1964 (6) TMI 42 - HC - Companies Law

Summary

Issues Involved:
1. Petitioner's claim for winding up the company.
2. Alleged indebtedness of the company.
3. Evidence of loans and advances.
4. Allegations of collusion and ulterior motives.
5. Opposition by the objector.
6. Admission of additional evidence.
7. Sufficiency of grounds for winding up.
8. Abuse of court process.

Detailed Analysis:

1. Petitioner's Claim for Winding Up the Company:
The petitioner sought an order for winding up East Kajoria Collieries (P.) Ltd. on the grounds of the company's failure to pay a debt amounting to Rs. 48,007.02 nP. The petitioner claimed that diverse sums were lent and advanced to the company for business purposes, resulting in a balance due of Rs. 49,490.02 nP as of April 1, 1960. A statutory notice was served, but the company neglected to pay the sum.

2. Alleged Indebtedness of the Company:
The petitioner relied on an account annexed to the petition, showing a debit balance of Rs. 49,490.02 nP as of April 1, 1960, and subsequent payments reducing the balance to Rs. 48,007.02 nP. The company's secretary admitted the debt and the company's inability to pay in a letter dated November 3, 1962. However, the court noted the absence of detailed evidence of the loans, such as particulars of advances or how the debit balance was arrived at.

3. Evidence of Loans and Advances:
The petition lacked detailed evidence of the loans, with no particulars of advances between 1947 and 1960. The accounts annexed to an affidavit by Basanta Kumar Bose showed journal entries without reference to the cash book, and no indication of payments by cheques. The petition did not contain evidence of a larger sum being advanced and adjusted by shares allotment, contrary to what was alleged in the affidavit.

4. Allegations of Collusion and Ulterior Motives:
The court found significant evidence of collusion, noting that the directors controlling the petitioner-company also controlled the debtor company. The petitioner and the company operated from the same address, and the company had readily admitted its liability and inability to pay. The court concluded that the real object of the petition was not to wind up the company but to compel the objector to vacate the company's colliery.

5. Opposition by the Objector:
Jaipuria Kajoria Collieries Ltd. opposed the application, alleging that the petition was a tactic to force the objector out of possession of the company's colliery. The objector had entered into agreements with the company for amalgamation and had advanced Rs. 98,000 for operating the colliery. The objector contended that the petition was a result of disputes between the directors of the company and the objector.

6. Admission of Additional Evidence:
The court rejected the petitioner's request to file a further affidavit to introduce additional evidence of indebtedness. The court emphasized that grounds for winding up must be made in the petition itself, and additional evidence should not be admitted to support the petition.

7. Sufficiency of Grounds for Winding Up:
The court held that the petition did not contain sufficient evidence of the company's indebtedness to justify a winding up order. The accounts annexed to the petition were insufficient to establish the company's liability. The court referred to legal precedents, emphasizing that a winding up petition must allege facts justifying the order and sufficient evidence must be presented in the petition itself.

8. Abuse of Court Process:
The court concluded that the petition was an abuse of the court process. The real object was not to obtain a winding up order for the benefit of creditors but to secure the release of the company's assets from the objector's possession. The court cited observations from previous cases, asserting that the coercive machinery of the winding up court should not be used for purposes other than securing a winding up order for the benefit of creditors.

Conclusion:
The application for winding up was dismissed, with the petitioner ordered to pay the costs. The court directed that any monies spent by the receiver and sums advanced to the receiver be paid out of the company's assets, and the receiver was discharged subject to filing accounts within one month.