The Sabapathi Press Co., Ltd. vs R. Sabapathi Rao and Others

Ramesam, J.—The first point argued in this appeal is a question of law. It has been contended before us by the Chairman of the Sabapathi

Press Co., Ltd., who argued the case personally, that this petition for winding up filed by some shareholders who have paid up their share capital

fully is not maintainable. u/s 166 of the Companies Act, an application to the Court for the winding up of a company shall be by petition presented

either by the company or by any creditor or creditors, contributory or contributories, etc. Section 156 of the Act runs thus:

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 winding up, and for

the adjustment of the rights of the contributories among themselves, with the qualifications following.

Clause (iv) lays down the following qualification: "" In the case of a company limited by shares, no contribution shall he 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.

It is therefore contended before us that a member who has fully paid up his share is not liable to contribute anything under this clause and

therefore he is not a contributory within the meaning of Section 166. Section 158 defines the term ""contributory."" It means ""eveery person liable to

contribute to the assets of a company in the event of its being wound up, and, in all proceedings prior to the final determination of the persons who

are to be deemed contributories, includes any person alleged to be a contributory. "" The corresponding Sections of the then English Act were the

subject of consideration in English Courts in In re National Savings Bank Association (1866) 1 Ch. App. Cases 547. The question was considered

by Knight Bruce and Turner, L.JJ., in a case which came up on appeal before them from an order of the Master of the Rolls. Section 74 of the

English Act then under consideration is the same as Section 158. Section 38 corresponds to our section-156. It was held by Lord Justices that all

past members of the company were liable to contribute and the qualification that a member shall not be liable to pay more than the unpaid amount

of his share does not make him the less a contributory in the particular case where his share capital is fully paid up. The case follows another

decision in In re Anglesea Colliery Co. (1866) 1 Ch. App. Cases 555. Following these decisions, we hold that this petition is maintainable. In

some cases it has been laid down as a matter of practice that the petition by a single shareholder ought not to be allowed unless it is supported by

other shareholders or creditors. In the present case, the petition is supported by no less than 84 shareholders. The petition also alleges that, in the

event of winding up, the petitioners have a tangible interest in the surplus assets. We therefore do not see any kind of objection to the

maintainability of this petition.

The next point relates to the grounds on which the company is sought to be wound up. Section 162, Clause (vi) says that a company may be

wound up by the Court, if the Court is of opinion that it is just and equitable that the company should be wound up. Clauses (i) to (v) of the section

do not apply. A. similar clause was the subject of construction by the Privy Council in Loch v. John Blackwood, Ltd. (1924) A.C. 783, Following

that case, our brothers, Spencer and Srinivasa Aiyangar, JJ., reversed in Sabapathy Rao v. Sabapathy Press Co., Ltd I.L.R.(1924) M. 448 : 48

AT .L.J. 118, the original order of Kumaraswami Sastri, J., dismissing the petition and remanded the case back for consideration on the ground

that the reasons alleged in the petition will, if made out, be enough to sustain an order of winding up as just and equitable. The learned Judge, our

brother Beasley, J., has now found that on one occasion the press was auctioned and leased out to K.V.S.R. and Co. and that on the next day it

was subleased to Pola Sankariah for Rs. 10,523. Again in another year the same press was leased out to Mr. Ramachander, son of the Chairman,

Mr. Venkata Rao. It was then subleased to Pola Sankariah for Rs. 14,300. The learned Judge observes that the very large profits made by

intermediaries make the transactions not altogether proper. The next point, the learned Judge relied on, is that suits had to be filed against the

company for the recovery of dividends. Mr. Venkata Rao sought to explain this fact by saying that sometimes the shareholders would not draw

their dividends so that they might make this complaint, and various other explanations are given in connection with the other shareholders. But

whatever the explanations may be, there is no doubt that there are numerous cases of shareholders having had to sue the company for recovery of

their dividends. The learned Judge also referred the matter to the Official Referee on two points, that is, to look into the accounts and also examine

certain dividend warrants for the purpose of satisfying himself on the questions as to whether dividends had been paid and whether Mr. Venkata

Rao was authorised by the persons whose names appear on the dividend warrants to give an acquittance or receipt on their behalf. On both these

questions the report of the Official Referee was against Mr. Venkata Rao. It is said that Mr. Venkata Rao had no opportunity of Explaining these

matters. On the other side, it is stated that his counsel, Mr. Sydney -Smith, did not question the correctness of the report. The learned Judge also

observes that there are other matters which he need not go into. Having regard to all these circumstances, we think it is not a matter in which we

should differ from the discretion of the learned Judge.

We dismiss this appeal with taxed costs on the higher scale of the petitioners. The taxed costs of the Official Liquidator will be recovered out of

the estate. The costs of the respondents may be paid out of the sum of Rs. 800 which has been deposited by the appellants as security for costs.