Contingent or conditional liability.

(a) If Mr. A had ceased to be a member of the company within a period of one
year before the commencement of the winding up.
(b) If the debt or liability of the company was contracted or incurred while he was
a member.
(c) If the present members are unable to meet the liabilities in respect of the debts
incurred while he was a member (Section 426).
b this case since one year has not elapsed, Mr. A will be liable to contribute to the
assets of the company provided other two conditions are also satisfied.
In any case, the liability of the past or present member cannot exceed the unpaid amount on the shares and if the shares are full paid-up, no contribution is required to be made by the members, past or present [Section 426 of the Companies Act, 1956].
P. 3. State, with reasons, whether the following are 'debts' for the purpose of Section 433 (e) of the Companies Act, 1956:
(i) Contingent or conditional liability.
(ii) Non-payment of dividend declared. (iii) Non-payment of salary to an employee. (iv) Non-payment to a creditor of a disputed liability.
[C.S. (Final) June, 2001J
.9Lns. Section 433 of the Companies Act, 1956 provides for the circumstances in which the company may be wound up by the court. Clause (e) of Section 433 provides that company may be wound up by the court if the company is unable to pay its debts.
(i) Contingent or conditional liability is not a debt unless the contingency or the condition has already happened or has been satisfied and debt has crystallised. So long as the matter remains as a contingent or its crystallisation depends on fulfilment of a condition and such condition has not been satisfied, it is not a debt under Section 433 (e).
(ii) Non-payment of dividend declared-Dividend once declared at the annual general meeting of the company, becomes a debt and it is to be paid in the manner laid down in the Companies Act-Hari Prasad v. Amalgamated Commercial Traders (Pvt.) Ltd. (1964) 34 Compo Cas. 209 (Madras). Hence, non-payment of a declared dividend is a debt under Section 433 (e).
(iii) Non payment of Salary to an employee-See Pg. AII-l48 (What is Debt?)
(iv) Non-payment to a creditor of a disputed liability-The Supreme Court of India in
the case of Madhusudan Goverdhandas and Co. v. Madhuwoolen Industries Pvt. Ltd. (1972) 42 Compo Cases. 125, had held that where the petition for the winding up of the company is based on the ground of the inability of the company to pay its debts, if the debt is bona fide disputed and the defence is a substantial one, the Court will not order winding up. Hence it is not a debt
under Section 433 (0).
P.4. The High Court a~ Mumbai appointed the Official Liquidator as the Liquidator of Imprudent Engineering Company Ltd. Some of the creditors have brought to the notice of the Liquidator that though the company is in liquidation for the past several years, nothing worthwhile has been done to speed up the winding-up and no documents have been filed to indicate the progress of Liquidation. Examine in this connec