9911796707
TMI Blog1953 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... certain auditors under the directions of the Company Court, are considerable, but so are the liabilities of the Bank not inconsiderable. Apparently, the affairs of the Bank were not being conducted in a prudent and businesslike manner which attracted the attention of the Reserve Bank of India, and shortly before the date which I have mentioned, namely, 14-5-1951, the Reserve Bank of India appears to have carried out some kind of investigation, presumably under Section 35, Banking Companies Act. As a result of the examination of the affairs of the Bank made by it, the Reserve Bank of India felt it necessary to take some action and the action it took, or caused to be taken, was to direct the Bank not to accept any fresh deposits and not to do any further banking business. Upon that direction being given, the Bank suspended payment on 14-5-1951, and applied for a moratorium to this Court under Section 37, Banking Companies Act. An interim moratorium was granted, but within seven days thereof, an application was made by one Sachindra Bhattacharyya for a winding up of the Bank on 21-5-1951. While that application was still pending, the present appellant, Dwarkadas Agarwalla, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time an Accountant General. It appears that even after the scheme had been finally sanctioned, he continued to remain in office. 6. Between February 11, 1952, and May 27 following, the scheme was apparently in operation, but the interval seems to have been spent mostly over wrangles between the Special Officer on the one hand and the Bank of Jaipur on the other, either directly or indirectly. On 27-5-1952, another person appeared on the scene with an application for a winding up. He was Dharam Chand Jain, one of the respondents to these appeals, who had an amount of ₹ 1,105-10-0 in deposit with the Gaya Branch of the Bank in a current account. Dharam Chand Jain alleged that on 2-5-1952, he had served a notice on the Bank under Section 163, Companies Act, for the repayment of his money, but bad not obtained payment. On the basis of that failure to obtain payment, he alleged that the company was unable to pay its debts and asked for a winding up order. 7. On 9-6-1952, Dharam Chand Jain was joined by one Sree Gopal Joshi who was a shareholder, holding eight ordinary shares in the Calcutta National Bank. On his behalf an affidavit was affirmed and filed by one Biswanath Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration of the creditors and shareholders was a revised version of the old. scheme, the Bank of Jaipur still figuring as the prospective agent of the Calcutta National Bank Ltd., to be charged with the duty of winding up the affairs of the Bank and to be remunerated more or less in the same way as under the previous scheme. Certain alterations, however, were made, to which reference will be made later. The second application of Dwarkadas Agarwalla was made on 25-11-1952, and was disposed of by Mr. Justice S. R. Das Gupta on December 2 following. By the same order the learned Judge also disposed of the application made by Dharam Chand Jain for the winding up of the Bank. He held that the scheme of arrangement sanctioned on the previous occasion by Mr. Justice Banerjee was a nullity and, therefore, there was no legal bar to Dharam Chand Jain making or the Court entertaining the application for a winding up. As regards the second application for the adoption of a revised scheme, the learned Judge held that in view of the provisions of Section 38, Banking Companies Act, it was obligatory upon him to direct a winding up and not open to him to entertain an application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 38, Banking Companies Act, was erroneous, and the error had been caused by the fact that the learned Judge had overlooked the opening and qualifying words occurring in Sub-section (1) of the section. It was submitted that if proper regard was paid to those words, it would appear that even under Section 38, Banking Companies Act, the Court had a discretion to order or not to order a winding up and that it had not been made obligatory on the Court to order a winding up in the circumstances stated in the section. The learned Advocate-General took a different line, but I shall deal first with the contention of the learned Standing Counsel. 14. Section 38(1), Banking Companies Act, is thus expressed: Without prejudice to the provisions contained in Section 162 or Section 271 of the Indian Companies Act, 1913 (7 of 1913), and without prejudice to its powers under Section 37, the Court shall order the winding up of a banking company if it is unable to pay its debts and the Court shall also order the winding up of a banking company if the Reserve Bank applies in this behalf to the Court. 15. Mr. Justice S. R. Das Gupta held that the company in the present case was a ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up. Had Section 38(1) contained only a simple provision that in the case of a banking company being unable to pay its debts, the Court must order its winding up, it would be easy to construe it as superseding the general provision applicable to all companies contained in Section 162, Companies Act. Section 38(1), Banking Companies Act, however, saves the provisions of Section 162, Companies Act, for it begins, as I have already stated, with the words without prejudice to the provisions contained in Section 162 . The learned Standing Counsel contended that the effect of the opening words was to preserve the discretion or option conferred by Section 162, Companies Act, even in the case of banking companies which were unable to pay their debts. But I do not see how that can possibly be the true construction. If the opening words of Section 38(1) also comprise the case of a banking company which is unable to pay its debts and if the effect of those words be to maintain the operation of Section 162, Companies Act, even on banking companies in that condition, the subsequent provision making it obligatory on the Court to direct a winding up when a banking company is unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, without prejudice to the provisions contained in Section 163 of the Indian Companies Act, 1913 . 18. The learned Advocate-General's contention was that what Section 38(1), Banking Companies Act, contemplated was a case where the company concerned was a banking company and the debts which it was unable to pay were banking debts and its inability to pay had been of the kind mentioned in Sub-section (3) of the section and, to such inability, a certificate of the Reserve Bank that the bank was unable to pay its debts was added. The conclusion to which that argument led was that the default in the present case had not been of the kind mentioned in Sub-section (3) of Section 38, nor had there been any certificate by the Reserve Bank to the effect that the Calcutta National Bank Ltd. was unable to pay its debts. Consequently. Section 38(1) did not apply end the discretion given to the Court by Section 162, Indian Companies Act, remained unaffected. 19. I find it extremely difficult to accept even this construction suggested by the learned Advocate-General. In aid of his argument he referred to the provisions contained in Section 38(1) to the effect that the duty laid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (3) which he was suggesting, there was absolutely no room for the introductory words without prejudice to the provisions contained in S. 163 of the Indian Companies Act. Those words, he said, were utterly irrelevant and lie could not suggest any use for them, consistently with the construction which he was proposing for the sub-section. It seems to me, however, that on another construction of Sub-section (3), some use for the introductory words can be found. 22. The introductory words are, as I have already said, without prejudice to the provisions contained in Section 163 of the Indian Companies Act, 1913. Sub-section (1) of Section 163 is concerned with enumerating the cases when a company shall be deemed to be unable to pay its debts. Case (1) is it case where upon a demand being made, the company neglects to pay the demand for three weeks or to make an arrangement for its payment. Case (2) is a case where some order for payment in favour of a creditor is not complied with and execution or other process, issued in respect thereof, is returned unsatisfied. Case (3) is a case where it is proved to the satisfaction of the Court 'aliunde' that the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the result; it seems to me, is that so far as Section 38(1) is concerned, its provisions are attracted as soon as it is proved that a company is a banking company and it is unable to pay its debts either within the meaning of Section 163(1), Companies Act, or within the meaning of Section 38(3), Banking Companies Act. So far as Sub-section (3) of Section 38 is concerned, the effect, it seems to me, is only to add a fourth case where also a company, if it is a banking company, shall be deemed to be unable to pay its debts. I am accordingly of opinion that the constructions respectively suggested by the learned Standing Counsel and the learned Advocate-General will not bear examination and that the view taken by Mr. Justice S. R. Das Gupta was the right view. 24. I have discussed this matter at such length, because it was argued before us with some elaboration. The present case, however, does not require to be dealt with on grounds of law at all. As I have stated, Mr. Justice S. R. Das Gupta, after he had dealt with the question of law, proceeded to deal with the facts and he came to the conclusion that the facts were sufficient to justify him in throwing out the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
