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In Re: New Kaiser-i-hind Spinning and Weaving Co. Ltd. (In Liquidation) - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberAppeal Nos. 86, 96, 97, 98 and 100 of 1967 arising out of Company Application Nos. 14, 19, 21 and 8
Judge
Reported in[1968]38CompCas701(Bom)
ActsSecurities Contracts (Regulation) Act, 1956 - Sections 2, 13 and 23(1); Companies Act, 1956 - Sections 391, 391(2), 392, 392(1), 392(2), 393, 393(2), 397, 398, 402, 433, 434, 439, 441(2), 536 and 536(1)
AppellantIn Re: New Kaiser-i-hind Spinning and Weaving Co. Ltd. (In Liquidation)
Excerpt:
.....of suspicious circumstances held, it is a fit case where the high court should have appointed a receiver and/or an administrator with suitable directions. s alone had been given exclusive powers not only to execute documents but also induct tenants. - group made strong allegation against the new management of the kaiser-i-hind mills (the jalan group) and alleged that they were backing out of the agreement which ought to be enforced against them and the company. being faced with certain difficulties of securing the presence of parties before the court gave up the prayers (g) to (p) contained in the judge's summons dated 27th february, 1967. this fact is noted in the minutes of that day as well as in the order passed by mr......group and another group, which for the sake of convenience and brevity we shall call the 'jalan group'. the principal persons in this group are sanwarmal todi, jagannath agarwal, k. m. goenka and nandlal jalan. the agreement was that the jalan group was to buy over the controlling shares belonging to the j.k. group and thus obtain the control and management of the company. we will presently refer to the detailed terms of this agreement but for the time being it may be stated that the singhania group had agreed to sell 25,625 ordinary (equity) shares of rs. 100 each which they owned to the jalan group at a price of rs. 10 per share payable in a certain manner and on completion of the transaction the directors of the singhania group were to resign as the directors of the company.....
Judgment:

Kotval, C.J.

1. These are all appeals arising out of several proceedings taken in the winding up of a limited joint stock company known as the New Kaiser-I-Hind Spinning & Weaving Co. Ltd., Bombay, which was engaged in the business of running a cotton mill. The appeals raise common questions of fact and law and the principal parties thereto are also common and were represented by the same counsel. It will be convenient therefore to dispose of all the appeals by one common order.

2. This company was at one time being run by a management which for the sake of convenience and brevity we shall call the J.K. group or as it is called in the judgment of the court below in Appeal No. 98 of 1967 as the Singhania group. On 21st June, 1965, a petition for winding up of the company was filed being Petition No. 39 of 1965 by a concern named Indualal and Co. and by an order of this court a provisional liquidator was appointed, who took charge of the company on the 2nd August, 1965. In consequence the working of the mills stopped as from the 6th of August, 1965. On the 16th August, 1965, an agreement was arrived at between the Singhania group and another group, which for the sake of convenience and brevity we shall call the 'Jalan group'. The principal persons in this group are Sanwarmal Todi, Jagannath Agarwal, K. M. Goenka and Nandlal Jalan. The agreement was that the Jalan group was to buy over the controlling shares belonging to the J.K. group and thus obtain the control and management of the company. We will presently refer to the detailed terms of this agreement but for the time being it may be stated that the Singhania group had agreed to sell 25,625 ordinary (equity) shares of Rs. 100 each which they owned to the Jalan group at a price of Rs. 10 per share payable in a certain manner and on completion of the transaction the directors of the Singhania group were to resign as the directors of the company as the Jalan group would direct. By the agreement the secured and unsecured creditors of the company were divided into four categories and provision was made for the repayment of the debts of the four categories. Of these, the first category were M/s. J. K. (Bombay) Private Ltd. and other J.K. concerns and as regards them it was provided that a sum of Rs. 3,46,501 had been advanced by J. K. (Bombay) Private Ltd., for purchase of certain shares held by the company as investments and that these shares had been pledged by the company with the Punjab National Bank and the company should get the shares released from the Punjab National Bank and hand them over to J.K. (Bombay) Private Ltd. The company on its part acknowledged that a sum of Rs. 48,13,899 was due to the J.K. concerns as listed in Schedule 'B' attached to the agreement and that the credits would be repaid out of 50% of the profits of the company commencing after the expiry of two years from the date of a second mortgage (agreed to be executed) but in any event not later than 30th June, 1980, as provided in a private agreement reached between Gopalkrishna Singhania (of the J.K. group) and Nandlal Jalan, Todi and Agarwal of the Jalan group. This agreement is dated 16th August, 1965, and is annexed to the main agreement dated 16th August, 1965. On the 19th October, 1965, the company took out a judge's summons for considering this agreement between the Singhania group and the Jalan group and after calling for meetings of creditors to consider the arrangement, the company applied on the 23rd December, 1965, for sanction by the Court of the scheme. This was Company Petition No. 113 of 1965. On 17th February, 1966, by an order made by Mr. Justice Mody the scheme was sanctioned subject to certain modifications and as a result of the sanctioning of the Scheme no winding-up order was made but the Petition No. 39 of 1965 for winding up the company was allowed to be withdrawn by a separate order passed on the 20th February, 1966. Thereafter the Kaiser-I-Hind Mills started working as from 1st April, 1966, under the new management of the Jalan group.

3. It appears that the new management had arranged for a loan of Rs. 50 lakhs from the Punjab National Bank on conditions that the Central and the Government of the State of Maharashtra guaranteed a moiety of that loan, but the Central Government declined to furnish a guarantee though the State Government agreed. As a result, there was some delay in the implementation of the Scheme and for that and diverse other reasons the Jalan group and the Singhania group fell out. Disputes arose between them. A suit came to be filed in the city civil court and on the 27th February, 1967, Company Application No. 14 of 1967 was presented before this court by Messrs. J. K. Private Ltd., Bombay. That application was by way of a judge's summons praying inter alia that Nandlal Jalan, Sanwarmal Todi, Jagannath Agarwal and K. M. Goenka (the Jalan group) should be ordered to pay forthwith to the J.K. group the first instalment payable under the scheme sanctioned on the 17th February, 1966. That application was supported by an affidavit in which the J.K. group made strong allegation against the new management of the Kaiser-I-Hind Mills (the Jalan group) and alleged that they were backing out of the agreement which ought to be enforced against them and the company. That application was argued before Mr. Justice Thakkar on several days between 12th June, 1967, and 16th June, 1967. In the meanwhile the new management - (the Jalan group) - closed down the mills on the 14th June, 1967, alleging that they had no funds to run the mills and it was impossible to carry on the company. The Company Application No. 14 of 1967 contained prayers for several reliefs Nos. (a) to (u), but in the course of arguments on the 15th June, 1967, counsel on behalf of the J.K. (Bombay) Private Ltd. being faced with certain difficulties of securing the presence of parties before the court gave up the prayers (g) to (p) contained in the judge's summons dated 27th February, 1967. This fact is noted in the minutes of that day as well as in the order passed by Mr. Justice Thakkar on the 15th June, 1967, and has been adverted to by. Mr. Justice Vimadalal in his order dated 6th November, 1967, on Company Application No. 14 of 1967 (paragraph 1). On the 16th June, 1967, Mr. Justice Thakkar also ordered that the notice should be served on the Jalan group afresh because the said prayer had been given up. On the same day, i.e., 16th June, 1967, the company itself took out a judge's summons that the company be wound up under the provisions of section 392(2) of the Companies Act as the scheme could not be worked. This judge's summons is Company Application No. 21 of 1967. On 17th June, 1967, the company itself also filed a winding-up petition praying that the company be wound up under the provisions of section 433 of the Companies Act. This substantive petition for winding-up preferred by the company itself is Company Petition No. 82 of 1967. On the 19th June, 1967, one of the creditors of the company, Messrs. Lalji Thakersey and Co., appeared in Company Application No. 14 of 1967 and filed and affidavit opposing the Company application No. 14 of 1967 and praying that the said application should be dismissed. We mention this fact here because from the granting of Company Application No. 14 of 1967 an appeal has been preferred by the said Messrs. Lalji Thakersey and Co. and that appeal is appeal No. 96 of 1967.

4. We have said that after the new management (the Jalan group) took charge of the company it restarted the mills on 1st April, 1966, and thereafter disputes arose between the new management (the Jalan group) and the old management (the J.K. group). While these disputes were going on, an employee of the company one L. A. Chaugule claiming to be a creditor of the company gave statutory notice to the company on the 23rd February, 1967, claiming payment of retrenchment compensation due to him in terms of clause (3) of the scheme and on the 24th December, 1967, after the Company Application No. 14 of 1967 had been presented, this creditor filed an application praying that the scheme should not be sanctioned and that the company, which was in a commercially insolvent condition and unable to pay its debts should be wound up. That application was obviously under section 392(2) of the Companies Act, and it is application No. 19 of 1967.

5. All these applications came up for hearing before Mr. Justice Vimadalal and by an order passed by him on the 6th November, 1967, he allowed the Company Application No. 14 of 1967, and ordered the Jalan group to comply with the conditions of the scheme and passed other ancillary orders. By a separate order he dismissed the Company Application No. 21 of 1967 for the winding-up of the company under section 392(2) of the Companies Act.

6. Against the allowance of Company Application No. 14 of 1967, two appeals have been filed in this court, one by the creditor, Lalji Thakersey and Co. being Appeal No. 96 of 1967 and the other by the company itself, being Appeal No. 97 of 1967. Against the dismissal of Company Application No. 21 of 1967, namely, the company's own application for winding it up under section 392(2) of the Companies Act, the company has filed Appeal No. 98 of 1967. We have already said that the company had also presented a substantive Petition No. 82 of 1967 for its own winding-up under section 433 of the Companies Act. By an order passed on the 18th October, 1967, Mr. Justice Vimadalal ordered that this petition should be adjourned for hearing till four weeks after he had passed orders on Application No. 14 of 1967 and the Company's Application No. 21 of 1967. The latter orders, as we have said, were all passed on the 6th November, 1967, but the winding-up petition under section 433 has not been heard because in the meanwhile the appellants in Appeals Nos. 96, 97 and 98 had obtained stay of this order. The substantive winding-up Petition No. 82 of 1967 under section 433 of the Companies Act is thus still pending before the learned single judge, but against the order dated October 18, 1967, adjourning that petition the company has preferred appeal to this court being Appeal No. 100 of 1967.

7. On 12th April, 1967, the creditor, L. A. Chaugule, had filed Company Application No. 19 of 1967 for winding-up of the company under section 392(2) of the Companies Act. That application was dismissed by Mr. Justice Vimadalal by an order passed by him in Chambers on 4th October, 1967. Against the dismissal of his application the creditor, Chaugule and filed Appeal No. 86 of 1967.

8. For the sake of convenience, we give below in tabular form how the five appeals before us arise :

1. Company Application No. 14 of 1967 (allowed) - Appeal No. 96 of 1967 by creditor, Lalji Thakersey and Co.

2. Company Application No. 14 of 1967 (allowed) - Appeal No. 97 of 1967 by the company itself.

3. Application No. 21 of 1967 for winding-up the company under section 392(2) of the Companies Act (dismissed) - Appeal No. 98 of 1967 by the company itself.

4. Company Petition No. 82 of 1967 for winding up the company under section 433 of the Companies Act (adjourned) - Appeal No. 100 of 1967 by the Company itself.

5. Application No. 19 of 1967 by the creditor, L. A. Chaugule (dismissed) - Appeal No. 86 of 1967 by the creditor.

9. All these matters substantially arise out of the non-implementation of the scheme sanctioned by the court on the 17th February, 1966, and before we set forth the position taken by the respective parties, it is necessary to refer to the terms of that scheme. It is annexed as a schedule to the order or Mr. Justice Mody dated 17th February, 1966, and the operative part of the order recites. 'THIS COURT DOTH PASS


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