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Geoffey Cornwallis Montogomery Vs. Sikdar Iron Works Ltd. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1932Cal691
AppellantGeoffey Cornwallis Montogomery
RespondentSikdar Iron Works Ltd.
- order of this court made in 1925 and, in august of that year one mr. l. s. bavin was appointed official liquidator by the court. on 27th august, by an order made by consent of certain persons, mr. bavin was given all the powers conferred by section 179, companies act, and was given liberty to carry on the business of the company for a limited time and to arrange for finance upon such terms as he should think fit. this order of 27th august was not unfortunately brought to the notice of the learned judge who hoard the present application on the original side. in june 1927 the usual steps were taken by mr. bavin as the official liquidator for having the list of contributories settled by the court on the 13th of that month. notices appear to have been issued to the contributories and, in.....

Rankin, C.J.

1. This is an appeal by one Geoffrey Cornwallis Montogomery against an order of my learned brother Costello made in the winding up under an order of the Court of the Sikdar Iron Works Ltd. The company was ordered to be wound up by an order of this Court made in 1925 and, in August of that year one Mr. L. S. Bavin was appointed Official Liquidator by the Court. On 27th August, by an order made by consent of certain persons, Mr. Bavin was given all the powers conferred by Section 179, Companies Act, and was given liberty to carry on the business of the company for a limited time and to arrange for finance upon such terms as he should think fit. This order of 27th August was not unfortunately brought to the notice of the learned Judge who hoard the present application on the original side. In June 1927 the usual steps were taken by Mr. Bavin as the Official Liquidator for having the list of contributories settled by the Court on the 13th of that month. Notices appear to have been issued to the contributories and, in particular, to Mr. Montogomery. For some reason which is not apparent, the list of contributories was not settled by the learned Judge until 18th April 1929 when that list was formally signed. In the meantime it appears that Mr. Bavin as Official Liquidator wrote to the appellant Mr. Montogomery asking for payment of a sum of Rs. 2,250 being the amount due from him in the winding up as 'call' upon 900 shares of Rs. 10 each held by Mr. Montogomery each share being paid up to the extent of Rs. 7-8-0 and Rs. 2-8-0 being payable therefore in respect of each share. The applicant immediately sent his cheque to Mr. Bavin as Official Liquidator for the amount demanded. The cheque has been produced. It is in the following form. 'Pay to Messrs. Viney Thurston, Liquidators, Sikdar Iron Works Ltd. Rs. 2,250 only.' It does not appear, as we have not got the letter from Mr. Bavin to Mr. Montogomery, how that letter was sent; but Viney and Thurston, was either the name of the firm of which Mr. Bavin was a member or the name under which Mr. Bavin practised as accountant. It will be seen that some little time after this was sent the list of contributories was formally settled and later on in the year, namely, on 25th November 1929 a formal order was made by the Court under Section 187, Companies Act, making a call for the full amount payable on each share from all the contributories. That order was in the form prescribed by the rules of this Court directing each contributory to make the payment due from him into the Imperial Bank by March 1930. The order having been made at the instance of Mr. Bavin, it does not appear that, so far as Mr. Montogomery was concerned, Mr. Bavin took any steps under that order.

2. Now, when March 1930 came, Mr. Bavin was in trouble and at the present moment he is undergoing a sentence in respect of some offence not connected with the present company. When he was about to be removed, he wrote to his attorneys a letter in which he asked them to inform the gentlemen who would be appointed in his place that from time to time he had received amounts payable for calls on shares during the course of the liquidation. That letter has been produced in evidence and one of the persons mentioned in it as having paid the call was Mr. Montogomery the appellant who is stated quite truly to have paid Rs. 2,250 on that account. Mr. Bavin was immediately afterwards succeeded by Mr. Purohit who completed his security and obtained an order extending the time for payment of the calls up to August 1930. In February 1931 he took out a summons inter alia against Mr. Montogomery to enforce the call under the order of 25th November 1929. Mr. Montogomery's answer to that was that he had already paid to the then Official Liquidator Mr. Bavin and that he could not be called upon to pay twice.

3. The learned Judge in his judgment laid great stress upon the fact, as ho understood it, that no order had been made giving Mr. Bavin any of the powers under Section 179, Companies Act, and so none of the powers therein mentioned could be exercised by Mr. Bavin without obtaining the sanction of the Court. This is really the main ground of the judgment. As it now appears that proper materials were not laid before the learned Judge on that point and that an order had been made giving these powers to Mr. Bavin, the reasoning of the learned Judge's judgment is to a great extent removed. There is one passage however in his judgment to which I would like to refer. The learned Judge observes:

As I have already said, it is no doubt a very great hardship upon Mr. Montogomery that he should have to suffer owing to the default of Mr. Bavin. The answer to that view of the matter is that persons when they are making-payments to a company in liquidation in respect of an obligation due from them to the company in liquidation would satisfy themselves that the person to whom the payment is made is clothed with the necessary authority to receive the payment and has power to give a proper discharge from that obligation.

4. Now, it appears to me that this is a matter which requires somewhat careful consideration before the principle stated by the learned Judge is applied to the facts of this case. The position is that under the Companies Act and by virtue of Section 157, upon the happening of a winding up, a new statutory liability is imposed upon certain persons who are called contributories. Prior to that, no doubt there was a liability to pay the calls when calls should be made by the management of the company; but where such calls have been made, if any money is due and unpaid upon the total amount of the shares, the liability attaches upon the (winding up under Section 157 of the Act This matter was very fully considered with reference to a question of set-off by Sir George Jessel in the well-known case of Whitehouse & Co.[1878] 9 Ch. D. 595. There can be no doubt therefore that it is no answer at all to a claim in a winding up under Section 157 to say that a transaction had been! had by the company before the winding up or that there had been an arrangement made by the Directors which could be 'set up as excluding the statutory liability which attaches upon the winding up.

5. The present case is clearly not one of that character. The present case is one in which it is said that after the winding up the money was demanded under the section by the person who was the Official Liquidator at that time, that it was paid to him as such and that he received it. Now, it is noticeable and it is not in any way denied that quite a number of persons appear to have been treated in the same way and to have acted in the same way as Mr. Montogomery. A demand was made by Mr. Bavin as Official Liquidator at a time when no formal order of the Court was in existence. It is quite intelligible that an ordinary business man should not have noticed anything wrong. In a voluntary winding up as distinct from a compulsory winding up, it is the liquidator who without any order from the Court may make a call on his own responsibility and he would be quite in order in such a case to make a call and receive the payment. One cannot expect a business man always to have in considered whether the company has been wound up voluntarily or compulsorily. In India as distinct from England, there is at present no provision by which the liquidator in a compulsory winding up can make a call without coming to Court; but there is no doubt that whether in a voluntary winding up or in a compulsory winding up the call is really a contribution to the assets of the company for the purpose of the winding up which contribution is enforceable by the Official Liquidator for the purpose of putting funds into his control for the administration of the company's affairs. A number of people for one reason or another had been induced by the demand made by the Official Liquidator and then immediately afterwards steps were taken to put the demand in order and the order of 25th November 1929 made the liability for the first time become payable. But I would here point out that by the express terms of the Indian Act Section 159, Sub-clause (1), the liability does not arise for the first time on the making of the order by the Court. The section says:

The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced but payable at the times when calls are made for enforcing the liability.

6. So that, at the time when his money was paid it was paid in respect of the existing debt which was debitum in preasenti but solvendum in futuro. It may further be noticed that although as a matter of practice, when this Court makes an order to enforce calls, it directs the contributories to pay to the Imperial Bank, that is purely a precautionary measure and, if it becomes necessary in order to facilitate enforcement of the payment, this Court by its rules has power to make an order on the contributories to pay to the Official Liquidator direct. As a matter of fact the summons taken out by Mr. Purohit asked for an order that he might be paid the sum direct.

7. In these circumstances the question is whether it is enough to say that this contributory who sent his cheque to the Official Liquidator upon the demand of the Official Liquidator should have known better and because he did not take the precaution to see that the Court had made an order enforcing the call and did not notice that under the usual practice of the Court payment would be ordered to be made into the Imperial Bank, it is reasonable and right that ha should be ordered to pay the money twice. It seems to me that as regards the order of 25th November 1929, it was an order obtained by Mr. Bavin who had no intention whatever of obtaining the money twice. Mr. Montogomery had no reason to think that because a formal order constituting his liability was being made Mr. Bavin would attempt to obtain the money twice. It was Mr. Bavin's duty as an officer of the Court, when he applied for and obtained that order to lay before the Court all the facts as regards the receipt of the money in anticipation of the liability maturing and, while it is quite true that there is a section in the statute which says that the order is to be conclusive evidence that money was due, all that one can say as to that is that the money became due in the sense of becoming payable when the order of 25th November was made and if in the meantime the Official Liquidator has obtained the money, then it was his duty to apply it in discharge of the liability which became operative for the first time when the order of the Court was made. I do not think that Section 190, Companies Act, has any importance whatever in the circumstances of this case. Mr. Purohit merely stands in the shoes of Mr. Bavin, that is to say, as regards his official capacity and we have to ask ourselves, first, whether there is any real evidence that the assets of the company have been deprived of the money which Mr. Montogomery paid or whether there is any evidence that the company in one way or another has got the benefit of that payment. Upon that point, the evidence is practically non-existent. The only evidence in the case is a very short affidavit of Mr. Purohit who says nothing about this matter at all. He merely takes his stand on the facts of the order of 25th November and the fact that no payment has been made since. Mr. Montogomery naturally knows nothing about the matter.

8. The learned Judge made an order directing that Mr. Bavin should be required to give an account, in particular, as to what he had done with the money. But that only resulted in a letter written from prison by Mr. Bavin saying that he had filed all his papers and had accounted for all his receipts and what he had done with the money. In view of Mr. Bavin's action in collecting the money prior to his having any right to collect it and putting it in the way that he put into another bank instead of putting it into the Imperial Bank it seems very doubtful whether the company's creditors have really got any benefit of the money which Mr. Bavin had so collected. There is however no material before the Court which would enable us to say that the Official Liquidator has proved that the money was misapplied or which would enable the appellant Mr. Montogomery to say that he has shown that the company did get the benefit of the payment in any way. We have to deal with the question in that state of evidence. I do not consider that it is sufficient to say that Mr. Montogomery should have taken care to sea that there was an order enforcing the call and should have noticed that in that event he would be directed to pay to the account of the Official Liquidator into the Imperial Bank. The Official Liquidator is a person who was appointed by the Court. He was administering this company as the hand of the Court for the purpose. There was an existing debt though the money had not yet become payable. Mr. Montogomery had received notice that he would be put on the list of contributories. This Court by its officer demanded the money from him. He in company with other very respectable people answered the calls made by the Official Liquidator in that way. He was paying the money direct to the person who had the administration of the company's affairs. In these circumstances it does not seem to me that it would be right for this Court to enforce against him a liability which he has already at the request of this Court's officer discharged by payment made to him in his official name. I quite agree that there are hard cases where nevertheless no attention can be paid to the hardship. But I am of opinion that this is such a case. In my judgment it would be wrong for this Court to make an order that Mr. Montogomery should pay this amount twice over. In this view I am of opinion that the appeal should be allowed, the order of the learned Judge as against Mr. Montogomery should be discharged and the application against him should be dismissed with costs before the learned Judge and in this Court.

C.C. Ghose, J.

9. I agree.

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