TMI Blog1961 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of the liquidator's application of March 19, 1959. Shrimati Ram Khetri and S. Taranjit Singh were, however, held liable to pay to the bank a sum of Rs. 17,732-6-o as against Rs. 2,75,000 claimed by the official liquidator, the balance having been allowed to them as a set-off. The learned judge repelled the contention that the liquidator's claim was barred by time under article 112 of the Indian Limitation Act and also disallowed their prayer for giving them benefit of section 19(4) of the Displaced Persons (Debts Adjustment) Act. In the present appeal, it is only these two points which have been re-agitated before us. In so far as the question of limitation is concerned, it is not disputed that before going into liquidation, the company made a call on its shareholders which was payable on August 7, 1947. It is also clear that the petition for compulsory winding up of the company was presented on October 1, 1953. According to the appellants, the period of three years prescribed by article 112 had long since expired with the result that the appellants, as members of the company, could not be called upon to pay anything towards the unpaid amount of the call money. The learned liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cases cited, it would be desirable here to give some dates. The banking company in question is stated to have made a call of 50 per cent, of share money payable on or before August 7, 1947. On August 15, 1947, the country was partitioned and the banking company in question was brought to India. In July, 1948, this company was sought to be wound up voluntarily, but the legality of the proceedings for voluntary liquidation were successfully challenged in this court. The company judge, in December, 1950, upholding the attack, found the proceedings to be illegal and letters patent appeal against his decision was dismissed in August, 1953. Then started proceedings for official winding up in October, 1953, resulting in the winding up order of April 9,1954. During the course of winding up proceedings, the official liquidator took the requisite proceedings before the learned company judge, who passed an order in August, 1957, endorsing the list of contributories and directing that the entire unpaid amount of shares be called by the official liquidator. The official liquidator is said to have taken the necessary steps calling upon the contributories to pay the unpaid amount. This was fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Tek Chand J. in First National Bank Ltd. v. Seth Sant Lal [1958] 38 Comp. Cas. 402. That the mere fact of a debt having become barred by time does not by itself extinguish it also finds support from the language of section 25 of the Contract Act which says that a written promise signed by a person to be charged with a promise to pay wholly or in part a debt payment of which might have been enforced but for the law of limitation, is not considered void for want of consideration. This section clearly recognises that the liability of the debtor, in case of time barred debt, is not extinguished, though the debt may not be realizable by means of a suit on account of section 3 of the Indian Limitation Act. Recognition of the existence of the liability is also implicit in sections 60 and 61, Indian Contract Act. In the light of the foregoing discussion, I do not find it possible to uphold the contention that the liability of the appellant was extinguished on the expiry of the period of limitation for enforcing the call made by the company before liquidation. This conclusion, in my view, furnishes a complete answer to the appellant's contention. I have considered it inadvisable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Flour and Oil Mills Company Ltd. [1916] ILR 38 All. 347, and observed that it was a misconception to treat those two cases to be in conflict with each other. The Allahabad case was held by the Privy Council to have no relation to section 186, Indian Companies Act, whereas the Lahore case was concerned with the power of the companies contained in this section. In the case before us, we are concerned with sections 187 and 156 of the Companies Act and not with section 186. The Privy Council decision thus does not support the appellant's contention. The point canvassed before us is also the subject-matter of discussion in a bench decision of the Bombay High Court in Mahomed Akbar's case ( supra ). Chagla C.J., who prepared the judgment of the division bench, stated the position thus : "The next contention that is urged is that the plaintiff is realising a debt which is not a contractual debt but which has become a statutory debt and which he is entitled to recover and realise independently of section 159. It is perfectly true that on a winding up order being made the liability of a contributory to contribute to the assets of the company to the extent set out in section 156 becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is statutory liability that the court may make a call and ask him to pay the liability." A little lower down, the learned Chief Justice continued [1950] 20 Comp. Cas. 325, 329, 30 : "... an order under section 186 can only be made in respect of contractual debts due by the contributory to the company. Section 186 has no reference whatever to the statutory liability created by section 156. It is only those debts which a liquidator can realise by means of a suit that can be ordered to be paid by the court under section 186. As I said before, the liquidator, instead of having to institute a suit against a contributory, is allowed to come to court and obtain a pay order under section 156. Therefore, if the plaintiff's claim is barred by limitation in respect of a contractual debt due by the defendant he cannot obtain an order under section 186. The Privy Council laid this down in Hansraj Gupta v. Official Liquidators, Dehra Dun M.E.T. Co. [1933] 3 Comp. Cas. 207 ." And still lower down : "Mr. Seervai has tried to distinguish this case by stating that these observations only apply when the debt due by the contributory is other than a debt in respect of a call. Mr. Seervai' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the merits of the controversy on account of time bar. A plain reading of article 112 does not attract its applicability to the instant case. I must, therefore, repel the argument of time bar under this article. Whether article 120 or some other article should apply to this case does not call for determination, as on behalf of the appellant it has not been suggested that the present petition is otherwise barred under any other article of the Limitation Act. We are also not called upon, on the present occasion, to express any well-considered opinion whether or not the liquidator can by himself, by a suit, enforce payment of calls made by the company prior to the commencement of winding up proceedings after the expiry of three years, as provided by article 112. This point undoubtedly arose in Mahomed Akbar's case ( supra ), but it is unnecessary to say anything on this precise point in the case in hand. It is enough for our present purpose to state that I agree with the line of reasoning adopted by Chagla C.J. with respect to the scope and effect of sections 156, 186 and 187, Indian Companies Act. Beyond this, I need not go. One more argument remains to be noticed. It is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (6) from section 19 altogether. This sub-section seems to mean that where an action has been taken or omitted under section 19, for example when a displaced person's partly paid up shares have been converted into smaller number of fully paid up shares or interest has not been charged from him in pursuance of this section, then, by virtue of the exception contained in sub-section (6), even after the expiry of the period of ten years, as respects the conversion of shares and the omission to charge interest, the section would not cease to have effect. Omission on the part of the appellant to avail of the benefit of section 19 during the ten years of its life is not the omission contemplated by the exception, for that would make the limit of ten years contained in this section wholly meaningless and inoperative. The construction sought to be placed by the appellant's counsel is, in my opinion, justified neither by any sound reason or principle nor on the plain meaning of the sub-section in question. The appellant's counsel has emphasised that his client could not with certainty know whether the present case was covered by section 19, and this uncertainty, according to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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