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TMI Blog1988 (5) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts in brief. Prem Singh and other shareholders of the National Transports and General Co. (P.) Ltd. (B group), Ludhiana (for short "the company"), filed C.P. No. 236 of 1980 under sections 397 and 398 of the Companies Act, 1956 (for short "the Act"), for relief on the ground that the affairs of the company were being conducted in a manner which is prejudicial to the public interest and the petitioners therein and the company. They complained that the affairs of the company were being mismanaged. During the pendency of the same, C.P. No. 56 of 1982 was filed on July 27, 1982, by Pritam Singh and ten other creditors of the company under section 433 of the Act for winding up the company on the ground that it is unable to pay its debts to its creditors. C.P. No. 236 of 1980 filed by Prem Singh and other shareholders-petitioners was, however, dismissed as not pressed on February 24, 1983, as their counsel conceded that the same was not maintainable against a group of the company. C.P. No. 56 of 1982, however, culminated in an order of winding up of the company by R.N. Mittal J. (as he then was) vide order dated August 16, 1984. The official liquidator was appointed as liquidator of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company should be stayed for a period of five years so that the business of the company could be resumed and all financial matters settled. The petitioner also undertook to submit a report about the progress of the business of the company to the official liquidator regularly. C.P. No. 125 of 1986 came up for motion hearing before G.C. Mital J. on November 20, 1986, when notice of the same was issued to the official liquidator for December 11, 1986. The official liquidator submitted his report in the form of a reply on December 11, 1986, wherein he stated that he had no objection if an opportunity is given to Sarvshri Harjinder Singh and Duleep Singh to resume the business of the company. He recommended that the winding up proceedings may be stayed for a period of three years and not five years. He, however, laid down the following conditions for acceptance of the prayer made in the petition : ( i )winding up of the company may be stayed for a period of three years ( ii ) the affairs of the company may be entrusted to Shri Duleep Singh along with Sarvshri Harjinder Singh, Amarjit Singh and Karamjit Singh ; ( iii )that the company be allowed to be run by Shri Duleep Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company at Samrala. The meeting was held at the given time and date under the chairmanship of Shri Harjinder Singh. Six directors of the company were also appointed. In this meeting, he and his group invested a sum of Rs. 3,38,475 for purchasing shares of the company. He also invested more than Rs. 10,00,000. On the other hand, Sarvshri Amarjit Singh and Karamjit Singh did not invest anything for the reconstruction of the company. On the contrary, they had been hampering the affairs of the company. It was stated that Sarvshri Amarjit Singh and Karamjit Singh are closely related to Shri Harjinder Singh who is not at all helping in the reconstruction of the company. Shri Duleep Singh also averred that he had approached the Motor and General Finance Company, Delhi, which had disbursed a loan of Rs. 8,60,000 for purchase of new buses. This loan had been given on his personal guarantee. It was also alleged that instead of helping resumption of the business of the company, Sarvshri Amarjit Singh and Karamjit Singh took away a new bus purchased by him for the company from the bus stand at Samrala and kept it at Khanna. The conductor of the bus was also taken away by them. He filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, opposed by the official liquidator and Shri Harjinder Singh. C.P. No. 24 of 1987 was filed by Shri Gurdial Singh, a shareholder, and now a contributory of the company. He also prayed for vacation of the order dated 11th December, 1986, passed in C.P. No. 125 of 1986, by G.C. Mital, J. He stated that the directors of the company did not file any statement of affairs under section 454 of the Act after the winding up order was passed by R.N. Mittal, J., on August 16, 1984. The official liquidator, therefore, filed C.P. No. 56 of 1986, against Shri Harjinder Singh under section 454(5) of the Act which is still pending. It was complained that no notice of C.P. No. 125 of 1986 had been issued to the petitioners and other shareholders of the company as required by rule 116 of the Rules. No ground existed for staying the winding up proceedings for three years. The interest of the general body of the creditors and the shareholders of the company demands that the winding up proceedings ordered by this court should be allowed to continue so that the creditors may be able to recover whatever little they can from the assets of the company. He, therefore, prayed that the order dated D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had also been taken back by the financier. He has floated shares for Rs. 3,34,475 which, according to him, have been purchased by his group. In fact, after the order of winding up of the company, no such shares could be floated or purchased. In these circumstances, the prayer mentioned above has been made in this application. Notice of this application was given to the counsel for Shri Duleep Singh and to the official liquidator. However, no reply to the same has been filed by either of them. On December 15, 1987, when C.A. No. 24 of 1987 filed by the petitioning creditors came up before me, their counsel, Shri Surjit Singh, stated that in case condition No. ( iv ) in the order of G.C. Mital J., dated December 11, 1986, to the effect that the petitioning creditors should be paid through the official liquidator is satisfied by payment of the amount due to them along with the interest calculated at 12 per cent. per annum, they shall not press their application. Shri A.C. Jain, appearing for Shri Duleep Singh, who himself was present in person in court, stated that a sum of Rs. 67,016 payable to the petitioning creditors along with interest due thereon shall be deposited by Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal minutes book and those given in the photostat copy filed in this court and given to the official liquidator do not agree with each other in so far as the heading and signatures were concerned. He further reported that in the board meeting held on February 22, 1987, Shri Duleep Singh was elected as managing director of the company and 13,539 shares payable at Rs. 25 per share were allotted to 15 persons including Shri Duleep Singh himself, who got 3,939 shares. In the board meeting on May 5, 1987, Sarv-shri Duleep Singh and Harjinder Singh have signed at the end of the proceedings under date July 5, 1987. Another board meeting dated September 1, 1987, is signed by Shri Duleep Singh alone at the end of the proceedings. On a scrutiny of the accounts, the official liquidator reported that Shri Duleep Singh produced an audited balance-sheet for the period from December 15, 1986, to September 30, 1987, annexures I and J to the report. On scrutiny of the same, the official liquidator found that rent amounting to Rs. 5,600 for office premises were allegedly paid to one Shri Kulwant Singh. Shri Duleep Singh, however, produced three receipts of Rs. 700 each signed in Urdu for a tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering Company, Delhi, and no steps had been taken to record this amount. A sum of Rs. 3,100 had been shown to have been paid to Shri D.R. Aggarwal, advocate, but no receipt in support of the same had been produced. This amount thus remained unverified. As regards hire-purchase charges, etc. to the tune of Rs. 4,12,800, receipts for Rs. 3,47,400 had been produced which show that payment had been made to Super Star Engineering Company, Delhi. However, a sum of Rs. 65,400 remained unaccounted for. As regards investment of Rs. 9,59,522 allegedly made in the company by Shri Duleep Singh and his associates, the official liquidator reported that ordinarily, under the accounting principles, this amount should have been credited into the bank account of the company in the first instance. Thereafter, the amount required for day-to-day expenses should have been withdrawn by drawing cheques. This had, however, not been done. Only a sum of Rs. 1,30,000 is shown to have been deposited as per entry in the pass book of the company on March 13, 1987. It is not known as to in what way the balance amount of Rs. 8,29,522 had been spent without crediting to the company's account. Thus, this amount rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. The court is generally empowered to make an order under section 466 of the Act for stay to enable the company to frame a scheme of arrangement or reconstruction or amalgamation. In the present case, however, it appears that both Shri Duleep Singh and Shri Harjinder Singh have misused the order of stay of winding up proceedings. Under section 428 of the Act, the holders of the shares of a company which is wound up no longer remain shareholders. They, in fact, become contributories liable to contribute to the assets of the company in the event of its winding up. There was, therefore, no occasion for Shri Duleep Singh and his associates to float new shares, 13,539 in number, at Rs. 25 per share. Further issue of capital is permitted by the provisions of section 81 of the Act only. These provisions were neither attracted to the given circumstances nor was the procedure laid down therein followed for allotment of further shares. It is a statutory requirement under section 69 of the Act that all moneys received from the applicants for shares should be deposited and kept deposited in a scheduled bank. This admittedly, has not been done. It appears that without underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, I find force in C.A. No. 24 of 1987 in C.P. No. 56 of 1982, filed by the petitioning creditors. Their grievance that they were not given any notice of C.P. No. 125 of 1986 and were not afforded an opportunity of being heard before the order dated December 11, 1986, was passed is well founded. Had they been provided with an opportunity, they would have placed before the court their own view point and they would have properly watched their interest. In fact, the order dated December 11, 1986, in C.P. No. 125 of 1986 passed behind their back has virtually robbed them of the fruits of the legal battle which they fought in C.P. No. 56 of 1982 and which culminated in the order of winding up of the company dated August 16, 1984. This view is reinforced by the fact that in spite of a categoric condition laid down in the order dated December 11, 1986, that the petitioning creditors should be paid through the official liquidator, Sarvshri Harjinder Singh and Duleep Singh did not deposit even a penny with the official liquidator for payment to the petitioning creditors. They have thus been left high and dry. Neither of these two gentlemen has been able to establish his bona fides. I, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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