Link Industries Limited, In Re v. . — 1956 DIGILAW 376 (MAD)

Judgment :- BALAKRISHNA AYYAR J. The Link Industries Ltd., a public limited company incorporated in 1946, was ordered to be wound up on 8th February, 1956. In 1947, however, it was a going concern. On 13th August, 1947, the company issued 50, 000 shares of the nominal value of Rs. 10 each, and Ramanathan Chettiar, the applicant herein, took up 36, 555 shares on each of which he paid Rs. 5. At this time the Link Industries Ltd. was being managed by another limited liability company called Factors Ltd. of which A. C. K. Krishnaswami was managing director. The case of the applicant is - here I quote from Exhibit P. 1, the letter which the applicant wrote to A. C. K. Krishnaswami on 15th April, 1949 - that at the time he took up these shares, "it was expressly understood and agreed to that in the event of my taking the bulk of the shares of account of the non-subscription from the public, the shares will be Rs. 5 paid up only till such time as I am able to unload the 3/4 of my holding in the market at a little profit. The other day when you were kind enough to call on me the subject came up for discussion and I told you about the position." * This letter, it may be explained, was written by Ramanathan Chettiar to Krishnaswami in view of a notice dated 12th April, 1949, calling for a meeting of the Board of Directors to consider among other things, "the question of making a second call of Rs. 2-8-0 on the 50, 000 partly paid up shares." On 18th April, 1949, Krishnaswami replied to Ramanathan Chettiar by Exhibit P. 3, in which he stated : "The subject has been included in the agenda only for consideration. I hope to meet you here before the meeting and if you insist after discussing with me, I shall withdraw the subject from the agenda." * On 21st April 1949, the applicant wrote to Krishnaswami, (Exhibit P. 4) expressing his inability to attend the meeting and asking that this subject be deleted from the agenda. Exhibit P. 5, an extract from the proceedings of the meeting of the Board of Directors of the Link Industries held on 23rd April, 1949, reads as follows : "To consider the question of making a second call of Rs. Exhibit P. 5, an extract from the proceedings of the meeting of the Board of Directors of the Link Industries held on 23rd April, 1949, reads as follows : "To consider the question of making a second call of Rs. 2-8-0 on the 50, 000 partly paid up shares - Deferred for the present." On 27th July, 1949, the Link Industries Ltd. executed a mortgage, Exhibit P. 10, in favour of the Industrial Finance Corporation of India in order to secure an advance of Rs. 5, 00, 000. To the significance of some of the terms of document I shall refer later. But, at this stage, it is sufficient to say that it purports to be an English mortgage, and, "assigns unto the Corporation all the right of the company to receive the balance of Rs. 5 (Rs. five) per share remaining uncalled upon the said shares that have been issued by the company when the same shall be called up either by the directors in the exercise of their powers or by any liquidator of the company in the event of the same being wound up." * Sometime after this document was executed (the exact date was not mentioned to me) the managing agency was transferred to a new firm called Goenka and Khaitan. On 29th April, 1953, Khaitan wrote to the applicant as follows : "In accordance with the resolution of the Board of Directors dated the 15th April, 1953, we hereby give you notice that the balance of Rs. 5 payable on above shares is being called up in the manner given below : First call of Rs. 2-8-0 to be paid on or before the 31st May, 1953; and the second and final call of Rs. 2-8-0 to be paid on or before the 30th June, 1953.lease remit the amount payable by you, i.e., Rs. 1, 82, 755 (Rs. one lakh, eighty-two thousand, seven hundred and fifty-five only) respect of 36, 555 (thirty-six thousand five hundred and fifty- five only) shares held by you cheque or demand draft payable in Madras or by cash." It appears from Exhibit P. 7 that the applicant had a discussion on the subject with the new managing agents and that they agreed to cancel the notice of call which had been issued and take up the question two years later. On 27th May, 1953, the applicant wrote Exhibit P. 8 to the new managing agents informing them that in view of Exhibit P. 7 he was not making any payment. However, on 1st February, 1954, the company wrote Exhibit P. 9 to the applicant drawing his attention to the notice Exhibit P. 6 which had been issued on 29th April, 1953, and informing him that under the terms of the mortgage deed executed in favour of the Industrial Finance Corporation, the corporation had a charge on the unpaid money and that the corporation had written on 30th January, 1954, calling upon the company to take all steps to recover all moneys from the shareholders. After stating that the sum due from the applicant was Rs. 1, 82, 775 he was called upon to make immediate arrangements for the payment of this money together with interest at six per cent. On 24/25th April, 1953, the Industrial Finance Corporation of India wrote to the Link Industries Ltd. drawing their attention to certain clauses of the deed of mortgage and asking them to "open a separate account with your bankers in the joint name of the company and the corporation and deposit all call money in that account. The joint account will be operated by the Madras manager of the corporation on behalf of the corporation." * As already stated, the order to wind up the company was made on 8th February, 1956. On 29th June, 1956, the corporation wrote Exhibit P. 14 to the Official Liquidator informing him that "we have an English mortgage over all the freehold land, buildings, engines, plant, machinery.....and all other assets and uncalled capital of the company for the total amount due to us............and particularly under clauses (a)(xii) and (xiii) of the said deed, the right of the company to receive the balance of Rs. 5 per share remaining uncalled upon the shares of the company that have been issued, has been assigned in our favour.We are a secured creditor of the company and are staying out of the winding up. In view of the terms of the mortgage deed mentioned above, we are exclusively entitled to the calls in arrears due from the contributories and hence request you to please pay to us all the amount of the calls in arrears that you recover from the contributories. In view of the terms of the mortgage deed mentioned above, we are exclusively entitled to the calls in arrears due from the contributories and hence request you to please pay to us all the amount of the calls in arrears that you recover from the contributories. We thank you in anticipation and assure you of our best co-operation in this behalf." On 14th June, 1956, that is to say, some 15 days before the date of Exhibit P. 14 the Official Liquidator had passed an order settling and confirming the list of contributories that he had prepared and overruling the objection of Ramanathan Chettiar, the applicant. In paragraph 6 of his order he observed : "In the circumstances, I hold that A. C. K. Krishnaswami, the managing director of the company, did not give any undertaking to treat the 36, 555 shares held by Ramanathan Chettiar as fully paid up, and, at any rate, there cannot be such an undertaking given by him for the shares were issued only as partly paid up. Further the managing director has no power to give such undertaking and even if any such undertaking was given it cannot bind the company. There was also no denial of liability on the part of AR. RM. Ramanathan Chettiar to pay the unpaid share capital. He is, therefore, liable to pay to sum of Rs. 1, 82, 775 the unpaid share capital in respect of these partly paid shares. His name will, therefore, be included in the final list of contributories according to the provisional list." * The present application has been taken out by Ramanathan Chettiar for removing his name from the list of contributories as settled by the Official Liquidator. Mr. Thyagarajan, the learned advocate for the applicant, raised in the main three points. The first was that when Ramanathan Chettiar took up the shares he was given the most explicit assurance that he would be called upon to pay the balance of the money on those shares till he was able to sell about 3/4 of his holdings in the market, and, that the Official Liquidator is bound by those assurances. The first was that when Ramanathan Chettiar took up the shares he was given the most explicit assurance that he would be called upon to pay the balance of the money on those shares till he was able to sell about 3/4 of his holdings in the market, and, that the Official Liquidator is bound by those assurances. He also remarked that the Industrial Finance Corporation had also notice of this fact because in paragraph 2 of Exhibit P. 1, a letter written by the managing agents of the Link Industries Ltd., to the Industrial Finance corporation, it is stated : "When we requested the corporation to help us with finance, we had already tried to float an issue of shares in the market and had not met with success. As you are aware the issue had to be taken up by some of our directors, and they could do so then only if we agreed not to make the shares fully paid up." * The probabilities of the matter are that A. C. K. Krishnaswami did give some assurance of the kind which the applicant pleads, but in view of the conclusion I have reached on the other parts of Mr. Thyagarajan's arguments it is unnecessary for me to decide how far this assurance is binding on the company or the liquidator or the Industrial Finance Corporation. The second contention of Mr. Thyagarajan was this. In the present case what the Official Liquidator is seeking to do is to recover from the applicant the money which has been called up by the directors. He purports to act under section 186 of the Indian Companies Act, VII of 1913. But section 186 explicitly excludes "any money payable by him (contributory) for the time being settled on the list of contributories or the estate by virtue of any call in pursuance of this Act." Under this section the only moneys that can be collected from a member are the debts due from him excluding call moneys. So far as call moneys are concerned, once a winding up has supervened, the procedure prescribed by section 187 must be followed. So far as call moneys are concerned, once a winding up has supervened, the procedure prescribed by section 187 must be followed. Under that section the court is given power to make a call when it considers that it is necessary to do so in order to satisfy the debts and liabilities of the company and expenses of the winding up and for adjusting the rights of the contributories among themselves. To support his argument Mr. Thyagarajan relied in the main on the language of the statute itself which runs as follows : "Section 186(1). 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 manner directed by the order, any money due from him or from the estate of the person whom he represents to the company exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act." * He emphasised the words that have been underlined and explained that they exclude moneys payable by virtue of calls made under the Act. He then referred to the decision of the Privy Council in Hansraj Gupta v. Official Liquidators of Dehra Dun etc. Co. At page 215 their Lordships observed as follows : "Now, in considering the meaning and effect of section 186 it is impossible to overlook the fact that it is verbatim identical with the corresponding section in the legislation of this country, a section which dates back some 70 years to 1862, and which has appeared in our company legislation ever since. It is therefore a section with an ancestral history. Three features of the section call for notice : (1) It is concerned only with moneys due from a contributory, other than money payable by virtue of a call in pursuance of the Act. A debtor who is not a contributory is untouched by it. Moneys due from him are recoverable only by suit in the company's name. (2) It is a section which creates a special procedure for obtaining payment of moneys; it is not a section which purports to create a foundation upon which to base a claim for payment. It creates no new rights. (3) The power of the court to order payment is discretionary. (2) It is a section which creates a special procedure for obtaining payment of moneys; it is not a section which purports to create a foundation upon which to base a claim for payment. It creates no new rights. (3) The power of the court to order payment is discretionary. It may refuse to act under the section, leaving the liquidator to sue in the name of the company and it will readily take that course in any case in which it is made apparent that the respondent under this procedure, if continued, would be deprived of some defence or answer open to him in a suit for the same moneys".It will be noticed that in this elucidation of the section their Lordships say that the money recoverable must be moneys other than those payable by virtue of a call in pursuance of this Act. The reply of the official liquidator to this objection of Mr. Thyagarajan may be summarised more or less in this way. When before the winding up supervenes the directors of a company make a call on unpaid capital it is a call made by virtue of the articles of association of the company, and not a call made in pursuance of the Act; and so, it is not covered by the words of exclusion appearing at the end of sub-section (1) of section 186. Moneys payable in pursuance of such a call are contractual debts and all contractual debts due from a contributory are recoverable under section 186 of the Act. On a proper construction of sections 186 and 187, it must be held that all that is excluded by the last words of section 186(1) are moneys payable by virtue of a call made under section 187 of the Act. To hold otherwise would produce this anomaly; a member who paid up promptly would be placed in a more unfavourable position than a recalcitrant member who refused to honour his obligations and pay up. The member in default may be able to plead limitation when proceeded against by way of a suit or he may be able to say when proceeded against under section 187 that there is no need to make a call. I see several difficulties in this reasoning of the learned official liquidator. The member in default may be able to plead limitation when proceeded against by way of a suit or he may be able to say when proceeded against under section 187 that there is no need to make a call. I see several difficulties in this reasoning of the learned official liquidator. The articles of association of a company are binding on members not because they have signed those articles - in fact members may not have even seen them - but by virtue of section 21 of the Act, the first sub-section of which runs as follows : "21(1) The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member, and contained a covenant on the part of each member, his heirs, and legal representatives, to observe all the provisions of the memorandum and of the articles, subject to the provisions of this Act." * Sub-section (2) explicitly enacts : "All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company." To say, as the official liquidator appeared to do, that something done under the articles is not a thing done in pursuance of the Act is analogous to saying that what hangs from a bough does not hang from the tree. The liability to pay the unpaid part of the share capital is created by the Act itself. Only this : the time and stage of the call and the quantum of the call are left to be decided by the directors when the company is going and by the court when the company is being wound up. It is no doubt true that when a call has been made by the directors the liability to pay has been held to be a contractual debt to recover which an action can be brought. But for that reason it does not cease to be money payable by virtue of a call made under the Act. It is no doubt true that when a call has been made by the directors the liability to pay has been held to be a contractual debt to recover which an action can be brought. But for that reason it does not cease to be money payable by virtue of a call made under the Act. If a shareholder who is called upon to pay what the official liquidator described as a contractual debt were to enquire why he is bound to pay, the only answer that can be given to him is, that he is a member of the company, that a call has been made and that it is a call which the directors have a right to make under the Act. The anomaly indicated by the official liquidator is more apparent than real. Of course, in some instances the law of limitation favours the elusive debtor. If he can dodge and evade payment till limitation has actually set in and barred the remedy against him he would be better off than if he had paid when payment fell due. Section 186(1) does not create any special anomaly so far as that aspect of the matter is concerned. Besides, money cannot be recovered under section 186 of the Act when an action for it would be barred. It must be further borne in mind that even though a right of suit against a defaulting contributory on whom a call has been made by the directors has become time-barred, his statutory liability is not extinguished and can in proper cases be enforced under section 187 of the Act. It is no doubt true that under that section the court has to be satisfied that it is necessary to make a call. But then, one is entitled to proceed on the assumption that ordinarily the court would act in a reasonable and just manner. It will not therefore refuse to exercise its power in a proper case, and, under section 187(1) the court has power to enforce the reserve liability of a shareholder by ordering him to make payments for the adjustment of the rights of the contributories among themselves. It will not therefore refuse to exercise its power in a proper case, and, under section 187(1) the court has power to enforce the reserve liability of a shareholder by ordering him to make payments for the adjustment of the rights of the contributories among themselves. If it finds that some contributories have paid more and others have paid less than they should properly have done, the court has power to require those who have paid less to pay more so as to make the burden on all equal. The section is wide enough to enable a court to issue a direction even to a single contributory. The apprehension voiced by the official liquidator that the contention of Mr. Thyagarajan would lead to anomalies appears to me to be groundless.I shall now examine some of the decisions which the learned official liquidator cited. Jagannath Prasad v. U.P. Flour and Oil Mills Co. Ltd. ( 1916 (38) ILR(All) 347, is a case decided under the Companies Act of 1882. The facts there were as follows : The U.P. Flour and Oil Mills Co. was started in 1904 with 2, 000 shares of Rs. 50 each. Jagannath Prasad applied for and was allotted 25 shares and he paid Rs. 10 per share. Subsequently the company made further calls for the balance of the share money which he did not pay. Suits for the recovery of the unpaid calls had become barred some time before 1913. In 1913 the company was ordered to be wound up on a creditor's application and a liquidator was duly appointed. A list of contributories was prepared and the name of Jagannath Prasad was entered in that list without any objection on his part and the amount of his liability was stated there to be Rs. 1, 000. When called upon by the court at the instance of the liquidator to pay that sum into court Jagannath Prasad raised, inter alia, an objection that the claim was time barred. The District Judge overruled the objection. Jagannath Prasad appealed to the High Court and the appeal was dismissed. At first sight this decision would seem to support the contention of the official liquidator. The District Judge overruled the objection. Jagannath Prasad appealed to the High Court and the appeal was dismissed. At first sight this decision would seem to support the contention of the official liquidator. But, when we read through the decision it will be seen that what the learned Judges enforced on Jagannath Prasad was his liability to pay under section 151 of the Act which corresponds to section 187 of the Act of 1913. It has been held that a claim for the recovery of which a suit is barred cannot be collected under section 186 of the Indian Companies Act. The learned Judges in the Allahabad case could not, therefore, have intended to make an order for payment under section 150 of the Act of 1882 which corresponds to section 186 of the Act of 1913. Actually they seem to have rested their decision on section 151, and, if that is so, this decision will not help the official liquidator at all. I quote the relevant passage : "But the Act says that for the purpose of recovery the amount shall be deemed to be a debt payable at the time or respective times when calls are made, the section 151 gives a court power to make calls from persons on the list of contributories for the amount for which they are shown as liable in the list prepared by the liquidator; so that really it is not even the right of a company which is being enforced by a liquidator. It is a statutory right of the creditors of a company to enforce against the contributories of an insolvent company through the court the obligation which the shareholders took upon themselves when they originally subscribed in the event of insolvency subsequently overtaking the company." * (page 350) The passage in Hansraj Gupta v. Official Liquidator of Dehra Dun etc. Co. which explains section 186 of the Companies Act has already been quoted. When the facts of that case are examined it will be found that no question arose there of requiring a contributory to pay a call under the Act. Co. which explains section 186 of the Companies Act has already been quoted. When the facts of that case are examined it will be found that no question arose there of requiring a contributory to pay a call under the Act. The suit was for a debt due from a member to the company and what the Privy Council decided was this : "The court has not power under section 186(1) of the Indian Companies Act, 1913, to order a contributory in a winding up to pay a debt the recovery of which by a suit in the name of the company would have been barred by limitation had it been instituted at the date of the application to the court. In these circumstances the debt is not 'money due' within the meaning of the section; the section leaves open every defence which would have been open in a suit by the company." * J. C. Chandiok v. Pearey Lal 1942 ILR(All) 26, is a case directly in point and supports the view of the official liquidator. That was a case in which a company falling under the definition of a provident society in section 65 of the Insurance Act, went into voluntary liquidation and the liquidator appointed by the superintendent of insurance sought to collect calls which has been made by the directors but which remained unpaid. Some of the respondents raised the point that it was unnecessary to make a call. On page 33 the learned Judge observed : "They all raise the same point, which I understand to be this. They say that, if the matter be inquired into, it will be found that the liquidator has no occasion to levy these sums from them because, to put it shortly, he has over-estimated the liabilities of the company. To my mind, that is a wholly irrelevant argument as far as this application is concerned. A call, once it has been validly made by the directors prior to liquidation and once the date for its payment has passed, becomes a debt due from the shareholder to the company and is indistinguishable from any other debt. When subsequently the company goes into liquidation, that debt, or those debts, become assets of the company which have to be realised by the liquidator. When subsequently the company goes into liquidation, that debt, or those debts, become assets of the company which have to be realised by the liquidator. They have lost their character as calls and have become debts and, as such, are realisable by the liquidator just as any other debt or asset is realised. This court is not in the least concerned with what he wants it for and, in my view, this court has not even any jurisdiction to ask the liquidator what he wants it for and still less to withhold the payment of it from him. When, of course, a liquidator comes to the court under section 187 and asks for leave to make a call after the liquidation has intervened, the position is quite different. There the court has jurisdiction and indeed it is the very object of its being brought to the court at all to consider whether the liquidator really needs the money he says he needs it or not. In that case the liquidator is making a call himself and that is a step in the liquidation over which the court has control." * Now, this is a decision of a single Judge, and, with great respect, I have some difficulty in seeing how when a call is made by the directors and the money payable in pursuance thereof remains unpaid it loses its character as money payable under a call. A call can be made either before a company is ordered to be wound up or after. The only provision under which a call can be made after a winding up is ordered is section 187. All other calls must be made by the directors and if they become debts merely by reason of the fact that a call has been made I would expect section 186(1) to end with these words :"exclusive of any money payable by him or the estate by virtue of any call in pursuance of section 187 of this Act." The reserve liability of a shareholder is a statutory liability and how it loses that character merely because an unsuccessful attempt has been made to enforce it, is not quite easy to see. By describing it as a debt we cannot eliminate the fact that it is payable in pursuance of the call. By describing it as a debt we cannot eliminate the fact that it is payable in pursuance of the call. Besides it is not a debt for all purposes in that for instance there cannot be a set-off. The official liquidator referred to Mohamed Akbar v. Associated Banking Corporation of India The facts of that case were as follows : The defendant was the holder of 876 shares of the company. On 24th July, 1945, the directors of the company made a call of Rs. 25 on the shares, payable in two instalments. The first was payable on 5th September, 1945, and the second on 2nd December, 1945. In spite of notices issued the defendant failed to pay either instalment in respect of 375 shares. A provisional liquidator was appointed on 11th April, 1947, and a winding up order was made on 1st October, 1947. On 9th July, 1948, the liquidator made a demand upon the defendant to pay the amount of the unpaid call. On 9th August, 1948, the defendant took out a chamber summons for rectification of the list of contributories alleging that he was not a contributory in respect of 375 shares. That summons was dismissed on 17th September, 1948. The defendant appealed and the appeal was also dismissed. On 10th December, 1948, the liquidator filed a suit for recovering the amount of the unpaid calls. As it was originally instituted it was a simple suit for recovering the debt due from the defendant to the company in respect of the unpaid calls. It was immediately realised that the suit was liable to be dismissed by reason of the statute of limitation. Thereupon an amendment was applied for and the application was granted whereby the plaint was amended. Paragraph 9-A of the plaint set out the amended cause of action as being that on the winding up order being made the liability of the defendant to pay the amount of the calls became a statutory liability and such statutory liability was not barred by the law of limitation. No call had been made by the court on any of the contributories under section 187. It was held that the suit filed by the liquidator, if looked upon as a suit to recover a contractual debt, was barred by limitation. No call had been made by the court on any of the contributories under section 187. It was held that the suit filed by the liquidator, if looked upon as a suit to recover a contractual debt, was barred by limitation. If looked upon as a suit to realise a statutory debt created by section 156, then the suit was not maintainable because no call in respect of that liability was made by the court, and, in the absence of any such call the statutory liability could not be realised by the liquidator. !! There is nothing in this judgment to support the view that a call made by a company and remaining unpaid on the date of the winding up can be recovered under section 186 of the Act. The last case which I need examine is reported in In re Whitehouse and Co. 1878 (9) Ch 595) The headnote to that case is as follows : "Where a limited company is in voluntary liquidation, a contributory cannot set off a debt due to him from the company against calls made against him either by the company before or by the liquidator after the resolution to wind up." * On examination this case does not seem to support the official liquidator. On the contrary, it contains observations which are against him. The learned Judge, after quoting section 38 of the old English Act which imposes on every past and present member of a company the liability to contribute to the assets of the company an amount sufficient for payment of the debts and liabilities of the company, proceeds : "That is a new liability; he is to contribute; it is a new contribution. It is a mistake to call that a debt due to the company. It is no such thing. It is not, as has been supposed, in any shape or way a debt due to the company, but it is a liability to contribute to the assets of the company; and when we look further into the Act, it will be seen that it is a liability to contribution to be enforced by the liquidator. It is not, as has been supposed, in any shape or way a debt due to the company, but it is a liability to contribute to the assets of the company; and when we look further into the Act, it will be seen that it is a liability to contribution to be enforced by the liquidator. It is quite true that a call made before the winding up - and in this case before me a call was made before the winding up - is a debt due to the company, but that does not affect this new liability to contribution. But there are certain limits to the liability........... Now, first of all, as regards the calls made in the winding up, they being calls for something unpaid on the shares, that is a contribution due by the member under the Act, and is not a debt due to the company. The contribution also under this section applies to the unpaid calls made before the winding up; because, though that is a debt due to the company, it is not the less an amount unpaid on the shares in respect of which he is liable, and therefore he must be liable to contribute all that is unpaid on his shares. As I said before, it is as much unpaid if he had not paid the calls made before the winding up, as it is in respect of the amount unpaid on the shares in respect of which no call has been made before the winding up. It seems to me that the contributories' liability created by the 38th section being only limited to the amount unpaid, it is immaterial, for the purpose of this section, whether the call was made before or after the winding up, provided the amount is unpaid. That being so, it is a liability to contribute which, in the case of an ordinary winding up, is of course enforceable by the court; but so it is in a voluntary winding up." * The observations on page 541 in Buckley on the Companies Act, 12th Edn., made on this case may be quoted : "And, premising this, the judgment in Re Whitehouse and Co. 1878 (9) Ch 595), renders the true construction of this section a matter of much less difficulty. 1878 (9) Ch 595), renders the true construction of this section a matter of much less difficulty. The bases of that judgment are (1) that contributions under section 212 of this Act are not debts to the company, but contributions to the assets enforceable by the liquidator; (2) that such contributions include all that is unpaid on shares at the commencement of the winding up, including, therefore, calls made before, as well as made in the winding up; and (3) that this being so, there is no set-off under the statutes of set-off because it is the liquidator who enforces the calls, while it is not the liquidator but the company that owes the debt, and therefore to establish a set-off the person asserting it must find in the Companies Acts some provision giving a right of set-off." * On this point I am inclined to agree with Mr. Thyagarajan. Section 186(1), in plain terms, says that an order may be made in respect of any amount due from a contributory "exclusive of any money payable by him or the estates by virtue of any call in pursuance of this Act." I find it difficult to say that a call made by the directors of a company is not a call made in pursuance of the Act. To get the result which the official liquidator wants, the words and figures "of section 187" must be inserted before the last three words of that sub-section. The next objection of Mr. Thyagarajan was this. The right to enforce the reserve liability of a shareholder is an actionable claim. By clauses (a)(xii) and (xiii) of the deed of mortgage, Exhibit P. 10, there has been a complete assignment of these rights in favour of the Industrial Finance Corporation. In consequence it is only the corporation that can now seek to recover the money. The official liquidator has no locus standi in this regard. Before he can proceed he must obtain a re-assignment from the mortgagee. Mr. In consequence it is only the corporation that can now seek to recover the money. The official liquidator has no locus standi in this regard. Before he can proceed he must obtain a re-assignment from the mortgagee. Mr. Thyagarajan referred to sub-section (1) of section 130 of the Transfer of Property Act which provides that the transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing and that upon the execution of the instrument "all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee..........." He remarked that all the rights of the company in respect of unpaid capital having vested in the Industrial Finance Corporation it is only that body which can seek to recover the money.He then referred to the decision of the Privy Council in Mulraj Khatau v. Viswanath Prabhuram Vaidya 1913 (37) Bom 198). The appellant and the respondent in that case were rival claimants to the proceeds of a policy of life insurance which had been paid into court by the insurance company. The appellant relied on an assignment by the debtor of the policy by an instrument in writing, and the respondent based his claim on a deposit of the policy with him by the debtor unaccompanied by any written instrument. On page 209, after referring to section 130(1) of the Transfer of Property Act, 1882, their Lordships observed : "It is admitted that the right to the moneys becoming due under the policy is an actionable claim. Their Lordships are also of opinion that the section covers transfers by way of security as well as absolute transfers. If any doubt existed on either these two points it would be set at rest by the second illustration to the section which is given in the Act." * Muthukrishnier v. Veeraraghavier 1915 (38) Mad 297) was a case in which there was a mortgage in writing of a promissory note. It was held that the right of the promisee to sue on the note became vested in the mortgagee, and the mortgagee alone was entitled to sue. In Santuram Hari v. Trust of India Assurance Co. It was held that the right of the promisee to sue on the note became vested in the mortgagee, and the mortgagee alone was entitled to sue. In Santuram Hari v. Trust of India Assurance Co. 1945 AIR(Bom) 11, 13), Chagla J. has stated : I, therefore, hold that on the execution of the transfer of an actionable claim all the rights and remedies of the transferor vest in the transferee and the transferee alone is entitled to enforce the remedy; there is no interest left in the transferor which would entitle him to maintain a suit in respect of the actionable debt." The official liquidator sought to surmount the difficulty raised by Mr. Thyagarajan by pointing out that though the mortgage is an English mortgage, it does not totally divest the company of all legal interests in the property mortgaged, and referred to Ram Kinker Banerjee v. Satyacharan Srimani (1939 1 N.L.J. 544).It is no doubt true that by executing what is called an English mortgage the mortgagor does not divest himself of all legal interest in the property; but from this it does not follow that he is entitled to get the property into his hands or even to sue for it. The official liquidator next stated that under Exhibit P. 14, the Industrial Finance Corporation has constituted him its agent and authorised him to collect the money. I find it difficult to discover in Exhibit P. 14 words conferring on the official liquidator the requisite authority. In the first sentence of the letter the Corporation merely states that it has learnt that the official liquidator was taking steps to realise the calls in arrears. Then it goes on to explain that it holds an English mortgage over all the assets of the company including its uncalled capital. It next says that it is a secured creditor and requests the liquidator to pay all the amount of the calls in arrears that he might recover. And the letter ends with the customary formula : "We thank you in anticipation and assure you of our best co-operation in this behalf." There are no words in Exhibit P. 14 conferring any authority on the liquidator; the letter proceeds on the assumption that the liquidator has in himself the requisite power to collect the money. And the letter ends with the customary formula : "We thank you in anticipation and assure you of our best co-operation in this behalf." There are no words in Exhibit P. 14 conferring any authority on the liquidator; the letter proceeds on the assumption that the liquidator has in himself the requisite power to collect the money. He is reminded of the rights of the Corporation and requested to pay into its coffers whatever moneys he may realise. Proceeding for a moment on the assumption that the Corporation intended to constitute the liquidator their agent, still I do not see how the liquidator can proceed under section 186 of the Act. In so far as the liquidator is the agent of the Corporation he can have no larger rights than the Corporation itself and the only way in which the Corporation can recover the money is by appropriate proceedings based on the mortgage it holds. But, this is not what the liquidator seeks to do. He does not purport to take his stand on the mortgage; what he seeks to do is to exercise his powers as liquidator without seeking to act as the agent of the Corporation. This, it seems to me, he cannot do. If the Corporation has properly constituted him the agent - I do not think it has - then he must proceed on the mortgage. If it has not, then he must proceed as a liquidator, pure and simple.There is another important fact. In Exhibit P. 14, the Corporation has explicitly stated that it had decided to stand outside the winding up which of course it is entitled to. See M. K. Ranganathan v. Government of Madras But how when standing outside the winding up the Corporation can obtain the remedies available in a winding up, it is difficult to see. I must uphold also this objection of Mr. Thyagarajan. In the result, this application is allowed with costs, to be paid out of the estate. Advocate's fee Rs. 400. This order is made without prejudice to the rights, if any, of the official liquidator, to proceed under section 87 of the Companies Act, 1913. Application allowed.