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of <h1>Legal Call Notice Requirements under Indian Companies Act: Court Clarifies Distinction</h1> <h3>Mahomed Akbar Abdulla Fazalbhoy Versus Associated Banking Corpn. India Ltd.</h3> The court found that the notice sent by the liquidator did not meet the statutory requirements for a valid call under the Indian Companies Act. It was ... Winding up - Liability as contributories of present and post members, Payment of debts due by contributory and extent of set off and Power of Tribunal to make calls Issues Involved:1. Validity of the call made by the liquidator.2. Authority of the liquidator to make calls.3. Distinction between contractual and statutory debts.4. Applicability of Section 186 of the Indian Companies Act.5. Applicability of the statute of limitations.Issue-wise Detailed Analysis:1. Validity of the Call Made by the Liquidator:The primary issue was whether the notice sent by the liquidator on 9th July 1948 constituted a valid call under the Indian Companies Act. The court found that the notice was a simple demand for payment and did not meet the statutory requirements for a call. The language used in the notice did not fulfill the criteria for a call as contemplated by the Act.2. Authority of the Liquidator to Make Calls:The court examined whether the liquidator had the authority to make a call upon the contributories. Section 159 of the Indian Companies Act specifies that the liability of a contributory becomes a debt payable at the time specified in the calls made by the liquidator. However, the court noted that this section does not confer any power upon the liquidator to make a call. The power to make calls is vested in the court under Section 187, and no rule had been made conferring this power upon the liquidator by the High Court. Therefore, the liquidator did not have the authority to make a call, and any such call made by him would not impose a liability on the defendant.3. Distinction Between Contractual and Statutory Debts:The court distinguished between contractual debts and statutory debts. A liquidator can recover contractual debts without following any special procedure. However, to recover statutory debts under Section 156, the liquidator must follow the procedure laid down in Section 187. The statutory liability of a contributory to contribute to the assets of the company arises upon the winding-up order and must be enforced through a call made by the court. The liquidator's attempt to recover the statutory debt through a suit without following the procedure under Section 187 was not permissible.4. Applicability of Section 186 of the Indian Companies Act:The court addressed the contention that Section 186 provided a summary procedure for the liquidator to realize debts due by the contributory. It clarified that Section 186 applies only to contractual debts and not to statutory liabilities under Section 156. The Privy Council in Hansraj Gupta v. Official Liquidators had established that Section 186 does not create new liabilities but provides a summary procedure for enforcing existing liabilities. Therefore, the liquidator could not use Section 186 to recover the statutory debt.5. Applicability of the Statute of Limitations:The court considered the applicability of the statute of limitations. The suit was originally filed to recover a contractual debt, which was barred by limitation under Article 112 of the Indian Limitation Act, 1908. The court rejected the argument that the winding-up order changed the nature of the debt from contractual to statutory, thereby altering the applicable limitation period. The court held that once limitation begins to run, no subsequent event, including a winding-up order, stops the time from running. The liquidator's failure to follow the proper procedure under Section 187 to recover the statutory debt meant that the suit was barred by limitation.Conclusion:The appeal was allowed, and the suit was dismissed with costs. The court held that the liquidator could not recover the statutory debt through a suit without a call made by the court under Section 187. The liquidator could have followed the correct procedure to enforce the liability, but the failure to do so resulted in the dismissal of the suit. The defendant was awarded a decree for Rs. 450 as allowed by the lower court when the plaintiff amended the plaint.
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