TMI Blog1957 (2) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 1950, so that there were only 13 shareholders on the date of the filing of the petition under sections 213(1) and 221 of the Indian Companies Act. The first respondent is the company in voluntary liquidation; the second respondent was the liquidator who is alleged to have resigned and the third respondent is a contributory and the creditor of the company. The assets of the first respondent company consisted of 11 motor transport vehicles of the value of Rs. 1,50,000 with ten route permits. The appellant alleged that as the company was running at a loss and was neither profitable nor encouraging in its business it was decided by a special resolution of the company passed on 6th December, 1952, to voluntarily wind up the affairs of the company and appoint the second respondent who was the managing director of the company as the liquidator. The second respondent thereafter functioned as the liquidator only up to 29th October, 1953, when he resigned his post. The office of the liquidator was vacant and it is alleged that the second and the third respondents were disposing of the assets of the company to the detriment of the shareholders. It was further alleged by the appellant tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure payment of their shares of the liabilities by different groups C certificates and G permits of the motor vehicles were kept in the name of the company and the agreement provided that on default of payment by shareholders or a group of shareholders of his or their share of company's liabilities, the buses could be taken possession of by the managing director and sold for discharging the liability undertaken by the defaulter. The appellant was allotted M.D.E. 856 (A.D.E. 641) plying on the Kakinada-Mandapeta route. He took possession of the same and ran it for his own exclusive benefit. Though he had not signed the agreement, yet he was aware of the facts and acted pursuant to that agreement by obtaining the bus allotted to him and running it on his own account. The brother of the appellant, Pamarti Govindarajulu, Saladi Satyanarayana and Saladi Ayyanna were allotted one bus M.D.E. 1350. Of these the first two were signatories. They thus took charge of the buses. The second respondent also stated that other shareholders to whom the buses were allotted took possession of them and ran them on their own account. It is further alleged that from out of the amounts realised from vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and brother-in-law after which a sum of Rs. 5,600 stands to their credit and will be adjusted towards the share of the remaining debts of the company. It is further stated that all the assets of the company have been distributed and practically all debts have been discharged and nothing is left for the liquidator to do, and that the appellant having run the bus in his own right for a period of 27 months and appropriated the profits and having now chosen to refuse to pay his share of the income-tax cannot complain of the forfeiture clause of the agreement invoked against him. In these circumstances the petition was resisted. The third respondent's counter has generally adopted the counter of the second respondent. The appellant in his rejoinder challenged the legality of the agreement of 16th March, 1952, and the distribution of the motor vehicles and liabilities of the company among the shareholders. He stated that he was not a party thereto and that this agreement was superseded by the resolution for voluntary winding up of the company and that the income-tax arrears were payable by the company from its funds. He further stated that the motor vehicles belong to the company as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the voluntary winding up in pursuance of the special resolution dated 6th December, 1952, should continue and that Sri Nakka Suryanarayana Murty of Kakinada should be appointed as voluntary liquidator, he was accordingly appointed with the direction that if he does not act, it will be open to the parties to move the court under section 203 of the Companies Act for the appointment of another liquidator. The learned advocate for the appellant contends before us that (1) the appellant was not a party to the arrangement, Exhibit B-20, and is not bound by it, (2) this agreement is in contravention of the provisions of section 211 of the Companies Act and also contravenes section 54A of the Companies Act which prohibits the company buying its own shares, and (3) the sale of the buses on 7th August, 1954, by the second respondent was after he had resigned as liquidator, on 20th October, 1953, and consequently he had no power to sell the same ; as such the sales were not binding on the company and the buses therefore continued to be the assets of the company. For these reasons the learned advocate contends that the voluntary winding up should be ordered subject to the supervision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but if it can be shown that the resolution for voluntary winding up has been passed fraudulently or where the creditors support an order for supervision in order to safeguard their interests or where there is preponderating influence of the shareholders whose conduct is impeached or where investigation is required and the assets are large, the court might pass an order under that section. The above are some of the considerations which weighed with courts in England in considering the application for voluntary winding up under the supervision of the court. These principles would, in our view, equally apply in applications under section 221 of the Indian Companies Act. The appellant must show that he is a creditor and is likely to suffer by the action of the majority or that the action of the majority virtually amounted to the action of a single person who has controlled the majority of the votes or the majority has otherwise acted in a manner prejudicial to the interests of the shareholders in general or that the supervision order is necessary in order to have recourse to some of the provisions of the company law which are not exercisable under the voluntary winding up, but the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ramdas Co., R.W. 4, with their route permits and nine motor vehicles were allotted to the nine groups of shareholders who were to be proportionately liable for the debts of the company existing as well as for the future liability towards income-tax for the years for which assessment had yet to be made. Towards the excess of the value of the motor vehicles over the value of the shares of each group some amount was paid by them in cash and for the balance promissory notes were executed some of which were subsequently discharged "as a result of novation by which the shareholders of the groups made themselves personally liable to the third respondent who was the principal creditor of the company." The company's liability to the third respondent was thereby discharged. It was also provided in the above agreement that if any group made a default to pay its share of the liabilities and debts of the company, the second respondent will be entitled to take possession of the assets of such defaulting group or groups and sell the same and discharge the debts and liabilities of such defaulting group. With respect to one of the shareholders, Toladi Dhanaraju, who died possessed of shares it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Of course the appellant has denied the fact of his having run the buses on his own account, but Viswanatha Sastry J. has held against this contention. There is no doubt that the shareholders have a right to draw up a scheme of liquidation whereby the debts and liabilities of the company are paid and provision is made for distributing the balance. The liquidator can be authorised to carry out a scheme of this nature and there is nothing illegal or contrary to the provisions of the Companies Act in arriving at such a scheme. The appellant contends that the provision that the amount of the share capital was to be deducted from the value of the asset allotted to the shareholder, contravenes the provisions of section 211 inasmuch as the contributories are paid first instead of the debts being discharged. In considering this contention the scheme as a whole has to be taken into consideration. The main purpose of the scheme, in our view, was the discharge of the debts and liabilities of the company which was first and foremost in the minds of shareholders who met on the 16th of March, 1952. The buses continued to belong to the company as long as the debts were not discharged and it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,000. Both of us paid Rs. 7,000 to liquidator, K. Venkanna, some days prior to 6th December, 1952. For the balance of Rs. 7,000 Venkanna and the plaintiff asked us to execute a pronote in favour of the plaintiff saying that two buses would be transferred to us. We executed exhibit A-1 for Rs. 7,525." Two other shareholders, Saladi Ayyanna and Saladi Satyanarayana, and the appellant's brother, Govindarajulu, were allotted a motor vehicle. Saladi Venkataratnam, another shareholder and the brother-in-law of the appellant, was also allotted a motor vehicle on 18th March, 1952, and when he was examined in the same suit on 23rd October, 1954, (exhibit B-3) he admitted that he and the appellant got motor vehicles M.D.E. 1262 and 856 which were valued at Rs. 14,000 and that they had paid the amount after deducting their share capital. The evidence of R.Ws. 2, 5, 8 and 9 shows that the appellant was present at the time exhibit B-20 was drawn up and the reason for not signing it is given by R.W. 9 who says that he and the appellant left when exhibit B-20 was about to be signed as they could not sit in a congested place. R.W. 9 is one of the persons who did not sign the agreement. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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