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TMI Blog2009 (2) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... control. However, at the time of arguments, with a view to avoid getting into disputed issues, the petitioners have sought to highlight, the amount owed by the respondent-company to petitioner No. 1, without in any way giving up any part of the claim of the other creditor companies. (ii)That the directors of the company have misappropriated the proceeds from the sale of the company's assets and have diverted the same in their personal accounts, to the exclusion of the company and its shareholders. The company is liable to be wound up under section 433(f) of the Act as it is just and equitable to do so. (iii)That the management of the company has totally disregarded the provisions of the Act in their functioning and conduct : (i) by not holding the annual general meeting and (ii) by not filing the balance-sheet and profit and loss account, and non-compliance of various other mandatory provisions of the Act. (iv)That the business of the company has been suspended for over a year thus the company is liable to be wound up under section 433(c) of the Act. 3. A brief narration of the petitioners' case, as found in the petition is as under :- (A)M/s. Indo Rollhard Industries Ltd., w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and request was made to fully co-operate with the Liquidator to facilitate the liquidation. The liquidation proceedings were not effectuated on account of non co-operation and non-fulfilment of legal requirements on the part of the directors. Hence, the petitioners have came before this court for seeking winding up of the company. 4. I have heard counsel for the petitioners, Ms. Vibha Mahajan Seth and Mr. S.K. Sarin on behalf of the respondents, and perused the record relied upon by the parties. 5. The first dispute is with regard to the status of petitioner No. 1 as a creditor of the company. In support of this submission, the petitioners rely upon the acknowledgement of debt issued to petitioner No. 1 dated 31-3- 2004, marked as annexure F, acknowledging a credit of Rs. 9,50,000 in the petitioner's favour by a director of the company, viz., Shri Gulshan Gandhi. The petitioner also relies upon the statement of account of the petitioner with the respondent-company, issued by the respondent-company, which is placed on record as annexure A to the additional affidavit of petitioner No. 1 dated 29-8-2006. The petitioners also rely upon the extract of the balance-sheet of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e acknowledgement of debt of Rs. 9,50,000 as on 31-3-2004, is a forged document and does not match the letterhead of the company. An affidavit of Mr. Gulshan Gandhi, director of the company to whom the said acknowledgement is attributed, dated 16-10-2006, has been relied upon, in which Mr. Gandhi has categorically stated that he never signed the document, i.e., annexure F and that the signature on the said document appears to be forged. The letterhead of this document does not match the regular letterhead of the company. 9. Learned counsel for the respondents also contended that the petitioners have contradicted themselves on several occasions by claiming Rs. 59,06,780 in the petition (as being outstanding due owed to petitioner No. 1 and his various companies) and later in the additional affidavit filed on 30-8-2006, stating that Rs. 7,50,000 is the outstanding amount, and then again in notice of demand, annexure F, by claiming Rs. 9,50,000. He stresses that this indicates the malicious and founded story by the petitioner. With regard to notice of demand, annexure F, the respondents have admitted receiving an envelope but states that the contents of the envelop were waste paper. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the company. It was certified by the managing director of the company that an amount of Rs. 9,50,000 is payable to petitioner No. 1 as on 31-3-2000. 13. It is also pertinent to note that the respondents do not explain as to why, on what account, payment of Rs. 1,80,000 as reflected by various cheques issued in the name of petitioner No. 1 was made to him. In fact, in the statement of account pertaining to petitioner No. 1 the respondent-company shows payment of Rs. 2,00,000 in the year 2002-03 reducing the outstanding balance from Rs. 9,50,000 to Rs. 7,50,000 as on 6-9-2002. Merely stating that the payment was made on account of certain other transactions is not sufficient. The respondent could well have placed on record the documents to show the existence of any other transaction in relation to which the amount of Rs. 1,80,000 or Rs. 2,00,000 was paid to the petitioner. However, apart from making a vague assertion as aforesaid, no other document has been placed on record by the respondent in support of their submission. On the other hand, petitioner No. 1 has placed on record the income-tax returns filed by him, inter alia, for the assessment years 1999-2000 and 2000-01 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of petitioner No. 1 was for Rs. 9,50,000 the same would not render the demand illegal and the said notice would still be considered as a valid notice for the purposes of sections 433 and 434 of the Act. Reference in this regard may be made to Devendra Kumar Jain v. Polar Forging & Tools Ltd. [1995] 84 Comp. Cas. 766 (Delhi). The Supreme Court has held in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125, that where the debt is bona fide, and there is not doubt that the company owes the creditor a debt, the creditor would be entitled to seek winding up of the company even if the exact amount is disputed. The court would order winding up of the company without requiring the creditor to quantify the precise debt. 17. The submission of learned counsel for the respondents that they did not receive the notice of demand and that the petitioners had merely sent some waste paper cannot be believed. If there was any truth in this statement, one would have expected the respondents to have immediately put the petitioners to notice that they have been served with waste paper in a registered cover. It does not stand to reason that the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution alleged to have been passed by the Board on 1-10-1999, to substantiate their defence that the said sale was authorised. From the order dated 30-5-2005, of the Registrar of Companies, the petitioners rely upon the following passage wherein the reference to first party is to the petitioners and reference to the second party is to the respondents :- "The second party has denied the allegation levelled by the first party and has submitted that the property situated at 61/1, Naresh Park, Nangloi, Delhi has been sold by the second party in April, 2000, only after complete authority from the shareholders and board of directors and had produced one certified true copy of the resolution of the board of directors passed in the meeting held on October 1, 1999, authorising Shri Anil Kaushal, managing director of the company authorising the sale of the property. The certified true copy was issued by Shri Mohinder Kumar Mahajan the then chairman of the company who was present in the hearing. The original certified copy of the true copy was shown to the first party and Shri Mohinder Kumar Mahajan was specifically questioned as to whether the signatures upon the board resolution dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected in Form No. 13 dated 4-5-2001, filed with the Registrar of Companies. Counsel for the petitioners further points out that the resolution stated to have been passed in the meeting of the board of directors on 11-1-2001, which purports to authorise the sale of the two plots at Mundka, records that these plots were acquired vide sale deeds dated 17-2-2000. Whereas, as per the admission made by the respondents before the Registrar of Companies, as recorded in his order dated 30-5-2005, the Nangloi property was sold in April, 2000. Accordingly, he asserts that the submission that the Mundka land was purchased from the sale proceeds of Nangloi land falls flat on the ground. Thus, he contends that the respondents have failed to provide any explanation regarding the manner of utilisation of the sale proceeds of Nangloi land and this further strengthens the case of misappropriation done by the directors of the company at the cost of the shareholders of the company. 26. Counsel for the petitioner gives another illustration, i.e., disposal of property at Bahadurgarh without any knowledge, authority or approval from the shareholders or even from the Vijaya Bank with which this property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply the copies of the auditor's accounts despite repeated requests and did not file the balance-sheets and annual return with the Registrar of Companies. The petitioners point out the order of the Registrar of Companies, NCT, Delhi and Haryana requesting the Ministry of Company Affairs to examine the books of account and other statutory records of the respondent-company, and the filing of the complaint under section 220(3) read with section 162 of the Act, with the Additional Chief Metropolitan Magistrate, New Delhi, to indicate the dismal state of affairs prevailing in the respondent-company, and to show that the company is being managed in a manner prejudicial to the interest of the shareholders and creditors of the company. It is further alleged that the substratum of the company is lost and the business has come to a stand still and the company has sold off its plant and machinery, factory building, lab equipments, etc. Thus, neither is there any intention, nor any resources available to commence the business of the company. The opposition to this petition is only to facilitate the further misappropriation of the company's remaining assets by its directors. Reliance is sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent to all the shareholders of the company. The extraordinary general meeting was held under the Chairmanship of Mr. M.K. Mahajan, who is not even a shareholder of the company. 31. With regard to allegation of misappropriation of the assets of the company, the respondent has denied the allegations that the original title deeds of the company's property bearing No. 61/1, Naresh Park, Nangloi, New Delhi, were fraudulently procured by, and handed over to Mr. Anil Kaushal, the managing director of the respondent-company by the bank official without any information, approval and requisite authority. He submitted that it was unanimously decided in the board meeting of the respondent-company which was held on 1-10-1999, under the chairmanship of petitioner No. 1, i.e., Shri M.K. Mahajan, that the said property is to be sold after getting it released from the Vijaya Bank. As at that time the said property was hypothecated with the Vijaya Bank, Shri Anil Kaushal, managing director of the company was authorised to negotiate with the relevant parties. Reference is made in this regard to annexures R and V to the reply of the company to the petition, viz., copy of the resolution passed in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the wide and wise judicial discretion of the court. The only limitations are the force and content of the words themselves, 'just and equitable'. Since, however, the matter cannot be left so uncertain and indefinite, the courts in England for long have developed a rule derived from the history and extent of the equity jurisdiction itself and also born out of recognition of equitable considerations generally. This is particularly so as section 35(6) of the English Partnership Act, 1890, also contains, inter alia, an analogous provision for the dissolution of partnership by the court. Section 44(g) of the Indian Partnership Act also contains the words 'just and equitable'." (p. 60) 35. The court also quoted with approval the following passages from Loch v. John Blackwood Ltd. 1924 AC 783, 788 (PC) :- "It is undoubtedly true that at the foundation of applications for winding up, on the 'just and equitable' rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, nor in regard to their private life or affairs, but in regard to the company's business. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the business of the company has been carried on in a non-transparent and clandestine manner is clearly evident from the contradictory stand taken by the company. The respondent-company had admitted the sale of Nangloi land in April, 2000, before the Registrar of Companies, NCT, Delhi and Haryana and also in their reply to the petition dated 17-1-2006, they have admitted that property at Mundka, Delhi was purchased from the sale proceeds of Nangloi property to start the work at its units. But as per Form No. 8 it can be clearly seen that the property at Nangloi was released in lieu of properties at Mundka located at khasra No. 57/17, min. (1-00) and 57/17 min. (0-08). The same fact is reiterated in Form No. 13 filed under the Act. Further, in the resolution passed in the meeting of the board of directors on 11-1-2001 (marked as annexure VI to the reply of the company), there is a specific admission that the plot at Mundka was acquired vide sale deed dated 17-2-2000, whereas, as per admissions before the Registrar of Companies, the Nangloi land was sold in April, 2000. Thus, there are serious contradictions to the claims of the respondent that the sale proceeds of the Nangloi land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sufficient to cause justifiable lack of confidence in the conduct and management of the company's affairs and also lack of probity in the conduct of the company's affairs. 42. On perusal of the statement of accounts of the company it appears to me that the substratum of the company is lost and the business of the company cannot be carried on in its current financial state. The "list of fixed assets" under schedule 4 appended to the balance-sheet for the year ending on 31-3-2005, shows the entire plant and machinery, factory building, lab equipments, crane, furnace, with other assets of the company have been disposed of during the year 2004-05. These are basic ingredients for running the business of this nature without which a company cannot sustain itself as a running concern. The company is not being able to run in an efficient manner and its output has fallen drastically is evidenced from its profit and loss account for the year ended 31-3-2005, which shows material consumed at Rs. 12,55,000 and the sales figure are at Rs. 16,48,285 whereas the corresponding figure for the year ended 31-3-2004, shows sales at Rs. 3,31,565 as against Rs. 2,94,340 of raw material consumed. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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