TMI Blog1971 (7) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... the main petition which is a petition for winding up the company. The other is taken out in Company Petition No. 114 of 1971 for appointment of an administrator or special officer with all powers of the board of directors of the company pending the hearing and final disposal of the main petition, which is for reliefs under sections 397 and 398 of the Companies Act, 1956. A few facts about the company may be mentioned. These facts are not in dispute. The company was incorporated in India in 1884 and has its registered office in Bombay. It has workshops at Bombay and Bhavnagar. The company carries on business of manufacture and supply of heavy and light structurals, transmission line towers, railway points and crossings, grey-iron castings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners ask for appointment of a provisional liquidator. Company Petition No. 114 of 1971 has been filed by three shareholders of the company in their own right and as persons authorised to present the petition by more than 100 members of the company. They allege that Haridas Mundhra, the respondent No. 2, is a de facto director of the company within the meaning of section 303(1), Explanation 1, of the Companies Act. It is not in dispute that his son-in-law, K. Tapurish, was a de jure director up to 25 th March, 1971. Respondents Nos. 4, 5 and 6 have been purported to be appointed directors of the company in a meeting alleged to have been held at Calcutta on 18th March, 1971. It is alleged by the petitioners that all the shares in the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies Act, including appointment of an administrator or special officer to manage the affairs of the company, removal of the present directors, investigation into the affairs of the company and other reliefs. In the judge's summons the petitioners seek an interim order appointing an administrator or special officer. It is not in dispute that from February, 1971, the activities of the company have come to a standstill for want of funds. It will therefore be appropriate if some interim order is made appointing either a provisional liquidator or an administrator or special officer. In the winding-up petition, the State of Gujarat appears claiming to be a creditor of the company in the sum of about Rs. 86 lakhs. The State of Maharashtra appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition. Haridas Mundhra, respondent No. 2 in the Company Petition No. 114 of 1971, opposes the appointment of both of a provisional liquidator or of an administrator or special officer. It is contended on behalf of those who support the appointment of a provisional liquidator that when a company is unable to pay its debts, the creditors are ex debito justitiae entitled to a winding-up order and the appointment of a liquidator. I am afraid this argument ignores the recent trends in social thinking, now embodied in sections 397 to 407 of the Companies Act pertaining to prevention of mismanagement. Sections 397 and 398, as they stood in 1956, even prior to 1963, contemplated that the court may, instead of winding up a company, make other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in the shape of the need of the community and the interest of the employees. This, in my opinion, is the requirement of sections 397 and 398 of the Companies Act. This country has been spending vast sums of money in promoting new industries in public and private sectors in the interest of the economic progress of the country and improvement of living standards. In face of this, it would appear to be improper to destroy a company which has worked for nearly 87 years and has acquired experience and expertise in manufacture and supply of structural and in boat building and ship repairing. At the same time the company cannot be kept alive so as to incur further liabilities and to diminish the dividend payable in case of winding-up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation, preservation and maintenance of the assets and property of the company and for purpose of the report hereinafter mentioned. The special officer shall investigate into the affairs of the company and make a report to the court on ways and means of resuscitating the company and more particularly the following matters : ICash flow statement for the next two years. IIOn the basis of orders on hand : ( a )production programme for the next two years; ( b )proforma profit and loss account for the next two years indicating explicitly economies in the revenue expenses. III( a )Present ratio of debt to equity, ( b )Current ratio of assets to liabilities, ( c )Liquidity ratio, and ( d )Projected sales. The special offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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