1961 (1) TMI 74 - HC - Companies Law

Summary

Issues Involved:
1. Whether the petitioners in the O.P. are secured creditors.
2. Whether secured creditors can maintain a petition for winding up without abandoning their security.
3. Whether the claims of the petitioners are barred by limitation.
4. Whether the financial embarrassment of the Company is temporary and if it is in the interest of the Company to pass a winding-up order.
5. Whether the Industrial Trust Fund is a corporation or a department of the Government.

Detailed Analysis:

Issue 1: Whether the petitioners in the O.P. are secured creditors
The appellant argued that the petitioners are not secured creditors. However, the petitioners had provided loans to the Company under a deed of mortgage and promissory notes, which implies a secured interest in the Company's assets. The court did not specifically address this issue in detail, but it was implied that the petitioners held a secured interest.

Issue 2: Whether secured creditors can maintain a petition for winding up without abandoning their security
The appellant contended that if the petitioners are secured creditors, they cannot maintain the petition for winding up without abandoning their security. This argument was not upheld by the court. The court directed the winding up of the Company under the provisions of the Companies Act (I of 1956), indicating that the petitioners could maintain the petition without abandoning their security.

Issue 3: Whether the claims of the petitioners are barred by limitation
The appellant argued that the claims of the petitioners are barred by limitation, asserting that the mortgage was not registered under the Companies Act and thus void against any creditor of the Company. The court rejected this argument, holding that the Industrial Trust Fund, H.E.H. the Nizam's Government, is a department of the Government and not a corporation. Therefore, the claim is governed by Article 149 of the Indian Limitation Act, which prescribes a period of 60 years for any suit by or on behalf of the Central Government or a State Government. Consequently, the claim was not barred by limitation.

Issue 4: Whether the financial embarrassment of the Company is temporary and if it is in the interest of the Company to pass a winding-up order
The appellant claimed that the financial embarrassment of the Company is only temporary and that it is not in the interest of the Company to pass a winding-up order. However, the court found that the Company had ceased to function since 1949, and its assets were insufficient to meet its liabilities. Therefore, the court upheld the winding-up order, indicating that it was in the interest of the Company and its creditors.

Issue 5: Whether the Industrial Trust Fund is a corporation or a department of the Government
The appellant argued that the Industrial Trust Fund is a corporation and not a department of the Government. The court examined the Hyderabad Industrial Fund Rules and other related documents and concluded that the Industrial Trust Fund is a department of the Government. The court noted that the Fund was controlled by civil servants in the course of their official duties and did not possess the attributes of a corporation, such as perpetual succession and a seal. The court also referenced the Hyderabad Industrial Fund Rules (Andhra Pradesh Amendment) Act, 1957, which stated that the Industrial Fund shall be controlled and administered by the State Government. Therefore, the court held that the Industrial Trust Fund is a department of the Government, and the claim is governed by Article 149 of the Limitation Act.

Conclusion:
The appeal was dismissed with costs, and the court upheld the winding-up order of the Deccan Porcelain and Potteries Ltd. The court found that the Industrial Trust Fund is a department of the Government, and the claim is not barred by limitation. The objections raised by the appellant were overruled, and the Official Liquidator was directed to take charge of all the properties and effects of the Company.