1. By this petitioner under section 560(6) of the Companies Act, 1956, the petitioners seek to secure an order of restoration of the name of the company, M/S. Bulakidas Mohta and Co. (P.) Ltd., Akola, from the Registrar of Companies and also for issue of fresh registration certificates.
2. The brief facts leading to the present petition may be narrated as follows :
3. The Company, M/s. Bulakidas Mohta and Co. (P.) Ltd., was incorporated on October 13, 1939, and, after the Companies Act, 1956, came into force, it became a private limited company in 1956. Two of the original directors of the company are no longer alive. The company was dealing with the business of ginning and pressing mills and with that view they have secured a lease of vast territory of land admeasuring 1,46,991 sq. ft. being a Nazul plot from Khamgaon Municipal Committee in the year 1945. The lease was for a period of 30 years with an option for renewal, and it commenced from July 2, 1944. The company had also established a factory over the said plot and had purchased several machineries of substantial value and had commenced its business.
4. In the year 1953, another concern knows as 'Rai Saheb R. G. Mohta Spinning and Weaving Mills Ltd., Akola' had secured a loan from Laxmi Bank, and for that purpose, the present company, M/s. Bulakidas Mohta and Co., had tendered an equitable mortgagee of their property and assets to the Laxmi Bank for the security of the said loan. The company, Bulakidas Mohta and Co., were furnishing their balance-sheets and accounts to the Registrar of Companies right from its incorporation till October, 1959. It was at about that time that the Laxmi Bank, the principal who had advanced the loan to M/s. Rai Saheb R. G. Mohta Spinning and Weaving Mills Ltd., went into liquidation. As a natural result, the properties and assets of Bulakidas Mohta and Co., which were under equitable mortgage with the Laxmi Bank, were taken over under the custody of the official receiver appointed in the liquidation proceedings of the Laxmi Bank.
5. On September 16, 1961, Rai Saheb R. G. Mohta Spinning and Weaving Mills was also taken over under the Industries (Development and Regulation) Act, 1951. All throughout, the loan liability of Rai Saheb R. G. Mohta Spinning and Weaving Mills with the Laxmi Bank continued and particularly because the assets of Bulakidas Mohta and Co. also were taken over by the official receiver. It is in these circumstances that Bulakidas Mohta and Co. had ceased to carry on any business and had also defaulted in filing returns with the Registrar of Companies as required under the Companies Act.
6. By notification dated May 1, 1968, bearing No. 10298/560, the Registrar of companies notified that the name of Bulakidas Mohta and Co. be struck off from the register of companies and that it shall stand dissolved. This notification is published in the Gazette of India dated May 18, 1968. In the meantime, the property which Bulakidas Mohta and Co. had taken on lease was in the custody of the official receiver. The original lease contained an option for renewal three years before the expiry of the 30 year period of the original lease. The original lease was to expire on July 2, 1974, and more than three years prior to that, the official receiver, who was in custody of the said property, filed an application on June 17, 1971, to the Khamgaon Municipal Committee for renewal of the lease.
7. The official liquidator, acting on behalf of the court, to guard the interest of the bank in liquidation as well as of the debtor, R. G. Mohta Spinning and Weaving Mills Ltd., as also of the guarantor, Bulakidas Mohta and Co., had moved an application before the company judge for restraining the Municipal Committee, Khamgaon, from taking possession of the property under the lease to Bhulakidas Mohta and Co. The order restraining the Khamgaon Municipality from taking possession of the property of Bulakidas Mohta and Co. was passed on July 18, 1975, vide C.A. No. 6 of 1975.
8. In the course of event is that followed in September, 1977, R. G. Mohta Spinning and Weaving Mills Ltd., was also nationalised under the Sick Textile Undertakings (Nationalisation) Act, 1974. The assets of the said company were taken over and ultimately an award was passed by the Assistant Commissioner of Payments on May 16, 1980, fixing a compensation of Rs. 5,16,801.50, payable to the nationalised mills. This award amount was received by the official receiver for and on account of R. G. Mohta Spinning and Weaving Mills Ltd. It may not be out of place to mention here that at the time the Laxmi Bank went into liquidation, R. G. Mohta Spinning and Weaving Mills owed them an amount of Rs. 4,46,000 odd on the date of liquidation against their 'loan account' and for which Bulakidas Mohta and Co. were the guarantors. By payment of the awarded amount of compensation running into Rs. 5 lakhs odd, substantial claim of the Laxmi Bank, in liquidation, as it stands against R. G. Mehta Spinning and Weaving Mills, has been satisfied.
9. It is after these events, it appears, that the members and shareholders of the defunct company, Bulakidas Mohta and Co., convened an informal meeting in the months of October, 1980, and November, 1980, and expressed their desire to resume the business of the said company also to get the name restored in the register of companies by the Registrar of Companies. Immediately after, in March, 1981, the present petition under section 560(6) of the Companies Act came to be filed.
10. The first respondent is the Registrar of Companies who is duly severed but not represented. The second respondent is the official receiver who is represented by Shri D. R. Gharote, Asst. Official Liquidator, Nagpur, and has also filed his reply on oath. The third respondent is the Khamgaon Municipal Committee, through its administrator, which is joined as a necessary party in view of the reference and relevance of the leasehold rights of Bulakidas Mohta and Co., and is represented by Shri R. V. Patil, advocate. Sri S. B. Mukherjee, senior Advocate, and Sri P. K. Banerjee, Advocate, of the Calcutta High Court with Shri Y. S. Athale, advocate, appeared for the petitioners.
11. At the outset, a query was made to the counsel for the petitioners as to the locus standi of the petitioners in moving this petition. Sub-section (6) of section 560 of the Companies Act provides :
'(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.'
12. Section 41 of the Companies Act defines 'member' as one who was 'the subscriber of the memorandum of a company shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members'. Sub-section (2) of section 41 of the Companies Act describes 'every other person who agrees in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company.'
13. According to the averments in paragraphs 6 of the petition, after the company came into existence in the year 1939, the share capital and number of shares were increased in June, 1950, and at that time petitioner No. 1 and petitioner No. 2 were shareholders holding 40 and 41 fully paid up shares respectively apart from other shareholders. This averment is not refuted on behalf of the Registrar of Companies or the official receiver. In that view of the matter, it is certain that the petitioners were the members of the company from 1950 and, at any rate, till the company was dissolved and the name was struck off under section 560 of the Companies Act in the year 1968.
14. In my opinion, therefore, the petitioners, as members of the said company, have a right to apply within 20 years for restoration of the name of the company in the register of companies. The present petition is also filed within the period of 20 years from 1968 and is, therefore, maintainable.
15. Shri Mukherjee, advocate, for the petitioners, apprised this court of the sequence of events in connection with Bulakidas Mohta and Co. right from its inception in 1939 till its name was struck off in the year 1968. It is on the basis of the said data that I have given the facts in the opening part of the judgment. According to Shri Mukherjee, counsel for the petitioners, inasmuch as the company's name was struck off in inevitable circumstances narrated above and the company lost its directors during the course of period and one of its directors was involved in the Laxmi Bank fraud case resulting in its liquidation, there was hardly any guiding person at the helm of affairs of the company to keep it running. He also laid stress on the fact that in the year 1953, the original directors of the company, in their own wisdom, had stood as guarantors for a large loan taken by R. G. Mohta Spinning and Weaving Mills from Laxmi Bank, and which decision involved equitable mortgage of the major immovable and movable assets of Bulakidas Mohta and Co. with the Laxmi Bank. Further, in the event of the liquidation of the Laxmi Bank, the official liquidator and the official receiver, on behalf of the court, took possession of all the running factory machinery and immovable property of Bulakidas Mohta and Co. which was a security by way of equitable mortgage with the Laxmi Bank. It is in these circumstances that the members of the company could not carry on the business as usual, and, consequently, the name of the company was struck off from the register of companies in the year 1968. It is further unfortunate that in litigation was going on between the official receiver of behalf of the Laxmi Bank with R. G. Mohta Spinning and Weaving Mills, notices were issued in the name of Bulakidas Mohta and Co., after its name was struck off from the register of companies and, as such, there was no appearance or contest on behalf of the said company.
16. Shri Mukherjee, counsel for the petitioners, further pointed out that the official liquidator, while guarding the interests of the members of the company, creditors of the Laxmi Bank and the debtor, R. G. Mohta Spinning and Weaving Mills, as well as the guarantor, Bulakidas Mohta and Co., was making regular payment of the lease money to the Khamgaon Municipal Committee and had also taken steps well in time to exercise the option for renewal of the said lease. This has been done by him purely in the interests of all the parties concerned so as to preserve and protect the assets of the company for all concerned. Again, as submitted by Shri Mukherjee, counsel for the petitioners, the Khamgaon Municipal Committee, because of intervention on the part of the State Government, refused to renew the lease and it is in these circumstances that the liquidator has secured an order of injunction restraining the Municipal Committee, Khamgaon, from taking over the assets of Bulakidas Mohta and Co.
17. For one reason or the other, the company is in operation even though it is not carrying on any business and, at any rate, Shri Mukherjee, counsel for the petitioners, submit that it could be in the interest of justice, equity and goods conscience to restore the name of the company for the benefit that will enure to all its creditors as well as to the members of the company.
18. All these averments in the petition could have been contested on behalf of the Registrar of Companies, but even though served, he has chosen not to contest the same. The official receiver, respondent No. 2, has filed his statement on oath through the assistant official liquidator. In the reply affidavit, the official receiver has not disputed the statement of facts in respect of the events from the years 1939 to 1968 regarding Bulakidas Mohta and Co. On the other hand, the official receiver, by his reply in paragraph 4, has admitted that by letter dated May 16, 1980, the Assistant Commissioner of Payments has passed an award in respect of R. G. Mohta Spinning and Weaving Mills and a payment of Rs. 5,16,000 odd has been received by the official receiver as against the original claim for Rs. 4,66,000 odd.
19. The Municipal Committee of Khamgaon have not disputed the allegations in the petition except for the objection that the petitioners have no locus standi as the company stood dissolved in the year 1968. I have dealt with the objection at the very outset and I have held that the petitioners were the members of the company, at any rate, since 1950 before the company's name was struck off from the register of companies.
20. The objects of section 560(6) of the Companies Act is to give a chance to the
21. In the instant case, I find that the company which was functioning from 1939 was constrained to close down its business by virtue of the fact that immovable and movable assets of the company, which were the mainstay of the functioning of the business, were taken over by the official receiver for discharge of the liabilities of a third party for which the present company had stood as guarantors. It was on the basis of their equitable mortgage standing as guarantor for the loan given by the Laxmi Bank to R. G. Mohta Spinning and Weaving Mills that the properties went into the hands of the official receiver. It is, thus, reasonable to except that, when the entire factory machineries and properties were taken over by the official receiver, the company could not function and carry on its normal business.
22. It is thus seen that the main liability of R. G. Mohta Spinning and Weaving Mills has been wiped out by the payment of the compensation awarded by the Assistant Commissioner in the case of the nationalised textile mills i.e., in the case of R. G. Mohta Spinning and Weaving Mills. Apparently, therefore, if the directors and members of the said company are now in a position to restore the company to the register of companies and to assimilate and collect funds sufficient for putting the company into normal function, particularly when there is no serious objection either from the Registrar of Companies or the official receiver, I would feel that the petitioners have given satisfactory explanation for the stoppage of their business during 1960 and 1980 and, after this petition was filed, they have bona fide pursued the said petition to seek restoration of the name of the company on the register of companies. It is not only the interests of Bulakidas Mohta and Co. which is to be considered, but it is also necessary to keep in view the claims of other creditors that may be against the said company as also the viable functioning of the business of the company which would enure for the benefit of all the members of the company, its shareholders, creditors and debtors.
23. It has been pointed out that the property, including the factory and machinery of Bulakidas Mohta and Co., was situate on a leasehold land initially for a period of 30 years. The said period of lease expired in 1974, but fortunately for the company, the official receiver had presented an application for renewal of the lease and exercised the option as per the terms of the said lease well in time prior to three years of expiry of the lease. No doubt, the Government of Maharashtra did not permit the Khamgaon Municipal Committee to renew the lease for a further period, but, at any rate, if the company is resorted to the register of companies, then, as a legal entity, it would be in a position to pursue the application for renewal either with the Government of Maharashtra directly or through courts of law. Even otherwise, if unfortunately the lease is not renewed, the company, on restoration, would be entitled to take steps for the possession of the factory and machinery as also the other structures which they owned and which they were entitled to retake after the expiry of the lease. On the other hand, if the Municipal Committee of Khamgaon has any right to recover damages or mesne profits for the use and occupation of the said land after 1974, the said municipal committee also would be benefited if the company's name is resorted and a legal entity with all its rights and liabilities is created.
24. The company, on restoration, would also be entitled to contest the case for release of the property from the custody of the official receiver for the functioning of its business and it is possible only if the company is resorted to the register of companies and given its legal entity. Thus, the object of putting both the company and all its persons in the same position as they would have occupied if the dissolution of the company had not intervened, could be served by such an order under section 560(6) of the Companies Act. I am, therefore, satisfied that there is sufficient material produced by the petitioners to show that it is in the interests of the members of the company as well as its creditors that the name of the company should be restored in the register of companies.
25. Having given my careful consideration to all the aspects in this petition, I find that it would be just and proper to grant the relief as prayed for.
26. In the result, therefore, Company Petition No. 6 of 1981, succeeds and the relief as prayed for is hereby granted. It is further directed that after the certified copy of this order is presented before the Registrar of Companies, the company, on restoration, shall present all the audited statement of accounts for the intervening period from 1959 to the date of this order with the Registrar of Companies within a period of six months. They shall also take steps to increase the share capital by an additional sum of Rs. 5 lakhs and on a date six months hereafter, that is, on October 8, 1984, these matters be placed before me along with a compliance report from the petitioners and the Registrar of Companies. The petitioners shall bear the costs of the proceedings only in so far as the official receiver is concerned.