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TMI Blog1931 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be distributed among those entitled to them in the most efficient and fair manner the court in some cases may permit the realization of the assets to be suspended temporarily, but for no other purpose. The reason why an order is made that the affairs of a company should be wound up by the court is because it is deemed expedient that the company should come to an end, and no longer remain in existence as a business undertaking. Now, in order to ascertain whether the present petition was filed bona fide or not it is necessary to refer to a letter written on the 22nd July, 1931, by Sir Oscar de Glanville, an Advocate employed by Mr. Hormasji, to Messrs. Leach and Clark, who had been instructed by Mr. Dawson in connection with a complaint that a statement had been made by Mr. Hormasji that was defamatory of Mr. Dawson. In this letter Sir Oscar de Glanville stated on behalf of Mr. Hormasji that "he did not and does not suggest that the present position of the Bank is due to bad management. At no time was there any intention to make any charges or to reflect on Mr. Dawson's conduct or on that of any of the officials of the Bank...... In conclusion if any of Mr. Hormasji's rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the bank in opposing an order for the compulsory winding up of the company. Now, under section 174 of the Indian Companies Act "the court may, as to all matters relating to a winding up, have regard to the wishes of the creditors or contributories as proved to it by any sufficient evidence. The reason for the enactment of section 174 is plain. A company is a business concern, and it is fair and reasonable that the court in considering whether it should order that the company be wound up or not should have regard to the views and wishes of the creditors of the company. If a company is unable to pay its debts or is temporarily in embarrassed circumstances, it is peculiarly, a matter for those primarily concerned in its assets and well-being to determine whether the company shall be wound up or not. If the general body of creditors are of opinion that it will best serve their interest that an order for compulsory liquidation should be made and the company closed down, their views are entitled to respect; on the other hand, if the creditors think that it will be more to their interest that the company should go into voluntary liquidation, again it is primarily a matter for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilway Company had covenanted with the trustees of certain bond-holders that it would pay interest upon the bonds at certain fixed dates. The Government of the Republic of Uruguay, owing to temporary financial embarrassment, was unable to pay the interest which it had guaranteed, and in the events that happened interest was not paid by the company to the trustees. Thereupon a petition for the compulsory winding up of the company was filed by a minority of the creditors. In the course of his judgment the Master of the Rolls observed: "There is another ground on which I think also the petition should be dismissed, and it is this, that bond-holders to the amount of 1,42,700 have instructed Counsel to appear for them to oppose the petition. Now, under the 91st section (which corresponds to section 174 of the Indian Companies Act), it has been decided that the court may have regard to the wishes of persons opposing a winding up petition. It has been decided that the section authorizes the court even to refuse a winding up order. I agree that, as a general rule, a creditor is entitled to a winding up order ex debito justitiae; but that rule is not without an exception; and if ever th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a member. The right ex debito justitiae is not his individual right, but his representative right. If a majority of the class are opposed to his view, and consider that they have a better chance of getting payment by abstaining from seizing the assets, then, upon general grounds and upon section 91 of the Companies Act, 1862, the court gives effect to such right as the majority of the class desire to exercise. This is no exception. It is a recognition of the right, but affirms that it is the right not of the individual, but of the class; that it is for the majority to seek or to decline the order as best serves the interest of their class." Now, what attitude have the creditors adopted towards this petition? I do not suppose that the creditors of Dawsons Bank, while it is being wound up voluntarily, would be prepared to give a free hand to the liquidators of the company to manage the affairs of the company in their own way without consulting the wishes of the creditors, and it is always open to the creditors at any time to petition the court to wind up a company compulsorily when it is in voluntary liquidation. In the present case we have to consider how matters stood on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivators on honest and reasonable terms in order to enable them to cultivate the land without undue harassment and anxiety, is performing a public service. But the success of such a bank depends largely upon the proceeds of the paddy crop from year to year. A number of persons have deposited money with the bank for fixed periods, and the money so deposited has mainly been invested by way of loan upon petty agricultural adventures. Of course, so long as there is agricultural prosperity in Burma, Dawsons Bank will be in flourishing condition, and the normal variation in the crop from year to year will not seriously affect its stability. But in an agricultural country like Burma some temporary disaster, coincident perhaps with other transitory difficulties, may occur which for the time being will render the collection of the debts due by the cultivators to an agricultural bank a matter of great difficulty, and if such a period of depression is unduly prolonged the stability of the bank may grievously be diminished. The position of the bank, however at any particular time must depend upon the circumstances then prevailing. Now, it so happens that Burma recently has been passing throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y must as wise and reasonable persons make provision for contingencies in the future. I am of opinion that the evidence adduced at the hearing of the petition to prove that the bank was unable to pay its debts on the 22nd June would not have justified the court on that ground in making a compulsory order for winding up the company. The second ground upon which the petition is based is even more unsubstantial. Indeed, the moment it is investigated it collapses. My learned brother in the course of the argument invited the learned Advocate who appeared for the appellants to explain what was meant in para. 11 of the petition by the statement that the management after the 8th of June, 1931, had been "paying one class of its creditors in preference to, and to the serious prejudice of, another and much larger class in order to give colour to its contention that it is not insolvent." Cunliffe, J., asked whether it was intended by that paragraph to convey that the petitioners were in a position to prove that between the 8th of June and the 22nd of June the liquidators had been discriminating between one class of creditors and another, and whether there had been what would be called in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, keeps liquid cash in its coffers sufficient to satisfy the demands of all customers even on current account. If all the customers of a bank on the same day decided to claim payment forthwith of the balance due to them on current account, there is no bank, I take it, which would be able to provide cash from its till to satisfy its customers demands. When the learned Advocate was asked whether that was not so, his answer was: "Yes, but it can obtain credit. Some other bank will come to its rescue and will enable it to tide over the temporary embarrassment." That normally would be the case, and that, I apprehend, is what happened in connection with Dawsons Bank, because it is not denied by the learned Advocate on behalf of the appellants that in fact these 10 lakhs were paid to the creditors of the bank before the 22nd of June. Where did the money come from? The bank must have obtained it either from its own coffers, or from other persons who were willing to give it credit. I have a shrewd notion that the increase in the secured overdrafts of the bank from 14 lakhs on the 30th May, 1931, to 25 lakhs on the 22nd June indicates the source from which Dawsons Bank was able to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine that Dawsons Bank should be closed down by compulsory liquidation in the circumstances obtaining on that date and the view that I have expressed has been confirmed by the events that have happened because on the 22nd of July, at a meeting of the creditors a motion for the compulsory winding up of Dawsons Bank was defeated by Rs. 21,30,130 against Rs. 1,81,647. A scheme of reconstruction requires the sanction of the court, and when an application in that behalf is made, the court will determine whether it ought to sanction the proposed scheme for reconstructing Dawsons Bank in whole or in part. For the purpose of disposing of the present petition it is enough to hold that the court is not satisfied in the circumstances obtaining on 22nd June that the proposed scheme if carried out would of necessity work prejudice to the depositors. Having regard to the principles by which the court should be guided in determining whether an order for the compulsory winding up of a company should be made or not, I am of opinion that there is no substance in this petition, that it is not a bona fide petition, and that it was rightly dismissed by the learned Judge who heard it. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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