1973 (1) TMI 48 - HC - Companies Law

Summary

Issues:
1. Application under section 433(e) of the Companies Act, 1956 for winding up of the company.
2. Validity of the sanction obtained under section 439(5) of the Companies Act.
3. Consideration of subsequent balance-sheets for the years 1964 to 1970.
4. Calculation of profit in the company's balance-sheets and the impact of depreciation on fixed assets.
5. Determining whether the company is incapable of paying its debts and requires winding up.

Detailed Analysis:
1. The judgment addresses an application filed under section 433(e) of the Companies Act, 1956, by the Registrar of Companies, Bihar, seeking the winding up of Cinco Laboratories Private Ltd., Patna, as the company is unable to pay its debts and requires winding up.

2. The validity of the sanction obtained under section 439(5) of the Companies Act for filing the winding-up application was challenged by the company, citing subsequent balance-sheets filed after the sanction was accorded. However, the court rejected this objection, stating that the sanction remained valid despite the filing of subsequent balance-sheets.

3. The judgment discusses the consideration of subsequent balance-sheets for the years 1964 to 1970. Initially, there was an objection raised regarding the balance-sheets of 1964 to 1969, as the company had not paid the necessary additional fees due to late filing. The objection was resolved when the company deposited the additional fees, allowing the court to consider these balance-sheets during the hearing.

4. The judgment delves into the calculation of profit in the company's balance-sheets, specifically focusing on the impact of depreciation on fixed assets. The petitioner argued that after accounting for depreciation, the company showed no profit. However, the court noted that the company had shown a profit in its 1970 balance-sheet, indicating an improvement in its financial position over the years.

5. Finally, the court analyzed whether the company was truly incapable of paying its debts and necessitated winding up. After considering all the facts and balance-sheets from 1963 to 1970, the court concluded that the company did not deserve to be wound up at present. The court observed a gradual liquidation of past losses and noted the profit in the 1970 balance-sheet as a positive sign of improvement in the company's financial standing, leading to the rejection of the winding-up petition.

In conclusion, the judgment dismissed the winding-up petition, stating that the company's current financial position, as evidenced by the 1970 balance-sheet, did not warrant immediate winding up as it showed signs of improvement and profitability.