TMI Blog1975 (7) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... th July, 1975, when the petitions were again listed for further orders, it was stated on behalf of the company that it had not succeeded in raising the necessary funds to pay the creditors. Meanwhile, the company had filed applications under rule 9 of the Companies (Court) Rules, 1959, and section 151 of the Civil Procedure Code in each of the proceedings Counsel for the company said that these may be treated as its answer to the notice to show cause against admission. During the discussion on 16th July, 1975, counsel for the company prayed that the petitions be ordered to stand over for a period of four months to enable it to obtain loans from two banks with which it was negotiating. He said that if the loans were obtained the company would then be in a position to pay its debts. The creditors opposed this request, but, after some persuasion, were minded to agree, provided that satisfactory guarantees were furnished for the amounts owing to each of them so that their interests were safeguarded in the intervening period. Counsel for the company took time to obtain instructions. On 25th July, 1975, he informed me that the company was unable to find sureties. Consequently, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, it was feared, that if the petitions for winding up were admitted, the company's scheme to revive the mills and "to repay the creditors in full in the course of time" would be jeopardised. A request was again made that the petitions be ordered to stand over for about four months so as to enable the company to obtain a final decision regarding the loans for which it had applied. Thirdly, it was asserted that the majority (in value) of the creditors were opposed to winding up the company. In each of the proceedings, applications have been filed by Shree Rishabh Investment Ltd. and others, jointly claiming to be creditors of the company to the extent of Rs. 96 Jakhs in which the winding-up is indeed opposed. The grounds of the opposition are the same as those urged on behalf of the company and mentioned above. Also, the view is expressed that it is not in the interest of the general body of creditors of the company that it be wound up. As to these applications moved by the creditors opposed to winding up, an objection was raised that they had no locus standi to be heard at this stage. Counsel for these creditors sought to maintain the applications under Rule 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se creditors have been urged on behalf of the company. Their validity must still be determined as put forward on its behalf. Of course, it is material to know, as the company has alleged in its third ground, that there are creditors opposed to the winding up and that they might even have the majority in value. However, that in itself would not be sufficient to refuse an order for winding up, and such creditors would have to adduce good reasons why the order should not be made. That they think the company is commercially solvent and have full faith and confidence in its management, and that the company expects to pay its creditors in the near future are not adequate reasons. Nor is it enough that they believe that in the long run the creditors are more likely to be paid if the company is allowed to continue trading instead of being wound up. These principles are well-settled and the leading authorities are noticed in In re Focus Advertising Pvt. Ltd. [1974] 44 Comp. Cas. 567 (Bom.). With them in mind, one has to consider and weigh the other two grounds urged by the company, treating them as propounded not only on its behalf but also on assumed majority of the creditors. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany before or after the admission or both. This view is supported by the judgment of the Supreme Court in National Conduits ( P. ) Ltd. v. S.S. Arora [1967] 37 Comp. Cas. 786, 788 (SC). Elucidating various possibilities, the Supreme Court said : "When a petition is filed before the High Court for winding up of a company under the order of the court, the High Court, ( i ) may issue notice to the company to show cause why the petition should not be admitted ; ( ii ) may admit the petition and fix a date for hearing and issue a notice to the company before giving directions about advertisement of the petition ; or ( iii ) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order". Two sentences later, the court said ; "In answer to a notice to show cause why a petition for winding up be not admitted, the company may show cause and contend that the filing of the petition amounts to an abuse of the process of the court". To my mind this is clear authority for the proposition that a company may be allowed to show cause against the admission of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o substantiate the allegations made on behalf of the company. At the very least, the latest balance-sheet ought to have been produced. Obviously, that would have thrown a great deal of light on the real financial state of the company. In the circumstances, I can only think that this and other relevant documents have been advisedly withheld. An adverse inference must follow. Furthermore, even supposing that the company has sufficient assets to pay its debts, that is cold comfort to its creditors. It was said in In re Focus Advertising Pvt. Ltd. [1974] 44 Comp. Cas. 567 (Bom.), that once it is established that a debt, regarding which there is no bona fide dispute, is owing to a creditor despite statutory notice of demand, he is entitled to a winding-up order "and the court will not listen to a defence on the part of the company that it is not commercially insolvent or that its financial position is not such as to be unable to pay its debts". Here, counsel for the company conceded that the amounts claimed by the petitioning creditors and also by the creditors opposed to the winding-up were in fact due, though there were disputes regarding some small items. It is also apparent fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aspects, in my view, the only appropriate order to make at this stage is to admit the petitions, No real prejudice can be caused to the company by such an order. It can still carry on its negotiations for loans and present a scheme if, and when, its position improves. At the hearing, no doubt the court will consider what is the appropriate order to make on all the facts established before it. On the other hand, to defer orders admitting the petitions would be to delay the claims of the petitioning creditors further ; and, this, on rather nebulous grounds. Such a course would be contrary to the interests of justice, especially when it is remembered that the amounts claimed by them are admitted to be due, and have already been outstanding for a considerable period. Accordingly, I admit ail these petitions. Costs will abide the event. In order to avoid multiplicity of proceedings, all further proceedings will be taken only in C.P. No. 26 of 1975. The other petitions will be kept pending for the time being. The petition in C.P. No. 26 of 1975 will now be advertised in the Hindustan Times, the Vir Arjun, and the Delhi Gazette, and also the Gujarat Samachar published from Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
