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TMI Blog1974 (7) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ssengers and goods. The original board of directors of the company included Shri V. P. Narula and Shri Harnam Singh, and alter their resignation from the board on January 20, 1967, the present board consists of Shri Rattan Singh Bedi, Shri Punjab Singh, Shri Nasib Singh and Shri Gulzar Singh. The balance-sheet and the profit and loss account of the company as on September 30, 1965, discloses that the total realisable assets were Rs. 3,48,262 while the liabilities amounted to Rs. 5,23,494 and there was an accumulated loss of Rs. 2,55,791. The petitioner, being of the opinion that the company was unable to pay its debts, applied to the Central Government for sanction under section 439(5) of the Act to enable him to present a petition in court for the winding-up of the company under section 433( e ) of the Act. Pursuant to section 439(6) of the Act, the Regional Director, Company Law Board, Kanpur, issued notice to the respondent-company to make its representation against the grant of sanction. The administrative officer of the company represented that the company was not insolvent and no proceeding for winding it up was called for. It appears that the representation was not considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, and with regard to the balance of Rs. 39,000 due in respect of outside liabilities the payment has been guaranteed by the managing director. It is pointed out that the liability of Rs. 1,09,000 shown in the balance-sheet for the year ending September 30, 1965, represents a sum due to the Valley View Transport Private Ltd., the parent of the respondent-company. In respect of that liability, it is alleged, an agreement has been entered into that the parent-company would not recover the sum due to it until the respondent-company was in a position to pay off its other liabilities. It is also urged that by reason of the improved financial position of the company the interest payable on the loans raised for the business of the company has been reduced from Rs. 59,000 due on September 30, 1965, to Rs. 40,000 as on September 30, 1967. The establishment expenses of the company have also been reduced from Rs. 1,05,000 as on September 20, 1965, to Rs. 90,000 as on September 30, 1967. The company earned profits totalling Rs. 13,527 during the years 1966 and 1967. It is not denied that the company was running in loss during the previous seven years but, it is asserted, that with the change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent-company is disputed and it is alleged that the agreement was not confirmed either by the board of directors or by the shareholders or by the creditors of the company. On November 1, 1968, the following two issues were framed by the court: "1. Whether the petition for winding up of the respondent-company is not maintainable ? 2. Whether the company is liable to be wound up under section 433( e ) of the Companies Act, 1956, for the reason given in the petition?" The parties led oral evidence ; Shri V. S. Bhargava, Registrar of Companies, Shri Krishan Kumar, Senior Technical Assistant in the Registrar's office, and Shri V. S. Parmar, a director of the Valley View Transport Company Ltd., were examined for the petitioner and Shri Nasib Singh, a director of the Transport Finance Private Ltd., Jullundur, Shri Rattan Singh, a director of the respondent-company, Shri Joginder Singh, general manager of the respondent-company, and Shri Nuradh Chand, former chairman of the Valley View Transport Company Private Ltd., were examined for the respondent-company. Documentary evidence was also filed by the parties in support of their respective cases. It may be mentioned at thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: Year ending Amount of profit Rs. September 30, 1966 4,960 September 30, 1967 8,827 September 30, 1968 29,135 September 30, 1969 59,459 1,02,381 It has been alleged that the rate of profit would have been maintained in subsequent years but the company was unable to purchase new vehicles pursuant to an undertaking given in court that no old vehicles would be replaced or transferred until the decision of the case. The position in respect of booking of traffic shows a progressive increase from Rs. 6.12 lakhs in 1965 to Rs. 8.72 lakhs in 1969. ( d )The respondent-company held ten route permits granted by the transport authority of Himachal Pradesh, which, according to the respondent-company, represents an asset of Rs. 1,50,000. ( e )The position in respect of losses of the company shows that the losses have been reduced from Rs. 2,55,971 in the year 1965 to Rs. 1,84,017 as at present. On the basis of the balance-sheet for the year ending September 30, 1971, the following statement has been shown : Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the position as on September 30, 1971, when the respondent-company had an accumulated loss of Rs. 1,84,017 as against the paid-up capital of Rs. 85,500 and the net tangible assets of the respondent-company were Rs. 3,26,564 as against the total liabilities of Rs. 4,31,171, the company must be considered to be unable to pay its debts within the meaning of section 433(e) of the Act. The reply filed by Shri Chunni Lal does not materially add to the position adduced by the petitioner. It merely disputes the valuation set to the fleet of vehicles and the immovable property of the respondent-company and refers to the decrease in the income during the years 1971 and 1972 as well as the decrease in the number of route permits held by the respondent-company. In its replication the respondent-company has explained that the loss of Rs. 29,349 suffered in the year 1971 by the respondent-company was primarily due to the fact that it has to meet the charges of toll tax imposed by the Himachal Pradesh Government to the extent of Rs. 31,325, but for which liability the respondent-company would have declared a profit. The issues framed may now be considered. Issue No. 1. This issue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar, and inferentially he had in mind the capacity of the company to wipe it off. That is apparent from the petition as well as the statement of the Registrar, Shri B. S. Bhargava, PW-1. So long as the material is relevant, its sufficiency as a basis for the Registrar's opinion that the company is unable to pay its debts cannot be enquired into by the court for the purpose of determining whether the opinion is sustainable in law and the petition is maintainable. Nor can the court hold that the opinion of the Registrar is invalid if the criteria applied by him are reasonable. The first ground is rejected. The second ground for contending that the petition is not maintain able is that the company cannot be deemed unable to pay its debts inasmuch as the. requirements of section 434 of the Act are not satisfied. This is not a case, it is said, where a demand has been made by a creditor for pay me at of his debt and the respondent-company has omitted to pay it within the statutory period. As regards that, it seems to me that the circumstances set out in the proviso to section 439(5) of the Act should be construed as an alternative to the requirements of section 434. To maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a petition such as this, to consider the overall financial position of the company, the manner of its working during recent year and whether the potential for profit making is such that it can pay up its debts as and when they accrue. The averments in the affidavites filed by the respondent-company and the oral evidence adduced on it:, benefit contain data indicating that it has now embarked on a course of making profits and that it has generally earned profits during the years since 1965. In the year 1971, it would have declared a profit but for the toll tax liability imposed by the. Himachal Pradesh Government. It is also clear that the volume of traffic carried by the vehicles of the respondent-company has been generally increasing. The quantum of liability has also decreased. The potential for earning profits has improved, and that is evident from the increase in the number of vehicles and other assets of the respondent-company. The losses accumulated in past years have shown an appreciative reduction. There was considerable argument on the capacity of the respondent-company to pay up a debt of over rupees one lakh to the parent-company, the Valley View Transport Co. Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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