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High Court Of Delhi
MADHUBAN PRIVATE LIMITED - Appellant
Versus
NARAIN DASS GOKAL CHAND - Respondent
First Appeal Order 45 of 1970
Decided On : 10/20/1970
COMPANY LAW - WINDING UP - JURISDICTION - DISTRICT COURT - NOTIFICATION UNDER SECTION 10(2) OF THE COMPANIES ACT, 1956 - SAVING OF EARLIER NOTIFICATION ISSUED UNDER THE INDIAN COMPANIES ACT, 1913 - SCOPE OF JURISDICTION CONFERRED - SECTION 645 OF THE COMPANIES ACT, 1956 - INTERPRETATION - NOTICE TO COMPANY UNDER SECTION 434(1)(A) - CREDITOR HOLDING DECREE AGAINST COMPANY - WHETHER REQUIRED TO TAKE OUT EXECUTION BEFORE SERVING NOTICE - SECTIONS 434(1)(A) AND 434(1)(B) - INTERPRETATION.
Fact of the Case:
The appellant company was incorporated in 1954 with a registered office in Delhi. Its principal objects were the management of theatres and cinematographic shows. The company had a paid-up capital of approximately Rs. 24,000 and 15 members, seven of whom were directors. The respondent obtained a decree against the appellant company for Rs. 2,640 in 1957. The appellant company allegedly closed its business in early 1958 and failed to pay the decretal amount despite notice. The landlord also obtained a decree against the appellant for eviction and recovery of rent arrears. The appellant company had not held shareholder meetings, submitted returns to the Registrar of Joint Stock Companies, or filed balance sheets. The respondent filed a petition in June 1959 to wind up the appellant company, alleging that it was just, equitable, and convenient to do so as the company was not carrying on any business and had no income or commercial solvency. The appellant company objected to the jurisdiction of the District Court, arguing that the notification conferring jurisdiction on the District Judge under the Indian Companies Act, 1913, had lapsed with the enactment of the Companies Act, 1956. The District Judge held that the notification continued to be in force under the new Act by virtue of section 645, which saved orders, rules, and regulations made under the old Act. The appellant company also contended that the respondent, as a decree-holder, was required to take out execution of the decree before serving a notice under section 434(1)(a) of the Companies Act, 1956, which was not done. The District Judge rejected this argument, holding that clauses (a) and (b) of section 434(1) provided alternative methods of showing that the company was unable to pay its debts.
Finding of the Court:
The court held that the notification conferring jurisdiction on the District Judge under the Indian Companies Act, 1913, continued to be in force under the Companies Act, 1956, by virtue of section 645, which saved orders, rules, and regulations made under the old Act. The court also held that a creditor holding a decree against a company was not required to take out execution of the decree before serving a notice under section 434(1)(a) of the Companies Act, 1956, as clauses (a) and (b) of section 434(1) provided alternative methods of showing that the company was unable to pay its debts.
Issues: 1. Whether the notification conferring jurisdiction on the District Judge under the Indian Companies Act, 1913, continued to be in force under the Companies Act, 1956. 2. Whether a creditor holding a decree against a company was required to take out execution of the decree before serving a notice under section 434(1)(a) of the Companies Act, 1956.
Ratio Decidendi: 1. Section 645 of the Companies Act, 1956, saved orders, rules, and regulations made under the old Act, in "so far as it could have been made under or in pursuance of this Act." The notification conferring jurisdiction on the District Judge could have been made under the new Act, and therefore continued to be in force. 2. Clauses (a) and (b) of section 434(1) of the Companies Act, 1956, provided alternative methods of showing that the company was unable to pay its debts. A creditor does not cease to be a creditor if he obtains a decree in his favor against the company. The object of the two clauses is the same, that is to show that the company concerned is unable to pay its debts. Action can be taken under either of them.
Final Decision: The appeal was dismissed with costs.
( 1 ) THIS appeal undersection 483 of the Companes Act, 1956 by the appellant company, 13 directed against the order dated April, 1, 1970 of the learaed Additional District Judge, Delhi, whereby he ordered it to be wound up.
( 2 ) THE appellant-company was incorporated under the Companies Act, 1913. in or about the year 1954 with its registered office in the Film Colony, Chandni Chowk, Delhi. The principal objects for which the company was incorporated were, inter alia the carrving on of the business of the Management of Theatres, palaces, halls cinematographic shows and exhibitions The authorised capital of the company was rupees one lakh, divided into 8000 ordinary shares of Rs. 10. 00 each and 200 preference shares of Rs 100. 00 each Its subscribed and issued capital was Rs. 32 700/ ,while its paid up capital was about Rs. 24,000. 00 only. It had 15 members out of which seven were its directors.
( 3 ) THE respondent obtained a decree dated 4th December, 1957 against the appellant-company for a sum of Rs. 2,640. 00 from the court of Sub-Judge, 1st Class, Delhi. The appellant company, it is alleged, had closed its business since the beginning of 1958 and was not able to pay the decretal amount despite service of notice on it by the respondent for that purpose. Even the landlord is alleged to have obtained a decree against the appellant for its eviction and for recovery of arrears of rent. The company had not held even a meeting of its share holders, nor had it submitted any returns to the Registrar of Joint Stock Companies, nor had it filed any balance sheet with him. This had resulted in the prosecution of its directors. The appellant company, it was asserted, could not pay its debts and its substratum had gone. Its assets were said to consist of few films, which were hardly wroth any value. It was und^r the^ecircurnstanc^sthat ther spoadent prayed that it was Just, equitable and convenient to wind up the appellant-company, more especially as it was not carrying on any business of its own. It was said to be having no income and was not commercially solvent. It had run into losses and was not in a position to raise any further capita ). For these reasons, the respondent prayed for its winding up. After the filing of the petition on June 4, 1959. the counsel for the respondent made a statement in court on August 7, 1959 to the effect that the Court of the District judge had no jurisdiction to hear the petition in view of the Central Government s notificition dated May 29, 1959, issued under sub-section (2) of section 10 of the Companies Act, 1956 ; and that the same be returned to him for presentation to the proper court. The learned District Judge ordered accordingly. Before the petition could be actually returned, the respondent made another applicaton on August 20, 1959, under section 151, Civil Procedure, Code praying that the petition be retained on the file of the court, for taking further proceedings thereon, as the notification on the basis of which the earlier statement had been made by the counsel in court, was published in the official Gazette dated June 6, 1959 and was, therefore, effective from the slid date. As the winding up petition had been presented in court before June 6,1959. the said notification taking away the jurisdiction of the District Court was not attracted. The court of the District Judge under the circumstances alone had Jurisdiction to entertain the said petition. On this, the learned District called for the file and finding that the petition had originally been presented in his court on June 4, 1959, ordered its retention on the file of that court. The petition was admitted and notice of the same was issued to the appellant company. It was also advertised in the local official gazette, in the Hindustan Times and in the Indian Express. The appellant-company then filed a written statement wherein it was contended as a preliminary objection that the court had no jurisdiction to try the
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