K.M.A. LTD Vs. K.S. THAILAMBAL

JUDGEMENT

(1.) THIS appeal raises an interesting question regarding adjustments permitted in winding up in respect of dividends under the provisions of the Companies Act, 1956.

(2.) THE respondent No. 3, the Official Liquidator of Kamani Brothers Pvt. Ltd. (in liquidation), took out a Judge's Summons by way of Company Application No. 122 of 1983 praying mainly that the appellants (Kamani Metals and Alloys Ltd.), who were the respondents to the Judge's Summons should be ordered and decreed to pay to the Official Liquidator the sum of Rs. 8,40,147/ - together with interest as set out in prayer (a) of the Judge's Summons as well as further dividends as set out in prayer (b) of the Judge's Summons. The contributories who were appearing before us had appeared before the learned Trial Judge also at the hearing of the Judge's Summons. The appeal is directed against the order of Mehta, J. making the said Judge's Summons absolute and directing Kamani Metals and Alloys Ltd. to pay to the respondent No. 3, a sum of Rs. 8,40,147/ - with interest as claimed in the Judge's Summons as well as to pay to him further dividends as and when declared, For the sake of convenience, we propose to refer to the appellants, Kamani Metals and Alloys Ltd. as 'Kamani Metals' and to Kamani Brothers Pvt. Ltd. which is in liquidation as 'Kamani Brothers'.

(3.) THE submission of Mr. Chagla, learned Counsel for the appellants, Kamani Metals, is that it is settled law that a set -off can be claimed in respect of a claim for unliquidated damages for breach of contract. It was pointed out by him that when the set -off was actually claimed by Kamani Metals, the aforesaid dividends had become payable. It was submitted by him that, although the dividends became payable after the order of winding -up was made, the claim of Kamani Brothers to the dividends arose out of an obligation which existed earlier. That obligation arose from the ownership of shares of Kamani Metals by Kamani Brothers. It was urged by him that the aforesaid articles of association of Kamani Metals constituted a contract between the share -holders of that company and the company itself, and that on the purchase of the shares of Kamani Metals by Kamani Brothers and on the name of Kamani Brothers being entered in the register of share -holders of Kamani Metals as holders of those shares, the liability or obligation arose on the part of Kamani Metals to pay to Kamani Brothers a dividend on these shares when dividend was declared.