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Registrar of Companies Vs. M.K. Brothers (Private) Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAllahabad High Court
Decided On
Case NumberCompany Petition No. 24 of 1973
Judge
Reported in[1977]47CompCas314(All)
ActsCompanies Act, 1956 - Sections 433
AppellantRegistrar of Companies
RespondentM.K. Brothers (Private) Ltd.
Appellant AdvocateV.K. Burman, Adv.
Respondent AdvocateU.S. Awasthi, Adv.
Excerpt:
- - it is apparent that the company and its directors are habitual defaulters and in spite of repeated reminders, they have wilfully failed to file it with the registrar of companies. there is no reliable explanation for all this delay. 6. in the counter affidavit, it has been pleaded that the debts are time-barred but no details or reliable evidence has been furnished in support of this allegation......nath, were directors of the company. moti chandra was the managing director. the company filed a balance-sheet as at october 26, 1962, which disclosed the state of affairs of the company as follows :rs.rs.paid up capital30,000fixed assets2,733unsecured loans23,18,091investments11,48,800current liabilities-61,107current assets3,62,518 miscellaneous loss and expenses8,95,14724,09,19824,09,198from the balance-sheet, it is apparent that the company has incurred miscellaneous loss and expenses to the tune of rs. 8,95,147. it is evident that though the share capital of the company was rs. 33,000, it hadincurred loss and expenses to the tune of rs. 8,95,147. the company had virtually no fixed assets. it is obvious that the losses and expenses incurred by the company are far in excess of the.....
Judgment:

Satish Chandra, J.

1. This is an application by the Registrar of Companies, U.P., Kanpur, under Section 433{c) and (e) of the Companies Act, 1956. It prays that Messrs. M. K. Brothers (Private) Ltd., Kanpur, be wound tip by the court under the provisions of the Companies Act, 1956.

2. Messrs. M. K. Brothers (Private) Ltd., Kanpur, the respondent, was incorporated on June 15, 1950, under the Indian Companies Act, 1913. Its registered office is situate at Silver Oaks, Civil Lines, Kanpur. The main object of the company is to carry on the business of exporters, importers, distributors, wholesale and retail dealers, commission agents of textile fabrics of all kinds as also to buy and sell raw cotton, wool, silk, jute, hemp and other raw materials, etc. The share capital of the company was Rs. 33,000. It was held by three persons who were closely related to each other. Two of the shareholders, namely, Moti Chandra and Kailash Nath, were directors of the company. Moti Chandra was the managing director. The company filed a balance-sheet as at October 26, 1962, which disclosed the state of affairs of the company as follows :

Rs.

Rs.

Paid up capital

30,000

Fixed Assets

2,733

Unsecured loans

23,18,091

Investments

11,48,800

Current liabilities-

61,107

Current Assets

3,62,518

Miscellaneous loss and expenses

8,95,147

24,09,198

24,09,198

From the balance-sheet, it is apparent that the company has incurred miscellaneous loss and expenses to the tune of Rs. 8,95,147. It is evident that though the share capital of the company was Rs. 33,000, it hadincurred loss and expenses to the tune of Rs. 8,95,147. The company had virtually no fixed assets. It is obvious that the losses and expenses incurred by the company are far in excess of the share capital. The share capital has virtually disappeared.

3. The company and its directors did not file the balance-sheet after the year 1962. For default in filing the balance-sheets with the Registrar of Companies for the years 1963, 1964 and 1965, the company was prosecuted by the City Magistrate, Kanpur, on July 31, 1967. The City Magistrate imposed a fine of Rs. 1,200. The company and its directors were also prosecuted under Section 220 of the Act, for default in filing the balance-sheet as at October 26, 1966, and they were convicted and fined a sum of Rs. 100 each on December 13, 1968. In spite of it, the company continued to commit defaults and did not file the balance-sheets for subsequent years, namely, 1966 and 1967. For this offence, they were again prosecuted, convicted and'fined by the concerned Magistrate. In spite of these prosecutions and convictions, the company continued its habit of default in filing the balance-sheets for the subsequent years. In fact, no balance-sheet for any of the years subsequent to 1967 has been filed till now. It is apparent that the company and its directors are habitual defaulters and in spite of repeated reminders, they have wilfully failed to file it with the Registrar of Companies.

4. It has been stated in the counter-affidavit that the company was unable to file the balance-sheets because its account books were produced in a suit pending in a court of law. It has also been stated that the directors made various attempts to get the books but the courts refused to release them. It has, however, been stated in the reply of the managing director dated February 15, 1971, that the books which have been filed in court relate to the years 1962-63 and 1963-64. He further stated that the court had granted permission to inspect the books. At first, the box containing the books was not traceable but recently they have come to know that the same has been traced out and they have applied again to inspect the books. This was stated in the reply dated February 15, 1971, but till then and now balance-sheet has not been filed. There is no reliable explanation for all this delay. If the respondent-company's directors were keen to file the balance-sheet, there was nothing to prevent them from filing it. They have had several years at their disposal for this purpose.

5. On November 18, 1970, the Regional Director, Northern Region, Company Law Board, Kanpur, issued a show-cause notice under Section 439(6) of the Companies Act, 1956, requiring them to make representations, if any, against the move of the Registrar for granting of sanction to present a winding-up petition. In reply, Sri Moti Chandra, the managing director, admitted the correctness of the balance-sheet for the year 1962.He, however, stated that the liability of Rs. 23,73,198 is towards the firm and companies and a trust in which the directors are interested or are payable to directors. These firms and directors are not pressing for the repayment of their dues. The same allegations have been reiterated in the counter-affidavit filed to the present petition. It is significant that the company or its directors have not produced any cogent documentary or oral evidence to sustain this plea. In its reply, the managing director stated that Messrs. Roop Narain Ram Chandra (Private) Ltd., to whom the company owed a sum of Rs. 12,23,087.89, have also resolved not to charge any interest on the respondent-company. That shows that Messrs. Roop Narain Ram Chandra (Private) Ltd. have not given up the debt of Rs. 12 lakhs and odd. They have simply given up charging the interest. It is, therefore, not quite correct to say that the company is not indebted to the extent of the amount mentioned in the balance-sheet.

6. In the counter affidavit, it has been pleaded that the debts are time-barred but no details or reliable evidence has been furnished in support of this allegation. The bald allegation cannot be taken at its face value.

7. In. respect of the losses of Rs. 8,95,147 mentioned in the balance-sheet, it was stated in the reply filed by the managing director that out of this a loss of Rs. 2,50,000 was suffered by the company on account of Sri Hari Das Mundra which was not paid by him. It is thus evident that the company has suffered a loss of several lakhs which is not recoverable. Taking into consideration this aspect coupled with the fact that the share capital of the company was only Rs. 33,000, it is clear that the substratum of the company has vanished.

8. The Registrar of Companies has further stated that the company is not carrying on business at all for a large number of years. From the counter-affidavit, it appears that the company was the sole selling agents of Messrs. Kanpur Cotton Mills, a branch of the British India Corporation Ltd. It has been stated in the counter-affidavit that the agency of the respondent-company was terminated in 1958. From the counter-affidavit, it is apparent that the company is not carrying on any business ever since 1958, though the managing director, in the counter-affidavit and in his statement, has expressed his vague belief that the company is likely to commence its business. The contention of the Registrar that the respondent-company suspended its business for more than a year and that there is no possibility of its resuming business in the foreseeable future has been fully made out.

9. Under Clause (c) of Section 433, a company may be wound up by the court ii it suspends its business for a whole year. Under Clause (e), a winding-up order can be made if the company is unable to pay its debts.In my opinion, the Registrar has fully made out a case both under Clauses (c) and (e).

10. In the result, the petition is allowed. Messrs. M. K. Brothers (Private) Ltd., Kanpur, is directed to be wound up under the provisions of the Companies Act, 1956.

11. The order may be advertised in one issue each of a newspaper in the English language and a newspaper in the regional language circulating in this State at the discretion of the Registrar of Companies. The order shall , also be served on the managing director of the company. The official liquidator shall take over custody of the property and effects and books and papers of the company and shall proceed in accordance with law. There will be no order as to costs. The petitioner shall pay Rs. 200 to the official liquidator towards initial expenses.


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