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1972 Supreme(Del) 115
High Court Of Delhi
GOKUL CHAND D.MORARKA - Appellant
Versus
COMPANY LAW BOARD - Respondent
Company 2 of 1972
Decided On : 04/17/1972
B.DUTTA, B.R.AGRAWAL, B.RANA, F.S.NARIMAN, J.K.MEHRA, K.N.Kataria, M.S.GANESH, P.C.Khanna, S.PAPPU, Vijay Kishan
Headnote:
COMPANY - WINDING UP - APPEAL - MAINTAINABILITY - ORDER PASSED BY COMPANY JUDGE IN THE MATTER OF WINDING UP - APPEAL LIES TO DIVISION BENCH OF HIGH COURT UNDER SECTION 5(1) OF DELHI HIGH COURT ACT AND SECTION 483 OF COMPANIES ACT, 1956 - PRELIMINARY OBJECTION DISMISSED.
Fact of the Case:
The Ganesh Flour Mills Co. Ltd. (hereinafter referred to as the Company) had its registered office in Delhi with an authorised capital of Rupees two crores divided into equity and preference shares. The issued capital was Rs. 1,02,01,925. 00 out of which the subscribed and fully paid up capital was Rs. 99,42,333. 00. The Company has two vanaspati manufacturing units, one in Delhi and the other at Kanpur; an electric fan plant and a Food Products Plant, both at Delhi; a Solvent Extraction Plant at Bombay and a Vegetable Products Factory and Flour Mill in West Pakistan. Except the Vegetable Ghee Plant at Kanpur, which is still running, the other factories of the Company were closed.
Finding of the Court:
The impugned orders in this case came within the ambit of the expression "in the matter of winding up" and hence there is no further impediment to the maintainability of any of these appeals.
Issues: 1. Whether the impugned orders were passed in the matter of winding up? 2. Whether an appeal lies to a Division Bench of the High Court under Section 5(1) of the Delhi High Court Act and Section 483 of the Companies Act, 1956?
Ratio Decidendi: 1. The entire scheme and legislative purpose of the Companies Act, 1956 does not warrant a limited construction that orders passed under Sections 397 and 398 of the Act to avoid a winding up are just the contrary of those passed in the matter of winding up and hence cannot fall within the ambit of the expression "in the matter of". 2. Any order passed under Section 397 or Section 398 is one which is passed in lieu of winding up and hence it is obviously in the matter of winding up. 3. The orders passed in Company Application 323 of 1971 expressly falls within the scope of Section 442 as the impugned orders had been passed after at least two applications had been filed (not by the Company Law Board but by others) for winding up the company. 4. Section 483 of the Companies Act, 1956 confers a substantive right of appeal upon a party aggrieved by an order made or a decision given by a Company Judge in winding up. The second part of the section does not in any way cut down or impair the substantive right already conferred by the first part; it only deals with the manner and the conditions in which an appeal could be preferred to, namely, the procedural aspect of the appeal and the forum to which the appeal lay.
Final Decision: All the appeals (Company Appeals No. 2 to 5 of 1972), subject to the above clarifications, are dismissed but in the circumstances without costs.
( 1 ) THIS judgment will dispose of Company Appeals Nos. 3, 4 and 5 of 1972 also. These appeals are against the common orders of the learned Company Judge of this Court dated 7th January, 1972 and 12th January, 1972, the Fatter flowing from the former. The facts leading to these appeals may be briefly noticed :
( 2 ) THE Ganesh Flour Mil s Co. Ltd. (hereinafter REFERRED TO to as the Company) had its registered office in Delhi with an authorised capital of Rupees two crores divided into equity and preference shares. The issued capital was Rs. 1,02,01,925. 00 out of which the subscribed and fully paid up capital was Rs. 99,42,333. 00. The Company has two vanaspati manufacturing units, one in Delhi and the other at Kanpur; an electric fan plant and a P ood Products Plant, both at Delhi; a Solvent Extraction Plant at Bombay and a Vegetable Products Factory and Flour Mill in West Pakistan. Except the Vegetable Ghee Plant at Kanpur, which is still running, the o her factories of the Company were closed. Uoto November, 1968 the Company was looked after by a Board of Directors whose Chairman was S. N. Gupta and Secretary and General Manager was Kripa Narain the held this position since 1966 ). His brother Kishan Narain was the Manager of the Kanpur Unit.
( 3 ) THE Company had made: Rs. 8. 39 lakhs profits in 1964-65; Rs. 5. 67 lakhs losses in 1965-66; Rs. 9. 67 lakhs profits in 1966-67, and a huge loss of Rs. I crore 25 lakh in 1967-68. The assets of the Company, comprise, in addition to the above-said factories, a piece of land in Sabzi Mandi measuring 5600 sq. yards, industrial land at Najafgarh roads measuring 3,000 sq. yards, land in Soiiepat (haryana) measuring 175 bighas (out of which 145 bighas are under acquisition) and a small plot of. 084 acres at Kanpur.
( 4 ) INSPECTION, made in 1969 (under section 209 (4) of the Companies Act) of the accounts and other papers of the Company, is sta ed to have revealed following among other features. The Company was obliged to borrow moneys which were not entirely used for its business; the Secretary-CM/n-General Manager, who was allowed to maintain a personal account with the Company, made over-drawals right from 1962-63 which stood at Rs. 12 lakhs at the end of December. 1968 (the other managerial staff also made over-drawals ). The Company borrowed money at high rares of interest which were being allowed to be used by Kripa Narain, his brothers and other officials at nominal rates. The Company was even unable to lilt its allotted quota of soyabean oil for want of liquid funds; raw materials were purchased at higher than competitive market prices.
( 5 ) TOWARDS the end of 1968. Kripa Narain approached G. D. Morarka for loans which were ultimately made available by Messrs Belapur Company Limited (hereinafter called Belapur) and Messrs W. H. Brady and Company Limited (hereinafter called Brady ). Messrs Arms rong Smith Limited (hereinafter called Armstrong) and Shakti Trading Company (P) Limited (hereinafter called Shakti) were appointed to assist the Company in its sales and purchases at Kanpur on payment of commission at 3/4 per cent on Kanpur sales and purchases: Bradv was to assist, on a commission of 3/4 per cent, on all sales and purchases at Delhi. After payments of these commissions the margin of profit, which is already small, is said to be much further reduced. All these companies are said to be the concerns of Morarkas, which have been compendiously REFERRED TO to by the learned Company Judge as the morarka Group . The Morarka Group along with its Directors, Satya Narain Guota and 0m Prakash. arc stated to have establised a complete strangle-hold on the Company: some of its Directors left while some others, said to be nominees of Morarka Group (A. S. Nariman, Ganga Prasad, K. Morarka and S. K. Diwanii) were brought on the Board. The disbursements and receipts of the Company were mad" subject to the approval of A. S, Nariman or any of the nominees of Brady or Bel
