TMI Blog1977 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of subscriptions from its members to whom chit fund was sold from time to time and the directors have received a huge remuneration of Rs. 67,500 during all these years and also benefited by obtaining loans and advances at the cheap rate of interest. The Registrar is apprehensive that the affairs of the company were being managed solely for the personal benefits of its directors and there appears to be no security of the public money deposited with the company. In his opinion, it would be worthwhile to put an end to the uneconomical working of the company. The Regional Director of Companies had, therefore, served a show-cause notice on the company as to why sanction should not be given to the Registrar of Companies to make an appropriate application for winding up as the company was unable to pay its debts. After hearing the representatives of the company, the Regional Director has given his sanction on March 10, 1975, to the Registrar to make an appropriate application which has been filed in this court on 9th July, 1976. After notice to the company, this petition was admitted on 27th July, 1976, and usual advertisement has been inserted in two newspapers one in English and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not a single default on the part of the company in repaying the subscription to the members as and when it became due for repayment nor was there any complaint from any of the subscribers nor there was any default in repayment of the debt to the creditors. It is in this context that I have been called upon to decide whether the Registrar is entitled to an order of winding up under section 433( e ) of the Companies Act, 1956. Section 433( e ) permits the court to wind up a company if the court is satisfied that the company is unable to pay debts. If the court is satisfied that the company is, having regard to the circumstances, unable to pay debts, it will, before making an order of winding up, consider what is the extent of the debt and whether having regard to its assets and uncalled capital, if any, the liabilities exceed so as to warrant an order for winding up. At this stage, of course, the court considers the prospective and contingent liability for determining the extent of the debt as prescribed under clause ( c ) of section 434(1) of the Act. The crux of the problem in this petition, therefore, in the first instance is whether it has been established that there were any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senti: solvendum may be in praesenti or in futuro that is immaterial. There must be an existing obligation to pay a sum of money now or in future. The following passage from the judgment of the Supreme Court of California in People v. Arguello [1869] 37 Calif 521, which was approved by this court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax [1966] 59 ITR 767 : AIR 1966 SC 1370, clearly brings out the essential characteristics of a debts: 'Standing alone, the word "debt" is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that it is a debt due'." In the context of this very section, the Rajasthan and Punjab High Courts have also held that when the debt becomes absolutely due in the sense that the creditor is entitled to claim its payment presently, it is a debt which is payable by the company within the meaning of section 433( e ) [vide Registrar of Companies, Rajasthan v. S . Sohanmull Golcha P. Ltd. [1972] 42 Comp. Cas. 386 (Raj.); Registrar of Companies v. Atlas Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company from time to time in the course of its working in the past have been placed on record. According to the rules and regulations of the scheme, the subscriber will be entitled to repayment of his subscription provided that he does not make any default in making his subscription during the period of the scheme. In other words, he would be entitled to repayment of his subscription provided he goes through the scheme. He would be entitled to benefit of the prizes and gifts provided he does not commit any default in complying with the obligations prescribed in the scheme. The liability of the company to repay the subscription is clearly, therefore, contingent liability and that liability will not be a debt in praesenti. It is no doubt true that in the very nature of the business of the company, large funds have been placed at the disposal of the directors. It is equally true that the directors and their friends have obtained loans from the company. By the order of this court, all these loans have been repaid to the company. It is also an admitted position now that the company has stopped its chit fund business and has switched over to the construction activities and agency b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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