JUDGMENT - G.H. GUTTAL, J.:---In this Summons for Judgement, the defendants seek leave to defend. The question is whether the amount agreed to be underwritten under an underwriting contract represents a liquidated demand of money within the meaning of sub-rule (1) of Rule 2 of Order XXXVII of the Code of Civil Procedure. The facts out of which this Summons for Judgement arises are in paragraphs 2 and 3 below. 2. Starvox Electronics Ltd., a Joint stock Company, decided to bring out a public issue of 6,50,000 equity shares, each of Rs. 10/- aggregating to Rs. 6,50,000/-. The plaintiff, a Nationalised Bank, agreed to underwriters underwrite 50,000 equity shares of the Company. On 8th June, 1987, the plaintiffs entered into a subsidiary underwriting agreement with the defendants. Defendants are the plaintiffs sub-underwriters of the Company. The defendants agreed to “sub-underwrite 20,000 equity shares of the face value of Rs. 2,00,000 out of the public issue agreed to be underwritten by the plaintiffs. The defendants were to be discharged of their obligations under the agreement if the issue of equity shares was fully subscribed by the public on the closing date and the application money payable in respect thereof is not received by the Company before that date, the underwriters shall, after the receipt of the subscription position from the Company, inform the sub-underwriters, the defendants herein, “of the number of equity shares for which the underwriter is to subscribe in pursuance of” the agreement. The agreement goes on to record “the sub- underwriters shall, within 8 days after receipt of such intimation apply for and subscribe such unsubscribed amount of the equity shares and pay or procure to subscribe to the extent mentioned. “The sub-underwriter, the defendants shall subscribe for a number of equity shares representing the difference between the public issue and the subscription from the public. However, this obligation to subscribe to the equity shares or pay the amount of the value of unsubscribed shares is “ subject to a ceiling of Rs. 2,00,000/- ”(Clause 2(b) of the Agreement). 3. On 15th September, 1987, the plaintiffs informed the defendants that the issue “did not evoke good response with the result that there has been devolvement of the underwriters.” The plaintiffs then advised the defendants to subscribe to the shares of the above Company “to the extent of Rs. 2,00,000/- in fulfilment of “their sub-underwriting commitment (Exh. 3. On 15th September, 1987, the plaintiffs informed the defendants that the issue “did not evoke good response with the result that there has been devolvement of the underwriters.” The plaintiffs then advised the defendants to subscribe to the shares of the above Company “to the extent of Rs. 2,00,000/- in fulfilment of “their sub-underwriting commitment (Exh. '(B)' to the plaint). 4. Rule 2(1) of Order XXXVII, of the Code of Civil Procedure, provides inter alia, that all suits in which plaintiff seeks “only to recover (i) a debt or (ii) liquidated demand in money payable by the defendant with without interest, arising on a written contract…” be instituted in the manner provided therein. (Respondent from page in the Code Civil Procedure by Sir Dinshaw Mulla Thirteenth Ed, Volume II.) The question is whether the sum of Rs. 2,00,000/- claimed by the plaintiffs in this suit under the sub- underwriting contract is “ liquidated demand ". 5. What is the nature of an underwriting contract ? What is the liability of the underwriter to the Company and of the sub-underwriter to the underwriter ? Does the contract on which this suit is based stipulate the payment of a liquidated sum ? The answers to these questions will determine whether the amount claimed in the suit is a liquidated sum. Underwriting in its simplest form consists of an undertaking by some person or persons that if the public fails to take up the issue, he or they will do so. In return for this undertaking the Company agrees to pay the underwriters a commission on all shares or debentures, whether taken by the public or by the underwriters. The underwriters themselves will usually choose to spread their risk by using sub-underwriters who agree to take a certain number of the shares for which they receive a commission. In the result, if an issue to the public is a success, the underwriters receive their commission without having to take up any of the shares or debentures, but if it is a failure the underwriters and sub- underwriters have to take up a large proportion of it (Palmer's Company Law 24th Ed. pg. 411). 6. Underwriting is in the nature of an insurance against the possibility of inadequate subscription. pg. 411). 6. Underwriting is in the nature of an insurance against the possibility of inadequate subscription. The necessity for an underwriting contract arises because a public company cannot proceed to allot shares offered to the public, unless the amount specified in the prospectus as the minimum subscription, is raised by the issue of shares (Naini Gopal Laheri and others v. State of Uttar Pradesh, (1965)35 Comp. Cas. pg. 30 (S.C.). 7. From the nature of the underwriting contract it is clear, that if the public issue is not fully subscribed, the defendants as the sub-underwriters are under an obligation to take the shares to the extent stipulated by the contract. 8. In the context of debts, “to liquidate” means ascertain and/or apportion and “liquidated” means ascertained and/or apportioned. Generally, the amount clearly shown to be payable is referred to as a liquidated amount. For example, the principal sum and the interest stipulated in a contract constitute the liquidated sum. Where the parties agree that a sum stated shall be paid, such sum also is liquidated sum (Strouds Judicial Dictionary Fifth Edn. Vol. 3 "Liquidated Demand" and "Liqidated Damages"). The contract on the basis of which the suit is insisted must create a liability in the defendants to pay ascertainable amount. Under the contract in this suit, the liability of the defendants is to subscribe “such unsubscribed amount” of the equity shares. Therefore, this amount has to be ascertained. Until then, the defendants are liable to pay an uncertain amount. How is the amount of subscription by the defendants ascertained? The contract answers this question. The defendants shall subscribe to a certain number of equity shares, and the number shall be the difference between the public issue and the subscription from the public. Now, how are the defendants told that their liability is to subscribe, say Rs. X? The contract does not state the amount. This step in the process of ascertainment of the extent of the defendants' liability is left to be taken after receipt of the subscription from the Company. Therefore, the parties to the contract do not know until the closing date, as to what the defendants are liable to pay. That is why the plaintiffs have to inform the defendants “of the number of equity shares for which the sub-underwriter is to subscribe in pursuance of” the agreement. Therefore, the parties to the contract do not know until the closing date, as to what the defendants are liable to pay. That is why the plaintiffs have to inform the defendants “of the number of equity shares for which the sub-underwriter is to subscribe in pursuance of” the agreement. Therefore, in the first place, the value of the subscription from the public will have to be ascertained and deducted from the value of the public issue. This represents the total liability not of the sub-underwriter but of the underwriter. The contract then goes on to state that the liability of the sub-underwriter ascertained by the subtracting the subscription value from the public issue, shall be “subject to a ceiling of Rs. 2,00,000/-”. Significantly, the language of the agreement makes the defendants' liability to subscribe “subject to a ceiling of Rs. 2,00,000”. Therefore, the sum of Rs. 2,00,000/- claimed in this suit is not what the defendants are, under the contract, liable to pay. The sum of Rs. 2,00,000/- represents the ceiling or the upper limit of such liability. The amount due from the defendants is therefore not Rs. 2,00,000/- but may be a lesser amount representing the difference stated above. 9. The liability of the sub-underwriter is thus contingent upon (a) the number of shares subscribed by the public and (b) the intimation by the underwriter to the sub-underwriter that the latter shall subscribe or procure subscription. Having regard to the nature of the agreement, which stipulates the ceiling on the liability of the defendants, it cannot be said that Rs. 2,00,000/- is the liability of the defendants. It is inherent in a contract of this nature that the amount is not ascertainable on the date on which the contract is made. The amount claimed in this suit is therefore not liquidated amount which the defendants are liable to pay. It may be reduced to a liquidated sum after the ascertainment of the amount according to the mode prescribed by the contract. It is not the case of the plaintiffs that Rs. 2,00,000/- have been so ascertained. 10. It has been urged that commission is due to the defendants from the plaintiffs and therefore, what is due is not Rs. 2,00,000/- but the sum found after deducting the commission. It is not the case of the plaintiffs that Rs. 2,00,000/- have been so ascertained. 10. It has been urged that commission is due to the defendants from the plaintiffs and therefore, what is due is not Rs. 2,00,000/- but the sum found after deducting the commission. In view of my conclusion that the amount claimed in this suit is not a liquidated demand, it is unnecessary to decide this question. 11. The defendants also urged that the plaintiffs' claim of interest @ 17.5% is not based on any contract. It is no doubt, true that there is no agreement to pay interest. The plaintiffs have based their claim for interest on the Interest Act from the date of notice of demand. The Defendants' contention is therefore unsound. 12. For all these reasons, I grant unconditional leave to defend. Suit shall be tried as commercial cause. Written Statement within six weeks, Affidavits of Documents within two weeks thereafter. Parties shall complete inspection of documents within two weeks after the expiry of the time prescribed for filing Affidavits of Documents. Order accordingly. -----