(This Appeal came on for hearing on the 24th February and 5th, 6th 10th and 19th days of March, 1925, before their Lordships Venkatasubba Rao and Maihavan Nair, JJ.)

Venkatasubba Rao, J.

This is a Letters Patent Appeal from the judgment of Wallace J. One Subba Rao was a shareholder of the 2nd defendant company. A money decree was passed against him and in execution of it certain shares belonging to him together with the dividends that had accrued were attached and sold. The plaintiff who became the purchaser at the Court-sale has instituted the present suit for the recovery of the dividends. The short question to be decided is: What is the article of the Limitation Act that is applic able to the case The defendant company contends that the period of limitation is three years whereas the plaintiff urges that the period is six years. Wallace J., was of the opinion that the suit would have been in time had the plaintiff been a shareholder but that the plaintiff would not fall under that article. The ground of his decision is that Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354) which lays down that a suit for return of deposit is governed by Art. 116 is inapplicable, if the suit is brought not by a shareholder between whom and the company there is a contractual relation but by a transferee from such a shareholder. With great respect I am unable to agree. Art. 116 applies to a suit for compensation for the breach of a contract in writing registered. The article does not say that the suit must necessarily be by the promisee against the promisor, if, for instance, the claim is founded upon a registered bond, can it be said that a suit by a transferee from the payee under the bond does not come under this Article The suit being for a dividend that has accrued, is in the nature of a claim for money due and the position of the transferee for this purpose cannot be different from that of the shareholder himself.

The case cannot, therefore, be distinguished as has been done by Wallace J., from Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354).

In my opinion the real question that arises is: Does Art. 116 apply at all In other words, does Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354) correctly state the law

Sir John Wallis C. J., and Seshagiri Aiyar J., held in it that a suit by a shareholder against a company is governed by Art. 11

6. With the utmost respect for the learned Judges I feel bound to say that this decision is based on a fallacy. Art. 116 applies to contracts in writing registered. Is the contract between the shareholder and the company a contract of this description The learned Judges having held that the memorandum and the articles of association constitute the contract between the shareholder and the company, took the view that these two documents must be deemed to be registered within the meaning of Art. 11

6. Is this construction correct The word registered has not been defined in the Limitation Act but its definition is to be found in the General Clauses Act of 1897. Sect. 3, cl. 45, of that Act says:

Registered used with reference to a document shall mean registered in British India under the law for the time being in force for the registration of documents.

Can it be said that the Indian Companies Act embodies any portion of the law for the time being in force for the registration of documents The Act deals with the registration of companies and not registration of documents. Section after section refers to the registering of a company. Sect. 2 cl. 2 defines a company as one registered under the Act. Sect. 2, cl. (15) defines the Registrar as a Registrar performing under the Act the duty of registration of companies Sect. 4 prohibits certain partnerships unless they are registered as companies, Sect. 11 aims against the registration of companies by names identical with those of companies already in existence. Sect. 248 provides for the establishment of registration offices and deals with the offices where Companies shall be registered. It is unnecessary to refer to further sections, but it is clear beyond doubt that it is the registration of companies and not of documents that is within the purview of the Indian Companies Act.

It is no doubt true that in a few sections the word registered is used with reference to the memorandum and the articles of association. After dealing with the registration of these documents (Sects. 17, 18, 22 and 23), the Act proceeds to enact in Sect. 24 that a certificate of incorporation shall be conclusive evidence that the Association is a company registered under the Act. But registration of the articles, and memorandum is merely incidental and the object to be achieved is the registration of the company. It is not sufficient to say that in the Indian Companies Act there are some stray provisions that deal with the registration of certain documents. The real question is: Does the Indian Companies Act contain any portion of the law as contemplated by the General Clauses Act for the time being in force for the registration of documents

I have so far applied a negative test. Where is this law then contained If we now turn to the Registration Act of 1908 we find the preamble running thus:

Whereas it is expedient to consolidate the enactments relating to the registration of documents, it is hereby enacted as follows.

It is the Indian Registration Act, therefore, that contains the law for the time being in force for the registration of documents. It is needless to point out that this Act does not deal with the registration of memoranda or articles of association.

The view I have taken derives some support from Art. 112 of the Limitation Act which gives the period of limitation as three years for a suit to enforce a call by a registered company. If in the opinion of the legislature, enforcing a call is enforcing an obligation arising under a registered contract a period of three years would not have been prescribed; for under Art. 116 when any contract (whatever its nature may be) is in writing registered, the period of limitation is six years: see Tricomdas Cooverji Bhoja v. Gopinath Jiu Thakur (I.L.R., 44 Cal., 759 = 5 L.W. 654., (P.C.). The general policy of the Act is to prescribe the longer period in the case of obligations, arising under a registered contract. If, therefore, Art. 112 in truth refers to such an obligation, the position will be this: Art. 112 will stand apart and be inconsistent with the general scheme and policy of the Act. From this it is a fair inference that the idea underlying Art. 112 is that the obligation in respect of a call does not arise under a registered contract. This Article also incidentally shows by its wording that what is registered is the company and not the articles or memoranda.

Sect. 116, therefore, of the Limitation Act cannot apply to a suit by a share-holder against a registered company. The learned Judges who decided Ripon Press and Sugar Mills Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] . = 8 L.W., 354) came to the opposite conclusion as they felt that a narrow interpretation should not be put upon the words in the General Clauses Act. When two interpretations are possible, one narrow and the other a liberal one, I should certainly not have the slightest hesitation in adopting that interpretation which accords with justice. But I cannot help feeling in the present case that the construction suggested on behalf of the plaintiff is utterly unsound. It is with the greatest reluctance that I feel compelled, departing from the authority cited, to adopt a view which gives the shorter period of limitation.

The plaintiffs learned vakil suggests that if Art. 116 does not apply, Art. 120, the residuary article, governs the case. I cannot accept this contention. Art. 115 applies to suits for compensation for the breach of a contract not in writing registered. It is contended that the memoranda and articles do not constitute a contract between the company and its members. In Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354) it was held that the obligation to pay a dividend arises from the contract evidenced by these documents. I am prepared to follow this decision in this respect. Sect. 21 of the Indian Companies Act runs thus:

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.

This section is almost identical with Sect. 14 of the English Act, The Companies (Consolidation) Act, 1908. The contention is that although the section says that there shall be deemed to be a covenant on the part of each member , it does not say that the company is bound by reason of a contract entered into by it.

There has been a good deal of conflict of opinion in England on this point and Palmer in his Company Law deals in Ch. IV with this subject.

In Weiton v. Saffery [1807] A.C., 299, 315) Lord Herschell observed:

It is quite true that the articles constitute a contract between each member and the company.

Sterling J., in Wood v. Odessa Waterworks Co. [1889] 42 Ch., D., 636) said:

The articles of association constitute a contract not merely between the share-holders of the company but between each individual share-holder and every other.

James L. J., in Johnson v. Lyttles Iron Agency [1877] 5 Ch. D., 687) referred to the articles as a contract between the company and the share-holders. It is unnecessary to multiply references and it is sufficient to refer to the following passage in Buckleys Companies Acts, 1924 Edition, page 28:

All the authorities as to whether the articles constitute a contract as between the company and its members were reviewed by Astbury J., in the recent case in Hickman v. Kent Sheepbreeders Association [1915] 1 Ch., 881] who decided that the result of the apparently conflicting decisions and dicta referred to above was that though the articles can neither constitute a contract between the company and an outsider nor give any individual member of the company special contractual rights beyond those of the members (or quaere , any particular class of members) generally, they do in fact constitute a contract between a company and its members in respect of their ordinary rights as members.

If the articles and memoranda constitute, therefore, a contract binding on the company as well as on each member Art. 115 clearly applies to the case and a suit for the recovery of the dividend must be brought in three years from the date when payment becomes due.

As the view I am taking is opposed to that adopted by a Bench of this Court in Ripon Press and Sugar Mill Co., Ltd. v. Nama Venkatarama Chetty [I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L. W., 354] and as the point, I understand, is likely to frequently arise in connection with a company which is now under liquidation, I would refer the following question to a Full Bench:

Is a suit by a shareholder against a company for recovery of a dividend governed by Art. 115 or 116 of the Limitation Act

If neither article applies, which is the Article applicable

Madhavan Nair J. For deciding this Letters Patent Appeal, it has become necessary to consider the question, what article of the Limitation Act governs a suit by a shareholder against a company. In Ripon Press and Sugar Mill Co., Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354) it was held by Sir John Wallis C.J., and Seshagiri Aiyar J., that Art. 116 applies to such a case. Under this Article a period of six years is fixed for suits for compensation for the breach of a contract in writing registered. The learned Judges in Ripon Press and Sugar Mill Co. Ltd. , v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354), took the view (1) that the memorandum and articles of association constituted the contract between the share-holders and the company and (2) that these two documents must be deemed to be registered within the meaning of Art. 11

6. Accepting the soundness of the view that the two documents constitute the contract, the learned vakil for the respondent has argued that these two documents cannot be considered to be registered within the meaning of Art. 11

6. Registered according to the General Clauses Act, Sect. 3. Cl. 45, when used with reference to a document, means registered in British India according to the law for the time being in force for the registration of documents. According to its preamble, the Indian Registration Act contains the law for the time being in force for the registration of documents. That Act does not contain any special provision for the registration of memorandum and articles of association. Sects. 17 and 18 of the Indian Companies Act refer to the registration of these documents and Sect. 22 says that the Registrar of the province in which the registered office of the company is situate shall retain and register them. The Registrar means a Registrar or Assistant Registrar performing under the Indian Companies Act the duty of registration of companies: (see Sect. 2, Cl. (15). Sect. 23 refers to the effect of registration and Sect. 24 says that a certificate of incorporation given by the Registrar should be conclusive evidence that the Association is a company registered under the Act. As pointed out by my learned brother, Sects. 2, Cls (2) and (15 ), 4, 5, 11 and 248 indicate that the Indian Companies Act embodies only the law for the registration of companies and not any portion of the law for the registration of documents for which provision is made in the Indian Registration Act. The wording of Art. 112 of the Indian Limitation Act suggests that what is registered is the company and not the memorandum or articles of association. No doubt, there are sections, as already mentioned, in the Indian Companies Act relating to the registration of these two documents, but on the strength of those sections which deal only with what may be described as matters incidental to the registration of companies, I do not thinks it can be said that any portion of the law for the registration of documents for the time being in force is contained in the Indian Companies Act.

If this view is accepted, then Art. 115 of the Indian Limitation Act would be the article applicable to a suit by a shareholder against a company, but the learned vakil for the appellant argues that article is inapplicable because the memoranda and the articles of association do not constitute a contract between the company and its members and that, therefore, the proper article which would govern the case is Art. 120. As regards the question whether the memoranda and the articles of association constitute a contract, there has been some conflict of opinion in England, but the weight of authority is decidedly against the view put forward on behalf of the appellant. I think it has been rightly held in Ripon Press and Sugar Mill Co. Ltd., v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354) that the right to receive a dividend wises out of the contract evidenced by the memorandum and the articles of association.

In the circumstances pointed out by my learned brother, I agree that the opinion of the Full Bench may be invited on the questions proposed by him.

[This Appeal came on for hearing before a Full Bench constituted as above].

OPINION

The Chief Justice :In this case the appellant bought up at a Court-auction sale the rights of the judgment-debtor to receive dividends accrued in a limited company, of which he was a share-holder. The question that we have to determine, now that the auction-purchaser is seeking to enforce his right against the company, is what period of limitation is applicable to such a claim.

The Indian Limitation Act is one of those unfortunate pieces of Indian Legislation which by trying to provide for everything conceivable very often ends by leaving out cases of the most glaring description. I might take this as a very good instance, for there is no article which provides simplicitor for a debt due, such a debt as would have been the subject of the old common law action in debt, although oddly enough, provision is made by Art. 63 for money payable for interest upon money due from the defendant to the plaintiff so that a special article is enacted for the interest and nothing is said whatever about the principal debt. It was suggested that to such cases as this Art. 62 might apply which is for money payable by the defendant to the plaintiff for money received by the defendant for the plaintiffs use. The fact is that the money out of which the dividend has to come is received by the company for its own use and put into its own offers. Then at a later stage in accordance with the article a dividend is declared by the company in a general meeting on the advice and recommendations of the directors. The very ingenious argument put forward was that as soon as the declaration was made there must be taken to be a notional second receipt by the company as it were from its right hand to its left, the second receipt to be deemed to be for the use of the shareholders who will be entitled to the dividend. It is sufficient to say that that is a line of argument which seems quite in conflict with the enactment of the statute as to when the time begins to run and that is when the money is received, the clear implication being and it is not in-consistent with the frame of the English cause of action for money bad and received that the money must at the time it came into the hands of the defendant have been there and then put into his hands for the use of the plaintiff. It is quite true that in cases where the party aggrieved is ignorant of the facts the time will only begin to run, not when the money was in fact received by the defendant, but when the plaintiff became aware of it, but that is a matter of procedure which really does not, except for a special purpose fix the time when the money is to be deemed to be received. I think we are constrained to hold that the original receipt by the company is the only receipt upon which Art. 62 would operate and that as that receipt is not for the use of the plaintiff he cannot be brought within Art. 62.

I now pass to the next suggested alternative which is Art. 115, and that is worded as follows:

For compensation for the breach of any contract, express or implied not in writing registered and not herein specially provided for.

and if the defendant company can bring itself within the four walls of that article, that carries them home in this case and this action is statute barred. Were the matter res-integra I should myself be strongly inclined to say that an action such as this was not an action for compensation for the breach of any contract. The English and the Irish Courts have quite clearly laid it down that upon the declaration of a dividend a debt immediately becomes payable by the company to such shareholdr in respect of the amount of dividend represented by the amount of his holding in shares, and I should have thought therefore that it was not correct to describe the obligation to pay a debt as being compensation for the breach of a contract. But that matter is not res Integra because it has been dealt with in a decision under the following Art. 116 of the Limitation Act by the Privy Council. That is the case of Tricomdas Coorverji Bhoja v. Gopinath Jiu Thakur (I.L.R., 44 Cal., 759 = 5 L.W., 654 (P.C.) and the judgment of the Board was delivered by Lord Sumner. Now the words of Art. 116 are as follows:

For compensation for the breach of a contract in writing registered.

In Tricomdass case the sum of money in issue was (1) arrears of rent due under a registered lease and the argument that was put forward and which the Board refused to accept was that Art. 110 of the Act specifically provided a period of limitation for arrears of rent and, that being so, it was immaterial whether the rent was due under a registered or an unregistered lease. The Board rejected that argument on the ground that the words of Art. 116 were not incapable of covering a case of rent duo and that a long cursus curiae of Indian decisions and the decisions of the Board had construed every possible section that they could with a view to giving favour to registered instruments and prolonging the period of limitation. That appears to us to be a method of approaching the case which is binding on us, and I think we have to say in the case of a debt such as the debt created between company and shareholder on the declaration of a dividend that, if it is a contract at all, the remedy sought is aptly described as compensation for the breach of a contract, express or implied. The matter does not rest there however, because a very learned argument has been put forward before us the effect of which is to show that although, the declaration of a dividend creates a debt, yet the relation between shareholder and company is not a relation which could be described as a contractual one. On that point there has been a very great conflict of opinion and divergent views in the English and Irish Courts. I am not a company lawyer and I do not propose to do more than refer very briefly to the main views that have been expressed. The whole matter is summed up in the judgment of Ashbury, J., in the case of Hickman v. Kent or Romney Mars Seepbreeders Association (1915) 1 Ch. D., 881) where he comes to the conclusion that although the articles cannot be held to constitute a contract between the company of the one part and an outsider in his capacity of outsider of the other part, yet as between share-holder and share-holder and company a contract is in fact constituted. There were many weighty expressions of opinion to the contrary. We have come to the conclusion that the safest course to adopt here is to take the view that the declaration creates a debt. Byrne in In re Artisans Land and Mortgage Corporation (1904) 1 Ch. 796) after reviewing the very weighty pronouncements in Irish cases which he refers to holds that it not merely creates a debt but by virtue of the share certificates and the memorandum of articles it creates a specialty debt. Although the Irish Courts, not I think Byrne, J., use language which seems to imply that it is not merely a specialty debt but it is a debt arising out of a specialty contract we are not really bound to go so far as that. We think that this debt created by the declaration, whether in certain circumstances and for certain purposes it might be regarded as a contract is not a contract such as was contemplated and envisaged by Art. 115 of the Limitation Act. It is difficult enough to regard that form of words as applicable to a claim for rent. It seems to me clumsy beyond anything that is legitimate to allow the claims of a shareholder for his dividend to be regarded as aptly described by compensation for breach of contract, express or implied. In our opinion, it is merely a claim for debt and, as unfortunately the Limitation Act does not contain a section applicable to debts, all we can do is to fall back on the Omnibus Art. 120 and treat this case as one for which no article specifically applicable is prescribed under the schedule.

There is only one other matter that we have to deal with, which in essence, was the start of this whole business. We were referred to a decision of this Court reported in Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33 [LQ/MadHC/1918/171] = 8 L.W., 354), a decision of Wallis C. J. and Seshagiri Aiyar, J. That was a suit for dividend and it was decided that the suit fell within Art. 11

6. Art. 116 of course speaks of registered contracts and there is no doubt that the learned Judges held not merely that registration of a contract, in the ordinary sense, was covered by the article but the deposit of the memo and Articles of Association of a Limited Co. with the Registrar of Joint Stock Companies under the direction of the Act. That seems to us to be putt ing an intolerable strain upon the word Registered and one which the draftsman of this statute could not possibly be thought to have contemplated. Of course the decision amounts to this, and we find ourselves unfortunately in disagreement with it even on the minor point that the relation constituted between the shareholder and the company is a contractual relation. We do not even go so far as that as we wish to limit ourselves carefully if contractual is taken to mean contractual in the sense contemplated by Arts. 115 and 116 of the Limitation Act. We the refore are of opinion, that Ripon Press and Sugar Mill Co. Ltd. v. Nama Venkatarama Chetty (I.L.R., 42 Mad., 33) [LQ/MadHC/1918/171] is, incorrectly decided and we think we ought to say so.

The reply to the question submitted to us is that in our opinion Art. 120 is the article that applies.

Krishnan J. I agree.

Beasley J :I agree.