Madhusudan Gordhandas And Company vs Madhu Woollen Industries Private LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1971 Supreme(SC) 573

SUPREME COURT OF INDIA
A.N. RAY, AND D.G. PALEKAR, JJ.
M/s. Madhusudan Gordhandas anf Co., Appellant
Versus
Madhu Woolen Industries Private. Ltd., Respondent; Mahendra B. Parikh and others, Creditors.
Civil Appeal No. 1113 of 1970, D/- 29-10-1971.
Advocates appeared
Mr. V.M. Tarkunde, Sr. Advocate, (M/s. R. L Mehta and I. N. Shroff, Advocates with him), for Appellant; Mr. V. S. Desai, Sr. Advocate (Mr. P. N. Tewari, Advocate and M/s. J. B. Dadachanji & Co., Advocate with him), for the Respondent; Mr. M. C. Chagla, Sr. Advocate, (Mr. S. N. Prasad, Advocate with him), for Creditors Nos. 1, 3 to 6 and 10; Mr. A. K. Sen, Sr. Advocate, (Mr. B. C. Agrawal, Advocate with him), for Creditor No. 9.

Headnote:WISHES OF CREDITORS—WHETHER COURT CAN CONSIDER- DISAPPEARANCE OF SUBSTRATUM OF COMPANY—PROOF - PETITION OUT OF IMPROPER MOTIVE TO COERCE THE COMPANY IN SATISFYING SOME GROUNDLESS CLAIMS MADE AGAINST IT BY PETITIONER
-if there is opposition to the making of the winding up order by the creditors the Court will consider their wishes and may decline to make winding up order. The wishes of the creditors will however be tested by the Court on the grounds as to whether the case of the persons opposing the winding up is reasonable, secondly, whether there are matters which should be inquired into and investigated if a winding up order is made. It is also well settled that a winding up order will not be made on a creditor’s petition if it would not benefit him or the Company’s creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonableness of the case,

Judgment

RAY, J. :- This is an appeal by certificate from the judgment dated 3 April, 1970 of the High Court of Bombay confirming the order of the learned Single Judge refusing to wind up the, respondent company.

2. The appellants are a partnership firm. The partners are the Katakias. They are three brothers. The appellants carry on partnership business in the name of Madhu Woollen Spinning Mills.

3. The respondent company has the nominal capital of Rs. 10,00,000 divided into 2000 shares of Rs.500 each. The issued, subscribed and fully paid up capital of the company is Rs. 5,51,000. divided into 1,103 Equity shares of Rs. 500 each. The three Katakias brothers had three shares in the company. The other 1,100 shares were owned by N. C. Shah and other members described as the group of Bombay Traders.

4. Prior to the incorporation of the company there was an agreement between the Bombay Traders and the appellants in the month of May, 1965. The Bombay Traders consisted of two groups known as the Nandkishore and the Valia groups. The Bombay Traders was floating a new company for the purpose of running a Shoddy Wool Plant. The Bombay Traders agreed to pay about Rs. 6,00,000 to the appellants for acquisition of machinery and installation charges thereof. The appellants had imported some machinery and were in the process of importing some more. The agreement provided that the erection expenses of the machinery would be treated as a loan to the new company. Another part of the agreement was that the machinery was to be erected in portions of a shed in the compound of Ravi Industries Private Limited. The company was to pay Rs. 3,100 as the monthly rent of the portion of the shed occupied by them. The amount which the Bombay Traders would advance as loan to the company was agreed to be converted into Equity capital of the company. Similar option was given to the appellants to convert the amount spent by them for erection expenses into equity capital.

5. The company was incorporated in the month of July, 1965. The appellants alleged that the company adopted the agreement between the Bombay Traders and the appellants. The company however denied that the company adopted the agreement.

6. The appellants filed a petition for winding up in the month of January, 1970. The appellants alleged that the company was liable to be wound up under the provisions of Section 433 (e) of the Companies Act 1956 as the company is unable to pay the following debts.

7. The appellants claimed that they were the creditors of the company for the following sums of money:-

A. (a) Expenses incurred by the appellants in connection with the erection of the plant and machinery ... Rs. 1,14,344.97

(b) Interest on the sum of Rupees 1,14,344.97 from 1 April, 1966 till 31 December, 1969 at 1% per mensem ... Rs. 51,453.13

(c) Commission on the sum of Rs. 1,14,344.97 due to the appellants at the rate of 1 per cent. per mensem from 1 April 1966 till 31 December, 1969 ... Rs. 51,453.12

B (a) Compensation payable by the company to the appellants at the rate of Rs. 3,100 per month for 22 months and 14 days in respect of occupation of the portion of the shed given by the appellants to the company on the basis of leave and licence ... Rs. 69,600.00

(b) Interest on the amount of compensation from time to time by the said company to the appellants till 12 April, 1967. ... Rs. 7,857.00

C. (a) 3 Invoices in respect of 3 machines ... Rs. 85,250.00

(b) Interest on Rs. 85,250 ... Rs. 37,596.00

The appellants alleged that the company failed and neglected to show the aforesaid indebtedness in the books of account save and except the sum of Rs. 72,556.01.

8. The other allegations of the appellants were these. The company incurred losses upto 31 March, 1969 for the sum of Rs. 6,21,177.53 and thereafter incurred further losses. The compan

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