TMI Blog1955 (4) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... resenting the present petition? [On respondent]. As regards issue No. 1, it is urged that all the petitioners are holders of fully paid-up shares and they therefore ought to have alleged in the petition that, on the winding up of the company, there will be left, after providing for liabilities of the company and payment of expenses of winding up, a substantial surplus for being distributed among the shareholders. As no such allegation is made the petition is liable to be summarily dismissed without going into its merits. Reliance in this connection is placed on sections 156 and 158 of the Indian Companies Act and the decision in Bharat Bank Ltd. v. Lajpat Rai Sawhney [1950] 20 Comp. Cas. 246 . The main basis of the contention is that a fully paid-up shareholder of a limited concern, as provided by section 156, is not required, in the event of its winding up, to contribute to the assets of the company. That being so, he cannot be regarded as a "contributory", as the term is defined by section 158; and consequently he cannot present an application for an order of compulsory winding up under section 166 of the Act. An application for winding up of a company, under section 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a company limited by shares, no contribution shall be required from any member exceeding the amount (if any) unpaid on the shares in respect of which he is liable as a present or past member. Reading this section, apart from the qualifications, there can be no doubt as to the persons upon whom the liability is fixed. It is clearly fixed upon the present and past members of the company, and the present and past members must be "contributories" within the meaning of section 158. The first part of section 156, in effect, describes the persons to whom section 158 refers. The above qualification contained in sub-clause ( iv ) of section 156(1) does not derogate from the description given in the first part of the section. On the contrary, it assumes all the members to be liable, and merely provides in what cases and to what extent the liability is to be enforced against them. A fully paid-up shareholder is equally liable to contribute and does contribute to the assets of the company under section 156 and he would, therefore, be included in the term "contributory", although one of the qualifications laid by the section places certain limitations on such liability. Part V of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under section 178-A, the official liquidator is required to convene a meeting of the creditors, and within one week thereof a meeting of the contributories to consider the decision of the creditors and to accept the same with or without modifications. Here again, the word "contributories" stands for the members of the company without any distinction. The same would be true with respect to the authority of the "contributories" to give any directions to the official liquidator by passing a resolution at a general meeting, as provided by section 183(1). Sub-section (2) of this section authorises the official liquidator to summon general meetings of the creditors or contributories for the purpose of ascertaining their wishes. Similarly, in the series of sections headed as "Ordinary powers of Court", the word "contributory" has to be taken to have been used in that sense. Section 185 empowers the court to require any contributory to pay, deliver, surrender or transfer forthwith, or within such time as the court directs, to the official liquidator any money, debt or documents in his hands to which the company is prima facie entitled. Section 186 gives the court power to make an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of winding up, there will be substantial surplus for distribution amongst the shareholders. To hold otherwise would be unreasonably limiting the scope of section 166. In fact, a fully paid-up shareholder has greater interest in the affairs of the company as compared to a shareholder who has not paid the full amount, and consequently, there would be no justification in placing the former in a less advantageous position. The word "contributories" in the section, in my opinion, includes a fully paid-up shareholder, and since no limitation in this connection is placed by the section itself he need not allege or prove that, in case of winding up, there will be substantial surplus for distribution among the shareholders. I am supported in the view that I take by another clear provision in the Act. Section 170, inter alia, lays down that the court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets. If the application of a fully paid-up shareholder cannot be dismissed on the ground that the company owns no assets, why should he be requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of adjusting the rights of contributories. Arthur Stiebel in his "Company Law and Precedents" at pages 823 and 824 says: "Under the old Act it was held that a contributory included a fully paid shareholder, because he was liable to contribute to the assets of the company under section 38 of the Act of 1862 [156 of the Indian Companies Act (VII of 1913)], although it was true that the later words of that section took away such liability." As regards his right to present an application for winding up the author observes: "A fully paid shareholder will, however, have to prove and allege in his petition that there will be substantial assets for distribution among the shareholders, though possibly, since the Companies (Winding-up) Act, 1890, less will in some cases have to be shown in this way than formerly." The view in England had thus been gradually developing that insolvency of a company should not necessarily disentitle a fully paid-up shareholder to apply for its winding up. In In re Aidall, Ltd. [1933] 1 Ch. 323 , the question was whether a fully paid-up shareholder could be regarded as a contributory for the purposes of sections 164 and 165 of the Companies (Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 1862. It was consequently held that where under a voluntary winding up all debts had been provided for, the liquidators were justified in making a call upon the partly paid-up shareholders for the purpose of adjusting the rights between them and the fully paid-up shareholders. In Halsbury's Laws of England, (second edition), Vol. V, page 554, it is stated: "A fully-paid shareholder may, as a contributory, present a winding up petition and the Court cannot refuse to make a winding up order on the ground only that the assets have been mortgaged to an amount equal to or in excess of those assets or that there are no assets." At the footnotes it is mentioned that the cases decided before 1907 are modified by the express provision introduced in section 29 of the Act of 1907. It is correct that a contributory may not be entitled to an order in a case where there is no ground for a winding up order except insolvency and the petition is opposed by other shareholders, But that is a question to be decided on the merits of each case. The court has a discretion and may refuse to make an order on a contributory's petition where the circumstances do not justify a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -up shareholder is not a contributory within the meaning of section 158 of Act VII of 1913. SHADI LAL J. (as he then was) repelled the objection in the following terms: "Upon the first point it is sufficient to say that section 158 is in item verbis with the corresponding section in the English Act, and that it has been repeatedly held in England that a fully paid-up shareholder is a contributory and may present a petition for winding up." In Sabapathi Press and Co. Ltd. v. R. Sabapathi Rao AIR 1930 Mad. 240 , it was held that the qualification contained in clause (4) of section 156, 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 the capital is fully paid-up, and a petition for winding up by members who have paid up their share capital fully is maintainable under section 186. In In re Cine Industries and Recording Co. Ltd. [1942] 12 Comp. Cas. 215 , CHAGLA J. (as he then was) dealing with an identical objection observed: "There is another important fact to be borne in mind. This is a shareholder's petition. It is true that as the law stands today, he is unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy recorded I am in respectful agreement with this view. In Lajpat Rai Sawhney case ( supra ) , Kapur J. while accepting that every holder of fully paid-up shares is a "contributory" as he is entitled to share in the adjustment of the rights of the contributories among themselves, expressed the opinion that where such a shareholder "files an application for winding up and ( i ) does not allege that there is a surplus, and (2) does not give prima facie evidence of the likelihood of there being some tangible surplus, he is not entitled to bring under the law a winding up petition because he has no interest in winding up and is not a contributory within the meaning of section 166, although for the purpose of adjustment he will come within the definition of the word contributory.'' In arriving at this conclusion the learned Judge relied upon the English cases decided before 1907, and did not take into consideration the change brought in by the introduction of section 29 of the Act of 1907. These earlier decisions as already observed, should be regarded as modified by amendment of the law on which they were based. It may be mentioned that in the case before me, the company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bi are joint holders of six hundred fully paid-up shares. Both of them are, therefore, jointly shown as petitioner No. 4. The objection is (1) that Mr. Balraj Tulli, by whom the petition is signed, holds no vakalatnama on behalf of Princess Rajindar Kumari, and (2) that the signature of Rani Ranbir Kaur was obtained on a blank power of attorney, without letting her know that it was meant for presenting a winding up petition on her behalf. The objection has no force. In cases of joint holders of any shares, article 91 of the articles of association of the company provides that the member whose name stands first in the register shall be entitled to vote in respect of such shares; the other or others of the joint holders are only entitled to be present at the general meetings. It is not denied that Rani Ranbir Kaur's name stands first in the register of members. Under article 153 of the same articles, any one of several persons who are registered as the joint holders of any shares may give effectual receipts for all the dividends and payments in respect of such shares. It is correct that these provisions do not expressly authorise one of the joint shareholders to present a petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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