MAHOMED AKBAR ABDULLA FAZALBHOY Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THIS is an appeal from an order of Tendolkar J. dismissing a summons taken out by the appellant. The summons was for altering the list "a" of contributories by excluding the name of the applicant therefrom in respect of 876 shares of the A. B. C. company and by substituting therein for the name of the applicant-appellant the name of Casamalli Munjee in respect of 676 shares and the name of Dr. Jivraj N. Mehta in respect of 200 shares and also for altering the list "b" of the contributories of the company by excluding the name of the appellant in respect of 15 shares of the company shown therein and by substituting therein for the name of the appellant the name of Gasamalli Munjee.

(2.) THE appellant was a director of the Associated Banking Corporation, Ltd. , which is now in liquidation, and he applied for and was allotted 1000 shares of the company on 18th August 1942. He had one more share, being the signatory to the memorandum of association and that share was given to him in that capacity. THE case of the appellant was that he only needed 500 shares as the qualifying shares for being a director of the company, and with regard to the other 500 he had applied for them at the request of Casamalli Munjee who was the chairman of the board of directors, and as soon as he got these 500 shares he executed the necessary blank transfer forms in respect of these 500 shares and he gave them to Casamalli Munjee in the presence of the secretary of the company Mr. M. G. Jhavery. With regard to the 501 shares, the case of the appellant was that he sold these shares in August 1945 and he was paid in respect of the same Rs. 18,386-8-0. This amount was received on 20th August 1945. THE amount was paid to him by Casamalli Munjee. When ho sold the shares he executed the necessary blank transfer forms. He then received dividends in respect of 891 shares for the year ended 30th June 1945. He then found out from an officer of the bank that 301 shares had been retained by Casamalli Munjee and 200 shares out of the 501 had been sold to Dr. Jivraj Mehta. THE appellant thereupon sent a cheque in respect of the 200 shares to Dr. Jivraj Mehta and a cheque in respect of 301 shares to Casamalli Munjee. Dr. Jivraj Mehta wanted the necessary certificate for income-tax refund and thereupon on 13th August 1946, the appellant asked the bank to split up the certificate which he had received in respect of 891 shares into three certificates, for 200, 301 and 390 shares. That was done by the bank on 17th August 1946, and the appellant sent one certificate in respect of 200 shares to Dr. Jivraj Mehta and another certificate for 301 shares to Casamalli Munjee.

(3.) TURNING to the law on the subject, when we look at the Indian Companies Act, Under Section 184, power is given to the Court as soon as may be after making a winding up-order to settle the list of contributories and the power is also given to rectify the register of members. But that power is limited to those cases where rectification is required in pursuance of this Act, and the only section which empowers the Court to rectify the register of members is Section 38.That section provides for two cases in which the rectification of the register may be made and those two cases are: (a) where the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members of the company; or (b) where default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member. It is perfectly clear that if there is no rectification of the register, then the liability of a member of the company in the event of its being wound up arises Under Section 156. That liability is not ex contractu but ex lege. It is by reason of the fact that the name of a certain person appears on the register of a company that he becomes liable as a contributory. The Privy Council in Hansraj Gupta v. N. P. Asthana,, 35 Bom. L. R. 312 : (A. I. R. (19) 1932 P. C. 240) have emphasised this position. In that case the executors were contending that the contract on the part of the testator to take certain shares was void and therefore the executors were under no liability in respect of these shares and therefore they applied to have their names removed from the list of contributories. The Privy Council assumed for the purposes of the judgment that the contract was void. But even so, they expressed the opinion that the liability of the testator and ultimately of the executors Under Section 156 in respect of the shares was absolute and flowed from the fact of his being on the register in respect of these shares. The original contract might supply the reason for his name having been placed on the register in respect of the shares, but after the winding up his liability in respect of the shares arose ex lege and not ex contractu. Therefore what we have really to consider in this appeal is whether the appellant has made out a case for the rectification of the register. If the register could not be rectified and if the appellant is not entitled to have the rectification of the register, then his name as a contributory has been rightly put in the list of contributories. Without the rectification he is a member of the company and as such his liability is absolute Under Section 156.