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TMI Blog2003 (4) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... o her. The petitioner therefore, filed the Summary Suit No. 1873 of 2003 against the respondent company for the recovery of Rs. 66,74,780 being the value of the royalty for the sales made till then and for interest thereon. In the said suit, the respondent company admitted the liability to pay the dues of the petitioner and accordingly, a decree in terms of the consent terms was passed on 1-10-2002. Under the said consent decree, the respondent company was to pay to the petitioner a sum of Rs. 66,74,780 together with interest thereon at the rate of 15% p.a. from 1-7-2001 and a further sum of Rs. 43,39,095 together with interest thereon at the rate of 15% p.a. from 1-4-2000 till payment. The petitioner agreed to permit the respondent company to pay the dues in four instalments. The first instalment of Rs. 16,82,000 was to be paid before 30-4-2002 and second instalment of the like amount was to be paid on or before 28-4-2003. The third instalment of Rs. 39,24,000 was to be paid on or before 30-6-2003 and the balance of Rs. 39,25,000 was to be paid on 31-8-2003 along with the costs of the suit. It was agreed on behalf of the respondent company that on payment as the aforesaid decree s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed away by the promotors or persons in control of the management of the company ; ( v )further business of the company was not viable and any further carrying of the business by the company would only enure to further liabilities and allowing the company to further carry on the business was prejudicial to the applicant and wider body of creditors as there was likelihood of the company incurring further losses. 6. Mr. Narula, learned counsel for the respondent company controverted all the submissions of the learned counsel for the applicant and submitted : ( i )the company is in a sound financial position ; ( ii )that the company is owner of the copyrights in the works of several artists which if properly valued far exceeded its liabilities including the claim of the applicant; ( iii )there was only a temporary liquidity problem ; ( iv )though the company had previously made profits only for the period of last couple of years, the company was making losses which were attributed to slow down in the sale in the music industry on account of piracy and free music down load in MP3 format available on the internet ; ( v )the company has entered into a contract with Amson A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Exchange Bank ; Emmersons case ( supra ). In Darshan Anilkumar Patel v. Gitaneel Hotels (P.) Ltd. 1993 (2) Bom. C.R.440 after referring to the passage of Lord Romilly in para 13 of the judgment, Dhanuka, J. observed : "Practice followed by our courts is to the contrary and not the practice followed by Lord Romilly. We never hesitate to appoint Provisional Liquidator of a company in an appropriate case particularly when a strong prima facie case for winding up is made out and the court is the view that would be just, equitable and proper to appoint provisional liquidator in the interest of the company, complaining shareholders or creditors or workmen s or public interest etc. Section 450(1) does not impose any such restriction or limitation on exercise of the power vested in the company court while considering an application for appointment of a provisional liquidator. It is well settled that discretionary power must be exercised on just and equitable considerations and the court can appoint provisional liquidator of a company only if it would be proper to do so after weighing all pros and cons of the matter and after considering as to whether the petitioners have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidator as the provisional liquidator the company was not likely to come out of the woes but was likely to incur further losses which is not in the interest of the creditors. 9. While considering whether the official liquidator should be appointed as a provisional liquidator, pending the hearing and final disposal of a winding up petition, the court looks beyond the claim of the appellants and considers whether the appointment would be in the benefit of all the creditors in general. 10. I would now come to the material facts emerging from the petition and the affidavit filed at the hearing of the petition for appointment of provisional liquidator in the light of the aforesaid principles. 11. The balance sheet of the respondent company shows that the company is making losses since prior to the financial year 2000-01. The company had accumulated losses of Rs. 3.37 crores at the beginning of the financial year 2000-2001 i.e. on 1-4-2000. For the financial year ending 31-3-2001 the company incurred a net loss of Rs. 2.75 crores. For the year ending 31-3-2002 the company suffered a net loss of Rs. 12.05 crores. The company has not produced the balance sheet for the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors are to the extent of Rs. 12.02 crores. The company owes an excess of Rs. 1.17 crores to the suppliers of raw materials and sum in excess of Rs. 4.36 crores to the creditors who have rendered various services to the company. Out of these creditors, only one viz. Amson Audio Private Limited having a credit of about Rs. 93 lakhs has filed an affidavit dated 1-4-2003 supporting the respondents for opposing the winding up or appointment of the official liquidator as the provisional liquidator. Even the admitted debt due to the petitioner is higher than the debt due to Amson Audio who is opposing the winding up and appointment of provisional official liquidator. Thus, the test of the majority in value of the creditor opposing the petition as laid down by the Apex Court in Madhusudan Gordhandas Co. s case ( supra ) is not applicable to the present case. The debt of the petitioning creditor is not disputed. It is not shown that company has any reasonable prospects of coming out of the woods. Mr. Narula learned counsel for the respondent company has stated that the principal reason for the losses incurred by the company in the last three years namely are : ( i )Piracy of music ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al liquidator of the respondent company. The official liquidator shall appoint Mr. Shashi Gopal, Chairman and Managing Director of the respondent company as its agent in the event the respondent company deposits the two defaulted instalments of Rs. 16,82,000 which were due on 31-3-2002 and 28-4-2003 forthwith and undertakes to further pay the balance due instalment of Rs. 39,24,000 each on their respective due dates i.e., 30-8-2003 and 31-10-2003. If all the instalments are paid on due date, the official liquidator shall stand discharged. In the event the respondent company fails to pay the 3rd or 4th instalment on their original due dates as per the consent terms in Summary Suit No. 1873 of 2002, the official liquidator shall forthwith terminate the agency agreement granted to Mr. Shashi Gopal and take possession of the assets of the company. The respondent is granted one week s time for making the payment of the two already defaulted instalments of Rs. 16,82,000 each. If instalments are not paid within one week, the official liquidator shall take possession of the assets and properties of the company. In the meanwhile, the company shall not dispose of any of its assets and prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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