1932 (2) TMI 23 - HC - Companies Law

Winding up - Liability as contributories of present and post members and Penalty for false statements

Summary

Issues:
Enforcement of call against shareholders of a defunct company, cause of action, limitation period, validity of call, rights acquired through auction purchase, liability of shareholders, necessity of notice of call, appropriate steps for enforcement, preliminary objection on appeal competency.

Enforcement of Call:
The judgment revolves around the enforcement of a call against shareholders of a defunct company by the plaintiff company, who acquired rights through an auction purchase. The suits were initially dismissed by the trial court due to failure in establishing defendants as co-shares. However, the lower Appellate Court recognized the defendants as shareholders but dismissed the appeal on grounds of limitation and lack of a valid call. The plaintiff company contended that the defendants' liability existed from share acquisition and was enforceable post-auction purchase.

Limitation Period and Cause of Action:
Regarding limitation, the plaintiff argued that it had not commenced running or started from the auction purchase date. The applicability of Article 120 over Article 112 was debated, with the suits being filed within three years of the auction purchase. The cause of action was asserted to predate the call, originating from the defendants' share acquisition.

Validity of Call and Notice Requirement:
The lower Appellate Court found that no valid call was made on the defendants as no notice of call was served. The judgment emphasized that a mere resolution without notice does not constitute a valid call. It highlighted that liability enforcement required adherence to the Articles of Association and the Companies Act, necessitating proper notice of call to shareholders.

Rights Acquired through Auction Purchase:
The plaintiff, as an auction purchaser, acquired rights regarding the uncalled capital of the defunct company. However, the judgment underscored that enforcing calls required compliance with company regulations and legal provisions, indicating that a demand post-auction did not substitute for a formal call.

Liability of Shareholders and Enforcement Steps:
Shareholders' liability for unpaid share capital was acknowledged, but enforcement was contingent on following prescribed procedures. The judgment clarified that passing a resolution alone did not constitute a valid call; service of notice was imperative. Failure to serve notice led to the conclusion that the plaintiff lacked a cause of action against the defendants.

Preliminary Objection on Appeal Competency:
A preliminary objection on appeal competency, based on the claim amount and nature of suits, was dismissed. The judgment deemed the objection unsubstantiated, citing relevant provisions of the Companies Act. Consequently, the appeals were dismissed, affirming the lower court's decision, and costs were awarded to the respondents for both appeal hearings.