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TMI Blog1981 (1) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ara. 8. It appears that the company in its balance-sheets for the years 1961-67 duly acknowledged its liability to the petitioning-creditor company and also by a letter dated 21st June, 1968, the company confirmed and acknowledged its liability to the petitioning-creditor company in writing for a sum of Rs. 3,88,17 403 as on 31st December, 1967. As the company failed and neglected to pay the loan together with interest to the petitioning-creditor company, ultimately a statutory notice under section 434 of the Companies Act, 1956, dated 12th/13th March, 1970, was served by the petitioning-creditor company on the company at its registered office on 16th March, 1970, by the advocate-on-record of the petitioning-creditor company. The company strangely enough by its letter dated 8th April, 1970, replied to the statutory notice alleging that there did not appear to be any such transaction between the company and the petitioning-creditor in the records of the company. The petitioning-creditor by its letter through its advocate-on record dated 30th April, 1970, denied the allegations in the said reply to the statutory notice of the company, asserting the liability of the company to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of the said Goenka Commercial Bank Ltd. after taking several steps for reviving the business of the company and changing its name. It was also alleged by the said S. N. Sarogee that the said Chirimars' directors having lost their control over the respondent company and other companies were now seeking to put pressure on the company and extort money from the company and the company bona fide disputed the claim of the petitioning-creditor. The letter of confirmation dated 21st June, 1968, by the company in favour of the petitioning-creditor which was signed by S. N. Sarogee as a director was denied and disputed and it is alleged that the same was written for income-tax purposes as a result of fraud practiced upon the company and, therefore, the said letter did not amount to a letter of acknowledgment and confirmation of the liability of the company to the petitioning-creditor. It was further alleged that the Chirimars. and their group were acting in collusion, and conspiracy. with, others and have procured and manipulated various documents including the said letter dated 21st June, 1968, for the purpose of creating evidence in favour of the petitioning-creditor. It was alleged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent company, Pandam Tea Co. Ltd., was incorporated. It appears that at the time both the companies were under the same management or at least had common directors. On 17th March, 1951, the deed of mortgage was executed by Pandam Tea Co. Ltd. in favour of Goenka Commercial Bank Ltd., which recorded the loan transactions between the said Goenka Commercial Bank Ltd. and the respondent company and the said deed was registered as it had created a charge on the properties of the respondent company by way of security. In 1955 the RBI prohibited Goenka Commercial Bank Ltd. from carrying on banking business. In September, 1961, the Chirimars for the first time joined the said Goenka Commercial Bank Ltd. as directors. On 6th February, 1964, the respondent company confirmed as on 31st December, 1963, a sum of Rs. 3,79,460.47 was due and payable to the Goenka Commercial Bank Ltd. Thereafter, in or about April, 1967, the name of Goenka Commercial Bank Ltd. was changed to the present name of the petitioning-creditor, being Darjeeling Commercial Company Ltd. Thereafter, on 3rd June, 1968, the respondent company admitted its indebtedness to the petitioning-creditor company in its balance-shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m order of injunction was passed by the Sub-Judge, Darjeeling. restraining the petitioning-creditor company from proceeding in any action whatever on the basis of the demand notice. The said order was considered by K. L. Roy J. and, thereafter, on 19th January, 1971, directions for advertisement were given but it was stayed for three weeks in order to enable the respondent company to proceed according to law. On 9th November, 1971, the respondent company made an application for stay of the winding up in which on 15th March, 1971, affidavit-in-opposition was filed by the petitioning-creditor company affirmed by one Bijoy Kumar Chirimar and on 26th March, 1971, affidavit-in-reply was filed on behalf of the respondent-company by one Biswa Bandhu Bhttacharya, a director of the respondent company at that time. On 13th May, 1971, the said stay application of the respondent company was dismissed by S.C. Ghose J. ( Pandam Tea Co. Ltd., In re [1975] 45 Comp. Cas. 67 (Cal.)),by a well considered judgment also dealing with the question of limitation and the fraudulent nature of the alleged loan of the petitioning-creditor company to the respondent company and also that both the companies wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 14 of the said paper-book. He also produced the balance-sheets of the respondent company from 1951 to 1967 where it has been specifically admitted that the respondent company was indebted to the petitioning-creditor company in respect of the amount which is the subject-matter of the winding-up petition as a secured debt. The last balance-sheet was signed as would appear from the directors' report which is dated 25th June, 1968, and from the auditors' report which is dated 3rd June] 968, and the acknowledgment in writing by the respondent company is dated 21st June, 1968, which is at page 11 of the said paper-book. The winding-up petition was presented on 10th June, 1970, that is, well within the period of limitation from the last acknowledgment of liability in writing by the respondent company. He also referred to the affidavit-in-opposition of Shanti Nath Sarogee affirmed on 27th July, 1970, in the stay application which are at pages 68-75 of the said paper-book, the only defence sought to be raised is that the petitioning-creditor company has not given particulars of the said loan of Rs. 3,00,000 and it does not appear from the records of the respondent company that the money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent company, where the reference to the suit killed by the respondent company in the subordinate judge's court at Darjeeling is referred to but the said suit had already been dismissed on 12th July, 1973, as hereinbefore stated. In sub-para, ( h ) of para.,7 the said Swapan Roy alleged that until March, 1965, the respondent company was being managed by the Chirimar directors who were the directors of the petitioning-creditor company and the Chirimars having lost the control since then have started to put pressure through other companies including the petitioning-creditor company to extort moneys from the respondent company with an ulterior motive. Mr. Mitter, therefore, submitted that the nature of the dispute sought to be raised is that the claim of the petitioning-creditor being the loan of Rs. 3,00,000 on the said mortgage deed dated 15th March, 1951, is barred by limitation as no particulars of the origin of the said loan are given. Secondly, the said loan is fictitious and, thirdly, the Chirimars were the common directors up to 1965 and they had created this loan fictitiously and now with a view to put pressure has brought this winding-up petition. Mr. Mitter also referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to be recorded in the said deed of mortgage in 1951. He referred to pages 87 and 90 of the paper-book. Mr. Mukherjee then submitted, drawing my attention to pages 96 and 133 of the paper-book, as to the appointment of directors of the company, wherefrom it will appear that at a certain point of time there were common directors between the petitioning-creditor company and the respondent company. He also referred to the affidavit-in-opposition at page 98 of the paper-book, paras 5, 7, 9 and 12, and to the affidavit-in-reply at page 188 of the paper-book, para 9, and submitted that in spite of a specific denial the petitioning-creditor company has not furnished any particulars or produced all the evidence in respect of its claim showing that the alleged claim is not barred. It is submitted that there were common directors of the company and, therefore, it must be held at this stage that the alleged loan is fictitious and brought into existence fraudulently and the same is now disputed by the petitioning-creditor company at the time of final hearing of the winding-up petition at this stage. Mr. Mukherjee thereafter commented on the winding-up petition which should have disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet Mr. Mukherji cited several decisions : In Consolidated Agencies Ltd. v. Bertram Ltd. [1965] AC 470; [1964] 3 All ER 282 (PC), which was a suit by a director against the company for realisation of the remuneration and the acknowledgment in the balance-sheet came up for consideration. Then, again he referred to In re Transplanters ( Holding Company ) Ltd. [1958] 2 All ER 711, which was also a claim by a director and there being common directors between the two companies, the acknowledgment was held to be not valid and Mr. Mukherjee submitted relying on the principle that the acknowledgment of a sister concern will, not be a valid acknowledgment unless it is proved by other materials. Mr. Mukherjee also referred to the decision in Petlad Turkey Red Dye Works Co. Ltd. v. Dyes and Chemicals Workers' Union, AIR 1960 SC 1006, paras. 4 and 7; [1961-62] 20 FJR 539, at pages 541 and 542, and submitted that it cannot always be said that the balance-sheet contains correct statement for various reasons in the circumstances of a particular case, The burden of proof, Mr. Mukherjee submitted, is always on the petitioning-creditor to show that the claim is not barred. He also ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the supporting creditors are Raghu Nath Sons who have obtained an ex parte decree against the company which is now under challenge and the said proceeding is pending. He further submitted that regarding the other supporting creditor, Central Excise Dept., their liability is admitted but a portion of the liability is disputed and it can be arranged by the company for payment by instalment or otherwise. Therefore, in the facts of this case, the winding-up petition should be dismissed or at least no order should be made by this court. Mr. Jayanta Mitter submitted in reply that in the balance-sheets of the company from 1952 to 1967, which were produced before the court at the time of the stay application and also at the time of hearing of this winding-up petition the said debt to the petitioning-creditor is specifically admitted year after year and the said balance-sheets were duly passed in the annual general meeting of the company and approved by the company as a subsisting loan which is payable to the petitioning-creditor by the company. Mr. Mitter also produced the ledger book of the company, which was also produced before the court in the stay application earlier, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n balance-sheets as having no application to the facts of the present case as each case has to be taken on the facts on which the decision is given and each of the said decisions are clearly distinguishable from the facts of this case. Therefore, those have no application in the present case. Mr. Mitter specifically relied on Bengal Silk Mills' case, AIR 1962 Cal 115, where it has been held that the acknowledgment in the balance-sheet of a company which is duly signed by the directors and adopted in the annual general meeting by the company amounts to an acknowledgment within the meaning of section 19 of the Limitation Act, 1908, and, therefore, as, in the present case, it must be held that the said debt is subsisting and duly acknowledged in the balance-sheets of the company year after year up to 1967. Mr. Mitter rightly submitted that the decision in Consolidated Agencies Ltd. v. Bertram Ltd. [1964] 3 All ER 282 at p. 288, was a case where there was a two years' lag and the debt cannot be said to be a subsisting liability which is not the case in the present one before this court. He also submitted that the decision in [1958] 2 All ER 711, relates to an acknowledgment by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud, illegality or anything unusual in the said transaction of loan advanced by the petitioning-creditor to the company since its inception. Moreover, the company should not be allowed to take this question after such a long time as it has been ratified all through by the shareholders in the annual general meetings year after year for nearly 16 years, and duly acknowledged in the balance-sheets all through as hereinbefore stated. I have-carefully considered the winding-up petition and also the documents annexed therewith and the balance-sheets of the company, which have been produced before the court and cannot be disputed by the company, that there is a clear acknowledgment of the liability, all through by the company, to the petitioning-creditor of the specific amount due to the company and, moreover, the said deed of mortgage dated March 17, 197!, wherein the loan granted by the petitioning-creditor company in its former name in which it carried on its business, being Goenka Commercial Bank Ltd., lent and advanced from time to time on a mutual open and current account a total sum of Rs. 3,00,000 as recorded in the said deed of mortgage which is annex. A to the affidavit-in-reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this court for the hearing of the winding-up petition after advertisement and after hearing the petitioning-creditor and the supporting creditors, I cannot but hold that the Company is unable to pay its debt, is an insolvent company and must be wound up. Reference may also be made to a latest decision of the English court In re Gee Co. ( Woolwich ltd. ) [1974] 1 All ER 1149; 2 WLR 515(Ch D), where the acknowledgment of the liability of a company in its balance-sheet came up for consideration and after reviewing the relevant decisions including some of the decisions cited by Mr. S. B. Mukherjee on behalf of the company and summarising the relevant facts of the case which, in my view, are very similar to the present one, Brightman J. observed at page 1160 (p. 527 of 2 WLR) as follows: "I shall accordingly decide this case on the footing that a balance-sheet, if duly signed by the directors, is capable of being an effective acknowledgment of the state of indebtedness as at the date of the balance-sheet; and that, in an appropriate case, the cause of action will be deemed to have accrued at the date of the balance-sheet, being the date to which the signature of the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies and thereby it does not follow that the loan is fictitious and fraudulent and has no substance. The said loan has been adopted by the company and its members in its annual general meeting have ratified as a subsisting loan all through till the new management took upon itself the onus of disputing the said loan on frivolous grounds in which they have utterly failed and, therefore, this is a fit case, where it must be held that the company is unable to pay its debt and there is no substance in the dispute and the defence sought to be raised. by the company either in fact or in law and, therefore, there must be an order of winding up as the company is a positive danger to the public and does not carry on business following the business norm and business honesty and has tried to dispute an undisputed claim unsuccessfully which has enabled the company to keep the matter pending for the last ten years. Therefore, it is just and proper that the company should be wound up. During the last ten years the winding-up petition is pending as in the course of the same the company made an application for stay which was heard at length and all the questions raised in this winding-up petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle on which company law has to be administered. Substantial compliance is there, particularly when the facts are clearly and specifically admitted for a period of nearly thirty years in the documents, and thereafter, year after year the balance-sheets, which have been duly audited along with the auditors' report and the directors' report signed by the directors and auditors are passed in the annual general meeting of the company amounting to a ratification by the company's general body of members, which acknowledges a subsisting debt. Therefore, the matters which are within the knowledge of the company and are repeatedly admitted and acknowledged in writing for nearly thirty years cannot be reopened by legalistic arguments supported by well-settled principles laid down in various decisions of the courts, both relevant and irrelevant, which cannot displace the simple fact of the admitted loan, which cannot be disputed on any materials save and except mere technicalities and arising suspicion and surmise in the mind of the court, if possible. After all, a company is now not the concern of the few individuals being the group of shareholders who control the management of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to administer justice in the interests of the contributories and the creditors of the company as well as in public interest and for such purpose the nicety of the pleadings will not stand in the way of the court, and in this case I am satisfied, on the material placed before me, beyond any doubt, that the company is insolvent and unable to pay its debts as hereinbefore discussed, both to ' the petitioning-creditors and also to the supporting creditors who are appearing in this application at the time of the hearing of the winding-up petition. Therefore, I must hold that the company is unable to pay its debt and there is no substance in the defence sought to be raised either in law or in fact. In the result, I am making the following order: There will be an order in terms of prayers ( a ) and ( b ) which will also include all costs of the stay application and costs of appeal. The official liquidator to take possession of the books, papers, documents, and assets of the company forthwith on a signed copy of the minutes and the petitioning-creditors to assist the official liquidator to enable him to take possession in terms of the order. The official liquidator and the petitionin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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