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TMI Blog1930 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... w settled that Directors of - Companies are not trustees. In In re Forest of Dean Coal Mining Company (1878) 10 Ch.D. 450, Jessel, M.R., said at page 451: Directors have sometimes been called trustees, or commercial trustees, and sometimes they have been called managing partners. and at page 453: They are no doubt trustees of assets which have come into their hands, or which are under their control but they are not trustees of a debt due to the company. 4. In Flitcroft's case (1882) 21 Ch.D. 519, Bacon, V.C., no doubt said: That the relationship of trustee and ceslui que trust subsists between the directors of joint stock companies and the shareholders, I do not entertain the slightest doubt. 5. But this statement is inconsistent with the remarks of Lords Justices in the Court of Appeal and with later special judicial opinions. On appeal in the same case Jessel, M.R., said: "If directors who are quasi trustees for the company, etc." Brett. L.T., said: "They are trustees for the company not for the individual shareholders." But even this statement is too wide. Cotton, L.J., said: "They have misapplied funds as to. which they stood in the positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case which show that "control" (in Lord Esher's judgment) must be regarded as synonymous with vesting". As to the decision in Pachaiyappa Chetti v. Sivakami Ammal AIR1926Mad109 , the facts are very plain and there is an express trust. I do not think that the remarks in these decisions affect the decision in Kathiawar Trading Co., Ltd. v. Virchand Dipchand I.L.R. (1893) B. 119 with which I entirely agree. It follows therefore that Directors can plead limitation. 9. Coming now to the second point, the question really turns upon whether entirely new rights with a new cause of action arise on the winding up of a Company. That, for certain purposes, new rights may be conferred by the winding up of a Company, there can be no doubt. One such well-known case is the liability to pay calls as a contributory. Both English and Indian authorities are very clear on this matter; but it does not follow from this that the right of a liquidator under Section 235 is a case of a new right accruing by reason of the winding up. The corresponding section of the English Act of 1862 is Section 165 and it has been held by the House of Lords in Cavendish Bentinck v. Fenn (1887) 12 A.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uitable doctrine explained by Bowen, L.J., in Soar v. Ashwell (1893) 2 Q.B. 390, that "time (by analogy to the statute) is no bar in the case of an express trust, but that it will be a bar in the case of a constructive trust." 17. In my judgment it is settled by Kathiawar Trading' Co., Ltd. v. Virchand Dipchand I.L.R. (1893) B. 119 and the English authorities there cited that a director of a joint-stock company is not, in the language of Section 10, "a person in whom property has become vested in trust for any specific purpose". And a series of later English authorities confirms this view of the position of a Director. In Flitcroft's case (1882) 21 Ch.D. 519, Jessel, M.R.. described Directors as quasi-trustees. In Soar v. Ashwell (1893) 2 Q.B. 390 Kay, L.J., observed: Generally speaking, a person who is not the appointed trustee and whom it is sought to affect with a trust by reason of his conduct is not a trustee at all, although he may be liable as if he were; which is commonly expressed by saying that he is not an express but a constructive trustee. 18. And in In re Lands Allotment Co. (1894) 1 Ch.D. 616 Lindley, L.J., said: Although directors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y application to the case. Admittedly, if the starting point of limitation is the alleged acts of misfeasance or breach of trust by the Directors, the remedy would be, barred whichever article governed it. But it has been contended by the learned Counsel for the liquidator that the winding-up order is the starting point of the liquidator's right of applying to the Court under Section 235 (1) of the Indian Companies Act (VII of 1913). Reliance for this proposition is placed on In the matter of the Union Bank, Allahabad, Limited I.L.R. (1925) A. 669, where this view prevailed, and the reasons for it are given by Mukherji, J., at p. 693 of the judgment as follows: The claim is by the liquidator who had no existence at the dates on which the amounts claimed are alleged to have been mis-spent. If the liquidator is given permission by the law to claim these moneys, certainly it would be unfair and unjust to say that the claim became time-barred before he came into existence. 22. But, with all respect, it may be pointed out that the right of application to the Court given by Section 235 is not confined to the liquidator; it is given to a creditor and to contributories. And if credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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