TMI Blog1948 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ing payment of-the sum of Rs. 16,000 for principal and Rs. 400 for interest due upon the said fixed deposit account. Perhaps apprehending that the petitioner might move for the winding up of the company on the expiry of 21 days after the date of his demand notices the company on the 20th January, 1947, presented before me a petition under sections 153 and 153A of the Companies Act and prayed for leave to convene meetings of its creditors and shareholders to consider and, if though fit, to approve, with or without modification, a scheme of amalgamation with the Mahaluxmi Bank, Ltd., (a scheduled bank) and for payment of its liabilities in the manner proposed in that scheme. The proposed scheme, broadly speaking, was that the company would transfer all its assets and liabilities to the Mahaluxmi Bank, Ltd., and the latter would take them over and pay the creditors in the manner following, namely, 25 per cent. by allotment of shares in Mahaluxmi Bank, Ltd., and in default of such allotment of shares within one year by payment in cash after the 10th year and the remaining 75 per cent. in three equal instalments of 25 per cent. payable, in case of all accounts other than fixed deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs until the disposal of the scheme application. Having granted leave to convene meetings of creditors and shareholders and in view of the possible amalgamation of the company with Mahaluxmi Bank, Ltd., which would become infructuous if creditors levied execution, I felt bound to give protection to the company by directing stay of all suits and proceedings. As I had not directed the affairs of the company to be investigated into by an independent auditor and as I did not know what charges might be made against the management by persons whose suits and proceedings were being stayed, I added in my order that those persons would have liberty to apply to Court for vacating the stay order. Again 1 cannot say that the possibility of amalgamation with a scheduled bank did not in any way induce me to grant the stay order at all. On the 10th February, 1947, the present petitioner applied before me asking, first, that the stay order be modified and leave be granted to him to present the winding-up petition and secondly that the company be wound up by the Court and thirdly that a provisional liquidator be appointed forthwith. In the petition serious allegations had been made against B. Mukh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreeing that all moneys realised including sale proceeds of any property would be deposited in Mahaluxmi Bank, Ltd., that no accounts would be settled or adjusted nor any movable property be sold or any establishment charges would be paid out unless jointly authorised by B. Mukherjee and Dwijen Bose, the son of the petitioner. Liberty was given to the parties to mention. On the 5th March, 1947, the petitioner wrote to the managing director enquiring as to what steps had been taken for the audit of the company's account and what progress had been made regarding the audit. The managing director replied on the 11th March, 1947, that the work concerning the amalgamation had been progressing satisfactorily. On the 18th March, 1947, however, a petition was presented before me on behalf of two persons named Bankim Chandra Banerjee and Syed Ehsan Kabir claiming to be two of the creditors of the company proposing a different scheme of arrangement and asking for directions for convening meetings of creditors and shareholders of the company to consider this fresh scheme or alternatively praying that this fresh scheme be considered at the same meetings which had been directed to be conven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate meetings of creditors and shareholders within two months from the submission of the report by the auditor appointed by Mahaluxmi Bank, Ltd., for the purpose of considering and if thought fit of approving the scheme of amalgamation that might be suggested by the Mahaluxmi Bank, Ltd. At the meetings were elected 13 creditor directors including Mr. J.C. Moitra and one Mr. S.C. Roy and one shareholder director who was no other than B. Mukherjee, the old managing director of the company. The chairman made his report to the Court that the fresh scheme as amended had been passed by the creditors and shareholders. The company thereupon moved the Court for sanction of this amended scheme which application was supported by some creditors including the present petitioner and on the 5th May, 1947, Edgley, J., was pleased to accord sanction to this fresh scheme as amended as aforesaid. The present petitioner's application for winding-up of the company which also appeared on the list was not disposed of but was adjourned sine die. By a letter dated the 16th May, 1947, the Mahaluxmi Bank, Ltd., declined to consider any proposal of amalgamation of the company with themselves. At or abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns. Being baffled in his endeavour to obtain any information the petitioner has now moved the Court on an affidavit for obtaining directions on his application for winding up which is pending, having, on the 5th May, 1947, been adjourned sine die. After setting out the history of the whole matter and reiterating and reinforcing his charges against B. Mukherjee and pointing out that the scheme has failed the petitioner submits that the scheme should be set aside and the company should be wound up by the Court. Mr. Chaudhuri who previously appeared for the 2 creditors who had proposed the fresh scheme and who now appears for the company has taken a number of technical points, as he is entitled to do, urging that no directions ought to be given on the petition which is defective in form and which, in the circumstances that have happened, is no longer maintainable. Mr. Chaudhuri's first objection is that the present application does not comply with rules 3 and 4 of our Company rules in that it has not been made on a petition but on an affidavit. In the order of the 12th February, 1947, liberty was given to the parties to mention. The petition for winding up is pending and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case no prayer for setting aside the scheme as there was in the Naokhila Loan Company's case ( supra ). I do not think, it is strictly necessary. Further, in paragraph 24 of the petitioner's affidavit he has asked for setting aside the scheme and, therefore, the distinction sought to be made does not exist. In the second place, Mr. Chaudhuri argues, on the strength of that case, that a scheme having been sanctioned the petitioner cannot maintain a winding-up petition on the ground of the company's inability to pay its debts. In Naokhila Loan Company's case ( supra ) no time had been fixed by the scheme for payment to the creditors and I held that the scheme must be construed to have contemplated payment within a reasonable time and a reasonable time having elapsed there was a default on the part of the company to carry out the scheme. There was also evidence that the realisations of the company's dues were extremely meagre and unsatisfactory and there was no chance of the scheme being implemented at any time. I pointed out that a company might be wound up in any of the circumstances mentioned in the six several clauses of section 162 and I held that in the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme remains unpaid there appears to be nothing in principle or logic to prevent the creditor from presenting a winding-up petition against the company in respect of the amount due under the scheme if that is more than Rs. 500. In the original petition there is sufficient averment of the company's inability to pay its debts, The scheme and the failure to pay in terms of the scheme will, to my mind, be cogent and sufficient evidence of the company's inability to pay its debts as they fall due. In any case the petitioner can, like the petitioner in the Naokhila Loan Company's case [1947] 17 Comp. Cas. 206 , rely on the just and equitable ground. In the third place, Mr. Chaudhuri points out that in Naokhila Loan Company's case, the winding-up petition was taken out after the company had made default in payment under the scheme. His argument is that on the happening of a default in payment under the scheme a new cause of action, as it were, accrues in favour of the creditor who is not paid so as to entitle him to present a winding-up petition but that such default does not revive his original debt abd he cannot proceed with a winding-up petition which was presented before the sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the pendency of his petition his claim, by reason of the scheme, has been reduced and modified but the amount presently due to him under the scheme on account of the first instalment is yet greater than the statutory minimum. I do not see why, in such circumstances, the petitioner should not be allowed to proceed with his petition which was not dismissed in view of the scheme but was adjourned in spite of the scheme. I now come to the question whether the petitioner has made out sufficient grounds on merits to proceed with the application. Mr. P.C. Basu says that the proposed amalgamation with Mahaluxmi Bank, Ltd., a scheduled bank, was the ultimate objective that was held out before the creditors. The creditors agreed to the scheme as a tentative or interim measure and as the proposed scheme of amalgamation has fallen through the sanctioned scheme must also fall with it. Reference is made to the speeches made at the meeting of creditors in support of this contention. Mr. Chaudhuri, on the other hand, contends that amalgamation with Mahaluxmi Bank, Ltd., was not an inducement at all, nor was it made a condition of the sanctioned scheme. The letter of Mahaluxmi Bank, Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppear to me now to establish that the sanctioned scheme was a part of a bigger and deep-laid and more insidious scheme which was to hoodwink the creditors and to firmly establish and consolidate the position and authority of the managing director. That insidious scheme worked according to plan. The proposed amalgamation misled me into giving leave to convene meetings of creditors and shareholders although the letter of Mahaluxmi Bank, Ltd., did not commit themselves in any way and to grant stay of proceedings without any safeguard as to investigation by an independent auditor and I have no doubt it was calculated to mislead and did in fact mislead many creditors and certainly the petitioner before me. Having thus secured the sanctioned scheme the pretence of amalgamation was thrown off in about 10 days time. It is said that independent directors have been elected by the creditors themselves and those directors being in majority B. Mukherjee cannot do any mischief. The provision in the scheme providing for the preponderance of directors to be elected by creditors is, in my experience, a paper safeguard, for creditors generally take no interest and do not waste time and further mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to carry out the scheme is the political situation in the country brought about by the division of India into two Dominions and partition of. the Province of Bengal and the fact that as no Courts were functioning in Eastern Pakistan the company's dues could not be realised. The reasons do not appear to me to be convincing at all. Further, those reasons will continue for a long time and there is no bright prospect in future. Mr. Chaudhuri then referred me to the resolution of the board of directors passed on the 6th December, 1947, authorising the managing director to contest the winding-up petition and to take steps for extension of time and urged that the directors are representatives of the creditors and the Court should respect the wishes of the creditors. No step has been taken for extension of time. Indeed the Court cannot extend the time. It can only be done after the creditors and shareholders have agreed to an extension of time as a new scheme. In the circumstances detailed above I do not regard the directors, who could in the face of the allegations entrust the management to B. Mukherjee as managing director, as real representative of real creditors. Mr. Chaudhuri urged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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