Bopanna, J.—This Petition is filed by the State Bank of India (hereinafter referred to as 'the Bank') having its Branch Office at J.C. Road, Bangalore, under the provisions of Section 439(i)(b) read with Section 433(e) and (f) of the Companies Act 1956 (in short 'the Act') praying for the winding up of the respondent company Hegde & Golay Limited (in short 'HGL') and for other incidental reliefs.

1.1 HGL was incorporated on 2/7/1965 under the Act initially as a Private Limited Company, limited by shares. It became a public Limited Company with effect from 27/6/1974 by virtue, of the provisions of Section 43A of the Act. Its nominal capital is Rs 50 lakhs divided into 50,000 equity shares of Rs 100/-each. The issued and paid-up capital or credited as paid-up is Rs 50 lakhs. HGL, among other things, is engaged in the manufacture and sale of various types of horological instruments both electronic and mechanical, printed circuits, their accessories and parts.

2. It is the case of the Bank that HGL in order to augment its manufacturing and trading activities applied to it for various cash credit advances. It represented to the Bank that it was engaged in the manufacture of watches and other instruments under licence pursuant to a collaboration agreement with a reputed, watch Manufacturing Company of Switzerland by name Golay S.A., that there was a great potential for the manufacture of Watches in this Country and accordingly HGL was incorporated and contemporaneously it had set-up 18 ancillary units (in short 'the units') for the manufacture of various parts and accessories required for watches and printed circuits and accordingly it sought financial assistance of the Bank for these units also, each of whom had been incorporated as a separate Company under the Act. Its further case is that acting on the representation of HGL and in particular the Chairman and Managing Director Sri B.T. Shankar Hegde (hereinafter referred to as 'Sri Hegde'), it gave financial assistance in different ways to HGL as well as to the units commencing from the year 1974. The total amount advanced by the Bank to HGL and the units exceeded Rs 338 lakhs but the same has remained unpaid inspite of repeated demands. The amounts due from HGL to the Bank as on 31/3/1980 are as follows :-

Sl. No. Head of A/c

Limit sanctioned

Amount due

1. Cash Credit A/c No. 1

Rs. 25,00,000

Rs. 24,50,000.00

2. Cash Credit A/c No. 2

20,00,000

20,00,000.00

3. Cash Credit A/c No. 3

18,00,000

14,01,954.89

4. Cash Credit A/c No. 4

5,00,000

5,00,000.00

5. Cash Credit A/c No. 5

25,00,000

25,00,000.00

6. Cash Credit A/c No. 6

77,00,000

1,68,62,365.84

7. Cash Credit A/c No. 7

40,00,000

36,47,715.36

Total :

2,10,00,000

2,93,62,036. 09

And the aggregate amounts due from HGL inclusive of interest is about Rs. 6,36,30,504. 75. These advances are evidenced by the execution of appropriate loan documents in favour of the Bank. They are demand promissory notes drawn by the Bank in favour of Hegde and his wife Smt. Hegde, both of whom are admittedly Directors of HGL. Both of them had personally stood guarantee to the Bank for the repayment of the loans of HGL and therefore these promissory notes were endorsed in favour of the Bank and thus the Bank became holder-in-due-course thereof. HGL and its Directors, namely Sri & Smt. Hegde have also acknowledged their liability and confirmed the balances due for some accounts in the year 1977 and for others in 1978.

2.1 As security for repayment of these moneys advanced by the Bank inclusive of interest and Bank charges etc., HGL bad hypothecated its stocks and book debts and had pledged some of its machinery to the Bank by separate agreements/letters of hypothecation or pledge. But the Bank had permitted HGL to retain the custody of the pledged machinery and work the same. The charges created by HGL for the aforesaid hypothecation were also registered with the Registrar of Companies as required under the Act.

2.2 Additionally, HGL had borrowed moneys to an extent of Rs. 7,50,000/-