1. This is an appeal from an order of Mr. Justice Shephard disposing of an application under Section 182 of the Indian Companies Act in the matter of the Madras Building Association (Limited).
2. The Madras Building Association (Limited) is now in liquidation, but prior to the petition for liquidation certain shareholders gave notice of withdrawal from the company, and the question for decision is, what are the rights of the withdrawing members between themselves' and the other members of the association; in other words, have the members who have given notice of withdrawal a right to be paid out of the assets in priority to the other members? The learned Judge decided that they had priority.
3. Article 42 of the memorandum of the articles of association says that a member who has received no loan may withdraw from the association and receive the amount at his credit calls minus the arrears (if any) and interest due thereon on giving one month's notice, such withdrawals to be paid from first available funds. The learned Advocate-General appears for the appellant and argues that Article 42 only applies to the association as a going concern, and that as the association is in liquidation all the shareholders as between themselves are entitled to share and share alike, and the case of In re Mutual Society 24 Ch. D. 427 decided by the late Master of the Rolls was relied on. But that case is distinguishable from the present, as the shareholders of the Mutual Society who had given notice of withdrawal were to be paid out of one particular fund which was non-existent at the time the society went into liquidation. Mr. Sundara Ayyar, who appears for the third respondent, relies on the case of In re Blackburn and District Benefit Building Society 24 Ch. D. 421 which has been confirmed by the House of Lords in Walton v. Edge L.R. 10 App. Cas. 33 Rule 3 of that society stated that any member of the society shall be allowed to withdraw (provided the funds permit) sums by giving certain notices of withdrawal, and that no further liabilities shall be incurred by the society till such member shall be repaid. It was held on the construction of the above that the rule as to the withdrawal of members must not be confined to the society as a going concern, but was applicable to adjust the rights of the withdrawing and continuing members inter se in the winding up, that the members who had given notice to withdraw, and whose notices had expired before the commencement of the winding up, were entitled to be paid out of the assets in priority to the other investing members who had not given notice of withdrawal, notwithstanding that at the date of the winding up there were no funds in hand for their payment.
4. In the present case Rule 42 states that the withdrawals are to be paid from the first available funds.
5. We hold, therefore, that the learned Judge was right, and this case comes within the principles laid down In re Blackburn and District Benefit Building Society 24 Ch. D., 421, and we dismiss the appeal with costs.
6. Alasingarachariar--Attorney for Appellant.