The Madras Native Permanent Fund Limited in Liquidation by Fraser and Ross, Liquidators vs T.S. Natesa Sastri and Others

This matter arises out of the liquidation of the Madras Native Permanent Fund Limited which is what is commonly called a Nidhi. The greatest

difficulties arise when these funds are turned into Limited Companies, because their articles are usually drawn without regard either to the

provisions of the Memorandum or to the general law embodied in the Companies Act. The effect of the articles relied upon in this case was shortly

to enable persons who had subscribed for shares of Rs. 100 to sever their connection with the company and end all their liability when they had

paid up Rs. 84. That appears to us not only to be ultra vires of the memorandum but to be a reduction of capital without the assent of the Court

which is directly forbidden by the Indian Companies Act. That being so, it is clear that these 357 persons mentioned in the Liquidators'' list should

be declared to be contributories. Mr. S. Duraiswami Aiyar argued a wider ground before us, namely, that the debts which it was sought to make

these persons liable to contribute to liquidate were debts themselves incurred ultra vires of the powers of the Fund. That may be right or wrong;

but it is obvious that it is premature to discuss it at this stage. When these persons are called upon to contribute to the liquidation of definite debts,

it will be open to them to argue that the debts which they are called upon to contribute to pay are ultra vires of the powers of the company, that is

to say, are not in law debts at all. That must be dealt with on its merits as each case arises. It is not a matter with which we can deal now.

Costs as between attorney and client out of the estate.