RAMCAHANDRA IYER C.J.

This is an appeal against the judgment of Balakrishna Aiyar J. directing the deletion of the first respondents name form the list of contributories, the question raised in the appeal being whether the existence of a mortgage (English mortgage) over the call money precludes the liquidator form including the name of the shareholder who is in arrears in respect of such money in the list of contributories. The fact going in rise to this appeal have been set out in out judgment in Official Receiver, Link Industries Ltd. v. Ramanathan Chettiar. But we shall , however, recapitulate such of the facts as are necessary of the purpose of the present appeal

The Link Industries Ltd., which is now under liquidation, was incorporated in 1946. On August 13, 1947, the company issued 50, 000 shares of the nominal value of Rs. 10 each. The respondent subscribed for 36, 555 shares and paid to the company at the time of the application and application a sum of Rs. 5 for each share. the balance of share money was payable under the articles of association on a call being made therefore by the directors. But no call was made till the year 1953. On July 27, 1949, the company had to borrow a sum of Rs. five lakhs form the Industrial Finance Corporation of India, for the purpose of its business. To secure the amount ;advanced by the corporation. the company executed a deed of English mortgage, securing its properties as well as the uncalled share money due form its member. It will be convenient at this stage to refer to the relevant portions of the document

"This indenture made on the 27th day of July 1949, ...th company hereby grants, assigns and transfers and assures unto the Corporation all an singular the freehold land, building and premised described in the schedule here under written and all and singular the engines, machinery (whether fixed or movable and whether attached to the said premises or not), plant, stocks, fixtures, utensils, articles, all there assets, and the uncalled capital of the company...and the company hereby covenants with the Corporation without prejudice to the fights of the corporation under the provisions of the Industrial Finance Corporation Act, 1948, as follows(xii) that for the consideration aforesaid the company hereby assigns unto the corporation all that the right of the company to receive the balance of the Rs. 5 per share remaining uncalled upon the said shares that have been issued by the company when the same shall be called up either by the directors in the exercise of their powers or by any liquidator of the company in the event of the same being wound up together with all moneys that may hereafter be received in respect of any of the said shares which have not yet been issued or in respect of any shares that may hereafter be created upon any increase in the capital either upon application or allotment or in payment of calls as here in before provided and all other (if any) of the uncalled capital of the company to hold the premises hereby assigned unto the Corporation

(xiii) That the company will as soon as any call in respect of the said shares shall have been resolved upon by the directors.... immediately give notice of such call to the Corporation.....and will not until the expiration of seven clear days form the time when such notice shall have been sent to the Corporation issue any notice to the members of the company in respect of payment of any; call...and if the Corporation shall so require every notice..sent out by the company in pursuance of any such resolution shall direct the members to pay the call s made...to the Corporation or as it shall direct ;and if no such requisition be made by7 the Corporation or as it shall direct and if no such requisition be made by the Corporation or as it shall direct and if no such requisition be made by the Corporation, the members...shall be directed to pay any call only into se bank to the joint account of the company and the Corporation or in such manner as the Corporation may direct, the Corporation or in such manner as the Corporation may dirt, the Corruption shall be entitled to require all such calls or the moneys received by the company to be applied either wholly or partly in or towards the payment or satisfaction of the said principle sum, interest and other moneys due to the Corporation..."On April 15, 1953, the directors of the company resolved to call the whole of the remaining uncalled amount form its shareholders in two installments of Rs. 2-8-0 per share, the first installment ;being payable by October 31, 1953, and the next within a month thereafter. A notice was issued to the respondent on April 29, 1953, calling upon him to pay a sum of Rs. 1, 82, 755 in respect of 36, 555 shares held by him. The respondent repudiated his liability. Further correspondence followed between the parties. But, before the controversy could be settled, the company was directed to be would up by an order of this court dated February 8, 1956, in O.P.No. 157 of 1955. After the liquidator took charge of the affairs of the ;company, he settled a list of the contributories. The respondent was shown in the list as due to the company in a sum of Rs. 1, 82, 775. The respondent thereupon filed Application No. 1598 of 1956 for deleting his name form the list of contributories. His case was that, at the time then he agreed to take up 36, 55 shares, it was agreed between him and the them managing agents of the ;company hat the uncalled share amount should not be demanded of him till he was able to unload three-fourth of his holding in the market at a profit. He also contended that, as the unpaid share money had been assigned over to the corporation under the English mortgage executed by the company on July 27, 1949, the Official liquidator would be incompetent o make any claim in respect of such call money and that therefore the respondent could not be included in the list of contributories settled by the liquidator

BALAKRISHAN Aiyar J. wa of opinion that the probabilities of the case showed that the managing directors of the company must have haven some assures of the kind pleaded by the respondent while he subscribed for the shares; but the learned judge fond it unnecessary to decide finally as to how far such assurance, even if made out, could be held to bind the company. On the ;other question, the learned judge accepted the position taken on behalf of the respondent, namely, the fight in respect of unpaid share money having been assigned over to the corporation by virtue of the executions an English mortgagee in it s favour in respect of the call money, the claim i respect of the call money would be outside the liquidation proceedings and the Official liquidator could not include the name of the respondents in the list of contributories settled by him. the official liquidator has appealedThe substantial contention urged on behalf of the liquidator is that an assignment of the unpaid share money be way of English mortgage in favour of the mortgagee could not take away the right of the company in the share money, and that, so long as that fight, viz ., the equity of redemption, subsisted it was comment form the liquidator to ascertain the amount due form the respondent and place him in the list of contributories

Before considering that contention, it is necessary ;to refer to a few section of the Indian Companies Act, 1913, which govern the present case. Under section 156 of the ACt, every past and present member of the company will be liable to contribute to the assets of the companion amount sufficient for payment of the company, liabilities, and costs and changes, etc., of the winding up, and for the adjustment of the fights of the contributories inter se. In the case of a limited liability company the amount be contributed will no, however, exceed the unpaid amount on the shares, in respect of which the ;member would be liable either as present of past members. Section 30 of the Act shows that members of the company are (1) the subscribers to the memorandum of the company, and (2) persons who agreed to become members of the company and whose name is entered in the register of members of the company. Section 40 states that the register of members shall be prima facie evidence in respect of matters which are directed to be contained or inserted therein. Section 31f provides for the maintains of the register of members. therefore, if a person, same is found in the registers of the company, it would be prima facie evidence that he is a present member of the company liable to contribute in respect of the unpaid share money. Section 1f84 deals with the list of contributories. It will be the duty of the liquidator , after he disappointed, to prepare a list of contributories form the ;share register and other documents available to hi, . After the list is prepared, section 184 provides for settlement of the list by the court. The list will how the names and other particulars relating to the contributory, the number of shares held by hi and the amount which he is liable to contributor. The importance of the list of contributories lies in this, namely, that a call for contribution for unpaid share money fan be made only after the list is settled and it is ascertained how rush the contrubutory is liable to pay to the company for the purpose of liquidation. The settlement of the list of contributories only enables the ascertainment of the amount due but it dies not ipso facto oblige the contributory to pay the money entered against him in the list. Section 187 provided a machinery for realising the all money form the contrubutory. to pay the money entered against him in the list. Section 187 provides a machinery for realising the call money for the contributory. In our judge in Official Receiver, Link Industries Ltd. v. Ramanathan Chettiar we have held that the provisions of section 187 would apply to a case where the unpaid share money is called for the first time after liquidation and also to call moneys which had become exigible before the date of liquidation by virtue of a call made by the diorites while the company was a going concern. It would follow form the above that, if the liquidator had a right to make a call on the respondent, the latter would be included in the list of contributories subject to the determination of the question whether the shares were allotted to hi conditionally or notIt is however contended that the liquidator would have no power to make a call on the respondent, as the company had parted with its rights in relation to the unpaid share amount by exacting an English mortgage over them. Mr. V. Thiagarajan, appearing or the respondent, contended that, as the unpaid share amount was a debt due to the company, it was an actionable claim, and that, when a security was created over such actionable claim, particularly; b;y ;way of an English mortgage, it amounted to an assignment of the debt and the assignor thereafter would have no interest therein t enable it to take proceedings in the company court. It was further contended that, as the money due in respect of future calls had been assigned to the mortgagee, who became thereafter ;the person entitled to collect the money, the claim of such money would be outside the liquidation proceedings, as it is, in essence, claim by the secured creditor. We shall consider the contention presently

It is not disputed that the company in the instant case had the power to mortgage the share money not yet called by it. Under section 21(2) of the Act, all money payable by any; member to the company under the memorandum or articles will be a debt ;due form him to the company. that would mean that the uncalled share money would be a debt due by the shareholder to the company. although by reason of the call not having been made, , it had not become payable. A mortgage executed by the company, securing the unpaid share money, will, therefore, amount to an assignment of the future calls that may be made by it in favour of the mortgagee, the creation of a security over actionable claim of that kind could only be by way of assignment under section 130 of the Transfer of Property Act. The fact that the right of the company in regard to the unpaid shares has been assigned, cannot alter the real character of the transaction, namely, that such assignment wa intended only by way of security--the assignors right to redeem would subsist till it is put an wend to to barred. The mortgagee, in case him claim is otherwise satisfied , will have to recovery the same ; if his claim is satisfies out of a portion of the call money, he will have to pay the balance to the company and till then he ;will be in the position of a trustee for the company in regard to the surplus. The transaction being by way of an English mortgage, the company will have a legal right in the equity of redemption. In Ram Kinkar Banerjee v. Satya Charan Srimani, the privy Council held that the interest which remains in a mortgagor under an English mortgage in a legal interest and the transfer to the mortgagee under an appropriated English mortgage would not amount o a transfer of an absolute interest. therefore, whether the assignment, in the instant case, of the claim to unpaid share money is regarded as an assignment of actionable claim or as an assignment by way; of English mortgage, the company will have even during the subsistence of the mortgage a substantial beneficial or legal interest in the call money. Section 156 of the Companies ACt, which creates a statutory liability o the part of a shareholder who was in arrears of call money or in respect of whose shares there remained moneys uncalled, should include even a case where a mortgage had been created over the call moneys, as the interest of the company in regard to the unpaid share money, which had been assigned over to a mortgagee, would still be as asset of the company. The nature of the interest of the company in the call money validly mortgaged has been considered in In re Pyle Works, where Cotton L.J. observed

"But then the question arise , what are to be considered assets or property of the company In my opinion, the assets or property of the company which are referred to in those sections must mean that portion of the capital which the directors have not actually dealt with before the winding-up commenced. that portion of the capital, being the property of the company, must be got in by the liquidator ; but if the legal estate, so to speak, i outstanding in a mortgagee, then the only; portion of that property which the liquidator can look upon as a fund in the winding-up for payment of the debts of the creditors will be the equity of redemption, or, in other worlds, that portion of the property remaining after the satisfaction of all the obligations which the director have properly thrown upon this part of the property of the company." *

This view was approved of by the privy council in Newton v. Anglo-Australian Investment Co.s Debenture-Holder, where Lord Macnaghten observed

"The liability of a contributory as a present member to pay calls in the winding up is not a liability springing into existence for the first time on the company going into liquidation. It is merely the ripening of

(1) 1939 L.R. 66 I.A. 50. (2) 1890 (44) Ch(d) 534, 577. (3) 1895 AC 244

that liability which the contributory undertook when he became a member. The liquidator, no doubt, is bound to distribute what belong to the company in the manner prescribed by the Act. But, after all, the question, what dies belong to the company What are its assets or its property That must depend on what dispositions have been made, and what charges have been validly created while the company acting within it powers was free to deal as it pleased with its own." *

The question in the two cases arose as to the validity of a charge created by the company before its liquidation. After liquidation supervened, a contention was raised that the liquidator was entitled to receive the entire call money, without any obligation to pay the shareholder, for the benefit of the simple money creditors. It was held in those cases that the mortgage or charge continued to be valid even after winding up. The observation referred to above how clearly; that the liquidator would be entitled to an interest the unpaid call money. If so much is certain, the next step is easy. The liquidator n able t call the money due form the shareholder under the machinery provided in the companies Act, and outs of the sums realized , ap the mortgagee, and if there is any surplus, utilise it for the purpose of liquidity. We shall show presently that he will be the only; person entitled to make the call. When the liquidator takes steps to realise the call money under those circumstances, he is really not ding as the agent of the mortgagee or by way of enforcing the mortgages claim, but collecting monies for the purpose of winding up, though incidentally;he may; have to payoff the mortgage out of the motes realised. To hold otherwise, i.e. that the mortgagee alone could recover the calls, would lead to an inconvenience with can best be expressed ny way of illustration. Suppose a company had call money due form a shareholder to the extent of one lakh of urges, but that uncalled share money had been mortgaged to a mortgagee whose claim was about Rs. 500. If not be enabled to her the large sum of money due to the company foster paying off the mortgagee ; but he will have to wait for the pleasure of the mortgagee to realise his moneys and take the surplus. A contention which leads to this result can no obviously be soundMr.V.Thyagarajan, however, placed considerable release on the decision, in Muthukrishier v. Veeraraghava Iyer and Santuram Hari v. Trust of India Assurance Co., as being contrary to what W. have stated above. In the former case, it was held that, where a promissory not was h subject-matter of a mortgage by the payee thereof in

(1) 1915 (38) ILR(Mad) 297. (2) 1945 AIR(Bom) 11

favour of a third party, the transaction amounted to an assignment of the promissory not e its in favour of the mortgagee, and the right to sue on such assignment would only vest in the mortgagee, and the original pate would not be entitled to instate the a suit thereon. in the latter case, there was an assignment of a life assurance policy by way of security. Chagla. J. held that it wa not competent of the assingnor to sue the insurance company for the amount due under the policy o the ground that, on the transfer of an atonal claim , all rights remedies of the transferor vested in the transfer, and that, thereafter, the tramsferee alone has entitled to enforce the remedy; as ;there ;was no interest lift in the transereor which would entitle aim to mountain a suit. The learned judge quite with approval the follwing observation, s of Lord User M.R. in Read v. Brow

"The debt is transferred to the assignee and becomes as thug it had been his for the beginning ; it is no longs to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him ; the assignee becomes the assignee f a legal debt and is not mullion assignee inequity, and the debt being hi, he can sue ;for it, and sue in his own name." *

We do not at ;all doubt that, where a mortgage is created over actionable claim the transaction is, in form, an assignment of the actionable climb itself, and the assignee would be the person entitled to full a suit. But the question is whether that rule would apply in all its rougher regardless of the nature of the subject-matter of the mortgage. The rule was no applied by this courts the case of ;ledges (vide Official Assignee, Madras v. Khimsura. I diayiadaru Chandrasedarlingam v. Nagabhushanam Ramesam J. sitting singly; held that a person who transferred a claim to past Meissen profits (which would be an actionable claim) could maintain a suit for the benefit of the assignee and that he could be make to hand over the amount in that suit to the assignee. The learned judge observed that Chapter VIII of the Transfer of Property ACt was intended to enable the transfers of actionable claims to maintain the action and was not intended to lay down that the transferor himself could not maintain an action for the benefit of the transfer. It is, however, unnecessary; for s to decide as to which of the two views, is correct, they had been no call of the unpaid share moneyUncalled share money would, no doubt, be a debt by virtue of the fiction created by section 21(2). But the debt had not become exigible

(1) 1889 22 Q.B.D. 128, 132 (2) 1941 ILR(Mad) 378. (3) 1927 (53) MLJ 342 [LQ/MadHC/1927/106]

It was payable only on the director deciding to call the share money. The right of the company to unpaid capital, as laid down in Bank of South Australia v. Abrahams is "strictly speaking, more in the nature of power than of property." By virtue of the convenient contained in the mortgage, it will, of course, be open to the mortgagee to call upon the directors to exercise that power and call the unpaid share money. He could also require the liquidator to so likewise if the company had been directed to be could up. Indeed, in the mortgage deed in the instant case, such power is expressly; vested in the mortgagee. While, on the trim of the mortgage, the mortgagee could require the directors or the liquidator, as the case may be, to call the unpaid share money he could not himself do so. It follows that, notwithstanding the mortgage, it is the company of the liquidator that will have to make the call. In Buckley oh the Companies ACts, 12th edition, page 222, it is stated

"A mortgage of uncalled capital must be treated as a mortgage of a chose in action....Tnhe holder of a charge on include capital is, it seems, entitled to a remedy by foreclosure against the uncalled capital.....But inasmuch as after winding up it is only; the liquidator who can make calls, the realisation of the security on called capital must be through the liquidator, and if made by the acute the jurisdictions by an order in the winding up. If necessary the receiver in the action may be empowered to use the liquidators name to he in the call." *

Sadler v. Worley was a case where a debenture created a floating charge of all proper of the company, present and future, including uncalled capital. The company was could up, and a qquestion arose as t the for in which judgment was to be entered tn the mortgages (debenture-holders) action for foreclosure. Kikewich J. observedBut these are the assets of a company, ad some of them cannot ;be ;realised except by the exercise of powers which are vested by state and articles of association in the company itself as represented by directors or liquidator. To take the most extreme and most embarrassing item, how can there be foreclosure of uncalled capital It cannot be vested in the mortgagee, and the extreme limit of his right must b;e to have the power of calling on the directors or liquidator to exercise their poser on his half. This sounds somewhat anomalous. but it must be remembered that a mortgage of uncalled capital an be effectual made ; and the decisions sanction in that would be idle if they did not also sanction the realist of the mortgage security. If it be urged that such realization must be by sale , the answer is that a sale is open to the same objection.

(1) 1875 L.R. 6 P.C. 265 (2) 1894 2 Cd.D. 170, 175, 177

In the judgment as drawn up, the leaned judge gave the direction

And it is ordered that in such case the defendant company, ad the liquidator thereof for the time being, do all such act, and executor all such continuous and deeds, as may be necessary for vesting in the planintff the said mortgage properly, such conveyances and deeds to be settled by the judge in case the parties differ." *

This decision would show that it is the liquidator alone after winding up that would be competent to make the call of the benefit of the mortgagee. In an earlier decision in Fowler v. Boards Patent Night Light Co., it wa held that, where a company had been order aid to be would up, the power of its directors to make calls came ipso facto to an end, and that thereafter the power to make calls would be with the liquidator, and that, where there was a charge created over uncvaled capitol by the compete infavour of its debenture holders and a winding up of the company supervened, the liquidator alone should make the lien the winding up and not outside it. It was, however, held that it was open to a receiver in the mortagees suit to the empowered to take proceedings in the name of the liquidator for getting in the call. In In re Wetkinster Syndicate Ltd., a mortgagee of uncalled capital applied in the winding up of the company to direct the liquidator to proceed with the settlement of the last of contributories and to make calls in respect of unpaid share money. Neville J. observedIt appears that it has been the practice for sometime past, where a receiver has been appointed in a debenture-holders action against a company in liquidation, if uncalled capital is included in the security, to allow, in proper cases, the receiver, upon giving the liquidator a proper indemnity, to use the name of the latter for the purposes of recovering three calls made by him, I see no objection to the continuation of this practice."

And an order in terms of the prayer was made

From the principle laid down in the above cases it will follow that, not with standing the creation of a mortgage by the company over its uncalled capital, the proper procedure for the mortgagee would-be to ask the company, if it is a going concern to call in the unpaid share ;money and pay the ;mortgagee, or in case the company has been directed to be ;would up, to ask the liquidator to call in those money;s

Mr. Thyagarajan, however, contends that the principle of these cases could be applied only to a case where there has been ;no call by the directors o the share ;money prior to the winding up, there being unpaid share money ;to be called for the first the after liquidation

(1) 1893 (1) Ch(D) 724. (2) 1908 W.N. 236

and that a case like the present, where the call had been made by the director, would stand on a different footing, in as must as such call money had become a debt payable by the shareholder. In Official Receiver, Link Industries v. Ramanathan Chettiar, we have held that there could be no distinction in regard to the claim against the contributory, whether the call had been made by the directors interior to the winding up or whether such call was made for the first time by liquidator after winding up. We act see no distinction in principle between the two cases so far as the right of the official liquidator to call in the unpaid share moneys is concerned, particularly in the view we have stated that the company is entitled at least to a beneficial interest in the surplus after meeting the claim of the mortgagees. that there is no distinction between the case of a call made before the winding up and that made after it has been recongnised by Stirling J. in In re Pyle Works, though for meeting a different contention. The learned judge has ;referred to the as in In re Sanky Brook Coal Co., where a charge was given on an uncalled share money ; as a part of that arrangement a call was thereafter made by the company ; buy it was voluntarily; would up before the entire proceeds were brought in. It was held that the charge was valid ; the liquidators were directed to apply; the proceeds of the call towards payment of the debt secured by the charge. That decision recongnised the power of the liquidator to call in moneys due in respect of calls made earlier than winding up and over which a charge had been created. It follows that, on principle and authority alike, it would be competent for the official liquidator to include a shareholder, whose name appears in the share register in the list of contributories in respect o fat e amount of share money due form him albeit there has ;been a valid ;mortgage created over such call money by the company while it was functioning. With great respect to Balakrishn Aiyar J., therefore, we are unable to agree with his view that, on the execution of the English mortgage in favour of the Industrial Finance Corporation over the unpaid call money, the company and the liquidator lost all right s t call in the money and that the latter cannot settle the last of contributories, including the respondent as a contributoryBut this does not wholly dispose of the controversy between the parties. As stated earlier, Balakrishn Aiyar J. did not give an;y final decision of the question whether the case of the respondent that there was an assurance on the part of the then managing agents not to make a call on him in respect ;of unpaid share money till he was

(2) 1870 44 Ch., D. 534. (3) 1870 L.R. 9 Eq. 721

able to transfer three-fourth of his holding at a profit, and whether such an assurance, even if made out, would exonerate the respond form liability to pay the unpaid share money. It has, therefore, become necessary while setting aside the judgment of Baladrishna Aiyar J.in Link Industries, In re to remand the application to the learned judge exercising jurisdiction over the company matters for final disposal ; there will be an order accordingly

The costs of this appeal will abide the final result

Case remanded.