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TMI Blog1973 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... n a scrutiny of the balance-sheet of the company for the period ending March 31, 1969. The company had been incurring losses since its incorporation. During the years ending March 31, 1966, March 31, 1967, March 31, 1968, and March 31, 1969, the company incurred losses of Rs. 24,173.42, Rs. 19,264.25, Rs. 8,341.40 and Rs. 10,602.61 respectively. The total losses of the company thus accumulated to Rs. 62,881.77 on March 31, 1969, as against the paid-up capital of Rs. 5,600 only. The net tangible assets of the company on March 31, 1969, were valued at Rs. 1,86,492.70 while the liabilities amounted to Rs. 2,44,409.47 leaving a deficit of Rs. 57,916.77. From these figures, which have been taken from the balance-sheet for the year ending March 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rar of Companies and has been produced in original and has been marked as exhibit P-17. The signatures of the Regional Director on this order have been proved by the witness. I, therefore, hold that the order granting sanction to the Registrar of Companies to file the winding-up petition is in order and issue No. 1 is decided against the respondents. Issue No. 2 : This is the crucial issue in the case. It has been stressed by the learned counsel for the petitioner that the balance-sheets of the company exhibit a very sad state of affairs and it is clear beyond doubt that the company has been incurring losses and is unable to meet its liabilities. It was, however, admitted by the only witness produced by the petitioner that no depositor or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refund 3,75,000.00 Prizes 75,000 00 Total 4,50,00000 Total income at the end of Scheme- 50 months 5,80,787.40 Less expenses 4,50,00000 Profit 1,30,787.40 Calculation in other similar EPS 1. 30x1 1,30,787.40 2. 10x1 43,595.80 3. 25x1 1,08,989.50 4. 10x2 87,191.60 5. 10x1 43,595.80 Gross profits after 50 months 4,14,16010 One year profit 1,03,540.10 Approximate expenses for one year 25,000.00 Net profit 78,540.00" From the order of the Regional Director, it is not clear on what matters the explanation was not considered to be satisfactory. According to this ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-sheet of a company only is considered to be a sound reason for filing a petition for its winding-up, the provisions made in sub-sections (5) and (6) of section 439 for sanction by the Central Government lose all meaning and significance. Something more is required to be gone into and that is why the provision for an explanation by the company has been enacted. The spirit of this provision was completely lost sight of by the Regional Director who passed his order granting leave to the Registrar of Companies to file the present petition mechanically and without applying his mind to the explanation tendered by the company. It should be borne in mind that a mechanical sanction leads to incurring expenses by the State, harassment to the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to meet its liabilities whenever they accrued. In order to determine whether a company is unable to pay its debts, the first matter to be considered is whether the company is able to meet its liabilities as and when they accrue due. Section 434 of the Companies Act enumerates the exigencies in which the company is deemed to be unable to pay its debts, and admittedly none of those exigencies are found in the present case. It has been admitted by Krishan Kumar, witness for the petitioner, that no complaint from any creditor of the company has been received in the office of the Registrar to the effect that the amount due to him had not been paid by the company "Debt" really means an amount which is due and can be claimed in praesenti by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab v. Rohtak Hissar Transport Company (P.) Ltd. [1966] 36 Comp. Cas. 9 , 14 (Punj.) to the following effect: ".... the mere fact that the company's assets are less than its liabilities is, by itself, no ground for sending the company to winding up. The test laid down is that the company should be commercially solvent which means that the company should be in a position to meet its liabilities as and when they arise". As I have said above, the only basis for the conclusion of the Registrar of Companies that the company is unable to pay its debts is the position revealed by the balance-sheets filed in his office. No further investigation seems to have been made by the Registrar of Companies to find out the real nature of the business or the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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