Contributory is a term used in the case of winding up of a company

P. 1. Mis Sunset Constructions Limited is being wound up by the court. The Official Liquidator after realisation of the assets has an amount of Rs. 28,00,000 at his disposal towards payment to the creditors of the company. The list of creditors is given below:
Rs.
(i) Dues to secured creditors 20,00,000
(ii) Dues to workers 15,00,000
(iii) Taxes, etc., payable to the government authorities 2,00,000
(iv) Unsecured creditors 40,00,000
Since the available amount is insufficient to meet the claims of all the creditors, explain the procedure to be followed for payment of dues as provided in the Companies Act, 1956. Assuming that the company has created a charge on all the assets of the
company in favour of the secured creditors. [C.A. (Final) May, 1999J
.9lns. Section 530 of the Companies Act, 1956 lays down the procedure for payment of debts out of the available funds with the Official Liquidator. However, Section 529A provides for overriding of the preferential payments as mentioned in Section 530. According to Section 529 A, notwithstanding anything contained in other provisions of this Act or any other law for the time being in force, in the winding up of a company,
(a) workmen's dues; and
(b) debts due to secured creditors shall be paid in priority to all other debts.
The above debts have to be paid in full unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.
In the light of the legal provisions explained, the funds available with the Official Liquidator are not even sufficient to meet fully the dues payable to secured creditors and workers. Thus, tax dues to the tune of Rs. 2,00,000/- payable to Government authorities will not get any payment even though they are to be considered as preferential payments as per Section 530 of the Act. The Secured Creditors dues and workers dues will get abated equally and they shall get Rs. 16lakhs and Rs. 12lakhs respectively. The other creditors will get nothing.

P. 2. Mis. XYZ Limited was wound up with effect from 15.3.2000 by an order of the Court. Mr. A, who ceased to be a member of the company from 1.6.1999, has received a notice from the liquidator that he should deposit a sum of Rs. 5,000 as his contribution towards the liability on the shares previously held by him. In this context explain whether Mr. A can be called a contributory and whether he can be made liable and
whether there is any limitation on his liability. [C.A. (Final) May, 2000J
.9lns. Contributory is a term used in the case of winding up of a company. A contributory can be a past or present member and is liable to contribute to the assets of the company in the event of winding up. In the present case Mr. A ceased to be a member of the company when it went into liquidation from 15.3.2000. Thus, Mr. A will be treated as a past member. He will be required to contribute to the assets of the company only if the following conditions are fulfilled: