TMI Blog1953 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ucting and maintaining a railway, operating between the Station of Bukhtiarpur on the East Indian Railway and the town of Bihar. There appears to have been an agreement between the promoters and certain local authorities which entitled those authorities to take over the railway in certain circumstances. In pursuance of that agreement the company appears to have established a railway running between Bukhtiarpur and Rajgirkund which was a distance of about 30 miles. The line was connected with the East Indian Railway and naturally some mutual adjustments between the appellant railway and the East Indian Railway became necessary. It is stated in the petition that there was interchange of coaching and goods traffic of every description between the two railways and the East Indian Railway afforded to the Light Railway joint station facilities as also the right of conveyance over its lines of materials required by the Light Railway for its own purposes. The case of respondent No. 1, the Union of India, who really represent the East Indian Railway, is that as a result of the interchange of coaching and goods traffic between the East Indian Railway and the appellant railway, a large sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 61,530-15-3. No reply to this letter is said to have been received. Thereafter, on July 18, the Union of India made an application to this court for a winding up order in respect of the Light Railway Company. The petition referred to the dues alleged to have been owing by the Light Railway Company to the East Indian Railway and alleged further that in spite of the two letters of demand sent on June 10 and June 30, 1950, respectively, no payment had been made. The amount of the dues was stated to be Rs. 5,91,784-2-0. It was also stated in the petition that the Light Railway had been taken over from the appellant company by the District Board, Patna, on or about 25th Jane, 1960, and that according to the information of the petitioner, a sum of Rs. 10,00,623 or thereabouts had been paid by the District Board to the Light Railway Company as purchase price or compensation. On the above allegations the Union of India asked for a winding up order on the ground that the Light Railway Company was unable to pay its debts and on the further ground that the substratum of the company was gone. The allegations made by the Union of India in its petition for winding up were sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Bachawat when he made the winding up order appealed from. Unfortunately, the learned Judge did not deliver any judgment and so we are deprived of the benefit of knowing what view he took of the facts. All that can be safely presumed is that the learned Judge thought that a case had been made out for his passing a winding up order. I have omitted to state that there appears to have been another creditor before the learned Judge, viz., the Bengal Nagpur Railway Administration, which, through an affidavit affirmed by their Deputy General Manager, D. K. Hopkins, put forward a claim of Rs. 1,78,498-14-0. The manner in which this debt was said to have been incurred by the Light Railway Company was the same as in the case of the debt alleged to be due to the East Indian Railway. What part the Bengal Nagpur Railway Administration took in the proceedings before the learned Judge is not at all clear and it appears that in the recital of the papers read before the learned Judge, as contained in his order, the affidavit of D.K. Hopkins is not included. The present appeal, I need hardly point out, is by the Bukhtiarpur Bihar Light Railway Company Ltd. On behalf of the company Mr. Bose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable to the Union. They are at liberty to prove still, in other ways that, in fact, the company was unable to pay its debts with in the meaning of item ( v ) of section 162. On that question, we listened to an interesting argument from the Bar as to when a company could be held to be unable to pay its debts and as to what the nature of the dispute must be if cases of disputed debts were to be excluded. It seems to me, however, that in view of one special fact in the case, it is unnecessary for us to embark upon an examination of the question debated before us. As I have already said, the demand of the Union of India is for an amount in the neighbourhood of Rs. 6,00,000. Even if the demand of the Bengal Nagpur Railway be added, the total would not be more than Rs. 8,00,000. Yet, on the admission contained in the petition itself, there is an amount of Rs. 10,00,623 which belongs to the company and it must therefore be available for the payment of the company's debts. In those circumstances, it is quite impossible for the Union of India to contend that although the appellant company has, according to its own case, a sum of Rs. 10,00,623 waiting to be paid over to it and although t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued, only a sum of 1s. per share had been called up on 1,000 of the shares. The company had never started any business at all, but had employed the petitioner in some work for which it had incurred to him a liability for a small sum. Even that small sum the company did not pay, so that the petitioner had to go to court and recover judgment for it. After that, the company made it impossible for the petitioner to realise his dues, because it declined to call up any further capital and defied the petitioner to realise his assets from wheresoever he could. It was only in circumstances of such an extraordinary kind that Mr. Justice Neville observed that he could not allow the Companies Acts to be used as instruments of fraud and that in view of the deadlock which the company had created by refusing to make calls and keeping itself deliberately out of the ample means which it could easily command, he thought that it was just and equitable that a winding up order should be made. It appears to me that the decision cannot be read as laying down any general rule and so far as it was a decision on its own special facts, it need only be pointed out that the facts of the present case are ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provided for compulsory acquisition by the Treasury of the shares of the third company which had purchased the physical assets. After that, proceedings were commenced for the assessment and payment of compensation in respect of the compulsory transfer, but before the termination of those proceedings, an application was made by certain preference stock-holders for a compulsory winding up of the company on the ground, inter alia, that the substratum of the company had gone. Pausing here for a moment, it will be evident that in the present case also the appellant-company had been formed with the object of constructing and maintaining a railway line under the terms of an agreement with certain local authorities and that on the petitioner's own case, the District Board of Patna acquired the physical assets of the company, namely, the railway itself, presumably under the terms of the agreement. In the present case also, there was a certain sum which had been set apart, at the time when the application was heard by the trial Court, as compensation payable to the appellant company, but neither the question of the right of acquisition, nor the question of the quantum of the compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the materials before us show, but because of the existence of the power of acquisition contained in the agreement in pursuance of which the company was formed. It is pointed out, in the next place, in the English case that the transaction of transfer had not been completed at the time when the winding up order was asked for, because the assessment and payment of the compensation remained to be made. Once again, the similarity is striking, because in the present case too, the transaction of acquisition had not been completed at the time when the application for winding up was made, because all that had happened was that the District Board was making an offer of Rs. 10,00,623 as compensation which had not yet been finally settled or finally accepted by the appellant-company. That being the background of the facts, Jenkins J. gave it as his reason for refusing a winding up order that it was eminently desirable that the directors of the company themselves, and not a liquidator, should act on behalf of the company in the matter of settling the compensation. He gave another reason as well, which is not pertinent here. But it appears to me that the reason I have first mentioned is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing at all, nor have we taken into consideration anything which does not appear in the paper book. No attempt has also been made to bring before us any other material in a proper form. As I have said, the allegation that an injunction had been issued against the District Board of Patna was not traversed by the Union of India and it would appear from the dates that if the allegation be correct, the District Board took forcible possession of the railway in the face of an injunction. It would be strange to make a winding up order on the ground that the substratum of the company was gone, if that state of things was brought about by the high-handed action of a third party who would perhaps yet have to answer for his act. What the real facts were have not been made clear by proper materials. Nor is there any material in support of another allegation made before us that there was a risk of the compensation money being taken out of India. Our sole duty as a court of appeal and so a court of error is to see whether the order of the trial Judge was right at the date it was made and since the grounds upon which it was sought to be supported cannot be sustained on the materials on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much in dispute between the parties. It is impossible to come to a definite finding one way or the other on the materials before us. It is not possible to come to a definite conclusion that the railway was taken over from the company by the District Board of Patna and unless we can do that, the question that the substratum of the company is gone cannot be entertained as the basis for making an order for winding up. In this connection I should point out that although in their letter dated 10th June, 1960, the appellant company made a definite statement that there was already an injunction against the respondent by the High Court and in the affidavit affirmed by Syed Mohamed Hashmatullah the same allegation has been repeated, nothing has been said with regard to the said statement in the affidavit-in-reply filed on behalf of the Union of India. Only reference has been craved to a certain telegram and a circular letter dated 28th June, 1960, addressed by the Chairman, District Board, Patna, to the General Manager, East Indian Railway. The person who affirmed the said affidavit on behalf of the Union of India has kept completely silent over the question as to whether or not an injun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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