TMI Blog1978 (6) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner alleged that it holds about 22% of the subscribed capital of the company. It appears that the company, by a resolution passed on the 28th of November, 1973, approved a draft agreement regarding the proposed transfer of the undertaking of the company to the United Bank of India Ltd. with its assets and liabilities as on 22nd of December, 1973. The clause 15 of the said draft agreement provided as follows: "15. The transferor shall not carry on any business at any time after the date of transfer except for the purpose of going to voluntary winding up. The major part of the amount payable to the transferor by the transferee, in terms of clause 2 of these presents, shall be kept intact in a term deposit account or account with such nationalised bank or banks and for such period as the board of directors of the transferor may decide till such time as they are required for distribution amongst the shareholders of the transferor. Only such portion shall be kept in current account or in cash as may be necessary for meeting the day to day expenses of the transferor as may be decided by the board. The transferor shall take expeditious steps for going into voluntary winding up b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 28th of September, 1977, and the same was published in the Statesman Calcutta, dated the 2nd of September, 1977, a special resolution proposed to change the name of the company by deleting the word "Bank" and also amendment of the object clause proposed therein, subject to the permission of the Reserve Bank of India under section 49C of the Banking Regulation Act, 1949, and also an ordinary resolution that, until such amendments, the board of directors of the company in supersession of all resolutions of the company be and hereby authorised to invest the funds of the company in such manner as it may think fit and proper in the best interests of the company. The petitioner challenged the said proposed resolution to be moved in the 33rd annual general meeting, which was resisted, to be held on the 28 th of September, 1977, as illegal, invalid, void, mala fide, and inoperative on various grounds alleged in para. 23 of the petition, inter alia , that it is violative of section 173(2) of the Companies Act, 1956, in the absence of an explanatory statement and it was contrary to the scheme of transfer of the undertaking of the company only to distribute the consideration mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Act, 1949. The resolution for change of name and alteration of the objects clauses has been adjourned pursuant to the order of this court till tomorrow at 10-30 a.m. and the other resolution of the 33rd annual general meeting, that is, for the voluntary winding up of the company, has been rejected by the shareholders at its meeting. As the matter, which to my mind, appears to be confined within a very limited scope, has been argued at length as usual in Surajmal Nagarmal matters, by citing all decisions on the question of whether the substratum of the company is gone and all relevant and irrelevant correspondence and provisions of the Banking Regulation Act and the Companies Act have been referred to and placed before the court, thereby prolonging the hearing to such an extent, that it reflects a waste of public time with the power of money bag. Mr. R.C. Nag with Mr. Bhaskar Sen and Mr. Sudipta Sarkar, for the petitioner, started with the history of the company, which is really a Surajmal Nagarmal concern and the dispute between the different groups of the partners of Surajml Nagarmal. It is really one group of the partners of Surajmal Nagarmal infighting with the other gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation Act, 1949, is to override the memorandum. Mr. Nag quite rightly referred to section 6(1)( a ) to ( n ), ( o ), 6(2), which provide the permissible business that can be carried on by a banking company. Mr. Nag referred to the Supreme Court decision in Rustom Cavasjee Cooper v. Union of India [1970] 40 Comp. Cas. 325, where it has been held that the definition of "banking" in the said Banking Regulation Act, 1949, does not include other commercial activities which a banking institution may engage in and does not extend to trading activities which are not incidental to banking. Mr. Nag, therefore, submitted drawing my attention to the director s report for the year ending 31st December, 1973, wherein it has been stated that all the assets and liabilities were transferred as on 21st of December, 1973, to the United Bank of India and the balance-sheet for the year ending 31st of December, 1973, shows the investment as "nil" whereas investment for the year ending 31st of December, 1972, shows Rs. 1,23,48,443. Therefore, Mr. Nag rightly submitted that no investment business has been carried on by the company, on its own showing, even up to the year ending 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that clause ( o ) of the company's memorandum is a power and not an object which is incidental to the banking business of the company as suggested by its name and also according to the provisions of the Banking Regulation Act. He further submitted that the admitted need of change of name of the company and also alteration of the object clause in the articles amounts to admission of disappearance of substratum. Mr. Nag submitted that since the company is a banking company permission of the Central Govt. is necessary under section 6(1)( o ) of the Banking Regulation Act and the alteration of the memorandum under section 17 of the Companies Act, 1956, with the sanction of the Company Law Board does not satisfy such requirement of the special statute, that is, the Banking Regulation Act, 1949. Mr. Nag submitted that under section 44A, sub-section (4), of the Banking Regulation Act, the scheme is binding on all and, therefore, the alteration of the memorandum is not permissible. In my view, Mr. Nag's contention that it is a scheme under section 44A of the Banking Regulation Act cannot be accepted as the said section on its very wording in sub-section (1) is not applicable to the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being dated 26th September, 1977. Mr. Nag submitted that since the transfer of banking business with the assets and liabilities to the United Bank of India the company has never carried on any business. He again relied on the principles laid down in Goenka Commercial Bank's case [1961] 31 Comp. Cas. 45 (Cal.) and the Burdwan Cutwa Railway Co.'s case [1978] 48 Comp. Cas. 611 (Cal.). Mr. Nag submitted that the members have not received any dividend from the company. Mr. Nag also relied on the letter of the company dated 5th December, 1972, written to the Joint Chief Officer of the Reserve Bank of India, inter alia , stating that the company was agreeable not to carry on business in future after the completion of transfer of all the assets and liabilities of the bank to the United Bank of India save and except as may be necessary for the realisation of any outstanding assets of the bank. Mr. Nag submitted that from the above it is quite clear that the transfer of the banking business together with all its assets and liabilities to the United Bank of India by the company was solely on the basis that the company would be voluntarily wound up and the surplus assets will be distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkadas Agarwalla v. Dharam Chand Jain [1954] 24 Comp. Cas. 283 ; AIR 1954 Cal 583, and the decision in Aswini Kumar Ghose's case, AIR 1952 SC 369, regarding the court's power to wind up a company on the grounds mentioned in section 433 of the Companies Act. It appears to me that section 38 of the Banking Regulation Act has only taken away the discretionary power of the court to wind up a company on the ground, i.e ., unable to pay its debts, and in the case of a banking company the court shall wind up the company. Interpretation before the amendment of the Banking Regulation Act by introducing the word "notwithstanding" has practically made no difference in its effect and the decision in Dwarkadas Agarwalla v. Dharam Chand Jain [1954] 24 Comp. Cas. 283 ; AIR 1954 Cal 583, in my view, regarding interpretation of the court's power to wind up still stands. Therefore, in my view, the court can wind up a banking company under the Companies Act subject to the provisions of section 38 of the Banking Regulation Act. Therefore, Mr. Nag submitted, having regard to the facts of this case as enumerated above by him, and more or less admitted which cannot be disputed by the company, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time pending the disposal of this application. Therefore, Mr. Mukherjee submitted that the winding-up petition cannot be said to be a bona fide one but a sheer abuse of the process of the court knowing fully well that the resolution will be passed for change of the name and alteration of the objects clause. Therefore, the petitioner is trying to put pressure on the company for the purpose of getting the value of his share paid by the company. Mr. Mukherjee also submitted that the court has power to wind up a company only under section 38 of the Banking Regulation Act and not on any other ground under section 433 having regard to the non-obstante clause in section 38 of the Banking Regulation Act. But, in my view, the said contention cannot be accepted, as indicated before, as the provisions of the Companies Act will apply subject to the special provisions of section 38 of the Banking Regulation Act, i.e ., the grounds, except what is laid down in section 38, for winding up of the company under section 433 of the Companies Act are available for winding up of the company after the prima facie grounds are made out. Mr. Mukherjee relied on the decision in McLeod Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, as it stands, can carry on banking business which includes the businesses specified in section 6, sub-section (1), only and no other business. It is an admitted position that in fact the company has not carried on any business, save and except after receiving the consideration money for transfer of its banking business together with the assets and liabilities with effect from 22nd December, 1973, and it has put the said consideration money at call and short notice and been earning interest. It is quite clear from the balance-sheet of the company for the year ending 31st December, 1974, 31st December, 1975, and 31st December, 1976, that there is no investment of the company or that the company is carrying on any business earning profit. It is only the interest and discount earned in respect of the money "at call and short notice" which is credited in the profit and loss account for those years. Therefore, in my view, having regard to the peculiar facts of this case, the company being a banking company regulated by the Banking Regulation Act, 1949, and having ceased to carry on its banking business after the transfer of its banking business together with the assets and liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntary winding up of the company subject to certificate being granted by the Reserve Bank of India under section 44(1) of the Banking Regulation Act, 1949. In fact, subsequent to the presentation of this petition, the certificate under section 44(1) of the said Act has been granted by the Reserve Bank of India, which is not disputed. Therefore, on these facts alone, it appears to me that it is just and equitable to wind up the company having regard to the fact that the substratum of the company is gone. The company has not carried on any business since its banking business together with its assets and liabilities were transferred to the United Bank of India and the company made repeated representations to its shareholders that it will be put to voluntary winding up and, in fact, that was the agenda in the annual general meeting scheduled to be held on the 22nd September, 1978. It further appears to me that the subsequent special notice of special resolutions alleged to have been received from a member of the company for moving the resolutions for change of the company's name and also the alteration of the articles of the company is not in compliance with the statutory provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench was that of a railway company and it was held that after the undertaking of the company was taken over by the Government on payment of compensation, the substratum of the company was gone and the other clauses of the memorandum were merely incidental or ancillary to the company which was a running company. In my view, the said principles also apply to the facts of this case, apart from the fact that the company is a banking company and is regulated by the Banking Regulation Act read with the Companies Act, 1956. The object of the company, if it is interpreted in the light of the provisions of section 6 of the Banking Regulation Act, it must be held that the company was a banking company and the banking business being the main and paramount business of the company and the other objects in the memorandum being ancillary or incidental to such banking business, in short, without carrying on the banking business, it cannot carry on any other business specified in the memorandum as all other businesses are connected with the banking business. If the banking business, which is admittedly gone in the present case, it must be held that the substratum of the company is also gone. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy". Applying the same to this case it appears to me that after the substratum of the company having gone, as I have held hereinbefore, and after repeated representations by the company to voluntarily wind up the company in due course and distribute the surplus among the shareholders, it will be unjust and unequitable to allow any other course to be adopted after the lapse of about 4 years. Further, as I have already observed that the company still being a banking company in respect of which certificate under section 44(1) of the Banking Regulation Act having been granted by the Reserve Bank of India, it is just and equitable to wind up the company and nothing else. In that view of the matter, which I am bound to take on the facts which can hardly be disputed, in my view, it cannot be said at this stage that the winding-up petition is an abuse of the process of the court. Therefore, I am passing the following order ; The winding-up petition is admitted. There will be an advertisement once in the Statesman, once in the Basumati, and once in the Calcutta Gazette and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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