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TMI Blog1961 (1) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... onstituted for the purpose of acquiring the business of the Hyderabad Potteries and to carry on the business of manufacturers, buyers and dealers in all kinds of clay work, chemical preparations and glazes whatsoever and obtain patents for them to carry out the other objects as set forth in the memorandum of association. On the 1st October, 1947, the Company executed a deed of mortgage in favour of the Industrial Trust Fund, H.E.H. the Nizam's Government (Industrial Department, Government of Andhra Pradesh, now) for O.S. ₹ 2,50,000 (Rs. 2,14,285/- I.G.) for purchase of machinery tools and construction of furnace, buildings etc., agreeing to repay the amount with interest at 3 1/2 % per annum. Under the deed of mortgage, the Company agreed to repay the loan in instalments of ₹ 8,000/-per month commencing from 1st October, 1950. On 19th September, 1949, the Company took a further loan of O.S. ₹ 13,000/- from the Industrial Trust Fund and executed a promissory note agreeing to repay the said amount with interest at 4% per annum. This promissory note was renewed by the Company on 6th December, 1952, and on the same date, the Company executed a further promissor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him and that therefore an amount of ₹ 1,26,712-8-0 was still due and payable by the Company to him. He also claimed that he has got a first charge and a right to preferential payment over the assets of the Company and valid lease in his favour till 8th September, 1970 and that as such, he is interested in opposing the petition for winding up. 6. The appellant's objections to the winding up are: (1) The petitioners in the O.P. are not secured creditors: (2) If they are secured creditors, they cannot maintain the petition for winding up of the Company without abandoning their security; (3) The claims of the petitioners are barred by limitation; and (4) The financial embarrassment of the Company is only temporary and that it is not in the interest of the Company to pass a winding up order. 7. The petitioners filed an affidavit in reply controverting the allegations in the counter-affidavit of the appellant. In a supplemental affidavit, the appellant reiterated that the debts of the petitioners are barred by limitation and that the mortgage deed in favour of the petitioners was not registered under the Companies Act and that therefore is void against all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter-affidavit filed by him in the O.P. But, on the other hand, he stated that the loan was advanced by the erstwhile Hyderabad Government in the name of the Industrial Trust Fund. It was also stated by him that the Industrial Trust Fund, that is, the Government, gave the loan . He had not specifically pleaded either in the counter-affidavit originally filed or in the supplemental affidavit that the Industrial Trust Fund is a Corporation and not a department of the Government. The question was allowed to be argued by Satyanarayana Raju, J. and therefore, we also permitted the learned counsel for the appellant to argue the same question before us. 10. The only question argued before us by the learned counsel for the appellant is that the Industrial Trust Fund is a Corporation and not a department of the Government and that, therefore, Article 149 of the Limitation Act has no application. The very recitals in the mortgage deed dated 1st October, 1947 indicate that the mortgagee was a department of the H.E.H. the Nizam's Government and not a corporation. The recital is as follows: This deed executed this day of 1st October, 1947 equivalent to 1st Azar F. 1357 between Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if necessary, to shares, and after full satisfaction of their needs, if the Fund still permits then it shall be invested in such industries outside H.E.H. the Nizam's Dominions, as may directly, indirectly or effectively be of benefit to these Dominions. Any surplus, remaining after satisfying these needs, shall be invented in such securities, as the Board may think fit. (3) The interest on the Fund shall be invested for the following purposes : (a) improvement and development of small industries and cottage industries; (b) demonstration of industrial experiments, industries plants and processes: (c) economic and industrial enquiry and research within H.E.H. the Nizam's Dominions: (d) grants to assist industrial and technical research; (e) grant of assistance to young men for obtaining education and practical training in industrial processes within or without H.E.H. the Nizam's Dominions. 12. After the integration of the erstwhile State of Hyderabad and the formation of the State of Andhra Pradesh, the Legislature passed an Act (IV of 1957) with the declared object of amending the above Hyderabad Industrial Fund Rules. The material provisions are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration aggregate is a number of individuals united into one body under a special denomination having perpetual succession under an artificial form, and vested by the policy of the law with the capacity of acting in several respects as an individual particularly of taking and granting property of contracting obligations and of suing and being sued, of enjoying privileges and immunities in common and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence. It is pointed out by the learned counsel that in recent years, a new class of corporations called national corporations, have come into existence and that corporations of this class are corporations aggregate and are created by Act of Parliament or by a Charter for the benefit or service to the Community and that the Industrial Fund is one such. He contended that these national corporations are public service corporations and carry on their undertaking as responsible independent organisations and not as part of any department of State. He submitted that the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall consider whether the Industrial Trust Fund, H. E. H. the Nizam's Government, is a Corporation and not a department of the Government. 16. The original Firman issued by H. E. H. the Nizam is not before us. We do not know what its terms are. The Hyderabad Industrial Fund Rules 1347 Hijri do not indicate that the Industrial Trust Fund, H. E. H. the Nizam's Government, is a corporation. Rule 1 (a) merely provided that the Fund shall be controlled by a Board comprising of the members mentioned therein. Admittedly, the persons entrusted with the administration of the Fund are civil servants and they are so entrusted with the power in the course of their official duties. The Fund was set apart, in our view, by the Government from the finances of the State and is administered by a department of the Government. None of the attributes essential to a corporation exist in the case of this Fund and this Fund has no separate legal existence. It is a department of the State. In our view, this is a Fund similar to the Harijan Welfare Fund, the Tribal Welfare Fund and many other kinds of funds set apart by the Government for specified purposes. Where the Government sets apart a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Education Act, 1892, held that the said Boards were not agents of the Government and that they were independent bodies. It was pointed out that once money was paid to the Boards, the Government had no longer any control over the money. At p. 672, of the report, it is further pointed out that by Section 34, the Boards have power to make bye-laws and rules to be approved by the Governor in Council but are not bound to do so though by Section 37, their accounts have to be audited and returns of all schools duly audited are to be transmitted to the superintendent and these are, by Section 72, to be laid before the Legislature. That procedure was only for the information of the Government and the Legislature and not in order that any item of expenditure may be disallowed if the Government have not approved it. The Privy Council also stated in that case that the appointment of Boards for each of the three religious denominations concerned thereunder and the institution of the Board, indicate that it is not to be a mere agent of the Government for the distribution of the money but is to have within the limit of general educational purposes, a discretionary power in expending, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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