditors, arose. The ruling in Ward's case [1866] LR 2 Eq 226, makes it clear that the court has got jurisdiction to rectify the register, provided the winding-up order has not been passed, which means that the petition for rectification will lie after the winding up petition but before the winding-up order is passed. All these cases have been reviewed by a Bench of this court in Bank of Hindustan v. Suryanarayana Rao [1958] 28 Comp. Cas. 71 , where it was held that: "A petition for rectification will He normally after the filing of a winding up petition and before the winding up order is passed, provided that the court will normally reject that petition if the company is already in a notorious state of bankruptcy by the time the petition for rectification is filed. " Therefore, there is a formidable array of authorities against the petitioner and the applications filed by him should be summarily dismissed as not maintainable on the simple ground that once the winding up order is passed, lie has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Esher M.R. observed at page 476 : "Supposing that, after the list of contributories has been settled, something comes to the knowledge of the court which makes it just and desirable that it should be altered, is there anything in the Act which says that, when the list of contributories has once been settled, it cannot be resettled ? I cannot find anything ; on the contrary, looking at rule 29 of the rules of 1862, which provides that the list may from time to time by leave of the judge be varied or added to by the official liquidator, it appears to me that the Act really gives power to alter the list, and there is no limit of time within which such alteration must take place. So I think that the list of contributories may be altered whenever the court finds it just and that it should be so altered." Relying on these observations the learned District Judge committed an error in directing the official liquidator to rectify the register. He has not referred to the rest of the judgment and especially to the following observations of Lord Esher at page 477: "Under the circumstances, we must now exercise the discretion which he (County Court Judge) declined to exercise as we think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terested in its assets." Therefore the decision relied on by the learned District Judge would not at all apply to the facts of this case. The appeals filed by the official liquidator, C.M.A. Nos. 168, 165 and 167 of i960, will have to be allowed and they are allowed accordingly with costs. C.M.A. No. 166 of 1960 is preferred against the order passed in I.A. No. 49 of 1959, which was an application filed by three persons (T.S. Krishnaswami Iyer, Rukmani Ammal and Susheela) who obtained a transfer of shares from one L. Balasubramania Sastriar. The said transfer took place during the winding-up proceedings and this would offend the statutory provisions contained in section 227(2) of the Companies Act. The liquidator filed I.A. No. 343 of 1954 and obtained an order against the petitioners in I.A. No. 49 of 1959 for payment of the call money and in pursuance of that order the liquidator filed E. P. No. 1224 of 1954 on the file of the City Civil Court, Madras, and also served notice on the petitioners. Unfortunately, the petitioners agreed to pay the call money in monthly instalments. Even though they consented to pay the money in instalments, I have to consider whether their names c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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