A company may be wound up if it is unable to pay its debts, has suspended its business for more than a year, or if it is just and equitable to do so.

( 1 ) THIS is a petition, under Section 439 of the Companies Act (Act 1 of 1956) by the State of Andhra Pradesh, represented by the Secretary to Government, Industries (Industrial Fund) Department, to Wind up the Hyderabad Vegetable Products Co. , Limited (hereinafter referred to as the company ).

( 2 ) THE petition was presented on 4/01/1960. It was adjourned for about nine months at the request of the learned counsel for the respondent for the purpose of enabling the Company to find monies to satisfy its creditors or to compound with them, but nothing tangible having emerged during the interval, I am left With no alternative but to dispose of the petition on its merits.

( 3 ) IN order to appreciate the matters arising for decision, it is necessary to give a short history of the Company. The Company was incorporated as a public limited Company under the Hyderabad Companies Act (Act IV of 1320 Fasli) on the 3rd day of Shehrewar, 1348 Fasli (corresponding to 10/07/1939 ). The situation of its registered office is at Hyderabad. The authorised capital of the Company is Rs. 25,00,000. 00 divided into 2,20,000 ordinary shares of Rs. 10. 00 each and 3,000 six per-cent cumulative preference shares of Rs. 100. 00 each. The issued capital is Rs. 24,50,000. 00 and the subscribed capital is Rs. 24,40,120. 00 made up of 2,14,012 ordinary shares of Rs. 10. 00 each and 3,000 six per cent cumulative preference shares of Rs. 100. 00 each. Out of this amount, a sum of Rs. 3,754. 00 represents calls unpaid. The objects clause of the memorandum of association sets out a multitude of objects. The main objects, however, are to estabiish a factory or factories in and around Hyderabad or elsewhere in India for manufacturing vegetable products and artificial ghee and as ancillary thereto to establish an oil mill or mills. On the date of the incorporation of the Company, Messrs. Sheik Imam and Sons were appointed its Managing Agents for a period of twenty years.

( 4 ) ON 1/11/1947, the Company borrowed on the security of its assets, including its land, buildings and machinery, a sum of Rs. 10,00,000. 00 from the erstwhile Government of Hyderabad for the purpose of acquiring five oil expellers and for completing the vegetable product plant. The company executed a deed of mortgage agreeing to repay the said amount with interest at 4 per cent per annum. The deed provides that the principal of the loan should be repaid in annual instalments of Rs. 2,00,000. 00 each and the interest in half-yearly instalments, the payment to begin from October, 1950.

( 5 ) ON 1/09/1948, the Company borrowed a further sum of Rs. 5,00,000. 00 from Government for the purpose of providing working capital and paying for raw materials, fuel, chemicals etc. and executed a second deed of mortgage in favour of the erstwhile Government of Hyderabad. It was stipulated in the deed that the sum should be repaid in annual instalments or Rs. 1,00,000/ and the interest accrued in half-yearly instalments, commencing from October, 1950. The construction of the factory was completed in or about the year 1949. In the year 1951, as a result of certain proposals made by the petitioner to the Company it was agreed that the managing agency should be transferred to Messrs. Sabu Khan and Sons, with the approval of the Board of Directors subject to the condition that the new Managing Agents should be responsible for providing the capital and to bring the factor into production. The other terms of the agreement are the subject-matter of controversy and will be referred to later. It would appear that the general body of the Company accepted this arrangement by a resolution dated 30/09/1951. Messrs. Sheik Imam and Sons relinquished their managing agency on that date.

( 6 ) WHILE so, the Part B States (Laws) Act (III of 1951) was enacted. The Act extended the operation of the Indian Companies Act to companies registered in Part B States before the commencement of the Act. It is therein provided