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Issues Involved:
1. Appointment of Provisional Liquidator 2. Objections to Winding Up Petition 3. Genuineness and Bona Fide Nature of the Defence 4. Limitation Period 5. Commercial Solvency of the Company Summary: 1. Appointment of Provisional Liquidator: The petition under section 433(e) of the Companies Act, 1956, was admitted on April 14, 1980. The company made an application for the appointment of a provisional liquidator. The court directed a commissioner to verify the company's stocks and deferred the newspaper advertisement of the petition, considering the potential harm to the company and the likelihood of an out-of-court settlement. 2. Objections to Winding Up Petition: The company filed objections on May 29, 1980, arguing that the debts were time-barred and that the loans were disbursed injuriously, causing damage and losses. The company contended that the dispute should be settled in a civil court, not in a winding-up petition. The bank, however, asserted that the debts were not time-barred due to various revival letters and balance-sheet acknowledgments, and that the civil suits and winding-up petition sought different reliefs. 3. Genuineness and Bona Fide Nature of the Defence: The court examined whether the company's defence was genuine and bona fide. The company claimed damages and counter-claims, asserting that the bank's disbursement of loans caused losses. The court found that the company's defence was not substantial or bona fide, noting that even if the counter-claim was allowed, the company admitted to owing a significant amount to the bank. The court cited the Supreme Court's decision in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., emphasizing that a mere plea of counter-claim does not constitute a tenable defence. 4. Limitation Period: The company argued that the debts were time-barred and that revival letters signed by its directors, who were also creditors, were invalid. The court, however, held that acknowledgments in balance-sheets and revival letters constituted valid acknowledgments under section 18 of the Limitation Act, 1963. The court relied on several Indian and foreign decisions, including Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Co. Ltd., and Gee and Co. (Woolwich) Ltd., In re, to conclude that the debts were not barred by time. 5. Commercial Solvency of the Company: The company argued that it was commercially solvent and had been performing well without the bank's assistance. The court noted that the company's liabilities were substantial, amounting to nearly five crores, and that the profits were insufficient to cover even the interest on these sums. The court emphasized the need to investigate further in public interest and decided to proceed with the advertisement of the petition. Conclusion: The court directed that the petition be advertised in accordance with law, setting the date of further hearing as June 3, 1983. The court emphasized that public interest served by the winding-up proceedings outweighed the potential harm to the company.
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