XYZ Ltd., took a loan of ₹ 50 lakh from a bank for its growth and expansion plans . The company was unable to repay the loan amount because of heavy losses incurred in the business on a continuous basis .
The management of the company asked its shareholders to contribute towards repayment of the loan .
But the shareholders refused as they had already paid the full amount due on their shares . The bank filled a case against XYZ Ltd. in the court . The court held that the shareholders of the company were not liable to repay the loan as they had not unpaid amount on shares .
(a) Is the court's decision justified ? Give reason in support of your answer .
(b) Which characteristic of the company form of organisation protected the shareholders ? Explain .