1931 (7) TMI 17 - HC - Companies Law

Winding up - Company when deemed unable to pay its debts, Exercise and control of liquidator s powers and Meetings to ascertain wishes of creditors or contributors

Summary

Issues Involved:
1. Compulsory winding up of the company.
2. Allegations against Venkata Rao.
3. Validity of company resolutions and transactions.
4. Conduct of the Official Liquidator.
5. Costs and expenses of the liquidation.

Detailed Analysis:

1. Compulsory Winding Up of the Company
The judgment revolves around the appeal against the High Court's order for the compulsory winding up of the company. Initially, the petition for winding up was dismissed by a single judge on 3rd November 1922, but this order was reversed by the High Court on 13th November 1924, which decreed the compulsory winding up. The appeal reached the Board after more than six years, creating significant difficulties due to the long duration of the liquidation process.

2. Allegations Against Venkata Rao
The petition for winding up was primarily an attack on Venkata Rao, alleging various misconducts. The petitioners, led by Sabapathi Rao, accused Venkata Rao of manipulating the company's affairs for personal gain, including threats to call up unpaid share capital and improper retention of company balances by his firm. However, the trial judge found no evidence to substantiate these allegations. The judgment notes that the petition was characterized by "reckless unsubstantiated allegations," and the High Court's acceptance of these allegations without proper scrutiny was criticized.

3. Validity of Company Resolutions and Transactions
Key transactions and resolutions, such as the appointment of K.U.S. Ramachander & Co. as treasurers and the leasing of the Raichur factory, were scrutinized. The High Court's decision to declare these transactions void was questioned, particularly since these were approved by the shareholders and the company had no creditors. The judgment emphasizes that the liquidation was driven by the contributories' interests, and their unanimous decisions should have been given due consideration.

4. Conduct of the Official Liquidator
The Official Liquidator's conduct was heavily criticized for being partisan and aligning too closely with the petitioners. The judgment highlights the excessive costs and delays caused by the Liquidator's actions, including the unnecessary inclusion of extensive and irrelevant appendices in the appeal. The Board expressed concern over the Liquidator's lack of impartiality and the detrimental impact of his actions on the liquidation process.

5. Costs and Expenses of the Liquidation
The judgment addresses the allocation of costs, noting that the petitioners should not benefit from costs given the baseless nature of their allegations. The Official Liquidator was ordered to pay the company's costs out of the assets. The judgment also suggests that future proceedings should be conducted with complete impartiality, considering the contributories' wishes to avoid further unnecessary expenses.

Conclusion:
The judgment concludes by maintaining the winding-up order due to the lapse of time and intervening events, despite it not being justified when made. However, the costs order was discharged, and the Official Liquidator was directed to pay the company's costs. The judgment emphasizes the need for impartiality in future liquidation proceedings and careful consideration of the contributories' wishes.