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Issues Involved:
1. Validity of the demand notice under Section 163(1) of the Indian Companies Act, 1913. 2. Evidence of the company's inability to pay its debts. 3. Bona fides of the petitioning creditor in filing the winding-up petition. Issue-wise Detailed Analysis: 1. Validity of the Demand Notice under Section 163(1) of the Indian Companies Act, 1913: The primary issue was whether the demand notice served by the agent of the petitioning creditor on the company was valid under Section 163(1) of the Indian Companies Act, 1913. Section 163(1) specifies that a company is deemed unable to pay its debts if a creditor serves a demand "under his hand" requiring payment of a due sum, and the company neglects to pay or secure the sum within three weeks. The court examined whether the phrase "under his hand" necessitated the creditor's personal signature or if an agent's signature sufficed. The court referred to common law principles and previous cases, including Reg. v. Justices of Kent and In re Whitley Partners, Limited, to determine that the phrase "under his hand" generally implies a personal signature unless explicitly stated otherwise by the statute. The court also considered Fricker v. Van Grutten, where it was held that "own consent in writing" required the personal signature of the consenting party. The court concluded that Section 163(1) imposed a penal obligation on the company, and the Legislature intended to ensure no question arose regarding the authority of an agent to serve the demand. Therefore, the demand should be signed personally by the creditor. Since the demand in this case was signed by the creditor's agent, it did not meet the requirements of Section 163(1). 2. Evidence of the Company's Inability to Pay Its Debts: The petitioning creditor also alleged that the company was unable to pay its debts, supported by an affidavit from the agent. However, this allegation was denied by the company. The court noted that the petitioning creditor sought to lead oral evidence to prove the company's insolvency, but the trial judge refused this request. The court cited In re Gold Hill Mines, where Jessel, M.R., emphasized that the petitioner should be prepared with evidence of insolvency. The court agreed with the trial judge's decision, stating that there was no evidence justifying a finding that the company was unable to pay its debts. Moreover, the company had paid the petitioning creditor in full by 5th August, further undermining the insolvency claim. 3. Bona Fides of the Petitioning Creditor in Filing the Winding-Up Petition: The third issue was whether the petitioning creditor filed the winding-up petition in good faith. The court examined the background of the agreement between the creditor and the company's secretary, noting that the creditor had not advanced the full agreed loan amount and had been repaid the difference. The court found that the petitioning creditor's primary objective was to obtain payment of the remaining loan balance, and after receiving full payment by 5th August, there was no legitimate reason to persist with the petition. The court inferred that the creditor's true motive was to ruin the company and avoid his obligation to purchase additional shares. The court concluded that the petition was not filed bona fide and was rightly dismissed by the trial judge on this ground as well. Conclusion: The appeal was dismissed with costs, as the demand notice did not comply with Section 163(1), there was no evidence of the company's inability to pay its debts, and the petitioning creditor did not act in good faith.
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