1. Gulamhussein Ahmedalli and Company presented this petition on March 17, 1967, inter alia, for winding up of canhag Private Ltd. (hereinafter referred to as 'the company'). The winding-up petition was presented on the ground that in spite of service of the statutory notice the company failed and neglected to pay the debt due to the petitioners and also otherwise the company was commercially insolvent. While this petition was coming up for hearing for admission, Fatehi Brothers, a partnership firm, were appearing in support of the order for winding up. I am informed by Mr. Chagla that from time to time this petition was adjourned and ultimately on June 21, 1971, it came up for hearing before my learned brother, Nain J. By the order passed on that day, the learned judge took the view that he was satisfied that there was a bona fide dispute as to whether the claim in the petition made by Gulamhussein Ahmedalli and Co. was payable by the company or by the Mandya National Paper Mills Ltd. He was, therefore, inclined to dismiss the petition as filed by Gulamhussein Ahmedalli & Co. However, the same day he directed Fatehi Brothers to be substituted as petitioning creditors and permission was given to them prosecute the petition. BY an order passed by Nain J., on June 30, 1971, Fatehi Brothers were allowed to amend the petition. As a result of this amendment Fatehi Brothers (hereinafter referred to as 'the substituted petitioners :) were permitted to plead that they were creditors of the company in the sum of Rs. 24,000; that in spite of service of the statutory notice under section 434 of the Companies Act, 1956, the company had failed and neglected to pay the amount to the substituted petitioners; that, therefore, the company was unable to pay the debt and the company should be wound up on that ground.
2. Under section 433 of the Act a company may, inter alia, be wound up by the court if it is unable to pay its debts. Sub-section (1) of section 434, inter alia, provides that a company shall be deemed to be unable to pay its debts if a creditor to whom the company is indebted in a sum exceeding Rs. 500 then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor.
3. By an agreement dated December 1, 1962, the substituted petitioners were appointed by the company as stockists for retail sale and distribution of some of their products. Pursuant to this agreement the substituted petitioners had deposited with the company a sum of Rs. 24,000. The period under the said agreement expired on November 30, 1965, and by their letter dated December 4, 1965, the substituted petitioners intimated to the company that they did not wish to have their agreement renewed and called upon the company to refund the deposit amount of Rs. 24,000 with interest. That letter was acknowledged by the managing director of the company, by their letter dated December 16, 1965. This letter shows that the company thereby accepted the position that a deposit of Rs. 24,000 was kept by the substituted petitioners with the company. However, this amount was not repaid by the company to the substituted petitioners. Ultimately, by their attorney's letter dated October 14, 1966, the substituted petitioners gave a statutory notice under section 434(1)(a) of the Act calling upon the company to pay the said sum of Rs. 24,000 with interest thereon at the rate of 4% per annum within three weeks of the receipt of the said notice. There was further correspondence between the substituted petitioners and the company which shows that in spite of demands the company failed to refund the deposit of Rs. 24,000 with interest or any part thereof.
4. In view of the correspondence annexed to the petition as a result of the amendment allowed, it is quite clear that the substituted petitioners are creditors of the company in the sum of Rs. 24,000 with interest; that the company has failed and neglected to pay the said amount or to secure or to compound for it to the reasonable satisfaction of the creditor in spite of service of a statutory notice as required by section 434(1)(a) of the Act. It is, therefore, clearly established that the company, under the circumstances, shall be deemed to be unable to pay its debts.
5. As the above ground is sufficient to dispose of this petition, it is unnecessary to consider the further contention of the substituted petitioners that the company is commercially insolvent and is unable to pay its debts.
6. As in spite of service of a statutory notice as required by section 434(1)(a) of the Act the company has failed and neglected to pay to the substituted creditors the sum of Rs. 24,000 due to them with interest and has failed to secure or compound for it to the reasonable satisfaction of the creditors, this is a clear case where the company is unable to pay its debts.
7. In the result, Canhag Private Ltd. is ordered to be wound up and under the directions of this court and the official liquidator is appointed liquidator of the company with all necessary powers under the Act.
8. The costs of Fatehi Brothers as supporting creditors as also substituted petitioning creditors do come out of the assets of the company. The order for winding up be advertised in the same newspapers in which the petition was directed to be advertised.