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Official Receiver, High Court, Madras and Vs. Ar. Rm. Ramanathan Chettiar (Died) and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberOriginal Side App. No. 23 of 1957
Judge
Reported inAIR1962Mad192; [1962]32CompCas395(Mad)
ActsIndian Companies Act, 1913 - Sections 186
AppellantOfficial Receiver, High Court, Madras and ;liquidator of Linking Industries Ltd.
RespondentAr. Rm. Ramanathan Chettiar (Died) and ors.
Cases ReferredChandiok v. Peareylal
Excerpt:
indian companies act (vii of 1913), sections 186 and 187--scope of-- official liquidator claiming unpaid share-capital--application under section 186--not maintainable ; under section 186 of the indian companies act (vii of 1913) the official liquidator can recover a debt due to the company. if the claim is well founded the court has not option but to make an order for payment of the amount claimed. under section 187, however,t he amount to be called does not depend on the claim made by the official liquidator. the court will have to fix the amount which the share-holder should be called upon to pay, and in fixing the amount it will have to ascertain the amount necessary to satisfy the debts and liability of the company, and the costs, charges and expenses of the winding up and for..... (1) this is an appeal from the judgment of balakrishna aiyar, j., rejecting a claim made on behalf of the link industries ltd., (which is now under liquidation) in respect of certain calls made upon the respondent by the directors at a time when the company was a going concern. a few facts must be stated in order to appreciate the point on controversy in this appeal. the link industries ltd., was incorporated in 1946 as a public limited company. there was no adequate response for the taking up of its shares even in the initial stages. on 13-8-1947, the company issued 50,000 shares on the nominal value of rs. 10 each. ramanathan chettiar the respondent applied for and was allotted 36,555 shares. on allotment he paid a sum of rs. 5/- for each share the balance being uncalled at the time.on.....
Judgment:
(1) This is an appeal from the judgment of Balakrishna Aiyar, J., rejecting a claim made on behalf of the Link Industries Ltd., (which is now under liquidation) in respect of certain calls made upon the respondent by the directors at a time when the company was a going concern. A few facts must be stated in order to appreciate the point on controversy in this appeal. The Link Industries Ltd., was incorporated in 1946 as a public limited company. There was no adequate response for the taking up of its shares even in the initial stages. On 13-8-1947, the company issued 50,000 shares on the nominal value of Rs. 10 each. Ramanathan Chettiar the respondent applied for and was allotted 36,555 shares. On allotment he paid a sum of Rs. 5/- for each share the balance being uncalled at the time.

On 27-7-1949 the Link Industries Ltd., created a security by way of English mortgage to the Industrial Financial Corporation of India go cover an advance made by the latter in a sum of Rs. 5,00,000/-. The company assigned inter alia their rights to receive the balance of Rs. 5/- on each share of uncalled share money in respect of the shares issued by the company. On 8-8-1956,the company was directed to be wound up the order of this Court. We are informed that the Industrial Financial Corporation has filed a suit on the basis of the mortgage executed in its favour on the Original Side of this Court. This suit is still pending.

(2) There was a change in the meeting agency of the company during the year 1953. The directors of the company in pursuance of a covenant entered into with the mortgagee decided at their meeting held on 15-4-1953 to call up the balance in the party paid shares giving two months' time to the share-holders to pay the money. The new managing agents intimated this fact to the respondent and made a demand on him in respect of the balance due from him. The respondent protested stating that he took up the shares with a view to boost them in the market and that it was expressly agreed between him and the previous managing agents at the time of the allotment of shares, that he should not be called upon to pay the unpaid share money till he was able to sell three-fourths of his holding to outsiders.

(3) This defence was not perhaps a new one, as the respondent raised the same objection when there was an earlier attempt on the part of the then managing agents to call upon share-holders to pay up their unpaid share capital. But neither the managing agents nor the mortgagee agreed to this.

(4) After the winding up of the company, the Official Liquidator passed an order on 14-6-1956 settling a list of contributors : included in the list was the name of the respondent with a liability for a sum of Rs. 1,82,775, representing the unpaid call money. Ramanathan Chettiar the respondent thereupon filed an application, Appln. No. 1593 of 1956, to remove his name from the list of contributories settled by the Official liquidator. The Official liquidator had earlier filed an application. Appln. No. 1342 of 1956, for directing the contributories in the list settled by him who were will liable to the company in respect of their unpaid share capital on their respective shares, to pay the sums stated against their names in the list with interest theron at six per cent per annum. Both the applications were contested.

(5) Balakrishna Aiyar, J., was of the opinion that the probabilities of the matter indicated that the them managing agents had given some assurance of the kind pleaded by the respondent but the learned Judge found it unnecessary to decide the matter finally as to how far such in assurance could be held to be binding on the company. The learned Judge held that the Official Liquidator could not sustain the application in view of the fact that the right in respect of unpaid money had been assigned under the English mortgage executed in favour of the Industrial Financial Corporation and the mortgagees' rights would be outside the liquidation proceedings. He further held that the application filed by the Official liquidator being one under section 186 of the Indian Companies Act, 1913, could not be maintained in respect of a claim for recovery of the call money. In the result the Official liquidator's application was dismissed and the respondent's application 1598 and 1956 was allowed and his name was deleted form the list of contributories. The Official liquidator has filed O. S. A. No. 23 of 1957 and 24 of 1957 respectively against the judgment of Balakrishna Aiyar, J., on the said two applications.

(6) We shall first consider O. S. A. No. 23 of 1957 which concerns the maintainability of Appln. No. 1342 of 1956. That application though purporting to be filed one under section 187 of the Indian Companies Act was really made under section 186 of the said Act.

(7) This is conceded by the Official liquidator. The objection that on an application field under section 186 the Court could not order payment of the call money is not a mere technicality. Under section 186 of the Indian Companies Act, the Official liquidator can recover a debt due to the company. If the claim is well founded the Court has no option but to make an order for payment of the amount claimed. Under section 187, however, the amount to be called does not depend on the claim made by the Official liquidator. The Court will have to fix the amount which the share holder should be called upon to pay and in fixing the amount it will have to ascertain the amount necessary to satisfy the debts and liabilities of the company and the costs, charges and expenses of the winding up and for the adjustment of the rights of the contributories among themselves. That implies that the Court can call for such amounts only as will be necessary for the purpose of winding up and no call could properly be made until one is able to realise the exact position as to the total amount payable by the company and the other available assets, for it is only then that the court can decide the amount necessary to be called up from the contributories. It is not the contention of the Official liquidator in the present case that the state has yet been reached. Therefore the point to be considered is whether in respect of a claim for the unpaid call money in respect of the shares issued which became exigible even prior to the commencement of the winding up proceedings the Official liquidator could file an application under section 186 of the Indian Companies Act or could only proceed under section 187.

Section 186 corresponds to section 469 and section 187 to section 470 of the Companies Act, 1956. They run thus :

186(1) The court may at any time after making a winding up order, make an order on any contributory for the time being settled in the list of contributors to pay, in manner directed by the order, any money due from him or from the estate of the person whom he represents to the company exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.

(2) The Court in making such an order may, in the case of an unlimited company allow to the contributory by way of set off any money due to him or to the estate which he represents from the company on any independent dealing or contract with the company, but not any money due to him as a member of the company in respect of any dividend or profit; and may in the case of a limited company make to any director whose liability is unlimited or to his estate the like allowance;

Provided that in the case of any company whether limited or unlimited when all the creditors are paid in full any money due on any account whatever to be contributory from the company may be allowed to him by way of set off against any subsequent call.

Section 187(1) : The Court may at any time after making a winding up order, and either before or after it has ascertained the sufficiency of the assets of the company make calls on and order payment thereof by all or any of the contributories for the time being settled on the list of contrubutories to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company and the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves.

(2) In making the call the Court may take into consideration the probability that some of the consideration the probability that some of the contributories may partly or wholly fail to pay the call.

These two sections provide summary remedies for realising the monies due from the contributories. The former confers an alternative to the remedy of the liquidator to resort to the ordinary Courts for recovery of monies, while the latter in terms prescribes a procedure for realisation of the calls due from the contributories either individually or with respect to the estate in his hands. A liabilty of a contributory to the company may arise in one of the three ways : (1) on account of a debt due to the company, (2) on account of unpaid share money in respect of which calls had been made even before the liquidation and (3) on account of unpaid share money which has not been called during the time when the company was a going concern but which has to be called for the purposes of the liquidation. Section 187 provides a machinery for the creation of fund for payment of proved debts and winding up expenses. An order under that section which is one for enforcement of call monies is technically known in England as "a balance order". By virtue of section 199 all orders may by the Court under section 186 and 187 can be enforced in the same manner as a decree.

(8) In order to appreciate the scope of section 187, reference must be made to section 156 which declare the liability of the contributory. By that selection a statutory liability is imposed upon every past and present member of the company to contribute to the assets of the company to an account sufficient for the payment of its debts and liabilities and the costs etc., subject to certain qualifications mentioned in the section. In the case of a limited liability company, such contribution would not exceed the amount of unpaid share money. It will follow from the provisions of the section that both calls in respect of unpaid share capital which calls have been made by the directors of the company when it was functioning and also calls not so made, would come within its ambit; a statutory liability is created in respect of both kinds of liability. Section 159 states that the liability of a contributory shall be a debt payable at the time specified in the class made on him by the liquidator. Thus, it will be seen that while under section 21(2) all money payable by any member to the company under the memorandum of articles will be a debt due from him to the company, that is in a case where a company is functioning, under section 159(1) all calls made will be debts payable by the contributory to the Official liquidator.

(9) Mr. V. P. Raman appearing for the appellant raises two contentions : (1) Unpaid share money in respect of which calls had been made by the directors having become payable immediately after such call, would cease to be call money and b become a debt which can be recovered by an action in the ordinary Court. As section 186 provides summary remedy for recovery of debts due from the contributories it should be regarded as a substitute for the right of a suit and would be co-extensive with it so as to include a claim made in respect of call money that had already been demanded by the company while it was functioning and (2) unpaid share money a after the call has been made before the company was would is not an amount payable by virtue of any call in pursuance of the Act, as the latter category would include only cases coming under section 187 which according to the learned counsel will compromise only amounts not called for by the company itself but for the first time called up at the instance of the Official liquidator.

(10) Section 186 in terms excludes from its operation a claim for money payable by the contributory by virtue of any call under the Act. It is necessary to ascertain first what is call money, whether it comprises amounts of share monies only which have not been called up before, or will include amounts due in respect of shares for which call had already been made by the directors.

(11) In a limited liability company which has issued shares but in respect of such shares the entire share money has not been paid up, the share-holder will be liable to the company to pay the balance of share money when a call is made. The right to make the call belongs to the company. The articles of association generally provide how and by whom calls have to be made. A member of the company will be liable to pay the calls in accordance with the request.

In Palmar's Company law, 20th Edn. It is stated at page 22 :

"It is the characteristic of the company limited by shares that subject to the provisions of the Articles the directors may call upon the share-holders at any time to pay up the unpaid portion of the nominal amount of their shares. Such calls may be made during the active life of the company or during the winding up; it will be noted that the statutory definition of the company limited by shares in section 1(2)(a) does not contain any qualification or restriction on the power of the company to make calls. The intention of the legislature is that once the initial working funds which were provided by the initial payments of the share-holders on their shares are exhausted, the directors may make further calls if and when the financial position of the company demands. No maximum or minimum amount of the call is prescribed by the statute. In the contemplation of the legislature, the call imports an element of uncertainty both as regards time and amount."

The share money which has been called by the directors but not paid, will still be call money, though it can be said it is only an arrear of call money. In other words, where a share of nominal capital is issued, the person taking up the share becomes liable to pay the company the nominal value of the share taken. It may be that the entire money is paid at once; or only a part is paid on application for shares and on allotment and the balance is stipulated to be paid later. The articles of association normally provide that the share money could be paid in installments on such dates on which the company makes a call on him. As long as anything remains uncalled on the issued share, that would be unpaid liability in regard to the balance amount due on such shares. Where the balance of share money or any portion thereof has been called but there is a default on the part of the share-holder to pay the same on such call that would be a call in arrear but it would still be call money. Whether it is the one case or the other it will be a debt.

As observed by Rankin, J., in Montogomeri v. Sikdar Iron Works Ltd., ILR 59 Cal 1099 at p. 1104: (AIR 1932 Cal 691 at p. 694), the former liability in uncalled share money is an existing debt although money will not be payable until a call is made, i.e, "debitum in presenti but solvendum in futuro". The mere fact that the money due after the call is made is mentioned in section 21(2) as debt, does not mean that it ceases to be call money. Indeed as we have pointed out earlier even a claim made by the liquidator in respect of uncalled share amount would be a debt (See section 159). Therefore the exception contained in section 186 would cover both the share money which had at the time of liquidation become exigible and that outstanding but not yet payable. The provisions of S. 186 which exclude from its operation any money payable by virtue of any call in pursuance of the Act is sufficiently wide to include a case where money has already been called by the directors while the company was a going concern. If the Legislature intended that the exception in S. 186 should relate only to cases where the Official liquidator wished to make a call in respect of unpaid share money which had not earlier been called by the directors, it would have certainly employed appropriate language and in clearer terms.

The second aspect of the contention of the learned counsel for the appellant is that although the arrear of call money is considered as call money, it being one made in pursuance of a contract evidenced by the Articles of Association and not in pursuance of the Act, the exception would not apply. Learned counsel would confine the words "any call in pursuance of this Act" to cases where the liquidator for the first time calls up the shareholder to pay as according to him that alone would be one under the Act. There are two answers to this contention. First, the Official liquidator in the instant case had settled a list of contributories, and in that included the name of the respondent and then applied to the court for the enforcement of the liability. Prima facei that is an application to enforce a statutory liability. Indeed the Official liquidator in the first instance based his application only under S. 187, although later realising that the necessary condition for an application under that section had not been fulfilled, he relied on Ec. 156 covers the case of a liability in respect of past as well as future calls; an application to enforce that statutory liability would be one under the Act.

Those considerations apart S. 21 provides that the Memorandum and Articles of Association shall bind the members to the same extent as if they had been signed by each member. By that section a statutory fiction is created by which every member though he is not a party to the contract evidenced by the Memorandum of Articles of Association, becomes a party. The liability under the Articles of Association can therefore be said to be only by virtue of S. 21(1). To quote the expressive simple of Balakrishna Aiyar, J., "to say as the Official liquidator appeared to do that something done under the Articles is not a thing done under the Act, is analogous to saying that what hangs from a bough does not hang from the tree. It would, therefore, follow that the unpaid share money in the instant case should be regarded as one due by virtue of a call made under the Act.

(12) But it is contended on behalf of the Official liquidator that S. 187 should be construed to be for a summary remedy only with respect of calls made by the Court in respect of uncalled amounts due from the share-holders and that therefore, S. 186 should be held to comprehend all claims for share money other than those covered by S. 187. This, however, is not correct. What we are concerned with in the present case is whether S. 186 applies to a claim for share money, and if by the terms of that section that claim is not included the fact that S. 187 (even assuming that to be so) would not be available to the Official liquidator would be hardly relevant.

Mr. Raman contends that the procedure prescribed by S. 186 would be available to all contractual liabilities of the contributory in respect of which action could be laid in a court and the liability of the share-holder in respect of the share money which has been called but not paid is in the nature of a debt; a suit would lie for recovery of the same. Section 186 being an alternative to a suit, would therefore include all claims which could be enforced by means of a suit. In other words, the contention is that S. 186 would apply to the enforcement of all liabilities in the nature of a debt and as the claim in respect of the share money called by the directors is a debt under the provisions of S. 21(2) of the Act such a claim would be comprehended by S. 186. On the other hand, S. 187 would refer only to a statutory call after liquidation. This argument ignores that the claim of the liquidator even in respect of uncalled share monies will also be debt by reason of Sec. 159(1).

(13) But let us see whether Sec. 187 is restricted only to claims of share money against contributories in respect of which no call had been made prior to the winding up by the company. The liability of the contributory to contribute to the assets of the company is, no doubt, not the same as a liability which could be enforced by the company while it was functioning. It is a liability created by the statute for the payment of the creditors etc. In Hansraj Gupta v. N. P. Asthana, ILR 54 All 827 : (AIR 1932 PC 240) Lord Russel of Killowen observed.

"On the winding up, S. 156 of the Indian Companies Act, came into play. His liability under that section in respect of the shares was absolute and flowed from the fact of his being on the register in respect of those shares. The original contract may supply the reason for his name having been placed on the register in respect of the shares but after the winding up his liability in respect of the shares arose ex lege and not ex contractu."

As stated earlier, S. 159 makes such a liability a debt but S. 187 describes the quantum which the share-holder should be called be found necessary for the discharge of the liabilities and expenses. As Sec. 16 covers both calls already made and calls to be made the statutory liability thereunder will be covered by S. 187. In re White house and Co. (1878) 9 Ch D 595 it was recognised that a balance order could be made in respect of a call made prior to the winding up by the company. That is also the decision in Jagannath Prasad v. U. P. Flour and Oil Mills Ltd. ILR 38 All 347 : (AIR 1916 All 317), where it was held that an order under S. 151 of the Companies Act of 1882 (which correspond to S. 187 of the Act of 1913) could be made for the purpose of realising the unpaid share money due by reason of a call made by the company prior to the winding up. This principle was accepted in Mahomed Akbar v. Associated Banking Corporation of India, Ltd., . It is, therefore, clear that both on principle and authority Sec. 187 could be resorted to by the Official liquidator for the purpose of realising monies due from a contributory in respect of calls made by the company itself while it was functioning. It stands to reason therefore that S. 186 would relate only to the other liabilities of the contributory.

(14) There is yet another principle of statutory interpretation by the application of which the same conclusion is reached namely the history of the section. In Hansraj Gupta v. Dehra Dun Mussoorie Electric Tramway Co. Ltd., ILR 54 All 1067 : (AIR 1933 PC 63) Lord Rusell of Killowen observed,

"In considering the meaning and effect of S. 186 it is impossible to overlook the fact that it is verbatim identical with the corresponding section in the English Act."

Section 186 corresponds to Sec. 259 of the English Companies Act, 1948. As observed by the Privy Council in the above case that is a section with ancestral history. (1) It is concerned only with monies due from a contributory other than money payable by virtue of a call in pursuance of the Act; (2) it is a section which creates a special procedure for obtaining payment of monies; it is not a section which purports to create a foundation upon which to base a claim for payment. It creates no new rights; and (3) the power of the court to order payment is discretionary. It may refuse to act under the section leaving the Liquidator to sue in the name of the company.............."

(15) Section 259 of the English Companies Act, 1948, corresponds to S. 101 of the English Companies Act of 1862. The terms of the section are practically the same except in regard to the exception contained in that section. The words in the 1862 Act were exclusive of any monies which he or the estate of the person whom he represents may be liable to contribute by virtue of any call made or to be made by the court in pursuance of this part of the Act. It was presumably because of this clause that Jessel M. R., observed in (1878) 9 Ch D 595 at p. 601, that S. 101 while it excluded call in the winding up included a call made before the winding up. No (sic) "part of the Act" referred to in S. 101 was part IV which related to the winding up of the company. S. 101 in terms therefore only excepted those monies which could be called under the winding up chapter, that is to say, monies that became payable by virtue of the statutory liability created under the Act. Section 259 of the English Act and its corresponding provision S. 187 of the Indian Companies Act enacted the exception in much wider terms by substituting the words "in pursuance of this Act," instead of "in pursuance of this part of the Act." The section would therefore cover all cases of calls made under other provisions of the chapters in the Act, namely those made by the company itself prior to the winding up even under S. 101.

(16) While construing Sec. 101 of 1862 Act courts in England have always held that a claim in respect of share money already called by the company would come within the terms of S. 102 (corresponding to S. 187) which enabled the court to issue a balance order. In lindley on Companies, 1902, 6th Edn., at page 1148 it is stated :

"The payment of calls made before the winding up may be enforced by a balance order but the balance order is not a judgment and the original debt is not merged in it. If, therefore, the Liquidator fails to obtain payment of such calls under a balance order he may still bring an action in the name of the company for the amount of the calls."

Authority for that proposition is the decision reported in Westmoral and Green and Blue State Co v. Feilden, 1891-3 Ch. 15.

(17) In 1878-9 Ch 595, a contributory sought to set off a debt due to him from the company against calls made against him by the company before the winding up. It was held that he could not do so as the right sought to be enforced was a new one in favour of the liquidator. Jessel M. R. Observed at page 600 :

"As I said before it is as much unpaid if he had not paid the calls made before the winding up as it is in respect of the amount unpaid on the shares in respect of which no call has been made before the winding up. It seems to me that the contributory's liability created by the 38th section being only limited to the amount unpaid it is immaterial for the purpose of this section whether the call was made before or after the winding up provided the amount is unpaid. That being so, it is a liability to contribute which in the course of an ordinary winding up is of course enforceable by the

court..........."

Referring to that decision Buckley in his Companies Act, 13 Edn., observed at page 539 :

"The bases of that judgment are : (1) that contributions under S..212 of this Act are not debts to the company but contributions to the assets enforceable by the liquidator; (2) that such contributions include all that is unpaid on shares at the commencement of the winding up; including therefore, calls made before as well as calls made in the winding up and (3) that this being so there is no set off under the Statutes of set off because it is the liquidator who enforces the calls. While it is not the liquidator but the company that owes the debt and therefore, to establish a set off the person asserting it must find in the Companies Act some provisions giving a right of set off."

It is thus clear that S. 187 can be invoked by the Official liquidator for realising the monies due in respect of calls made before the winding up of the company. It stands to reason that S. 186 would not apply to such a case, particularly in view of the fact that it expressly excepts from its operation all claims by virtue of calls made under the Act. To hold otherwise wold be, to construe the two sections as overlapping each other, it being left to the liquidator to resort to any section that he may choose. To assume such a discriminatory power in the liquidator would lead to injustice and even absurdity. For example, in respect of claims under S. 186, a set off is allowed while in respect of those under S. 187 no set off is permissible in claims under the former section the entire arrear of call money will have to be paid while under the latter provision only that which is necessary for the purpose of winding up need be paid; under the former section the contributory can plead limitation if the claim is barred; on the other hand if the claim is made under S. 187 no such defence would be permissible.

To construe the section in the way in which we are asked to do wold lead to his anomaly, namely, that at the choice of the liquidator certain defences would be made available to the share-holder. Such a power of discrimination as is suggested would certainly work hardship. On the other hand a harmonious construction of the two sections would require that each of them dealt with a distinct category of claims against the contributory, Sec. 186 dealing with claims other than those in respect of calls made and S. 187 dealing with claims under S. 156 of the Companies Act.

(18) Learned counsel relies on the decision in Chandiok v. Peareylal, ILR 1942 All 26 : (AIR 1942 All 136), where it was held that a call validly made by the directors prior to liquidation which remained unpaid became a debt due from the share-holder to the company, and if the liquitor applied under S. 186 of the Companies Act for realisation of such debt the court would have no power to question whether it is necessary for the liquidator to realise it, or not. Braund, J., referring to a call made by the directors prior to the winding up observed,

"They have lost their character as calls and have become debts and, such as realisable by the liquidator just as any other debt or asset is realised."

With great respect of the learned Judge, the proposition in our opinion, has been stated rather broadly. We have pointed out earlier that the calls already made and which were still in arrear would nevertheless be calls. The fact that they are treated as debts does not alter their essential character as call money. Indeed even the contributory's liability for uncalled payment would also be debts. No distinction can therefore be made in regard to the application of the section by reason of the fact that the share money once called becomes a debt and the share money not yet called at the time of the liquidation does not amount to an exigible debt.

Reliance is however placed on the following observations of Chagla, C. J in the decision, :

"The difficulty in the way of accepting this argument is that is now settled as I shall presently point out, that an order under S. 186 can only be made in respect of contractual debts due by the contributory to the company. Section 186 has no reference whatever to the statutory liability created by S. 156. It is only those debts which a liquidator can realise by means of a suit that can be ordered to be paid by the court under S. 186................"

and again

"MR. Seervai has tried to distinguish this case by stating that these observations only apply when the debt due by the contributory is other than a debt in respect of a call. Mr. Seervai's contention is that the debt in respect of a call stands on a different footing because such a debt becomes a statutory debt under S. 156. That contention is obviously erroneous because ILR 38 All 347 : (AIR 1916 All 317) was cited b before their Lordships and their Lordships apparently approved of that decision and pointed out that that case had no relation to S. 186 and went on to say that it was a case relating to money due on the shares in the company which was in liquidation, the liability for which on a winding up became a statutory liability under S. 156 of the Companies Act, 1913."

On the basis of the foregoing observations it is contended that S. 186 would also apply to cases where a claim is made in respect of calls made prior to the winding up. We are of the opinion that the statement of the principles set out in the passage cited above is a little wide. It is not that in respect of every suit that could be laid against a contributory, that S. 186 would apply. Whether the summary remedy provided for by that section could be resorted to would first depend upon the terms of that section. As pointed out earlier, ILR 38 ALL 347 : (AIR 1916 All 317) was a case in respect of a claim regarding calls made prior to the winding up. It was held that Sec. 187 would apply. In a suit was filed by the liquidator of a company for

recovering money due in respect of calls made prior to to the winding up by the directors. There was a plea of limitation by the contributory. It was contended on behalf of the liquidator that the plea of limitation was not available having regard to the statutory right given to him. The learned Judges held that a claim under S. 156 of the Act could not be agitated by means of a suit and the exclusive remedy provided under the Act was an application under S. 187, and that therefore, it was not open to the liquidator to base his cause of action on the statutory rights created by S. 156 to sustain his claim.

The learned Judges held that as the statute which created a right under Sec. 156 also provided for a remedy under S. 187 that remedy should be considered as an exclusive remedy. We are unable with great respect to share that view. As pointed out earlier Sec. 187 provides a procedure for obtaining a summary order known as balance order in England. 1891-3 Ch. 15 was a case that related to the recovery of unpaid share money which had prior to the liquidation proceedings been called up by the directors. It was held that an action could be maintained for the arrears of call money notwithstanding that a balance order had been obtained for the amount due. That case therefore recognised that (1) a balance order could be made in respect of a call made prior to liquidation and (2) that the balance order is not a judgment the existence of which would preclude an action.

(19) Under the Indian Companies Act, 1913, the position would be similar. Section 156 creates a right : there should be a remedy to enforce the right. Section 187 no doubt provides a summary remedy. But under S. 199 the order is not made a decree. It is merely made enforceable as a decree, i.e., a fiction is created for the purport of enforcement. As pointed out in the decision referred to above no execution could be levied in a foreign court or even a suit filed on the bases of a balance order, the debt not being merged in it. The remedy under S. 187 cannot therefore be regarded as a complete one. If a balance order (an order under S. 187) does not amount to a judgment in which the debt or liability could be said to be merged an action on the basis of the debt will lie.

(20) The position then comes to this; that both in respect of a claim in regard to a call made prior to winding up and that made subsequently a suit would lie. Sections 186 and 187 provide a summary remedy as an alternative to the normal remedy by way of suit. The question then is only to ascertain their respective field of operation. It can be presumed that the Legislature intended them for different categories of cases, thus avoiding a duplication of summary remedies. We have shown earlier that S. 187 would apply also to cases to calls made before liquidation. Therefore those calls should fall outside Sec. 186. This construction would give full scope to the words of Sec. 186 which specifically excludes from its operation call monies due under the Act. We are, therefore, of opinion that S. 186 would apply only to the case of a claim ex contractu other than call money whether due or yet to be called, while S. 187 would apply for the recovery of all call monies whether exigible at the time of liquidation or otherwise. We agree with Balakrishna Aiyar, J., that the liquidator in the instant case cannot proceed under S. 186. The appeal fails and is dismissed with costs.

(21) Appeal dismissed.


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