Members Voluntary Liquidator, S.P. Subbiah vs Pr. Pr. S.P. Periakaruppan Chettiar and Others

Ramaprasada Rao, J.—This is an application taken out by the members voluntary liquidator against the Respondents for a direction that they

may be asked to pay the amounts respectively due and payable by them and as set out in paragraph 6 of the affidavit in support of the application,

the said amounts being the principal due on the second and final calls over the shares admittedly held by the Respondents in Mahalakshmi Oil Mills

and Industries Limited (In Members Voluntary Liquidation). Only the first Respondent has filed a counter affidavit and Respondents 2 to 5 do not

appear before me. The first Respondent, in his counter affidavit, admits that the claim is not barred by limitation as it is one arising in the course of

liquidation proceeding, but objects to the claim for interest from October 30, 1956, at the rate of 9 per cent per annum. He states that under the

Companies Act (Act I of 1956), interest can be claimed only from the date on which this Court directs him to pay the same, that too at 4 per cent.

He also alleges that the company mortgaged its assets, including the unpaid call moneys by a mortgage deed, dated February 24, 1950, in favour

of SP. PR. Ramayee Achi and that, therefore, the said mortgagee is a necessary party before any directions could be given regarding the payment

of the unpaid calls. He has also stated that if the mortgagee is made a party to this application, he is willing to deposit the money into Court

provided this Court directs him to do so. In any event, he is ready and willing to deposit the sum of Rs. 1,250 due and payable by him as unpaid

call money to this Court. On the averment of the first Respondent that the mortgagee is a necessary party, the mortgagee was duly impleaded as a

third party to this application. The mortgagee filed a counter affidavit stating that she is not submitting herself to the jurisdiction of this company

Court and wishes to stand outside the winding up proceedings and exhaust her remedies available to her under the mortgage deed and in Original

Suit No. 38 of 1958 on the file of the Court of the Subordinate Judge, Chingleput, in which the mortgagee has already filed and has obtained a

decree thereon. In the said mortgage suit, the first Respondent who was a party therein along with the other directors of the company in liquidation,

undertook that he will pay all the amounts collected towards further calls of the share amount to the credit of the mortgage suit. In the light of this

undertaking, the third party-mortgagee submits that all the call moneys which are sought to be collected by the voluntary liquidator in this

application in any event should be directed to be put into this Court with liberty to him to draw out the same after such deposit. To the counter

affidavit filed by the first Respondent and the third party-mortgagee, the voluntary liquidator filed reply-affidavits in which he categorically states

that he has no objection to collect the unpaid call moneys and deposit the same in this Court and the third party-mortgagee being paid out the

same, so that the mortgagee may give credit to the same against the decree amount in Original Suit No. 38 of 1958, on the file of the Court of the

Subordinate Judge of Chingleput and enter up part satisfaction. The Applicant also states in answer to the counter-affidavit of the first Respondent,

that he is entitled to interest at 9 per cent per annum on the amounts due from October 30, 1956. that being the date of the original demand. His

claim for interest is based on the ground that the company has suffered a decree and has to pay the same with interest at 9 per cent to the third

party-mortgagee.

As already stated, Respondents 2 to 5 are ex parte. Only the first Respondent contests this application mainly on the ground that he is not liable

to pay interest as demanded. The principal amount as stated in paragraph 6 of the affidavit in support of the application is admitted by the first

Respondent. It is, therefore, clear that all the Respondents having defaulted in the payment of the unpaid calls, they are liable to contribute and pay

to the Applicant the principal amount of call moneys as set out by the liquidator in paragraph 6.

The only remaining question is whether the liquidator is entitled to claim interest at the rate of 9 per cent from October 30, 1956, or from any

other date. It is now well settled that though the payment of unpaid call moneys originates under a contract, it has become a statutory liability under

the Indian Companies Act, after the winding up of the company. What was, therefore, a debt ex contractu has become a debt ex legi. It is also not

disputed that the claim of the liquidator is not barred due to the supervening winding up proceedings. This proposition is well supported by judicial

precedents and, as it is not in dispute before me, I do not want to refer to the decisions of Courts which support the view that notwithstanding the

bar of limitation under the common law, the liquidator can claim such unpaid call moneys after the winding up of the company by adopting the

prescribed process under the Companies Act.

The only issue for determination, therefore, is whether the liquidator is entitled to claim interest. In the view that I intend taking in the matter, the

question as to what should be the rate of interest will not arise.

Though the first Respondent made a pragmatic assertion that he is not liable to pay interest, no further assistance was given by him. Sri G.

Vasantha Pai appearing for the third party mortgagee, however, volunteered to render assistance to this Court on this subject and I acknowledge

my thanks to him.

In Palmer''s Company Precedents, sixteenth edition, at page 497, Summons for leave to make a call appears. On a perusal of the summons, it is

clear that the statutory liability on the part of the defaulting snare -holder, notwithstanding the lapse of the erstwhile contractual liability, arises on an

order being made by the company Court, for making a call to the amount due by the defaulting share-holder as a contributory. In insure Welsh

Flannel and Tweed Co. (1875) 20 Eq. Cas. 360, Sir R. Malins V.C. makes it very clear that the articles of the association do not apply to calls

made by the liquidators. Sri S. M. Amjad Nainar appearing for the Applicant drew my attention to regulation 16 which is apparently attracted by

the articles of the company, under which the defaulting share-holder from whom the unpaid call money is demanded shall pay interest thereon from

the date appointed for payment to the time of actual payment at 5 per cent per annum or at such lower rate if any as the board may determine. The

board also has the liberty under this regulation to waive payment of any such interest wholly or in part. In Parsram Brij Kishore v. Jagraon Trading

Synd (1936) 6 Comp. Cas. 347 Addison and Abdul Rashid JJ., observed as follows:

The liability created by Section 156 is a new liability and no provision is made for interest therein. It may be that when a court makes a payment

order under that section it could direct future interest on the amount fixed in the payment order until realization but we are clear that it cannot

include interest prior to that time.

Section 156 of the old Act corresponds to Section 426 of the new Act. Regulation 16 cannot, therefore, help the Applicant. In Mahomed

Akbar Abdulla Fazalbhoy Vs. Associated Banking Corporation India Ltd., Chagla C.J., and Coyajee J., were of the view that irrespective of the

bar of limitation, a liquidator is at liberty to approach the company Judge, and, after satisfying him that the call should be enforced by a call made

by the Court in the winding up proceedings, can obtain a direction for payment from Court which direction compels the defaulting share-holder as

a contributory, to pay such unpaid calls. The above ruling is an authority for the proposition that what was originally a contractual liability has

fruitioned itself into a statutory liability, provided, of course, a call has been made in time by the liquidator. It is not disputed in this case that such a

call has been made, and in fact, the first Respondent admits that the amount is due. I respectfully agree with the dicta laid down by the learned

Judges in Mahomed Akbar Abdulla Fazalbhoy Vs. Associated Banking Corporation India Ltd., , that once the liquidator prefers to adopt the

statutory procedure to call for the unpaid call money, then the Court has jurisdiction to make such a call, and on such making a call only, the debt

becomes enforceable. Reference can also be made to the Company Rules made by the Supreme Court of India in exercise of the powers

conferred by Sub-sections (1) and (2) of Section 643 of the Companies Act, 1956. Rule 239 of the Companies (Court) Rules, 1959, runs as

follows:

The order granting leave to make a call shall be in Form No. 103, and shall contain directions as to the time within which such calls shall be paid.

When an order has been made granting leave to make a call, the Official Liquidator shall ''file in Court a document making the call in Form No.

104 with such variations as circumstances may require.

This attracts form No. 103. This form is in pari materia with the form referred to in Palmer''s Company Precedents already adverted to by me.

On a reading of this form No. 103 read with Rule 239 it is clear that what was originally a contractual liability becomes a statutory liability only

after an order to that effect is made by this Court. The relevant portion of form No. 103 runs as follows:

It is ordered that leave be given to the Official Liquidator to make a call of Rs. ...per share on all the contributories of the said company.... And it is

ordered that each contributory do, on or before the...day of...19, pay to the Official Liquidator...the amount due from such contributory in respect

of such call.

It is only after such an order is made by the company Court that the official liquidator has the power to enforce the call and ask for an order for

payment of the call amount due from the contributory. Forms 106 and 108 appended to the Companies (Court) Rules, 1959 read with rules 240

and 241 make it very clear that the liquidator is not entitled to any interest prior to the order of this Court giving leave to him to make a call. This is

the rule of law which has been precisely laid down by the division Bench of the Lahore High Court in Parsram Brij Kishor v. Jagraon Trading

Synd. (1936) 6 Comp. Cas. 347. No doubt, this was under the Indian Companies Act (VII of 1913). But I do not see any reason why this

principle of law as laid down by the learned Judges of the Lahore High Court be not made applicable even under the provisions of the (Indian)

Companies Act (I of 1956).

I am, therefore, of the view that a direction to pay interest on unpaid calls can arise simultaneously and concurrently only with the order to be

made by this Court enabling the official liquidator to call for such unpaid calls. Such a liability being a new one created by statute, it is reasonable

that interest should also be made payable only from such date when the Court directs the liquidator to make a call; otherwise it would lead to an

anomaly. In fact, it is because of the statute that a liability which has become barred is resurrected. If interest were to be allowed from any date

earlier than the date of this Court, as company Court, authorizing the official liquidator to make a call, then it would virtually mean that interest

would be payable on a debt which is barred and which is not enforceable in the eye of law; but the principal alone would be due by virtue of the

supervening winding up proceedings. It will lead to an absurdity if the claim of the liquidator for interest, as in this case, were to be upheld. In order

to harmoniously interpret the intention of the Legislature in creating a new statutory liability, it is but proper and indeed compelling that interest

should be allowed only from the date when the order for call is issued to the liquidator.

I, therefore, direct that the liquidator be entitled to make a call for the payment of the unpaid call money from all the Respondents to this

application together with interest at 4 per cent per annum from the date of this order till the date of realisation.

In view of the undertaking given in the mortgage suit Original Suit No. 38 of 1958 on the file of the Court of the Subordinate Judge of

Chingleput, by the erstwhile directors of the company and in view of the present Applicant''s averment in the reply affidavit that he has no objection

to collect the money and deposit the same in this Court and for the third party-mortgagee herein being paid out the same, I also direct that as and

when the moneys are so collected by the liquidator and paid to the credit of this application, the moneys so collected and deposited by the

liquidator may be paid out to the third party-mortgagee in part satisfaction of the mortgage decree obtained by the third party-mortgagee In

Original Suit No. 38 of 1958 on the file of the Court of the Subordinate Judge, Chingleput.