1966 (3) TMI 19 - SC - Companies Law

Whether, if proceedings were taken against the company under section 46(5A) of the Indian Income-tax Act, the company was deprived of the opportunity to pay the sum due to the respondent or to secure or compound for it to the reasonable satisfaction of the creditor within the meaning of section 434(1)(a) of the Indian Companies Act? Whether there was a bona fide dispute in respect of the liability of the company to the joint family? Held that - No doubt courts have held, in our view rightly, that a statutory notice under section 434(1)(a) of the Indian Companies Act shall strictly comply with the provisions of the said section. In the instant case the receiver asked the debtor to pay the amount due to the joint family to the Additional Collector, Bombay, towards the income-tax due from the joint family. The debtor was not only not asked to do something which was legally prohibited but was asked to comply with the Collector s requisition under section 46 of the Indian Income-tax Act, 1922. By not doing so, the company clearly neglected to pay the amount within the meaning of section 434 of the Indian Companies Act. In the present case, Narayanlal Bansilal was not only the karta of the joint family but was also the chairman of the board of directors of the company. In the partition suit he filed an affidavit wherein he stated from which it is manifest that the alleged dispute was not bona fide but was only a part of a scheme of collusion between the company and the karta of the joint family. There are, therefore, no merits in any of the contentions raised by the company. Appeal dismissed.

Issues Involved:
1. Power of the court receiver to file a petition for winding-up of the company.
2. Status of the court receiver as a "creditor" under the Indian Companies Act.
3. Compliance of the statutory notice requirements under Section 434 of the Indian Companies Act.
4. The existence of a bona fide dispute regarding the liability of the company to the joint family.

Issue-wise Detailed Analysis:

1. Power of the Court Receiver to File a Petition for Winding-Up of the Company:

The first contention was whether the court receiver had the authority to file a winding-up petition. The argument was based on Order XL, rule 1(d) of the Code of Civil Procedure, which allows a court to confer upon a receiver the power to bring a suit. The court held that even if a winding-up petition is not considered a suit under Order XL, rule 1(d), the other powers under this rule are comprehensive enough to include the realization of debts due to the joint family. The court cited Palmer's Company Precedents, which states that a winding-up petition is a proper remedy for enforcing payment of a just debt and is a form of equitable execution. Therefore, the court concluded that the receiver had the power to file the petition for winding-up of the company.

2. Status of the Court Receiver as a "Creditor" under the Indian Companies Act:

The second contention was whether the court receiver qualifies as a "creditor" under the Indian Companies Act. The relevant provisions, Sections 433, 434, and 439, indicate that a creditor can file a winding-up petition if the company is unable to pay its debts. The court referenced the case In re Sacker, where it was held that a receiver is not a creditor as he cannot sue for the debt in his own name. However, the court also discussed In re Macoun, which clarified that if a receiver can maintain an action at law or in equity for the recovery of a debt, he would be a good petitioning creditor. The court concluded that a receiver authorized to file suits under Order XL of the Code of Civil Procedure can be considered a creditor. Thus, the receiver in this case was deemed a creditor within the meaning of Section 439(1)(b) of the Indian Companies Act.

3. Compliance of the Statutory Notice Requirements under Section 434 of the Indian Companies Act:

The third contention was whether the notice issued by the receiver complied with Section 434 of the Indian Companies Act. The notice demanded payment to the Additional Collector of Bombay rather than to the joint family or the receiver. The court held that Section 434 does not specify that the demand must be to pay the creditor directly; it only requires that the debtor can get a full discharge of liability by making the payment. Since the notice under Section 46(5A) of the Indian Income-tax Act required the company to pay the amount to the Additional Collector, compliance with this notice would discharge the company's liability. Therefore, the notice was deemed compliant with Section 434.

4. The Existence of a Bona Fide Dispute Regarding the Liability of the Company to the Joint Family:

The final contention was that there was a bona fide dispute regarding the liability of the company to the joint family. The company argued that the debt was due to four individuals, while the receiver claimed it was due to the joint family. The court referenced W. T. Henley's Telegraph Works Co. Ltd. v. Gorakhpur Electric Supply Co. Ltd., which held that a winding-up order is not justified if there is a bona fide dispute. However, in this case, the court found that the alleged dispute was not bona fide but a scheme of collusion between the company and the karta of the joint family. The court cited an affidavit by Narayanlal Bansilal, the karta, which confirmed that the amount was due to the joint family. Thus, the court rejected the contention of a bona fide dispute.

Conclusion:

The court dismissed the appeal, holding that the court receiver had the power to file the winding-up petition, was a creditor under the Indian Companies Act, had issued a compliant statutory notice, and that there was no bona fide dispute regarding the debt. The appeal was dismissed with costs.

← Previous Next →