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Tulsidas Lallubhai Vs. the Bharatkhand Cotton Mills Co. Ltd - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberAppeal No. 31 of 1913
Judge
Reported inAIR1914Bom251; (1914)16BOMLR692
AppellantTulsidas Lallubhai
RespondentThe Bharatkhand Cotton Mills Co. Ltd
DispositionAppeal dismissed
Excerpt:
.....company can be wound up, on the petition of a creditor, only if it is unable to pay it a just debts. the inability is indicated by its neglect to pay after proper demand made and the lapse of three weeks. such neglect must be judged by the facts of each particular case. where the defence is that the debt is disputed, all that the court has first to see is whether that dispute is on the face of it genuine or merely a cloak of the company's real inability to pay just debts. - - on the 24th of october 1912 the company replied in a rather vaguely worded letter, the general content of which, however, clearly indicates the line of defence subsequently adopted by the company. in this case it is perfectly clear that the defence, whatever its ultimate result may be, has substance in it,..........the justice of his demand, put in a winding-up petition. this came on before the district judge, and the company replied in effect that the alleged demand was in respect of a claim which the company honestly believed to be a fraudulent claim and unsustainable at law. the matter appeared to the learned district judge to be one of great complexity, and we think that in declining to go into it upon this petition he acted upon sound and correct principle. we are not afforded any assistance by such cases as in re king's cross industrial dwellings company (1870) l.r. 11 eq. 149 and in re great britain mutual life assurance society (1880) 16 ch. d. 246. the dicta of jessel m.r. in the latter case certainly appear to be rather widely and loosely expressed, but in no case could such.....
Judgment:

Beaman, J.

1. The petitioner-appellant is assignee of certain debts alleged to be due by defendant-Company to its late Secretary and Manager, Mr. Kevaldas, and his benamidars, his wife and daughter. The petitioner-appellant gave the Company notice on the 7th of October 1912 and demanded payment. On the 24th of October 1912 the Company replied in a rather vaguely worded letter, the general content of which, however, clearly indicates the line of defence subsequently adopted by the Company. On the 15th of November the petitioner, instead of accepting the Company's challenge and bringing a suit to vindicate the justice of his demand, put in a winding-up petition. This came on before the District Judge, and the Company replied in effect that the alleged demand was in respect of a claim which the Company honestly believed to be a fraudulent claim and unsustainable at law. The matter appeared to the learned District Judge to be one of great complexity, and we think that in declining to go into it upon this petition he acted upon sound and correct principle. We are not afforded any assistance by such cases as In re King's Cross Industrial Dwellings Company (1870) L.R. 11 Eq. 149 and In re Great Britain Mutual Life Assurance Society (1880) 16 Ch. D. 246. The dicta of Jessel M.R. in the latter case certainly appear to be rather widely and loosely expressed, but in no case could such general dicta be carried further than the facts of the case would warrant. If any general rule is to be laid down at all, it is easily obtained from the Statute law. The principle upon which a Company is to be wound up, for all the purposes with which we are now concerned, is simply its inability to pay its just debts, and that inability is said to be indicated by its neglect to pay after proper demand made and the lapse of three weeks. It is quite clear, however, that any such neglect must be judged by reference to the facts of each particular case, and that, where the defence is that the debt is disputed, all that the Court has first to see is whether that dispute is, on the face of it, genuine or merely a cloak of the Company's real inability to pay just debts. In this case it is perfectly clear that the defence, whatever its ultimate result may be, has substance in it, for it is hardly even the petitioner-appellant's case that the Company is unable to pay the debt it owes him. It has been stated here that he expects to obtain all his dues in full in the liquidation. Thus, therefore, it appears that the petitioner's object is to bring the pressure of insolvency proceedings to bear upon the Company in order to make it pay cheaply and expeditiously a heavy debt which it desires to dispute in the Civil Courts, and this, we are both very strongly of opinion, is one of the worst abuses to which the winding up Sections of our Statute law upon Companies could be perverted. We are clearly of opinion that the learned Judge below was right, and that his order ought to be confirmed and this appeal dismissed with costs.


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