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1997 Supreme(Raj) 1341
RAJASTHAN HIGH COURT AT JAIPUR BENCH
N.L.Tibrewal, J.
In The Matter of Rajasthan Agro Industries Corporation Led., through its Managing Director having its Registered Office At B - Appellant
Versus
ABC - Respondent
S.B. Company Petition No. 30 of 1996.
Decided On : 3-09-1997
Headnote:
COMPANY - WINDING UP - PETITION BY COMPANY ITSELF - GROUNDS - INABILITY TO PAY DEBTS - JUST AND EQUITABLE - JURISDICTION - CONFLICT BETWEEN COMPANIES ACT AND INDUSTRIAL DISPUTES ACT - SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - APPLICABILITY.
Fact of the Case:
The petitioner company, a Government Company, filed a petition for winding up on the grounds of inability to pay its debts, losses, and that it was just and equitable to wind up the company. The company had been running in losses for years and had accumulated substantial debts. The State Government, which was the principal shareholder, had refused to provide further financial assistance. The employees of the company opposed the winding up petition, arguing that it was not maintainable without compliance with the provisions of the Industrial Disputes Act, 1947, and the Sick Industrial Companies (Special Provisions) Act, 1985.
Finding of the Court:
The Court held that the petition for winding up was maintainable. It held that there was no conflict between the Companies Act and the Industrial Disputes Act, and that the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, were not applicable in the present case. The Court found that the company was unable to pay its debts and that it was just and equitable to wind up the company.
Issues: 1. Whether the winding up petition was maintainable without compliance with the provisions of the Industrial Disputes Act, 1947? 2. Whether the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, were applicable in the present case? 3. Whether the company was unable to pay its debts? 4. Whether it was just and equitable to wind up the company?
Ratio Decidendi: 1. The provisions of the Companies Act and the Industrial Disputes Act are not in conflict. The Companies Act deals with the winding up of companies, while the Industrial Disputes Act deals with the relationship between employers and employees. 2. The provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, are not applicable to a company which is unable to pay its debts. 3. The company was unable to pay its debts as it had accumulated substantial losses and had no means of repaying its debts. 4. It was just and equitable to wind up the company as it was no longer a viable business and it was in the best interests of the creditors and the employees to wind up the company.
Final Decision: The Court allowed the winding up petition and ordered the company to be wound up.
(i) The Company has by its special resolution, resolved that Company may be wound up by the Court;
(ii) The Company is unable to pay its debt;
(iii) That it is just and equitable that the Company should he wound up.
(i) The Company was incorporated under the provisions of the Companies Act, 1956 on 1st August, 1969. The objects main or incidental and ancillary are described in para 3 of the petition, which are as under:
"(1) To aid, assist, promote or establish, develop or execute agro-industries, projects or enterprises or programmes for manufacture or production of plant, machinery, implements, accessories, tools, materials, substances, goods or things of any description which in the opinion of the Company is likely to promote or advance the agro-industrial development of Rajasthan.
(2) To organise, conduct or manage engineering or repair shops or workshops of all description and to manufacture, import, export, buy, sell or otherwise deal in workshops, machinery, agricultural machinery, implements, machine tools, accessories and metals of all kinds."
(ii) The Company came to be established under Central Government scheme to promote establishment of State Agro Industries Corporations with the object of making available in-puts and services required by a rapidly modernising agriculture and for promoting agro based industries. The National Commission on Agriculture in its report had also recognised dispersal of agro processing activities to inaccessible areas as the responsibility of the State Agro Industries Corporations and recommended that they should make arrangements for the disposal of industrial products manufactured in small and medium sectors under their patronage. (i) (ii)
The authorised share capital of the Company as on the date of incorporation was Rs. 5 Crores which was increased to 10 Crores divided into 5 Lacs equity shares of Rs. 100/- each. The increase in the authorised share capital was done vide amendment adopted in the adjourned 22nd Annual General Meeting of the share-holders held on 6.4.1992. The issued and subscribed capital of the Company as on 31.3.1992 was as under:
Share capital of the Central Govt. Rs. 1,87,77,600/- Share capital of the State Govt. (Governor of Raj.) Rs. 3,80,95,800/-
Total Rs. 5,68,73,400/-
(iii) As per the petition, since its establishment from 1.8.1969, the Company had been incurring losses year after year except marginal profits during four years, i.e. 1971- 72, 1974-75, 1975-76 and 1979-80. The huge losses suffered by the Company year after year were met out by obtaining short and long term loans from the State Government as the Central Government expressed its unwillingness either to increase its share capital or allow any future financial assistance to the Agro Industries Corporations. The Ministry of Agriculture, Government of India, vide its letter dated March 31,1994 proposed to dis-invest Central Government share holdings in the State Agro Industries Corporations as per decision of the National Development Council. The Government of India, therefore, agreed in principle for dis-investment in favour of the respective State Governments and in the case of the petitioner company, whose net worth had become negative, the Government of India expressed its willingness to pass on its share
