Notice before payment orders: require show-cause opportunity for listed contributories before directing payment to respect natural justice.

The note addresses whether a court may enter a payment order against a person listed as a contributory without prior notice, holding that natural justice requires notice and an opportunity to show cause before such orders. It explains the interaction between the liquidator's powers to fix contributories and make calls and the court's power to direct payment, observes absence of an express rule authorising payment orders without notice, and concludes that sound practice bars ex parte payment orders. Outcome: the impugned payment order was set aside and the matter remitted for hearing with notice.

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Issues: Whether a court may make a payment order against a person entered on the list of contributories without first issuing notice to show cause, having regard to the powers of the liquidator and the requirements of natural justice under the Companies Act.

Analysis: The Court examined the powers conferred by section 212(1)(c) and (d) of the Indian Companies Act concerning the liquidator's authority to settle a list of contributories and to make calls, and considered the scope of the court's power to make payment orders (section 186) and related provisions including section 196. The Court observed that, although the Company Rules contain a procedure (rule 112) for fixing a hearing date in applications by an official liquidator, there is no express rule permitting the making of payment orders without notice. Applying the rule of natural justice and observing authority cautioning against ex parte orders in related company proceedings, the Court held that the sound practice is to require notice before a payment order is made so that the person affected may show cause.

Conclusion: The appeal is allowed; the order making the payment order without notice is set aside and the matter is remanded to the District Judge for decision in accordance with law. (Decision in favour of Appellant)

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