T.M. Mathew and Others vs Industrial Bank Ltd. (In Liquidation)

Mathew, J.—The appellants in these appeals are shareholders in the banking company in question, They paid portions of the share money at the time of allotment. On February 16, 1955, the company made a call; they paid a portion of the amount called but failed to pay the balance. Thereafter, the company went into voluntary liquidation, and the respondents were appointed liquidators. They issued notices, exhibits D-2 and P-5, on August 8, 1957, calling upon the shareholders to pay the amounts still due from them on the shares standing in their names in the books of the company within ten days of the receipt of the notices. The amounts were not paid ; and so suits were instituted for recovery of the same. The appellants contended, among other things, that the suits were barred by time. The learned munsif overruled the contention and decreed the suits; but in appeal the suits were held to be barred by limitation and the decrees reversed. The liquidators filed second appeals to this court, and the learned single judge has allowed the appeals. Hence these appeals.

The only question for consideration is whether the learned single judge was right in holding that the suits were not barred by limitation. The appellants contended that the call was made by the company on February 16, 1955, while it was functioning, and three years elapsed from the date when the monies became due under the call, and, therefore, the suits filed on December 21, 1959, were clearly barred under Article 112 of the Limitation Act, 1908. They argued that the period of limitation would not be extended merely because the company went into voluntary liquidation, and the liquidators made further calls for those amounts also. In other words, the argument was that when the call monies were not paid on the due dates they became debts due to the company and were the assets of the company on the date when the company went into liquidation; and for recovery of the debts the article applicable is Article 112; and that the fact that the calls were made by the liquidators of the amounts still remaining due on the shares, including the amount already called, and the fact that the shareholders were placed on the list of contributor''s would not give the liquidators a new cause of action,

The liability to pay the calls made by the company on February 16, 3955, was ex contractu, but it became ex lege when the company went into liquidation and calls were made by the liquidators. Section 156 of the Companies Act, 1933, reads :

"(1) 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 any 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 contributors among themselves, with the qualifications following (that is to say):--......"

In Abdullah Ashgar Ali v. Ganesh Das, AIR (20) 1933 PC 63 , their Lordships of the Privy Council observed :

"It was a case relating to money due on shares in the company which was in liquidation, the liability for which on a winding-up became a statutory liability u/s 356, Companies Act, 1913."

As to the nature of the liability of a shareholder in respect of share money already called when a company is a going concern, but not paid on the date of winding-up, this is what Jessel M.R. said in In re Whitehouse & Co. [1878] 9 Ch. D. 595, 600 (Ch. D.) :

"Now, first of all as regards the calls made in the winding-up, they being calls for something unpaid on the shares, that is a contribution due by the member under the Act, and is not a debt due to the company. The contribution also under this section applies to the unpaid calls made before the winding-up; because, though that is a debt due to the company, it is not the less an amount unpaid on the shares in respect of which he is liable, and therefore he must be liable to contribute all that is unpaid on his shares. 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 contributories'' 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."

In L. Gupta v. Vishnu Babu Rao Sarvate, [1956] 26 C. Cas. 245: AIR 1956 Nag. 204 the court held that a liquidator in a voluntary winding-up can make a call u/s 212(1) without the sanction of the court and that, although he may apply to the court for enforcement of the call, he is not bound to resort to that course, but can file a suit for recovery of the statutory debt, and that a suit for the recovery of the debt would be governed by Article 120 of the Limitation Act, 1908. To the same effect is the ruling in Marulasiddanna v. Liquidators of Mysore Malleable Iron & Steel Foundry Ltd, [1963] 33 Comp. Cas. 713 ; AIR 1963 Mys. 61 . In In Re: East Bengal Sugar Mills Ltd. (In Liquidation), , it was held that a new liability arises for the first time upon the winding-up and that is unaffected by the fact that previous calls have been made and that the recovery of the same has become barred by time. See also Pure Milk Supply Co. Ltd. Vs. S. Hari Singh and Others, . In Mahomed Akbar Abdulla Fazalbhoy Vs. Associated Banking Corporation India Ltd., , the directors of a company made calls, but the call monies were not paid. The company was compulsorily wound up by court. The court liquidator issued a notice calling upon the shareholder in question to pay the amount of the calls already made. The amount not having been paid, a suit was filed for realising the amount. The shareholder contended that the suit was barred by limitation, as the amount had become a debt of the company and was not call money due from a contributory under the Companies Act. The learned judges of the High Court held that after a winding-up order, it is the court alone that can make a call, and that call made by the liquidator without the sanction of the court would not create a statutory liability on the shareholder to pay any amount. They also held that the suit filed by the liquidator, if looked upon as a suit to recover a contractual debt, was barred by limitation under Article 112 of the Limitation Act, 1908 ; and if looked upon as a suit to realise statutory debt, created by Section 156, then the suit was not maintainable because no call in respect of the liability was made by the court, and, in the absence of any such call, the statutory liability cannot be enforced by the liquidator. They further held that on a winding-up order the liability of a contributory to contribute to the assets to the extent mentioned in Section 156 becomes an absolute liability which arises by reason of statute and not by reason of contract, and that the liability is not confined to the amount of calls already made before the winding-up, but extends in the case of a shareholder in a company limited by shares to unpaid amount due on the shares. In a voluntary winding-up, it is clear from Section 212(1)(d) of the Companies Act, 1913, that a liquidator can make a call without the sanction of the court, and the observation to the contrary in the judgment of the Bombay High Court is clearly wrong. So the liquidators were perfectly competent to make the calls without the sanction of the court; and by exhibits P-2 and P-5 notices they made calls of the entire amount due on shares held by the shareholders including the amount which remained unpaid in pursuance of the call made by the directors on February 16, 1955. The article of the Limitation Act which is applicable to the suits in question is Article 120 of the Limitation Act, 1908, and the suits were, therefore, not barred by limitation.

We dismiss the appeals, but without any order as to costs.