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P.P. Ramabhadran, Liquidator Vs. T.S. Manickkam and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1941Mad565; (1941)1MLJ369
AppellantP.P. Ramabhadran, Liquidator
RespondentT.S. Manickkam and ors.
Cases ReferredSee Vaidiswara Aiyar v. Sivasubramania Mudaliar I.L.R.
Excerpt:
- - but where a shareholder has failed to pay for shares allotted to him as a signatory to the memorandum of association or on application he can, in the event of the company going into liquidation, be placed upon the list of contributories and the liquidator can make a call upon him for what is due, in which case the court can enforce the call without requiring the liquidator to institute a suit. 5. therefore, a member can be required to pay the amount remaining unpaid on shares held by him whether it is the result of a failure to pay what he should have paid on the allotment of the shares or what is due in respect of shares issued to him as partly paid up......claimed. in dismissing the petition, the learned judge held that the appellant was not entitled to make calls on the respondents and it is this part of the judgment which has really occasioned the present appeal, because if it stands this decision of the learned judge will in an important respect govern the suits to be filed. the appellant contends that this finding is erroneous and he asks this court to direct the respondents to pay the amounts claimed without requiring him to file suits.2. in holding that the amounts due from the respondents could not be made the subject of calls, the learned judge relied on alexander v. automatic telephone company (1900) 2 ch.d. 56, croskey v. the bank of wales (1863) 4 giff. 314 : 66 e.r. 726 and mohun lall v. sri gungaji cotton mills co 4 c.w.n......
Judgment:

Alfred Henry Lionel Leach, C.J.

1. The appellant is the liquidator of the Mahalakshmi Studios Limited, which went into voluntary liquidation on the 5th of November, 1939. The appellant, as it was his duty to do, settled a list of contributories, and, as nineteen of the persons on the list did not comply with the calls made upon them, he applied to this Court for an order under Section 216 of the Indian Companies Act. Of the nineteen respondents, respondents 1 to Sand the father of the nineteenth respondent signed the memorandum of association in respect of the shares subscribed for by them, but had not paid for their shares. The other respondents to the petition were not signatories to the memorandum of association, but had not paid what was due by them on the allotment of their shares. The application was heard by Mockett, J., who refused to make any order against the respondents and directed the liquidator to file suits to recover the amounts which he claimed. In dismissing the petition, the learned Judge held that the appellant was not entitled to make calls on the respondents and it is this part of the judgment which has really occasioned the present appeal, because if it stands this decision of the learned Judge will in an important respect govern the suits to be filed. The appellant contends that this finding is erroneous and he asks this Court to direct the respondents to pay the amounts claimed without requiring him to file suits.

2. In holding that the amounts due from the respondents could not be made the subject of calls, the learned Judge relied on Alexander v. Automatic Telephone Company (1900) 2 Ch.D. 56, Croskey v. The Bank of Wales (1863) 4 Giff. 314 : 66 E.R. 726 and Mohun Lall v. Sri Gungaji Cotton Mills Co 4 C.W.N. 369, but all these cases concerned companies which were not in liquidation and this makes a vast difference. We agree with the learned Judge that the directors could not have made calls in respect of the amounts alleged to be due by the respondents and that until the company went into liquidation, these amounts could only be classified as debts due to the company. Directors can make calls only when shares have been issued as partly paid. In such circumstances they can make calls for what is due by shareholders, bearing of course, in mind the conditions of the contract under which they were issued and the articles of association. But where a shareholder has failed to pay for shares allotted to him as a signatory to the memorandum of association or on application he can, in the event of the company going into liquidation, be placed upon the list of contributories and the liquidator can make a call upon him for what is due, in which case the Court can enforce the call without requiring the liquidator to institute a suit.

3. Section 156 (1) of the Indian Companies Act says:

In the event of a company being wound up, every present and past member shall, subject to the provisions of this section, be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, with the qualifications following.

4. Then follow seven qualifications. We are only concerned with the fourth, which says:

In the case of a company limited by shares, no contribution shall be required from any member exceeding the amount (if any) unpaid on the shares in respect to which he is liable as a present or past member.

5. Therefore, a member can be required to pay the amount remaining unpaid on shares held by him whether it is the result of a failure to pay what he should have paid on the allotment of the shares or what is due in respect of shares issued to him as partly paid up. Section 158 defines the term . 'contributory' and it includes every person liable to contribute to the assets of a company in the event of its being wound up. Section 159 provides that the liability of a contributory shall create a debt payable at the time specified in the calls made upon him by the liquidator and Section 187 gives power to the Court to make calls in liquidations ordered by the Court. Section 212 gives a liquidator of a Company in voluntary liquidation power to settle a list of contributories and states that the list of contributories settled by him shall be prima facie evidence of the liability of the persons named therein to be contributories. Section 216 empowers the liquidator in a voluntary winding up to apply to the Court to enforce calls made by him. Therefore, so far as this appeal is concerned, there is no real difference between a company which is being compulsorily wound up and a company which is in voluntary liquidation.

6. It has been contended by Mr. Ramaswami Aiyar that a debt which could not have been made the subject of a call by the directors cannot be made the subject of a call by the liquidator. But this contention ignores the plain wording of Sections 156 and 1.58. If a person is rightly placed on the list of contributories the liquidator can make a call upon him and we see nothing in the Act or in the authorities which lends the slightest support to the suggestion that the respondents here were not rightly placed on the list of contributories, subject of course to their answers which have not yet been the subject of inquiry.

7. In Lindley's Law of Companies (6th edition p. 573) there is this passage:

There are two kinds of calls. First, there are those calls which are nothing more than the unpaid portions of the nominal capital of a company; and, secondly, there are those calls which are contributions required after that capital has been raised and exhausted. Calls of the first kind are payable by virtue of the 'agreement entered into by the subscribers and the shareholders to contribute the sums fixed upon as the capital; but calls of the last kind are payable in consequence of the liability of shareholders to discharge their debts. If this liability is unlimited, the amount of calls (of the second kind) which a shareholder may be compelled to pay, depends entirely on the amount of the debts to be liquidated, and upon the number of the solvent co-shareholders, But no shareholder can be required to pay calls of the first kind beyond his unpaid proportion of the capital of the company.

8. In In re Whitehouse & Co. (1878) 9 Ch. D. 595 at 599, Jessel, M. R. referring to Section 38l of the English Companies Act, 1862, which corresponds to Section 156 of the Indian Act, said:

First of all, it must be remembered that the 38th section of the Act which directs what is to be paid in the case of a winding up by the share-holders of a limited company, creates new rights and rights which did not exist before the passing of the Companies Act, 1862, and rights which do not exist till there is a winding up. That point was decided by the House of Lords in the case of Webb v. Whiffin (1872) L.R. 5 H.L. 711, that it was in fact a new right, or rather a new liability as regards the shareholders; and that section alone, for this purpose, regulates their liability.

9. In In re Hull & County Bank (1880) 15 Ch. D. 507 , which was decided two years later, Jessell, M. R. said:

Now, what is the position of the applicant? Taking it in the most favourable way for him, he has been induced to become a shareholder by fraudulent misrepresentation. Can he after winding up be relieved? I think he cannot. The first ground to be considered is this: that the winding up order entirely alters the positions of the parties, that is, it makes the shareholders contributories, and contributories in a totally different way in some respects as regards the debts and liabilities of the concern from what they were before. It has been decided by a series of decisions in the House of Lords, commencing with Webb v. Whiffin (1872) L.R. 5 H.L. 711, that the 38th section of the Companies Act is not to be read otherwise than literally, and it is not to be read with reference to the previous liabilities of the shareholders or by analogy to the law of partnership whether of a limited or unlimited character, but it is to be read as imposing new liabilities on the members of the company--liabilities imposed and defined by that section.

10. The Privy Council in Hansraj Gupta v. Asthana (1932) 60 I.A. 1 : I.L.R. 54 All. 827 : 63 M.L.J. 859, an appeal from the Allahabad High Court, said:

On the winding up, Section 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 6f 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.

11. In view of the wording of the relevant sections and in the light of these very authoritative expressions of opinion, we hold that the learned Judge erred in saying that the demands made by the appellant for the amounts claimed were not 'calls' at all. Assuming that the respondents were rightly placed on the list of contributories, the liquidator was entitled to make calls upon them and the amounts became payable irrespective of any question of limitation. See Vaidiswara Aiyar v. Sivasubramania Mudaliar I.L.R.(1907)Mad. 66.

12. It remains to be considered whether the appellant is entitled to have an order from the Court under Section 216. The contesting respondents have raised several defences and after careful thought we see no reason why the decision of the learned Judge in directing the liquidator to file suits should be interfered with but these suits will be tried in the light of this judgment.

13. The liquidator will have his costs of this appeal out of the assets of the company. The respondents will pay their own costs.


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