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TMI Blog1952 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator. We must notice an argument urged by the learned Advocate-General as to the maintainability of the application. It is contended by him that under section 153, clause (1), which provides that, "where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the court may, on the application in a summary way of the company or of any creditor or member of the company or in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members as the case may be, to be called, held and conducted in such manner as the court directs," the application can be made only by the liquidator because this is "the case of a company being wound up" by the court. The provisions of the English Companies Act, section 153, are similar. In commenting upon the English section, in Palmer's Company Precedents, Part II Winding up, (15th edition), page 906, it is stated that : "A proposal for an arrangement or compromise is not confined to the company or its liquidator (if any). It is open to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for life. Four out of the five thousand shares are either owned or absolutely controlled by the secretary and treasurer. Instead of calling up the unpaid share capital, the secretary and treasurer functioned as financier to the company imposing onerous terms by way of a high rate of interest besides stipulating for a share in the profits. The liability that the company incurred in this fashion was allowed to accumulate and the factory was put in the possession of the financier to enable him to recoup his dues. There was a sub-lease of the factory to another party latterly. The result of all this was that notwithstanding the fact that the company was working and working profitably, no dividend was declared to the share holders, all the profits being absorbed in the appropriation of the amounts due to the secretary and treasurer by way of liquidation of the company's liabilities. This state of things was brought about and sustained by the secretary and treasurer by using his voting power with a packed majority, tyrannising over the minority to its detriment. Petitions for winding up the company were filed in the District Court, Nagercoil, in the year 1110, 1111 and 1112 which end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a domestic forum, so essential for its existence. We think that the affairs of the company ought to be wound up." Feeling the force of this observation and the futility of any attempt to resuscitate the company without suggesting any means to cure the defect which proved fatal to its continuance, the petitioners propose a remedy in paragraph 30 of the petition. That remedy consists in the 12th petitioner's agreement to be excluded from holding any office in the company and by providing that the voting power shall be one vote not per shareholder as it was but per share. This is the only remedy proposed. The exclusion of the 12th petitioner from holding office cannot be considered to be an effective remedy because the 12th petitioner can pull the strings equally effectively from behind the screen. The suggested change in the voting power would not lead to any change in the ultimate result. The remedy suggested is shadowy and not substantial. If X persons hold the large majority of shares, they can easily out-vote the minority whether the voting power be per shareholder or per share because upon the hypothesis they are numerically the majority shareholders and are the owners of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the creditors and of all the contributories, as if made on the joint petition of a creditor and a contributory. (Section 167). The consent of the legal representatives of the petitioner for winding up, to the arrangement proposed, does not affect its consideration except as showing the consent of another member to the said arrangement. In the facts of this case, even this consent would appear to be not one given freely but one procured for the occasion. The register of shareholders of the company is not complete nor is it up to date. There appears to have been various transfers not recorded in the register. Learned counsel for both sides agree that out of 192 shareholders, there are disputes as regards 102 and that those disputes have to be decided by the court to ascertain who the shareholders are. The result is that as things stand, more than 60 per cent. of the members of the company are unascertained. A meeting of the members of the company is not, therefore, feasible now. The period of the licence for manufacture of salt which was for SO years will expire within 6 or 7 years. The petitioners say that the manufacture of salt is profitable and will continue to be pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... postpone the sale until after determination of the 102 members of the company would be, in all likelihood, to render ' the sale impossible by the gradual diminution and ultimate determination of the remaining period of the licence which is one of the main assets of the company. Learned counsel for the petitioners drew our attention to section 153-C of the Indian Companies Act introduced by Amending Act LII of 1961 which provides for a remedy alternative to winding up even in cases where an order for winding up by court is applied for on the ground "that the affairs of the company are being conducted... ( b ) in a manner oppressive to some part of the members" and sought to bring this case within the ambit of that provision. Section 153-C applies to a stage before the order for winding up is passed by the court and has no operation to a case where an order for winding up has been passed by the court long before, as is the case here. We may, however, mention that had there been any bona fides in this application, the arrangement now proposed would have been placed before the court that was considering the question of winding up of the company and it would have considered the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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