9911796707
TMI Blog1974 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 14th of March, 1974, the company has filed this appeal. It is to be noticed that Focus Advertising Private Ltd. (hereinafter called "the company") is, as disclosed by its very name, an advertising company and carries on its business with its registered office at Bombay and a branch office in Madras. The petitioning-creditor, Ahoora Blocks Private Ltd. , by their solicitors' letter dated the 25th of June, 1973, called upon the company to pay to them a sum of Rs. 17,248. 41 described by them to be a sum now remaining due and payable in relation to the company's orders for preparation of various blocks "at the foot of their account". This letter was also described at the foot thereof as a statutory notice under the provisions of the Companies Act. There is no dispute that this notice of demand was received by the company on the 27th of June, 1973, and it is also an admitted position that no written reply was sent by the company within the period prescribed. It has been suggested that there were some discussions between the company's representative and a representative of the petitioners. But the fact remains that no written reply was sent by the company and there appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also a provision in the consent terms that if the first instalment of Rs. 4,000 was not paid on the 5th of September, 1973, or any instalment thereafter the petition for winding-up would stand dismissed. Now, a curious development appears to have taken place because on the 15th of September, 1973, the consent terms, which had already been signed, were not filed, and, we are told at the Bar, that they were not permitted to be filed by the court. But the counsel appearing for the company nevertheless made a statement before the learned company judge (Kania J.) that the company "admits the claim of the petitioners mentioned in the petition" and then the petition was adjourned for one week. It requires to be noticed that at that stage the petition had not yet been admitted ; it had only been accepted and a notice issued to the company to show cause why it should not be admitted. Ultimately, however, the matter came up again before the company judge in chambers on the 12th of October, 1973, and this time the petition was admitted and an order advertising the petition was also made. It may be mentioned that in between the above two dates a letter was addressed on the 6th of Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been properly framed if it merely set out : ( a ) that the petition was by a creditor for a certain amount ; ( b )that a statutory notice in respect of that claim had been served on a particular date ; and ( c )that the company had for three weeks from the date of the service of the notice neglected to comply with the notice in the manner prescribed by section 434( a ). Mr. Dhanuka argued before us that if reference is made to the Companies (Court) Rules, 1959, and the forms (and he then referred to rules 6, 17 and 95 and to Form No. 46), it would at once become clear that the details required to be incorporated in the petition as per paragraph 6 of Form No. 46 having not been furnished, the petition as filed was not maintainable. Now, rule 95 lays down that a petition for winding up of a company shall be in Forms Nos. 45, 46 or 47, as the case may be, with such variations as the circumstances may require and shall be presented in duplicate. Turning now to Form No. 46, which appears to be the appropriate form for a petition based on the failure of the company to comply with the statutory notice, we find that paragraph 6 of the form reads as follows : " The comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for winding up under section 433( e ) of the Act. Mr. Dhanuka has argued, and in our view there is some substance in the argument, that the petition must itself disclose a cause of action in the sense that there is a debt and notwithstanding a statutory notice the debt has not been paid or secured or compounded for to the satisfaction of the creditor. It is true that paragraph 7 of Form No. 46 indicates that there will be some information as to when the statutory notice was issued and served on the company. But it is to be noticed that paragraph 7 is not required to indicate the nature of the debt or even the amounts of the debt. All that is required is that the petitioner must say that a notice was served on the company and that the company has failed and neglected to pay the amount or any part thereof. It is possible to contend that it may not be necessary to give the particulars in paragraph 6 of Form No. 46 itself if it could be shown that the statutory notice of demand which is invariably annexed contains the necessary information. In any event the petition must contain all the relevant information and it does not matter if the information is to be found in paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed. As we have noticed, there was some dispute as to some of the bills which were not said to have been received by the company at all. The notice, exhibit A, also speaks of the sum of Rs. 17,248.41 being "payable by you at the foot of your account", but there is no statement of account annexed. We doubt if the company judge would have been able to make a valid order on this petition if the company had not appeared. However, in the case before us, the fact that the petition does not contain this information has no longer any relevance because, as we have mentioned, on the 5th of September, 1973, counsel for the company made a statement before the company judge that the company admitted the claim of the petitioner as mentioned in the petition. The next contention of Mr. Dhanuka, the learned cousel for the company, was that there was a bona fide dispute in the sense that one Vaishnav had gone to see one Yusuf, a representative of the petitioning-creditors, and there had been negotiations between the parties and the company's request was that the various bills and invoices should be shown to them so that the amount, if due, could be ascertained. Mr. Dhanuka has argued that bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the company should not be ordered to be wound up, even if the petitioning-creditor may have proved its case for a winding up order ex debito justitiae. It would appear from the judgment of the learned company judge that at the hearing of the petition affidavits were filed and eight creditors with claims of the aggregate value of Rs. 7,68,000 supported the company and opposed the winding up, as against some creditors with aggregate claims said to total Rs. 3,03,862.07 who were in favour of winding up of the company, including the petitioning-creditor. Now, before we consider this aspect of the matter, we may at once point out that the figure of Rs. 3,03,862.07 appears to have been based on a list hurriedly prepared by one of the counsel appearing for one of the creditors and handed in. On a correct appraisal we find that those creditors, including the petitioning-creditor, who are pressing for the winding up of the company, do not have claims aggregating to the value shown. We shall first take those creditors, or those who claim to be creditors, who wish to press for a winding up order. Perhaps, the most vocal of the creditors supporting the petition for winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants in respect of the excess payments recovered by the company and for non-delivery of certain articles and things to the applicants. In addition to the said claim, the applicants have also a claim against the company for non-delivery of art works, blocks, film prints, etc., of the value of Rs. 1,69,151.42. Despite repeated demand, the company has failed and neglected to pay the said amount or to deliver the said articles and things. " The affidavit does not disclose a debt, it merely talks of a claim for excess payments said to have been made and for non-delivery of certain articles and things. There is a further claim for non-delivery of art works, blocks, film prints, etc., and, they are stated to be of the value as mentioned. We have not understood how on these averments and on the basis of this single affidavit, without any details and without any particulars, it can be argued that Estrella Batteries Ltd. are the creditors of the company and, therefore, entitled to support the petition for winding up. It requires to be noticed that as a matter of fact a petition for winding up of Estrella Batteries Ltd. itself has been filed by the company and which is pending, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany judge at Rs. 3,30,862.07. As against these creditors who have pressed for winding-up, there are eight creditors, whose debts are of the aggregate value of Rs. 7,68,000, and they are supporting the company and opposing the winding-up. These creditors include the prestigious Indian and Eastern Newspaper Society Ltd., who are creditors in the sum of Rs. 6,00,000. It is in the light of these figures that we will have to consider the wishes of the creditors as proved before us by sufficient evidence and how far regard should be paid to those wishes for the purpose of deciding whether a winding-up order should or should not be made. There can be no doubt that the discretion granted to the court is unfettered, although it must be exercised on judicial considerations. It is for the court to take into consideration the relevant factors and then decide whether the right of the petitioning-creditor (after it has proved its debt) to a winding-up order must give way to the wishes of the creditors who are opposing the petition, due regard being had to the interests of the company's creditors generally. It is important to notice that, if the wishes of those creditors who are oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r behalf submitted that the court should not wind up the company. Now, this statement obviously expresses the wish of these creditors. But the creditors then proceed to give the grounds and reasons for their wish that the company should not be wound up. The first ground given is that they are satisfied from a consideration of the balance-sheets and various other statements of accounts that the company is commercially solvent. Secondly, that they have full faith and confidence in the management of the company, and, thirdly, that, according to them, there are prospects that the company would be able to make payments in the near future. This is followed by another statement that the winding-up of the company would not be in the interest of the creditors generally. It is true that each of the affidavits filed by the eight creditors is in similar language, but we are unable to see how they can be brushed off as "stereotyped affidavits" in the manner done by the learned company judge even if they are couched in the same language. There is no logic in saying that every creditor in order to express a similar wish and give similar reasons should have used different language. In our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . What is important is that the material is there. Now, the relevant material is to be found in the affidavit of Derek Freitus, managing director of the company, in reply to the petition dated the 21st of January, 1974. In exhibit C annexed to the affidavit the assets of the company in the form of book debts amounting to about Rs. 13,00,000 have been set out and a list of the persons from whom the debts are due have been set out. There is nothing to show that these outstandings will not in due course be realised. Then, there is a reference to payments made during the period from April, 1973, to December, 1973, and these show that a sum of Rs. 8,43,761 was paid to the press; Rs. 4,75,623 was paid to various suppliers; and Rs. 5,65,807 were expended for salaries and other expenses. Exhibit S to the affidavit shows that a sum of nearly Rs. 19,00,000 were received as payments from the company's clients during the period from April to December, 1973, and exhibit P to the affidavit shows that the billing of the company was nearly Rs. 23,00,000. We have also now before us the balance-sheet of the company for the period ending 31st March, 1973, which has been filed along with an affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but that their wishes are supported by evidence on record. The learned company judge ought not, on the facts of this case, to have made a winding-up order. He was, in our view, in error when he considered the reasons given in the affidavits of these creditors as mere statements without any justification. If the reason given by the creditors that the company is commercially solvent is borne out by the record, then we are unable to agree that it is a bare statement. As to the question of "full faith and confidence in the management of the company", it requires to be noticed that in a conceivable case where the shareholders and creditors of the company lose faith in the management and it is shown to the court that there is a lack of probity, then it would furnish a ground for the winding up of the company under the just and equitable clause. (See Rajhamundry Electric Supply Corporation Ltd. v. Nageswara Rao [1956] 26 Comp. Cas. 91 (SC)) . We do not see why an expression of faith in the management should not be a reason and a justifiable reason for a creditor to say that the court should allow the company to continue its business and not wind it up. A mere wish of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Hoare Company Ltd. and the company in relation to certain premises at Ballard Estate and that Turner Hoare Company Ltd. were actuated by a collateral motive to ensure that the company was wound up. Now, we do not think that the material on record is really sufficient to prove mala fides of the petitioning-creditors or Turner Hoare Company Ltd., even though there is some litigation between the parties which is being fought out. In any event, as held by this court in Bachharaj Factories Ltd. v. Hirjee Mills Ltd. [1955] 25 Comp. Cas. 227 (Bom.), the motive of the petitioners in presenting the application for winding up of the company is irrelevant, provided the necessary materials have been placed before the court which would satisfy the court that the petitioners have made out a case. In the matter before us the petitioning-creditors had given a notice under section 434( a ) of the Companies Act, 1956, which was not even replied to. In these circumstances, the petitioning-creditors were at least entitled in law to approach the court by filing a petition for winding up. Even if the petitioning-creditors have the support of Turner Hoare Company Ltd., for the reasons all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -creditor as mentioned in the petition, the following order is made by consent of the petitioners and the company. The petitioners be paid a sum of Rs. 21,500 (rupees twenty-one thousand five hundred) which includes the debt, interest thereon and the costs of this petition from out of the deposit of Rs. 2,00,000 lying with this court in full and final satisfaction of the petitioner's claim in this petition. Mr. Dhanuka states that a sum of Rs. 18,616 is due and payable to Rational Art Press Private Ltd., a sum of Rs. 6,478 is due and payable to Unique Blocks ; and a sum of Rs. 4,500 is due and payable to Wagle Processed Studio and Press Ltd. By consent of the company we direct that these parties be paid their respective sums from out of the said deposit lying in court in full and final settlement of their claims against the company. There will be no order as to costs so far as creditors who have appeared in support or in opposition to this petition for winding up. At this stage Mr. Khorde, appearing for Turner Hoare Company Ltd. , applies for stay of the operation of this order on the ground that his clients are party to this petition under section 447 of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
