TMI Blog1958 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... f this call was sent to the respondents by registered post. On the above calls, the respondents did not make any payment. On 22nd September, 1953, a notice was sent by registered post, informing each respondent that the shares would be forfeited if the amount was not paid by 10th October, 1953. On 24th March, 1954, the directors passed a resolution for feign the shares of the shareholders, who had not paid the call money, and they included the three respondents in these cases. Letters were sent to the respondents informing them that their shares had been forfeited by the bank. The bank filed the claim in this court on 24th June, 1954. The bank was ordered to be wound up by this court on 17th May, 1957, as an insolvent bank. Against Seth Sant Lal, respondent in Case No. 83 in Civil Original No. 48 of 1954, there is a claim made by the bank for Rs. 6,603-4-9 on account of the two calls of Rs. 12-8-0 per share each dated 15th October, 1948, and 24th March, 1953. Against Shri Girdhari Lal, respondent (Case No. 84 in Civil Original No. 48 of 1954) for similar reasons as in the earlier case the bank has made a claim of Rs. 5,908-3-0 in respect of the two calls. Against Shri Kishori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of the word "may", are not mandatory, and the Act gives discretion to the court to allow or refuse an application under this section. No new rights are created and the court may decline to act under this section and leave the liquidator to institute a suit in the company's name ( vide Hans Raj Gupta v. Mussoorie Electric Tramway Company. Ltd. [1933] 3 Comp. Cas. 207 Under section 186 of the Indian Companies Act, where a call has been made by the directors before the liquidation of the company and when the date for payment has passed, it becomes a debt like any other debt due from the shareholder of the company. If, later on, the company is wound up, the debt owed by the shareholder becomes an asset of the company and it has to be realised by the liquidator. Under section 186 the court is not given any discretion to ask the liquidator not to realise the debt or to reduce the amount of the claim. Under section 187 The quotation corresponds to section 470 of the Companies Act, 1956 which is reproduced below, the powers of the court are more extensive: "187. (1) The court may, at any time after making a winding up order, and either before or after it has ascertained the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Co. Ltd. v. Padamsey Premji [1934] 4 Comp. Cas. 100 . The right of forfeiting shares is given in this case under the articles of association, which are in the nature of a contract, not only between the company and the members but also between members inter se. In Wood v. Odessa Waterworks Co. [1889] 42 Ch. D. 636 at 642, Stirling J., said : "The articles of association constitute a contract not merely between the shareholders and the company, but between each individual shareholder and every other." See also Sardar Gulab Singh v. Punjab Zamindara Bank Ltd. [1940] 10 Comp. Cas. 188, Eley v. Positive Government Security Life Assurance Co. Ltd. [1875] 1 Ex. D. 20, and Salmon v. Quin Axtens [1909] 1 Ch. 311. To a claim for compensation arising out of the breach of any contract, express or implied, article 115 applies and the starting point of the above period of limitation is the breach of contract. In this case the breach must naturally be after the forfeiture, i.e., on 24th March, 1954, and the claim was instituted by the bank three months later. Under article 115, therefore, this claim is well within time. Articles 29 to 40 of the articles of associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not "money due" or "owing". It is a well established proposition that payment of a time-barred debt is a valid consideration for transfer of property. Similarly, an agreement in writing undertaking to pay a time-barred debt is lawful and binding. Again, a creditor can adjust a payment made by a debtor who owes several debts, towards a debt which had become time-barred. Sir Shadi Lal, Chief Justice, held in Nur Din v. Allah Ditto, and Others [1932] ITR. 13 Lah. 817: "The rule of law is firmly established that a debt does not cease to be a debt because its recovery is barred by the Statute of Limitation". See also Jokhu Bhunja v. Sitla Bakhsh Singh AIR 1930 All. 416 , Mohesh Lal v. Busunt Kumaree [1881] ILR 6 Cal. 340, and Bhagwati Prasad v. Shiromani Sugar Mills, Limited [1949] 19 Comp. Cas. 286 . The next question, which may now be examined, is, whether the language of article 35 of the articles of association in any manner restricts the liability of a shareholder, on the forfeiture of his share, to debts, with respect of which the period of limitation had not run out. In other words, regarding time-barred debt, can it be said that the debtor is "liable to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 45 be treated as such special contract, the term "money owing" in the article denoted in its primary sense an existing debt, whether or not the right to recover the same was barred under the Indian Limitation Act, 1908. Beaumont C.J. observed at page 113: "In my opinion the terms 'money owing' or 'money due' in their primary sense denote an existing debt, whether or not the right to recover the same is barred under the Indian Limitation Act, though no doubt either expression may bear the secondary meaning of 'recoverable in law' if the context so requires. It has been held in England that a call is owing from the date when it is made, although it may be payable at a future date. It is of course well settled that under the Indian Limitation Act, as under the English Limitation Acts, a debt is not destroyed; only the remedy to recover it is barred. The case in the Privy Council on which the learned Judge relied was a case arising under section 186 of the Indian Companies Act. That section provides that the Court may at any time after making a winding up order make an order on any contributory for the time being settled on the list of contributories to pay in the manner directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 'money due' and 'money owing' in that article in the sense of money due or money owing whether recoverable or not. Mr. Khergamwala has strongly relied upon the expression 'liable to pay' in article 145, but that in my view is an expression which is ambiguous, and which may mean either legally liable or liable independently of any enforceable legal obligation. Seeing that the words are capable in my view of that double meaning, I see no reason why one should read into the expression in article 148 the word 'legally' before the word 'liable'. Taking the articles together, in my opinion, the expression 'money owing' means money owing although not enforceable by action." Mr. Awasthy has drawn my attention to two Division Bench decisions of this court reported in 'Firm Sahib Dayal Bakhshi Ram v. Assistant Custodian of Evacuee Property, Amritsar and Another AIR 1952 Pun. 389, and Firm Priteshah Sadashiv v. Assistant Custodian of Evacuee Property, Amritsar AIR 1953 Pun. 21 . They were decisions under section 48 of the Administration of Evacuee Property Act, 1950. It was held in those decisions that the Custodian had no power to decide the question whether the debt is or is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally recoverable" when referring to the sums claimed by the company from the shareholders on forfeiture. The interpretation put by Blackwell J. in the case of Indian Co-operative Navigation and Trading Co. v. Padamsey Premji [1934] 4 Comp. Cas. 110 commends itself to me, when he said with reference to the meaning of expressions "money due" and "money owing" occurring in article 42 of the articles of association, that he saw no reason why one should read into the expression in article 48 the word "legally" before the word "liable". The interpretation placed by the learned Judges of the Oudh Chief Court is strained and cannot be accepted in preference to the view expressed in the aforementioned Bombay decision. This matter was also examined by a Bench of the Allahabad High Court in Bhagwati Prashad v. Shiromani Sugar Mills Ltd. [1949] 19 Comp. Cas. 286 , where the facts were similar to the case before me. It was held : "We are satisfied that it was open to the company to validly forfeit the shares and that it could exercise its powers in respect of dues which were time barred." That decision also endorsed the principle, that in a case to which section 28 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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