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TMI Blog1974 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... y acknowledged its liability in writing on this score to the extent of Rs. 60,35771. On the 3rd of October, 1970, the defendant-company asked for a short-term loan of Rs. 75,000 from the petitioning company and vide receipt of the same day, the amount was received from the petitioning company by the defendant-company. As the defendant-company failed/neglected to pay the aforesaid two amounts, notices of demand as provided under section 434(1)(a) of the Act were issued and when the defendant-company still failed to satisfy the demands, this application was filed on the 14th of February, 1973. The petitioning company has claimed three amounts to be due to it: Rs. (i)Price of materials supplied 60,357.71 (ii)Amount lent and advanced on the 3rd of October, 1970 75,000.00 (iii)Interest on Rs. 75,000 at the rate of 6 per cent. per annum from 3rd October, 1970 to the 3rd February, 1973 10,500.00 1,45,857.71 It has been alleged by the petitioner that the company has nominal assets save and except the leasehold interest in the mines ; large amounts are due and owing to the Government of Orissa by way of arrears of royalty and other public dues. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to payment of interest, nor is there any document to support the claim of interest. P.W. 1, the solitary witness on the petitioner's side, speaking about the payability of interest has stated: Though not mentioned in exhibit 1, there was a verbal agreement that the opposite party-company would pay interest at the rate of 6 per cent, on this amount. In cross-examination the witness has stated : The petitioner-company is not a money-lending or an investing company. The transaction relating to Rs. 75,000 under exhibit 1 took place in the Calcutta office of the petitioner-company. The loan under exhibit 1 was not a friendly loan but a commercial loan. Exhibit 1 does not say that money is repayable on demand. "On account" used in exhibit 1 only refers to the commercial practice. Members of the family of Sri Misrilal Jain, a mine owner and businessman of repute, who are constituents of the petitioning company, own shares in the defendant-company. There has been a series of business dealings between the two companies. In these circumstances, in the absence of clear proof that the interest was stipulated to be paid or had been agreed to be paid, it cannot be found that the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass an order of winding up even if the defendant-company is unable to pay its debts. It is equally open to the court in its discretion to make a conditional order. It is appropriate that at this stage reference is made to precedents. At page 742 of Palmer's Company Law, 21st edition, referring to the corresponding provision in section 223 of the English Act, it has been stated : "The court is invested with a wide jurisdiction in the interests of commercial morality;.........." In In re Great Western ( Forest of Dean) Coal Consumers' Company [1882] 21 LR Ch D 769 (Ch D), the court found it appropriate to deal with the adverse circumstances in which the defendant-company had been placed on account of depressed conditions of the coal trade in England. In In re Greenwood and Co. [1900] 2 QB 306 (QB) winding up was refused when it was found that a particular creditor was anxious to bring about statutory liquidation with a view to recovering some money due to it. In In re Tweeds Garages Ltd. [1962] 1 All ER 121 ; 32 Comp. Cas. 795 (Ch D), Plowman J. laid down that where there was no doubt that the petitioners were creditors for a sum which would otherwise entitle them to a winding-up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company judge has indicated that in an application to wind up a company on the ground of its insolvency, the fixed assets and the plant and machinery, which are necessary for carrying on the business of the company, cannot be ignored. The question to be considered is whether the company is able to meet its current demands and whether its existing and probable assets would suffice to meet future demands. That, if all the demands were forthwith made upon it, it would be able to meet the demands only by mortgaging or selling its capital assets, perhaps closing down, does not mean that it is insolvent. Reliance had been placed on some decisions of different High Courts. In the case of Amalgamated Commercial Traders P. Ltd. v. Krishna-swami [1965] 35 Comp. Cas. 456 , the Supreme Court dealt with a case where dividends declared by the company had not been paid and the shareholders as creditors in respect of the dividends due sued for winding up. Sikri J. as the learned judge then was, spoke for the court, thus (pages 463, 464): "It is well settled that 'a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell away some of its machineries. It is in evidence that a considerable quantity of iron ore was lying at the pit mouth and at the rail head. Even some manganese ore is said to be awaiting disposal. On account of non-availability of wagons, it has been stated that disposal had not been possible. D.W. 1, a director of the defendant-company, has stated that sincere steps have been taken for revival of the commercial activities of the company during the pendency of this application. D.W. 2 has been put in charge of the business. In the meantime, a small quantity of iron ore has been disposed of. Negotiation for further disposal is in progress. Enquiries have been received and rates have been quoted to different parties. It is stated that the Indian Bank with whom the stock-in-hand had been pledged has been paid a sum of Rs. 3,36,000 (exhibit J) and working arrangement after release of the stock has been made (exhibit J-1). A sum of Rs. 36,000 is said to have been paid towards employees' provident fund account, but in the absence of proof of payment, this assertion cannot be accepted. The surface and dead rent owing to the State Government to the tune of about one lakh rupees has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the defendant-company has not been able to satisfy the demands of the creditor for many years, and definitely for more than two years after statutory demand. There is considerable dispute as to whether the assets of the defendant-company exceed its liabilities or, otherwise said, the defendant-company is on the verge of insolvency. I do not think a detailed examination of this aspect of the dispute need be undertaken. The outstanding feature that even during the one and half years that this application has been pending in court, the defendant has not been able to offer to pay up the amount offers sufficient basis to hold that the defendant-company is not able to pay up the dues of the creditor. The application of the petitioning company is not a mala fide one. Admittedly, a huge amount is due to the petitioning company for more than three years now. It is true that the defendant-company has admitted that the amounts are due except so far as the claim of interest is concerned. Merely because the company was not in a situation does not mean that the petitioner should not be paid its dues and even when the company is in default, an order for winding up is not to be made. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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