1931 (5) TMI 34 - HC - Companies Law

Company when deemed unable to pay its debts and Substitution of creditor or contributory for original petitioner

Summary

Issues:
Substitution of petitioner under Rule 11(i) of the Rules made by the High Court under section 246 of the Indian Companies Act, 1913; Validity of petition for winding up of the bank under clause (vi) of section 162 of the Act; Allegations of mala fide intentions in petition for winding up; Approval of scheme of assumption of liabilities and assets of the bank by the Punjab National Bank Limited; Compliance with provisions of sections 153 and 153-A of the Indian Companies Act and section 44-A of the Banking Companies Act, 1949.

Analysis:
The judgment addresses the issue of substitution of a petitioner in Civil Original No. 17 of 1951 under Rule 11(i) of the Rules made by the High Court under section 246 of the Indian Companies Act, 1913. The rule allows the court to substitute a petitioner who has a right to present a winding-up petition and is desirous of prosecuting it if the original petitioner fails to proceed diligently. The court has discretion in such matters to prevent potential misuse of the process, especially in financial crises.

The judgment also delves into the validity of the petition for winding up of the bank under clause (vi) of section 162 of the Act. It emphasizes that such powers should be exercised only with strong grounds as companies are primarily governed by their members. In this case, an extraordinary general meeting of the bank shareholders ratified resolutions confirming an agreement with the Punjab National Bank Limited, indicating that the shareholders acted in the bank's interest.

Furthermore, the judgment examines the approval of the scheme of assumption of liabilities and assets of the bank by the Punjab National Bank Limited. The shareholders of the Punjab National Bank unanimously approved the scheme, and the agreement was given effect by both banks. The court concludes that continuing the winding-up petition would be detrimental to the interests of depositors and shareholders, especially as the petition was deemed mala fide.

Regarding compliance with specific legal provisions, the judgment clarifies that the agreement between the banks did not contravene sections 153 and 153-A of the Indian Companies Act or section 44-A of the Banking Companies Act, 1949. The agreement was executed within the bank's powers as per its memorandum and articles of association, with subsequent approval from the shareholders.

In conclusion, the court refuses to substitute the petitioner and dismisses the petition for non-prosecution based on the finding of mala fide intentions. It also dismisses Civil Miscellaneous No. 15 of 1951 and makes no order as to costs in the proceedings, considering the circumstances of the case.