1982 PLP 2660 (CLC)

4. The contention raised on behalf of the contributories was that the interest was payable only if there was a specific contract about it between the creditors and the company. Reliance, was also placed on Official Receiver v. Rao and Co. (A I R 1948 Mad. 64) where it was held that no interest be paid to a creditor whose debts did not carry interest even when the company is found to be solvent. This is sought to be supported by the decisions of Lord Westbury In re : Hadfield's Patent Cask & Package Co, Ltd. ((1963) 8 L T 846) and of the Court of Appeal to Re : Humber Iron Works and Ship. building Co. Ltd.

5. I have carefully considered the contentions of the learned counsel as well as the case Law cited by them. In the case cited by the Official Liquidator, ie. Dehra Dun‑Mussoorie Electric Tramway Co. Ltd. (A I R 1934 All. 189) referred to in para. 2 above, the learned Judge observed that it cannot really be said that creditors have been paid in full until their claims for interest on the amounts outstanding have also been satisfied. He, therefore, held that it was fair that they should get some sum by way of interest. The above principle was found to be stronger in cases of creditors whose amounts carried interest under a contract. Thus even in the case of interest bearing amounts the learned Judge took the view as a rule of equity and fairness and not of law. In this view of the matter, it cannot be said on the basis of the above judgments that the creditors without a contractual stipulation for interest can claim interest as a matter of right.

6. The learned Judge while deciding the above case relied on Devi Ditta Mal v. O. L. (A I R 1921 Lah. 346) a case decided by a Division Bench of this Court. The learned Judges considered section 147 of the Indian Companies Act of 1882 and section 129 of the 1913 Act and compared the same with the view taken by the English Courts where no such provisions are embodied in that Act. They also relied on various standard textbooks and held as under :‑ ‑‑We consider, therefore, that the trial Court was undoubtedly correct in applying ordinary insolvency rules to this case. The words "existing at the date of the said order" from which Mr. Santanam has attempted to derive advantage appear, as a matter of fact, to have been hardly necessary. They did not exist in the English Act of 1862, but it was always taken for granted that the liabilities to be discharged were then existing at the time when the winding up order was made, (see for instance In re : General Rolling Stock Company (1872) 7 Ch. D 646)." The decision upheld was that creditors whose debts carried interest must be paid in full if the company was solvent.

7. One of the English cases relied on in the above judgment was Humber Iron Works and Shipbuilding Co., where Sir G. M. Gifard, I.. J. opined :‑‑ "I am of the opinion that dividends ought to be paid on the debts as they stand at the date of the winding‑up ; for when the estate is insolvent this rule distributes the assets in the fairest way ; and where the estate is solvent, it works with equal fairness, because. as soon as it is ascertained that there is a surplus, the creditors whose debts carried interest is remitted to his right under his con tract ; and, on the other hand, a creditor who has not stipulated for interest does not get it."

8. In Esmail Esoof Molla v. Chartered Bank of India (A I R 1931 Rang. 334) a Division Bench held that section 229 of the Companies Act is only applicable to an insolvent company and any interest accruing after the commencement of liquidation is not a provable debt under that provision of law. However, the following observations at page 336 concerning the case in hand, may be reproduced with advantage :‑ 66Now, in a series of decisions from 1869 to 1929 it has consistently been held that where a company in liquidation turns out to be solvent in the sense that I have stated creditors whose debts carry interest by agreement or otherwise are entitled out of the surplus assets to payment of interest accruing after the commencement of the liquidation until payment is made of the principal debts at the rate at which by agreement or otherwise interest on such debts is payable." A similar view was taken earlier in re : Herefordshire Banking Co. ((1867) M R Eq. Cas. 250).

9. It will thus be seen that in a series of decisions from 1867 to 1931, it has consistently been held that where a company in liquidation turns out to be solvent, in the sense that its assets are more than it liabilities, the creditors whose debts carry interest by agreement or otherwise are entitled, out of the surplus assets, to the payment of interest. accruing after the commencement of liquidation, till payment, is made of the principal debts. This concession, however, is no permissible to such creditors whose debts did not carry any interest under any contract. In view of the above, the creditors in this case have no right to be paid any interest. There will be no order as to costs. M. Y. H. Order accordingly.