9911796707
TMI Blog1987 (9) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,46,042.78. Thus, in all, an aggregate amount of Rs. 33,49,262.58 is admittedly due from the company to these petitioners since 1984. The case of the petitioners is that these amounts have been outstanding in spite of repeated demands and, therefore, they are entitled to 12% interest on the amounts due to them from the respective dates for the supply of timber made by them to this company. It should be noted at this stage that this company was registered under the Societies Registration Act with no share capital. The object of this company is to rehabilitate the ex-servicemen by engaging them in the manufacture of a variety of goods and products made out of wood. Therefore, they required a constant supply of raw material in the shape of timber and cut pieces of timber and towards this requirement, the petitioners have admittedly supplied the necessary raw material from time to time. Though the company had commenced its business in the year 1966, it does not appear to have made much progress as could be seen from the notice of the special general meeting held on December 26, 1985, at its headquarters in Bangalore. In that meeting, certain resolutions were passed. The first reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties of the company, there would be a virtual scramble among them to take away as much as possible, leaving the petitioners and other creditors at the mercy of the company as there would be no assets at all to satisfy their claims. The petitioners have averred that they have served notices as required under the Act on the company, but in spite of such notices, the company has not discharged the debts due to the petitioners. On these grounds, the petitioners have sought the winding up of the company. A preliminary objection was taken by the company that the company petition was not maintainable under the provisions of section 583 of the Act. This objection was overruled by this court by its order dated August 8, 1986 See Bangalore Timber Industries v. Madras Sapper Ex-servicemen's Rehabilitation Association [1988] 63 Comp. Cas. 733 (Kar.). The company has filed its statement of objections partly denying certain averments made by the petitioners and partly admitting certain other averments in the company petition. But the fact that the company is due in a sum of Rs. 33 lakhs odd to the petitioners is not disputed. Therefore, whether on this admitted fact, this is a fit case for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of the company. According to him, the accumulated losses were not due to lack of production. The losses were because of the fact that the supplies were made by the factory on the basis of the lowest tender quoted which was not commensurate with the cost of the production, that the company had not availed itself of the concessions offered by the State Government for the supply of the raw materials but had always chosen to get raw materials from private parties; therefore the rates would be naturally higher than the Government rates and that the financial position of the company had worsened because of continuous losses. He has also relied on the figures given in the balance-sheet as on April 7, 1986 (unaudited), and he has submitted that while the liabilities to be discharged are Rs. 56,595.43 as on December 10, 1985, the assets as per the books are the factory with the machinery and the movables and if the same are revalued, their worth will be Rs. 214.33 lakhs leaving a deficit of Rs. 110.33 lakhs. But this deficit could be made up by proper management of the business of the company. He has accused the management of the company of mismanaging the resources and finances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. v. M. W. Pradhan [1966] 36 Comp. Cas. 426 (SC). But learned counsel for the workmen has relied on the Sick Industrial Companies (Special Provisions) Act, 1985 (in short "the Sick Companies Act") and also the provisions of the Act dealing with the investigation into the affairs of a company under section 235 and other relevant sections in support of the plea that this court should take into consideration the social and economic aspects involved in this case. It is well-settled that the remedy under section 433 read with section 439 of the Companies Act is an equitable as also a discretionary remedy. It is also well-settled that the provisions of sections 433 and 439 providing for an order of winding up on the creditors' petition is one mode of enforcing payment of a just debt due by the company. This position of law cannot be challenged despite the observations made by the Supreme Court in National Textile Workers' Union [1983] 53 Comp. Cas. 184. In Harinagar Sugar Mills' case [1966] 36 Comp. Cas. 426, an application by a receiver under the provisions of sections 433 and 439 was permitted by the Supreme Court on the ground that it is one mode of realisation of a debt due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up. Therefore, the only person or group of persons who have an interest in opposing the petition are the workmen and their case will have to be considered in the light of the provisions of the Sick Companies Act and section 237 and the other relevant provisions of the Companies Act as urged by learned counsel for the workmen. I will first deal with the provisions of the Sick Companies Act. This Act came into force on January 8, 1986 (See [ 1985] 58 Comp. Cas. (St.) 303): The Statement of Objects and Reasons of this Act read as: "The ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of banks and financial institutions are of serious concern to the Government and the society at large. The concern of the Government is accentuated by the alarming increase in the incidence of sickness in industrial companies. It has been recognised that in order to fully utilise the productive industrial assets, and to afford maximum protection of employment and optimize the use of funds of the banks and financial institutions, it would be imperative to revive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 237 of the Act should be ordered. The provisions of section 235 of the Act authorise the Central Government to appoint one or more competent persons as inspectors to investigate the affairs of any company and to report thereon in such manner as the Central Government may direct. Under section 235(1), the Central Government can appoint an inspector in regard to a company having a share capital, on the application either of not less than two hundred members or of members holding not less than one-tenth of the total voting power therein. On a plain reading of section 235(1) and (2), it is clear that the provisions of section 235 would not be applicable to an unregistered company. Therefore, it is not open to the workmen to contend that it is a fit case where this court should make a direction to the Central Government to investigate into the affairs of the company. However, it is contended by learned counsel for the workmen that section 237(a) (ii) of the Act provides that: "Without prejudice to its powers under section 235, the Central Government -- (a)shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs will have to be investigated in the winding up proceedings. The company court would be traversing beyond its jurisdiction to go into the various aspects of the rehabilitation of the company from the workers' point of view in order to arrive at a just conclusion. But I would have been inclined to consider their case seriously, if there had been a definite proposal to pay the petitioners' debts with interest either in a lump sum or in instalments. The suggestions made by the workmen are all laudable but the chances of revival without the Central and State Governments' aid are almost nil. In the circumstances, this court cannot and should not allow the petitioners to wait indefinitely to recover the debts due to them by refusing an order of winding up. Therefore, it is a fit case for winding up and it is ordered accordingly. The petitioners shall deposit a sum of Rs. 2,000 with the official liquidator within a period of two weeks to meet the contingent expenses. The petitioners shall take out an advertisement of this order in one issue of Deccan Herald within 14 days from the date of receipt of this order. Office to draw up the order in the requisite form. Parties to bear their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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