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TMI Blog1987 (7) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator of the company. The authorised capital of the company was rupees one crore and the issued, subscribed and paid up capital was Rs. 49,00,000, divided into 49,000 shares of the face value of Rs. 100 each and the 49,000 shares were fully paid up when the winding up order was passed. During the course of the liquidation proceedings between 1959 and 1979, the official liquidator discharged all the liabilities of the company to its various creditors. However, further amounts were available to the official liquidator for distribution amongst the shareholders of the company. Accordingly, the official liquidator, in the first return, declared a dividend of Rs. 50 per share on April 17, 1973, and in the second return a further dividend of Rs. 50 per share on June 23, 1976, as also in the third return, a dividend of Rs. 40 per share was declared on June 20, 1978. It would thus appear that against the face value of each share of Rs. 100 fully paid up, the shareholders received Rs. 10 from the official liquidator. Several shareholders, however, did not claim the amounts of the said dividends from the official liquidator. The official liquidator, therefore, in accordance with the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of section 555, inter alia, provides that where any company is being wound up, if the liquidator has in his hands or under his control any money representing ( a )dividends payable to any creditor which had remained unpaid for six months after the date on which they were declared, or ( b )assets refundable to any contributory which have remain ed undistributed for six months after the date on which they became refundable, the liquidator shall forthwith pay the said money into the public account of India in the Reserve Bank of India in a separate account to be known as the Companies Liquidation Account. Sub-section (2) of section 555 provides that: (2) The liquidator shall, on the dissolution of the company, similarly pay into the said account any money representing unpaid dividends or undistributed assets in his hands at the date of dissolution. Sub-section (3) provides for the procedure to be followed by the liquidator while making such payment as referred to in sub-sections (1) and (2). The liquidator is required to furnish to an officer as the Central Government may appoint in this behalf, a statement in the prescribed form, setting forth, in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (7) of section 555, it would be clear that it is only the person who is entitled to any money paid into the Companies Liquidation Account who can apply to the court for an order for payment thereof. In order that a person can apply to the court under the said provisions, it is incumbent on him to establish that he is entitled to the amount. In the present case, it is the company and not any of the contributories who has made this application. As far as the contributory is concerned, there can be no doubt that he would be the person who is entitled to claim the amount within the meaning of the said provisions. The question is whether the company has any right to lay its hands on the unclaimed amount lying in credit in the Companies Liquidation Account. There is no doubt that the various contributories were the persons who were entitled to this amount, and because of the fact that they failed to claim the said amount, the same was deposited by the liquidator in the Reserve Bank in compliance with the mandatory provisions of section 555. It must be borne in mind that before distributing the dividends, the liquidator has discharged all the debts of the company which have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contributory may be able to claim the same. As pointed out above, sub-section (7)( a ) of section 555 can be availed of by a person claiming to be "entitled" to any money which has been paid into the Companies Liquidation Account by the liquidator. On such an application, the court may, if satisfied that the person claiming is entitled to it, pass an order for the payment to such person, of the sum due. Sub-clause ( b ) of sub-section (7) provides an alternative procedure for such a person claiming to be entitled to the money. Instead of applying to the court, he has been given an option to apply to the Central Government for an order for the payment of the money claimed by him. This position would remain for a period of 15 years, but after the expiry of the period of 15 years, under sub-section (8), the money which has been paid into the Companies Liquidation Account under the section and which was unclaimed thereafter for a period of 15 years has to be transferred to the General Revenue Account of the Central Government. A claim to any money so transferred can be preferred by the person entitled in accordance with the procedure prescribed in section 555(7) by either applying to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By claiming the transfer of the unclaimed amount as an asset of the company, the company is trying to create a right for itself by divesting the rightful claim of the owner and creating for itself an interest in the amount. If the intention is merely to get control over the amount subject to the rights of the contributory, then the position of the company would be that of a trustee for the rightful claimant. In that event, it would amount to substituting a procedure different from the one prescribed by law under section 555. There is no provision in the Act to allow the company to retain the unclaimed dividend as part of its assets or to transfer the amount from the Companies Liquidation Account to itself. At this stage, it would be useful to refer to the provisions of section 205A of the Act which are analogous to section 555. Section 205A relates to the unpaid dividend to be transferred to a special dividend account. The provisions are almost similar. The amount is to be deposited in an account called "Unpaid Dividend Account of......Company Limited". There are provisions in the said section which enable the shareholder to claim the amount. If the unpaid amount of dividend of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts that the learned single judge of the Madras High Court made the following observations in the judgment (p. 232 of 47 Comp Cas): "Merely because the statement is filed showing the nature of the claim and the claimant is entitled to the amount, it does not cease to be an asset of the company and is earmarked for the contributory. It can only mean that the contributory is prima facie entitled to the said sum and that entitlement can be defeated by the preferential claims like the arrears of revenue to the State. Equally, it cannot be held that the moment moneys are deposited into the Reserve Bank of India, the assets would cease to be that of the company. It still retains that character till the payment is made to the contributory." In the first place, the observations made to the effect that the amount deposited into the Reserve Bank of India continues to retain the character as an asset of the company till the payment is made to the contributory, will have to be read in the context of the facts of that case. The court was required to consider the preferential claim of the Income-tax Department which had remained undischarged before the money was deposited in the Companies Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidation Account. In the statement which the liquidator had to file, the name of the contributory as well as the amount which has remained unpaid to him has to be specified. The amount thus belongs to the contributory and there is no question of the company after reconstruction, to lay its claim on such amount on the plea that such amounts are the assets of the company. We fail to see how the company is entitled to such amount which is earmarked for the contributory and it is he who has the right to claim and receive the amount. In our opinion, if we were to accept the contention of Mr. Bharucha that the unclaimed surplus assets of the company which belong to the contributories continue to remain as assets of the company after liquidation and as such entitled to claim the same, it would amount to defeating the very object of the provisions of section 555, apart from the fact that such an interpretation is not warranted by the express wording of section 555. We, therefore, hold that the learned single judge was justified in rejecting the application of the company as not maintainable. In the result, the appeal fails and is dismissed. In the circumstances of the case, there sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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