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TMI Blog1979 (1) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... month. It seems that as and from 1st June, 1975, the respondent-company did not pay the compensation of Rs. 1,000 or Rs. 400 per month or any part thereof. On or about 29th May, 1975, the respondent-company filed Declaratory Suit No. 2334 of 1975 against the petitioners and their landlords, Messrs. Tata Sons Pvt. Ltd., in the Court of Small Causes at Bombay. By this suit, the respondent-company has sought a declaration that they are the tenants in respect of the said premises in their occupation and claimed other reliefs like a perpetual injunction against the petitioners. The petitioners have filed their written statement and the said suit is pending. On 10th June, 1975, the respondent-company filed standard rent application in the said court being Application No. RAN/673/SR of 1975 against the petitioners and their landlords, Tata Sons Pvt. Ltd., for fixation of standard rent at the rate of Rs. 115 per month exclusive of permitted increases or such other sum as that court may determine. This application is also pending. The petitioners by their advocate's letter dated 4th May, 1978, addressed to the company, inter alia , called upon the company to pay the arrears of compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be established. The fact that the creditor has the alternative means of filing a suit to recover the debt is irrelevant." The above principle, though not absolute, has been a constant guideline for a company court in applying the provisions of section 433( e ) read with section 434(1)( a ) of the Companies Act, 1956. Ordinarily speaking, when a debt due by a company has been established and remains unsatisfied, it is not under the discretion of the court to refuse to a creditor an order for winding up of the company. The combined effect of section 433( e ) and section 434(1)( a ) is that when the circumstances mentioned therein exist, the company shall be wound up. One of the circumstances mentioned in section 434(1)( a ) is the indebtedness of a company to its creditor. The court has, therefore, to consider the nature of the money owing to the creditor. Money owing is that which is legally recoverable and not a debt of honour. The debt must be a valid debt for which there is clear proof. The debt must be one which does not require to be investigated by adopting proceedings. The debt must be one which cannot be impeached or disputed. The debt must be free from doubt or contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the word 'neglected' is not necessarily equivalent to the word 'omitted'. Negligence is a term which is well-known to the law. Negligence in paying a debt on demand, as I understand it, is omitting to pay without reasonable excuse. Mere omission by itself does not amount to negligence. Therefore I should hold, upon the words of the statute, that where a debt is bona fide disputed by the debtor, and the debtor alleges, for example, that the demand for goods sold and delivered is excessive, and says that he, the debtor, is willing to pay such sum as he is either advised by competent valuers to pay, or as he himself considered a fair sum for the goods, then in that case he has not neglected to pay, and is not within the wording of the statute." The Master of the Rolls refused to make an order of winding up in favour of the petitioner, Zuccani, who had charged the company 267 for furniture which he had supplied, but the directors considered this an excessive price and offered 155 and later, after having received the report of two valuers, 197. An action had been commenced in the Court of the Exchequer to resolve the dispute, but Zuccani, who had earlier served a statutory demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard rent, unless the landlord was, before the coming into operation of this Act, entitled to recover such increase under the provisions of the Bombay Rent Restriction Act, 1939, or the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944, or is entitled to recover such increase under the provisions of this Act. (2)( a )No person shall claim or receive on account of any licence fee or charge for any premises or any part thereof, anything in excess of the standard rent and permitted increases (or, as the case may be, a proportionate part thereto), for such premises if they had been let, and such additional sum as is reasonable consideration for any amenities or other services supplied with the premises. ( b )All the provisions of this Act in respect of the standard rent and permitted increases in relation to any premises let, or if let, to a tenant, shall mutatis mutandis apply in respect of any licence fee or charge and permitted increases in relation to the premises given on licence; and accordingly, the licensee or licensor may apply to the court for the fixation of the licence fee or charge and permitted increases and the additional sum mentioned above," ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Chagla also contended that the respondent-company is profiteering by allowing a third party use of a part of the premises. Mr. Shah, learned counsel appearing on behalf of the respondent-company, urged that the petitioners are paying a rent of Rs. 201.50 to their landlords, Messrs. Tata Sons Pvt. Ltd., for the entire area of 1,913 sq. ft. and the petitioners have collected Rs. 50,400 for three years in advance at the rate of Rs. 1,400 per month for an area of 825 sq. ft. and want to recover the arrears at the same rate and, therefore, the petitioners are profiteering rather than the respondent-company. I think that this controversy is not of any significance in the context of the issue before me. The second ground for winding up taken up is that the respondent-company is wholly insolvent and Mr. Chagla described it as a "bubble" company. Counsel pointed out that the paid-up share capital of the company is Rs. 200 and in 1976, the carried forward losses were Rs. 2,58,949.85 and the sundry creditors of the company were to the extent of Rs. 9,52,739. Mr. Shah, learned counsel appearing for the respondent-company, pointed out that the debt of the sundry creditors is reduced to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 240 (which this petitioner has done), and the sub-secretary 50. I believe a small profit of 7-10s. has been made; but with this exception, all the expenses of the company have been paid out of the advances of the unfortunate secretary and sub-secretary. Then I am asked to continue this wretched concern. I say, extinguished it must be ; and although, perhaps, the parties might find a more beneficial mode of extinguishing it than through the medium of a winding-up order, a winding-up order I shall make." The above case was one of the most extraordinary cases that had been brought before the court. There are two more cases examined by me in connection with a company being a "bubble" company, but I do not propose to make any reference to them. These cases are (1) In re Haven Gold Mining Company [1882] 20 Ch D 151 (CA) and (2) In re Thomas Edward Brinsmead Sons [1897] 1 Ch D 45 (affirmed on appeal see [1897] 1 Ch D 406 I think to dub the respondent-company as a bubble company is totally unjustified and uncalled for. This ground was not even alleged in the petition and seems to have been taken in desperation. To sum up, I have come to the conclusion that both the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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