9911796707
TMI Blog1949 (12) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts, tins and cannisters, chemicals, dyes or any other commodity. The managing agents of the company are a private limited company called the Vanaspati Agency Ltd., and Sir Sobha Singh is shown as the managing director of this company. Originally, firm Prabhu Dayal Hari Ram, who are now the petitioners in the application for winding up, were shareholders in this managing agents company and Lekh Raj Gupta was another major shareholder. One Ravi Kumar Jain purchased the shares of the petitioners' firm Prabhu Dayal Hari Ram, and he in turn sold them to Banarsi Lal Tulsyan and Sir Sobha Singh got the shares of Banarsi Lal Tulsyan in the managing agents company. He holds 50% shares in that company. Sir Sobha Singh is the managing director of that company and is also an ex officio director of the Vanaspati Industries Ltd., Delhi. Lekh Raj Gupta being a member of the managing agents company is the ex officio director of the Vanaspati Industries Ltd., Delhi. There are five other directors. On 25th May, 1949, firm Prabhu Dayal Hari Ram filed an application for winding up of the Vanaspati Industries Ltd., Delhi, claiming to be a creditor of the company to the extent of Rs. 40,091-2- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Lekh Raj Gupta is not shown therein. List 'B' is the list of creditors and in that at No. 3 is shown Lekh Raj Gupta, No. 4, Faiz Bazaar, Darya Gunj, Delhi. It appears, however, that Lekh Raj Gupta was not served in the ordinary way. On 12th August, 1949, a written statement in opposition was filed by the company verified by Sir Sobha Singh, managing director, Vanaspati Industries Ltd. In para 6 it was stated that although in the books of the company a sum of Rs. 35,000 was shown as being due to the petitioners the account required scrutiny as it related to the period when "the partners of the petitioners were in control of the management of the company. It was also pleaded that the amount was under lien of the company in respect of the various claims of the company against the petitioner firm and six headings were shown under which this lien was claimed. It was then submitted that the accounts required scrutiny and the petitioners were not presently entitled to the sum claimed. The respondent company was not unable to pay its debts nor it has denied payment of any money due to the petitioner firm, if found due." It put forward the excuse that the books of the company had been t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I may state here that the reply which had been put in on behalf of the company by Sir Sobha Singh had the approval of the Board of Directors which met on 11th August, 1949, and authorized Sir Sobha Singh to put in that reply. This is clear from annexure 'C' attached to the counter-affidavit filed in this Court, dated 15th September, 1949. On these facts the learned District Judge passed a winding up order on 14th August, 1949, and he held that: (1) the application was not being opposed, (2) the company was not in a position to run at a profit and was commercially insolvent, (3) the company had denied that it owed Rs. 40,000 or over as claimed by the petitioner firm, but that did not affect the matter of liquidation, and (4) on a perusal of the petition and the affidavits filed, it was just and equitable to make a winding up order as the company was commercially insolvent and it was "not feasible to run it as a profitable concern." He appointed Bakshi Harban Singh, Advocate, to be the official liquidator of the company whose remuneration was to be decided later. It may at this stage be pointed out that at the hearing on that date were present the following: Mr. A.N. Khanna, Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said. In re Securities Insurance Co. [1894] 2 Ch. 410 That was a case where an arrangement was made under the Joint Stock Companies Arrangement Act, 1870, and an appeal was presented by persons whose interest as creditors were affected by the scheme but who had not opposed the scheme at the meeting of creditors, nor appeared before the Judge when his sanction was applied for, nor obtained leave to appeal. It was held by the Court of Appeal that as the appellant was not a party to the proceedings he could not appeal from the order without leave of the Court. At page 413 Lindley, L.J., observed: "Now, what was the practice of the Court of Chancery before 1862, and what has it been since? I understand the practice to be perfectly will settled that a person who is a party can appeal (of course within the proper time) without any leave, and that a person who without being a party is either bound by the order or is aggrieved by it, or is prejudicially affected by it. cannot appeal without leave..........If a person alleging himself to be aggrieved by an order can make out even a prima fade case why he should have leave he will get it; but without leave he is not entitled to appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t merely on the ground that the Official Receiver who was a party to the suit represented him in the suit..........Only a person whose name appears on the record as a party can appeal.........There is no provision for a stranger to the proceedings to appeal from an order made therein." With these observations of the learned Judge I most respectfully agree. The rules applicable to the present case will be 5, 6, 7, 8 and 9 of the Company Rules which deal with proceedings in applications for winding up. In the present case, however, the appellant was a party to these proceedings. He was shown in list' B' as one of the creditors who had to be served and was, therefore, a party to the proceedings and even though he may not have appeared before the Court either deliberately or because he says he was prevented from doing so by a trick played on him by Sir Subha Singh he none the less remains a party and, therefore, he would still be covered by the observations of Lindley, L.J., where he said that a person who was a party to the proceedings could appeal without any leave as also was the opinion of Das, J., quoted above. Of course Mr. Tek Chand was on firmer grounds with regard to his obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication and on that ground alone the company must be wound up. Reliance was placed by the learned counsel in this connection on In re King's Cross Industrial Dwellings Co. [1870] L. R. 11 Eq. 149 where the petitioners claimed a sum of 78 16 sh. 6d. as charges of advertisements and served a written notice of demand on the company but it remained unpaid for three weeks. The company did not dispute the fairness of the charges but set up an agreement alleged to have been entered into on behalf of the company. It was held by Sir R. Malins, V.C.: "It is said that this is a bona fide question, whether there is or not a debt of the company, but, in my opinion, the Court is bound in such a case to see that the question is a substantial one before directing an action to be brought. I entertain no doubt that this is a debt of the company......" The next case relied on by the learned counsel was In re Great Britain Mutual Life Assurance Society. [1880] 16 Ch. D. 346 There a petition for winding up was presented by the mother of a person who held a policy for 5,000 with the company and had died. The claim having been made they resisted the payment on the allegation that at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r object: The Company v. Rameswar Singh [1920] 23 C.W.N. 814 . In the present case, however, there is no trace of any mala fides, and the object of the creditor is simply to recover his debt out of such assets as may be available. "It was further found in that case that the company was in a moribund condition, that the stocks were 6f no value when the application was made, that the report of the liquidator showed that the company had suffered heavy losses, and that, when the liquidator took charge, the closing balance in the books of the company was only Rs. 26-1-4. The petitioners being one of the principal creditors of the company who had presented his application for winding up it was held that he was so entitled. It was observed by Shadi Lal, C.J.: "The proposition of law is indisputable that a creditor is prima facie entitled ex debita justiliae to an order of winding up." This case has been strongly pressed to my attention. As I have said before, in my opinion, there was no bona fide dispute with regard to the amount due from the company to the petitioners. They had filed a copy of the account in the books of the company. The company never disputed that the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary shares and 24,750 deferred shares but now hold 3,275 ordinary shares and 1,250 deferred shares out of a total of 1,16,225 shares; (2)According to the balance-sheet Rs. 23,48,593 were loans owing to Joint Stock Banks, security deposits of the value of Rs 1,28,500 were due form the company and the other liabilities were Rs. 2,24,307 (balance sheet as on 30th June, 1948). It also shows that: ( a ) In that year there was a loss of about Rs. 3,00,000; ( b ) Value of the plant and machinery was Rs. 28,39,000; (3)The meeting of the company' was held on 11th September, 1949, under the chairmanship of the official liquidator. A resolution which was opposed by only one contributory, Mr. G.S. Bedi, was passed by the contributories in the following words: 'Resolved that the contributories have no confidence in Shri Lekh Raj Gupta and are of the opinion that the present difficulties of the company are largely due to his misconduct in relation to the affairs of the company'; (4)It was also resolved unanimously that the contributories were not in favour of the appeal which was filed by Lekh Raj Gupta in the High Court of East Punjab at Simila; and (5)Further that shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the liquidator with great fairness was able to show that a careful study of the balance sheet and the state of affairs of the company proved that the substratum was gone and that there was no possible chance of a profit being made. The fact that some of the directors of the company like the appellant and some officers are being accused of black-marketing and some trial is going or has been going on shows that the appellant is not a person who can be entrusted with the management of the company, or, at any rate, he will not inspire any confidence of the persons who are likely to come forward to finance the working of the company. From these facts I must hold that the company is commercially insolvent. The expression "commercially involvent" was defined in In re European Life Assurance Society [1869] L R. 9 Eq. 155 by Sir William James, V.C. as follows: "Not in any technical sense but plainly and commercially insolvent, that is to say, that its assets are such, and its existing liabilities are such as to make it reasonably certain as to make the Court feel satisfied that the existing and probable assets would be insufficient to meet the existing liabilities. " This ..... 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