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1952 Supreme(Cal) 100
HIGH COURT OF CALCUTTA
K. C. DAS GUPTA, P. N. MUKHERJEE
DAVCO PRODUCTS LTD. - Appellant
Versus
RAMESWARLAL SADHANI - Respondent
A. F. O. O. 43 Of 1952
Decided On : MAY 09, 1952
A.K.SEN, ANIL MITRA, P.MONDAL, S.CHAUDHARY, SANKAR BANNERJI
Headnote:
COMPANY - Winding up - Application by fully paid up shareholder - Whether allegation and proof of tangible interest necessary - Companies Act, 1956, Section 170(1).
Fact of the Case:
The appellant company was incorporated in 1946 with an authorised capital of Rs. 25,00,000/- and a paid up capital of Rs. 12,50,000/-. The company's main object was the manufacture of tubular furniture, children's toys and similar goods. In 1950, the company was indebted to the Imperial Bank of India to the extent of about 3 lacs of rupees. The bank filed a suit in the Original Side of the Calcutta High Court for the recovery of this debt and obtained a decree. The Official Receiver was appointed Receiver of the company's assets, stock-in-trade, good debts, plants and machinery. In April 1950, the Official Receiver took possession of all the goods, stock-in-trade, plants and machinery at the company's factory and show room and locked the said factory, the show room and the registered office of the company. On the 5th of May 1950 a decree was made in the suit in favour of the Imperial Bank of India without contest by the company of the amount claimed in the suit declaring a charge over the goods, stock-in-trade, plant and machinery of the company and its factory and show room and for sale thereof. Pursuant to the decree, the Official Receiver sold all the goods, stock-in-trade, plant and machinery of the company in June 1951. Since possession was taken by the Official Receiver in April 1950, the company did not carry on any business whatsoever. In December 1951, a shareholder filed an application under Section 162 of the Indian Companies Act, praying that the company be wound up by the court. Banerjee J., by his order, dated 12th March 1952, allowed the said application holding that the company was insolvent and it was just and equitable to make the winding-up order.
Finding of the Court:
The court held that the substratum of the company was gone and that there was no reasonable chance of the company starting business again. The court also held that the rule that the application of a fully paid up shareholder should be rejected if it be shown that he has no tangible interest in the order asked for was not good law. The court further held that the onus was on the respondent to prove that there was no reasonable possibility of any benefit accruing to the unsecured creditors from the winding up and unless that onus was discharged the petitioner was entitled to a winding up order.
Issues: 1. Whether the allegation and proof of tangible interest is necessary for a fully paid up shareholder to apply for winding up of a company? 2. Whether the substratum of the company was gone? 3. Whether there was any reasonable chance of the company starting business again? 4. Whether the onus was on the respondent to prove that there was no reasonable possibility of any benefit accruing to the unsecured creditors from the winding up?
Ratio Decidendi: 1. The court held that the rule that the application of a fully paid up shareholder should be rejected if it be shown that he has no tangible interest in the order asked for was not good law. The court further held that the onus was on the respondent to prove that there was no reasonable possibility of any benefit accruing to the unsecured creditors from the winding up and unless that onus was discharged the petitioner was entitled to a winding up order. 2. The court held that the substratum of the company was gone and that there was no reasonable chance of the company starting business again.
Final Decision: The court dismissed the appeal and upheld the winding up order passed by the trial court.
( 1 ) THIS appeal is against the order made by Banerjee J, on the application of a paid up shareholder of the Davco Products Ltd. to wind up the Company. The grounds on which the order was asked for were that the Company had suspended business for more than a year, that it was unable to pay its debts and that as the substratum of the Company was gone, it was just and convenient that the Company should be wound up. The application was contested by the Company. It was supported by two other paid-up share-holders and also by two persons who claimed to have been employed by the Company and to have obtained decrees for arrears of salary due to them against two of the Directors and claimed to be the creditors of the Company. Of the other creditors, the Imperial Bank of India, claiming dues of over Rs. 1,50,000/- for which a suit was pending in the Court of the Subordinate Judge, Alipore, appeared and denied certain allegations made against them by the applicant but did neither support nor oppose the application for winding up.
( 2 ) AT the hearing of the application, nobody appeared to oppose the same. The learned Judge held that this was an application on behalf of the share-holders to wind up a company and was supported by several creditors, that the company had practically done nothing during the last 4 or 5 years, that the company was insolvent and that it was just and equitable to make the winding up order.
( 3 ) THE main point urged on behalf of the appellant is that as the application is by a fully paid up share-holder, he is bound to allege and prove, in the first place, that on the winding up there will be such a surplus available for distribution to the fully paid up share-holders and that the applicant has a tangible interest in the matter.
( 4 ) BEFORE I consider this contention which is the appellant's main line of attack against the order made, it is necessary to consider some of the points that were urged. The first of them was that the application was not in proper form not being a verified application supported by a separate affidavit. The defect alleged is however one that the Court can excuse and we cannot interfere with the order that was made on this ground.
( 5 ) NEXT it was urged that the verification of the application itself was defective. The affirmation was in these words:"i Rameswar Sadhani the petitioner above-named solemnly affirm and say that the statements contained in all the paragraphs of the foregoing petition save and except those as are ascertained from searches which are believed by me to be true and those as are expressly made as submissions to this Hon'ble High Court are true to my knowledge. "it cannot be made out on a perusal of the petition which of the statements have been ascertained from searches, and, so it is impossible to know which statements are affirmed by the deponent to be "true to his knowledge". Solemn affirmations of the nature are worse than useless. They are really attempts to mislead the Court that certain facts are being affirmed to be true to the deponent's knowledge while really no facts are being so affirmed. The deponent is in the happy position that he cannot be touched in criminal proceedings for having made a false affirmation, for he has made no affirmation of fact. This kind of affirmation cannot be too strongly condemned and were it not for the fact, that the Company itself has admitted several facts I would have been inclined to accept Mr. Chowdhuri's contention on behalf of the appellant that no order should be made on an application verified in this unsatisfactory and deceptive manner. As however there are several admitted facts, I do not think it right to interfere with the order that has been made on this ground.
( 6 ) THE admitted facts may be briefly summarised thus: 'the Davco Products was incorporated in July 1946 under the provisions of the Indian Companies Act as a public Limited Company. The present authorised capital is Rs. 25,00,
