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TMI Blog1987 (7) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent, Poonmudi Tea Pack Ltd. (for short "the company"). The company was incorporated under the Companies Act as a public company limited by shares, on September 29, 1981, to carry on the business of manufacturers, blenders, processors and packers of tea in tea bags and other packets and other containers and to buy, seal, deal in and export all kinds of tea and tea products. One Shri K.T. Thomas approached the KSIDC with a proposal and KSIDC agreed to associate with him. Exhibit P-1, promotional agreement, was executed on November 14, 1979. Cost of the project was estimated at Rs. 60 lakhs out of which Rs. 20 lakhs was to be met by way of share capital and Rs. 35 lakhs to be raised by way of term loans and the balance by subsidy from Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timate. The overrun in capital cost rendered the project unworkable and impossible. Report of the auditors for the year ended on April 30, 1984, revealed several irregularities and mismanagement. Though different alternatives were suggested, K.T. Thomas was not taking any effective steps to improve the situation. For these and other reasons, KSIDC lost confidence and filed this petition for winding up on the allegation that it is the only course now open. The petition was filed under section 433 ( c ) and ( f ) of the Companies Act. On behalf of the respondent, the managing director, K. T. Thomas, in his counter and during arguments admitted that it became difficult to get term loans and implement the project, but contended that it was du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stay was filed. Though a company could be wound up for reasons enumerated in clauses ( a ) to ( f ) of section 433, this petition is only under the just and equitable clause in section 433( f ) as well as under section 433( c ). Under section 433( c ), if the company does not commence its business within a year of its incorporation, or suspends its business for a whole year, that will be a ground for initiating winding up proceedings. Especially, in such a case, there is all the more reason for the court to be overcautious to find, on the allegations in the petition and the materials placed before it, that there are prima facie grounds. Even admission of a petition which will lead to advertisement of the winding-up proceedings is likely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st resort and for compelling reasons. Otherwise, the provision would operate as an instrument, in possible cases, of harassment and even blackmail. A contributory who is also a joint promoter is having the added moral and legal responsibility to see that the company is alive and it is brought up properly to serve the interest of the shareholders and the public having dealings with it. Once a petition is advertised, the business of the company is bound to suffer serious loss and injury. A proceeding for winding up under the "just and equitable" clause, under which a variety of grounds could be taken up, should be in the nature of a last resort when other remedies provided under the Companies Act are found not efficacious enough to protect th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These and others are procedures short of winding up. Winding up means that the concern is lost once and for all. But these aspects along with other items are valuable considerations in a winding-up petition. Bearing these principles in mind, let us examine whether there are prima facie grounds for admitting and advertising the petition. I do not think that as argued on behalf of the respondent, a question of promissory estoppel as laid down in Gujarat Financial Corporation v. Lotus Hotels Pvt. Ltd. [1983] II SCWR 144 ; AIR 1983 SC 848, has arisen in this case. It was K.T. Thomas who approached the KSIDC with the proposal and KSIDC only agreed to associate with him because it is bound to do so. KSIDC is established and it is existing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat funds could be found only with the cooperation of the KSIDC. KSIDC says that it has lost all confidence in K.T. Thomas and the company and there is no possibility of the company functioning by finding funds. These facts are not in serious dispute. The situation that various banks and other financial institutions refused to advance term loans on account of the antecedents of K. T. Thomas is a fact more or less established in the case. KSIDC is apprehensive in these circumstances. The apprehension cannot be said to be unreasonable, and the fact remains that even with the wholehearted co-operation of the KSIDC and by a change of management also, the position of the company cannot be revived. Under such circumstances, it may not be proper e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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