' The respondent-Company has been ordered to be wound up. The Official Liquidator after going into state of assets and liabilities has reported that the company is solvent. He, therefore, seeks guidance of this Court for the purpose of disposing of the surplus amount. The company had its creditors but admittedly they had no express or implied contract with the company for the payment of any interest. The short question requiring determination, therefore, is whether any interest is payable to the creditors, in the absence of a contract, in a case where the company is solvent ?
2. The Official Liquidator has referred to the case of Dehra DunMussoorie Electric Tramway Co. Ltd.
(I). In that case Young, J. Held that when there was a surplus in the winding up of a company, the creditors are entitled to payment of interest from the date of winding up until payment and that such interest is pas, able not only to the creditors whose debts carried interest but also to those in whose cases there was no contract for interest.
3. In arriving at this decision, Young, J. Stated that the point was covered by an authority and quoted Devi Ditta v. Official Liquidator (2). That case is undoubtedly an authority for the proposition that the creditors whose debts carry interest are entiled to claim interest upto the date of payment, but it furnishes no authority for the further proposition that creditors are entitled to interest in the absence of a contract. Support was sought in this case from Re : Humber Iron Works and Ship- building Co. Ltd. (3). Reliance was also placed on Devi Ditta Mal v. Official Liquidatar (4). The Official Liquidator has also relied on certain other judgments but they were decided under the general law.
No analogy can, therefore, be imported therefrom in this case of a specific nature.
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. (5) 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. (6) and of the Court of Appeal in Re : Humber Iron Works and Shipbuilding 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, I e. Dehra Dun-Mussoorie Electric Tramway Co.
Ltd. (7) 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.
(1) (1934) 56 All. 423 (2) AIR 1921 Lab. 346
(3) (1869) 4 Ch. 643 (4) AIR 1921 Lah. 346
(5) AIR 1948 Mad. 64 (6) (1963) 8 L T 846
(7) AIR 1934 All. 189
6. The learned Judge while deciding the above case relied on Devi Ditta Mal v.
0. L. (1) 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 229 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. Giffard, L. 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 contract ; 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 (2) 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 "Now, 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. (3).
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
(1) AIR 1921 Lab. 346 (2) AIR 1931 Rang. 334
(3) (1867).M R Eq. Cas. 250 ' turns out to be solvent, in the sense that its assets are more than its 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 not 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.