1. This is an appeal against the judgment of Ramaswami Goundar J. on an application for certain directions taken out by the Voluntary liquidator of a company in liquidation called the Chicacole Electric Supply Corporation Ltd., and related to the rights of preference share-holders in the company, whether they are entitled 'o be paid arrears of dividend from and out of the assets of the company. The relevant Article in the Articles of Association of the Company is Article 16 which runs thus:
'(a) The preference shares shall carry a divident of six per cent subject to deduction of Income-tax at source. Such dividends are calculable from the date of allotment on the amounts received by the company.
(b) The preference shares shall carry the right to preferential repayment of capital in priority to the ordinary shareholders in the event of winding up, voluntary liquidation Or amalgamation with any other company for the amount paid up on the preference shares, including all dividends whether accrued or declared (current and all arrears) till the date of such winding up, liquidation Or amalgamation with any other company.'. Clause (c) is not material.
2. The provision in Article 16 Clause (b) leaves no room for doubt in the matter, It clearly confers on the preference shareholders a right to be paid both their share money as well as the dividends which had accrued year after year and which remained unpaid.
3. Our attention was not drawn to any other Article which conferred the right on the preference share-holders to the dividend at the specified rate only when the company earned profits. The dividend at the rate specified therefore would accrue every year, though if there was no profit in any year and no money available for payment, the preference shareholders would not be paid the amount of dividend which had accrued.
It is conceded that if in a subsequent year profit was made, the preference shareholders would beentitled not only to the dividend for that year butalso for the dividend which had accrued for theprevious years.
4. In the face of the clear language of Article 16 it is not necessary to refer to decided cases. If authority were needed, it is sufficient to mention the decision in Springbgok Agricultural Assets Ltd., 1920 1 Ch. 563 (A) which was followed in a recent case reported in In re Wharfedale Brewery Co. Ltd., 1952 1 Ch. 913 (B).
5. Reliance was placed by Mr. Radhakrishnan for the appellant who is an ordinary shareholder, on the decision of Gentle J., as he then was, in D'cruz v. Viswanathan : (1941)2MLJ94 . Ramaswami Goundar J. was inclined to think that the decision was wrong but we are not compelled to say so because Gentle J. appears to have been much influenced by Article 155 of the Articles of Association of the Company with which he was dealing in coming to the conclusion that he did. That article ran as follows:
'No dividend shall be payable except out of thenet profits arising from the business of the company.'
It is mainly on the language of this Article that thelearned Judge had held that as the company therenever made any profits, no dividend accrued. Thelearned Judge observed:
'In my view, as there were no profits, no dividends could be declared and were not declared, nothing is payable to the preference shareholders la respect of dividend or interest and they are entitled only to repayment of the actual share capital.....'
The learned Judge does not refer to the case of dividends not being declared but which had accrued because of the terms and conditions under which preference shares were issued. It is not necessary, in the view we have taken of Article 16 of the Articles of Association of the company, to pronounce On the correctness of the decision in : (1941)2MLJ94 . We agree with the learned Judge that the preference share-holders were ea-titled to be paid all arrears of dividends from out of the surplus assets of the company after payment of the preference share capital.
6. The appeal is therefore dismissed. The respondents will get their costs - two sets - from the assets of the company.