Solvent company liquidation: contractual interest may be paid from surplus assets, not limited to the insolvency rate.

Section 229 of the Indian Companies Act, 1913 was confined to the winding up of an insolvent company and imported the insolvency rules for provable debts. Interest accruing after commencement of liquidation was not treated as a provable debt under that provision, so the 6 per cent insolvency rate did not govern a solvent winding up. Where a company had surplus assets after payment in full of liabilities existing at the commencement of winding up, creditors entitled to interest by contract or other governing obligation could recover it from the surplus at the agreed rate until the principal debt was paid.

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Issues: Whether, in the winding up of a company found to be solvent, creditors whose debts carried interest were entitled to interest from the commencement of liquidation until payment at the contract rate, or only at 6 per cent per annum under the insolvency provisions.

Analysis: Section 229 of the Indian Companies Act, 1913 was confined to the winding up of an insolvent company and operated by importing the insolvency rules applicable to provable debts. Interest accruing after the commencement of winding up was not treated as a provable debt within that provision. Where the company was in fact solvent, surplus assets remained after payment in full of liabilities existing at the commencement of winding up, and the insolvency-rate rule did not govern. In such a case, creditors entitled to interest by agreement or otherwise could claim interest out of the surplus assets until the principal debts were paid, at the rate fixed by the contract or other governing obligation.

Conclusion: Section 229 did not apply to a solvent company in liquidation, and the creditors were entitled to interest out of the surplus assets at the contract rate until payment of the principal sums.

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