TMI Blog1966 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... 965. Company Petition No. 35 was also admitted on 1 March 1965. It may be stated here that in Company Petition No. 34 of 1965 twenty one creditors are supporters of the winding-up petition and their support is based on the affidavit of Mrinal Kanti Das affirmed on 11 May 1965. The affidavit of the supporting creditors has been answered by Satyendra Kumar Roy affirmed on 6 September 1965 in Company Petition No. 34 of 1965. These three petitions were heard together. The arguments were common and questions involved were common. Company Petition No. 34 was taken out of its turn and Mr. Das, Counsel for the petitioner, advanced the leading arguments on behalf of the petitioning creditors. Counsel for the petitioning creditors in Company Petitions Nos. 33 and 35 had also advanced their arguments. Mr. Sen, Counsel on behalf of the Company dealt with all the arguments advanced on behalf of the petitioning creditors. 2. The petitioner in Company Petition No. 33 is Jogendra Chandra Das. His claim is for a sum of ₹ 5400/- in respect of salary for the period 16 April 1963 to 31 August 1963. The petitioning creditor in Company Petition No. 34 of 1965 is Amrita Sankar Ray and his claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the statutory presumption of inability to pay and that the Company is insolvent and unable to pay its debts. In paragraph 13 of the petition it is alleged that the Company is not carrying on any business and has suspended its business for over a year. In paragraph 14 of the petition it is alleged that it is just and equitable that the Company should be wound up. 4. In the affidavit in opposition affirmed by Satyendra Kumar Roy on 6 September 1965 it is alleged that the claims of the petitioner Amrita Sankar Ray are barred by the law of limitation and as such the petitioner has no valid or lawful claim. It is also alleged that the petitioner Amrita Sankar Ray in the month of May 1962 wrongfully, illegally and in violation of the terms of employment left the services of the Company whereby the Company suffered loss and damage assessed at ₹ 10,000/-. The petitioner's claim for salary for the years 1955-56 is assailed on the ground of limitation. The petitioner's claim for ₹ 800/- as special allowance is denied. The petitioner's other claims are also denied. As to the claim for ₹ 3400/-in lieu of leave not availed of pursuant to application dated 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges of defalcation against Satyendra Chandra Sen. As to the claim of 21 creditors supporting the petition for winding-up it is alleged that they are not entitled to any contributions because of their various wrongful acts. It is alleged that since the assets of the Company were acquired by the State Government on or about 8 August 1963 the supporting creditors left the services of the Company without prior notice and since then they have been working under one B. C. Banerjee, who has been appointed Administrator by the State Government. The Company alleges a claim of ₹ 30,000/- against the supporting creditors. 7. In the affidavit in opposition it is alleged that the Company is solvent and lawful claims of any creditor can be paid out of the compensation money for which the Company has preferred claims. The Company further alleges that there are some amounts due from the Central Government on account of subsidy and subvention. 8. With regard to the petition of Jogendra Chandra Das in the Company Petition No. 33 of 1965 it is said on behalf of the Company that though the petitioner alleges to have been employed for 4 months from 16 April 1963 to 31 August 1963 and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company contended that the debt was disputed, first, on the ground of limitation and secondly, on the ground that the notice under section 434 was disputed as not relatable to any valid or lawful claim it having bean barred by limitation and thirdly, no presumption of insolvency would arise because no notice was left at the registered office of the company. It is also said on behalf of the company that there is a bona fide dispute as to the amount of debt. 12. In the case of (1) The Company v. Sir Rameswar Singh reported in 23 C.W.N. 844 the Company commenced a suit against some of its ex-Directors for recovery of a sum of over ₹ 6,00.000/-as damages for fraud and negligence. Subsequently the charge of fraud was withdrawn against one of the Directors and the claim against him was based on the ground of neglect of duty whereby the company suffered loss and damages. A Director thereafter filed a suit for recovery of certain deeds and securities alleged to have been pledged with the company as security for advances made. Thereafter the Director against whom charges wore made for neglect of duty filed a suit against the Company for recovery of a sum of ₹ 2,83,747 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew had been expressed in the case of The Company v. Sir Ramaswar Singh (Supra). In Bharat. Vegetable Products Ltd. (Supra), reference was also made to the decision in (7) Md. Amin Brothers v. The Dominion of India Ors. reported in MANU/WB/0023/1952MANU/WB/0023/1952 : 54 C.W.N. 514 where the Appellate Court directed the petition for winding up to be kept on the file and its hearing was adjourned sine die because the debt for income-tax on which the petition was founded was disputed bona fide by the company and it was said that the Court ought not to make a winding up order based on such disputed debt. 14. In the case of Bengal Luxmi Cotton Mills Ltd. (Supra), it was said that when the company failed to pay a debt and it appeared that the failure occurred not because the company was unable to pay but because it disputed the liability on a substantial ground and there was nothing to show that if the dispute was decided against the company, it would not or would be unable to pay the debt, there was no present proof of insolvency and therefore no sufficient basis for making a winding up order. In the case of Bengal Luxmi Cotton Mills Ltd. (Supra), it was said that there was no disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the more recent decision in (9) In re: Tweeds Garages Ltd.. reported in (1962) 1 All. E.R. 121 a petition was presented for winding up on the ground that the company was insolvent and unable to pay debts. The sum on which the petition was founded was the subject of a settled account. It was held that a dispute as to the precise amount owed was not a sufficient answer to the petition. 18. Counsel for the company in the present case distinguished the English decisions by submitting that the law laid down by the Supreme Court in the case of Amalgamated Commercial Traders (Supra), is that if a debt is bona fide disputed there cannot be neglect to pay. The case before the Supreme Court related to payment of dividends and the company in answer to the claim stated that there was not a proper declaration of dividend and it did not constitute a proper and valid declaration. It was said by the Supreme Court that there was no neglect to pay. Counsel for the company extracted observations from the decision in The Company v. Rameswar Singh (Supra), as also observations in the case of Bharat Vegetable Products Ltd. (Supra), that if there is bona fid dispute as to the substantial part of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roy in petition No. 34 of 1965. The claim is for ₹ 29,000 end odd. As to the claim for salary for ₹ 3,344 the company has not admitted the claim but has disputed. The question is whether there is bona fide dispute, or in other words, whether the company merely declines to pay without any reason. With regard to this precise sum of ₹ 3,344 the dispute is to be taken in the context of the entire affidavit evidence. There are grounds of limitation with regard to a large part of the claim. There are grounds of dispute based on the company's claim against the creditor. The company alleges that it has a lawful claim. The company says that it is rendered inactive by reason of the acquisition of its assets by the State. The company says that it cannot carry on its normal flying aeronautical activities because of the aeroplanes having been acquired by the State. The company further submits that the court should take into consideration the fact that these three petitions are all presented on the same day and doubts whether there is bona fide with regard to presentation of petition. It is said that Amrita Sankar Roy presented the petition on 18 February 1965 in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 434 of the Companies Act, and finally whether the petitioners are lawful creditors It is said that the statutory notice is bad because it is not at all in accordance with the provisions of the Companies Act which require service on the company by causing it to be delivered at its registered office. The petitioner creditors have alleged that it could not be served by post and therefore, the notice was by affixation. It is said on behalf of the company that there is no affidavit by the postman and that there is no evidence as to when attempt was made to serve. I am unable to accept the contention on behalf of the company that there has been no service of notice under section 434. But I uphold the other contentions of the company that there is substantial and bona fide dispute as to debt and therefore the petitions should not be acceded to. 22. The second contention on behalf of the petitioners was that the Company ceased to carry on business for over a year. Reliance was placed on the provision contained in Section 433 of the Companies Act that the Company may be wound up by the Court if the Company suspends its business for a whole year. Counsel for the petitioner relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), and German Date Coffee Company (Supra), Counsel for the petitioner contended that the Bengal Flying Club Ltd. by reason of acquisition of its assets was rendered totally ineffective for the purpose of carrying on business and that it ceased to carry on business for over a year and it was idle on the part of the Company to contend that its activities as Club were continuing or could continue. Reliance was placed on the decision in (13) Lawang Tshang v. Goenka Commercial Bank Ltd., reported in MANU/WB/0028/1961MANU/WB/0028/1961 : 64 C.W.N. 828 where the company's name was a material consideration for determining the main or paramount object and for the purpose of finding out whether the substratum of the Company was gone. The question in that case was whether the Company ceased to carry on business as a banking Company. The Company proposed to change its name to Goenka Commercial Co. Ltd. It was said that there was no denying the fact that banking was a primary object of the Company. The Company there did little or no business. On those facts of the case the Company was wound up. As to suspension of business for a year the question which is to be decided is whether the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eastern Telegraph Co. Ltd. (Supra), and it was said that in view of the fact that the Railway was acquired by the Government, the Government could not contend that the substratum of the Company was gone. It is true there the person who rendered the company's business ineffective was contending that the substratum of the Company was gone. In the present case there is no volition as far as the Company is concerned with regard to the normal activities of the Company. There is a compulsive or what is known as the police force of a State in acquiring the assets of the Company. The Company is left with no choice but to be shorn of its equipments. The company is preferring its claim for compensation. The decision In Re: Eastern Telegraph Co. Ltd. (Supra), seems to be apposite in regard to the facts of the present case. I am unable to hold that the Company has ceased to carry on business within the meaning of the provisions in Section 433 of the Companies Act in order that it might be wound up. 27. The final contention on behalf of the petitioner creditor was that the substratum of the Company was gone. There is no allegation that the substratum of the Company is gone. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chance of the Company carrying on business. It was also said that it was no longer a demur able petition by reason of affidavit evidence having been there. But the absence of a demurrer does not cure the petition of the inherent vice contained in it of total absence of allegation that that substratum of the Company is gone. Counsel for the petitioner relied on the Bench decision in (19) Ramshankar Prosad v. Sindri Iron Foundry (P) Ltd., reported in 70 C.W.N. 520 where it was said that a judge has the freedom to look at and draw upon materials other than those contained in the pleadings for fixation of issues. That was a case under Sections 397, 398, 399, 401 and 402 of the Companies Act as to whether there was oppression on share-holders. I am unable to hold that the decision is of any aid to the petitions for winding up. The petition for winding up is to follow the settled practice in the light of well-established decisions. That which is alleged is to be proved. It has to he alleged as a fact and it has to be proved as a fact. The company had no notice of such allegations. I am unable to accept the contention on behalf of the petitioners that there is any case that the substra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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