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State Vs. Mayurbhanj Spinning and Weaving Mills - Court Judgment

LegalCrystal Citation
CourtOrissa High Court
Decided On
Case NumberCompany Act Case No. 2 of 1960
Reported inAIR1963Ori1
ActsCompanies Act, 1956 - Sections 433(1), 439(1) and 443(2)
RespondentMayurbhanj Spinning and Weaving Mills
Appellant AdvocateAdv. General
Respondent AdvocateL.K. Dasgupta, ;G.N. Sengupta and ;B.K. Dasgupta, Advs.
Cases ReferredD. Davis and Co. Ltd. v. Burnswlck
- motor vehicles act, 1988 [c.a. no. 59/1988]section 173(1) proviso; [d. biswas, amitava roy & i.a.ansari, jj] appeal without statutory deposit but within limitation/or extended period of limitation maintainability - held, if the provision of a statute speaks of entertainment of appeal, it denotes that the appeal cannot be admitted to consideration unless other requirements are complied with. the provision of sub-section (1) of section 173 permits filing of an appeal against an award within 90 days with a rider in the first proviso that such appeal filed cannot be entertained unless the statutory deposit is made. the period of limitation is applicable only to the filing of the appeal and not to the deposit to be made. it, therefore, appears that an appeal filed under section 173 cannot.....orders. barman, j.1. this is an application by the state of orissa as share-holder of the mayurbhanj spinning & weaving mills ltd. (hereinafter referred to as the company) for winding up of the said company under section 433 (c) and (f) of the indian companies act, 1956, on the grounds that the company has not commenced its business within a year from its incorporation and that it is just and equitable that the company should be wound up, in the circumstances hereinafter stated:2. the ex-state of mayurbhanj (since merged in the state of orissa) had a scheme for the establishment of a cotton and textile mill with capacity of 25,000 spindles and 500 looms in the state, and they appointed indo-swiss trading calcutta as promoters of the proposed cotton mill. the company was.....

S. Barman, J.

1. This is an application by the State of Orissa as share-holder of the Mayurbhanj Spinning & Weaving Mills Ltd. (hereinafter referred to as the Company) for winding up of the said company under Section 433 (c) and (f) of the Indian Companies Act, 1956, on the grounds that the Company has not commenced its business within a year from its incorporation and that it is just and equitable that the Company should be wound up, in the circumstances hereinafter stated:

2. The ex-State of Mayurbhanj (since merged in the State of Orissa) had a scheme for the establishment of a cotton and textile Mill with capacity of 25,000 spindles and 500 looms in the State, and they appointed Indo-Swiss Trading Co.Ltd. Calcutta as promoters of the proposed cotton mill. The company was incorporated as the Public Limited Company in May 1947. There was also an agreement with the Indo Swiss Trading Co. Ltd. that they would be the managing agents of the new mill company. On June 14, 1947 the Maharaja, for and on behalf of the State of Mayurbhanj, agreed to purchase Rs. 2 lakhs worth of preferential shares and Rs. 12 lakhs worth of ordinary shares. On June 19, 1947 a certificate of commencement of business was obtained by the Company from the Registrar of Companies, declaring that the company is entitled to commence its business. The State of Mayurbhanj also settled vast areas of land with the Company and it is said the company was promised more lands as and when necessary.

3. The financial structure of the Company at the time of incorporation was this:

The authorised capital of the company was Rs. 75 lakhs divided into 25,000 redeemable cumulative preference shares of Rs. 100/ each and 500,000 ordinary shares of Rs. 10/- each; out of this amount only Rs. 50 lakhs was Issued, Rs. 17,15,250/- was subscribed and Rs. 13,92,725/- was paid up. The State of Mayurbhanj promised to subscribe shares worth Rs. 15 lakhs in the Company comprising Rs. 3 lakhs as preference shares at Rs. 100/- each and Rs. 12 lakhs as ordinary shares at Rs. 10/-each; out of this a sum of Rs. 12 lakhs was pard by the State of Mayurbhanj, Rs. 3 lakhs having been towards preferential shares and Rs. 9 lakhs towards ordinary shares.

4. The objects of the Company, as stated in the Memorandum of Association, were, inter alia, establishment and erection of mills, factories and works for the purpose of ginning, pressing, baling, spinning, weaving, bleaching, dyeing etc., manufacturing cotton and cotton goods, wool and woollen goods, silk goods and jute goods, hemp and hemp goods, flax and flax goods and other fibres and fibrous articles; to acquire lands for agriculture, horticulture, sericulture and other purposes and in particular for cultivating, growing and producing cotton, jute, hemp, flax, mulbery and other vegetables etc. and to acquire, establish, promote and run only other business whether manufacturing or otherwise as may from time to time, be decided upon by the Company.

5. As for the machineries which were purchased by the Company and brought to the site and installed, it is said that one Sri B. N. Dasgupta, Chairman of the said Indo Swiss Trading Co. Ltd., who happened to be in the United Kingdom in 1946, came across a mill which was available for sale in auction. With a view to ultimate re-sale of the Mill Machinery Sri Dasgupta purchased some selected items of machines, spare parts and accessories including consumable articles of store. In the said transaction Sri Dasgupta is said to have been advised by a technician expert who, it is said, was recommended by the Indian High Commissioner in London. Immediately, after the machines had been purchased. Messrs S. Dodds, a well known firm of renovators of textile machinery in the United Kingdom were asked to remove all the machinery to their works for renovation. Simultaneously orders were placed with Messrs Doddsfor the supply of 17 reconditioned Ring Frames totalling 7812 spindles. In the meantime, the Mayurbhanj Spinning and Weaving Mills Ltd. was incorporated as aforesaid and the said machines were sold by Sri Dasgupta to the said Mayurbhanj Mill Company; the price agreed upon was 60859 f.o.b. English port which subsequently was revised and thus the total revised price was 71,965 which it is said was the price at which Sri Dasgupta originally purchased the machinery.

6. On or about October 17, 1948, while thus the company was still in its infancy, there was a merger agreement between the Maharaja of Mayurbhanj and the Government of Dominion of India for merger of Mayurbhanj State with the State of Orissa. By virtue of the said merger agreement and provisions of law the said shares in the company belonging to the former State of Mayurbhanj vested in the State of Orissa with which the State of Mayurbhanj has since been absorbed.

7. In 1949, after the shares of the Company vested in the State of Orissa, the Company approached the Orissa State Government for payment of its balance call money of Rs. 3 lakhs. The State of Orissa. -- on whom had fallen the legacy of the said shares in the Company which originally belonged to the State of Mayurbhanj and subsequently vested in the State of Orissa as aforesaid,--expressed their unwillingness to pay the balance unpaid share money unless and until the company tried and collected more capital from the public because it was found that more than Rs. 25/ lakhs was required for running the mill with 10,000 spindles. There was a good deal of correspondence and discussion between the Company and the State of Orissa on this question of finance. Apparently certain financiers were also approached by the Company but ultimately nothing materialised.

8. The Indian Finance Corporation was also approached but they wanted guarantee from the State of Orissa, who, however,-- by reason of the provisions of the Bihar and Orissa State Aid to Industries Act (Act VI of 1923) and the rules thereunder (Sections 4 and 5 read with Rule 2(d)) -- was not agreeable to the giving of such guarantee. In the course of such fruitless, efforts for procuring finance, the All-India Handloom Board, Ministry of Commerce and Industry, Government of India,--who were also approached,-- intimated that the condition for such financial assistance having not been fully accepted by the State Government, the question of providing financial assistance to the mill does not appear possible, and that Government of India, however, arranged for inspection by competent technical officers of the machineries and assets of the mill company and further action was to be taken on receipt of the report of these officers.

9. This apparent dead-lock continued until the State of Orissa appears to have taken a firm stand as expressed in a letter dated May 9, 1953 from their Director of Industries to the Managing Agents of the Company stating that he cannot recommend to Government for the payment of the balance call money unless and until the Companyarranged for the necessary working capital to run the mill first. The Government of Orissa decided that before making any further investment in the concern, the possibility of the mill running as an economic unit was to be explored.

10. In July 1956, at a meeting in which the Textile Commissioner and Secretary, Development Department, Government of Orissa, were present, it was decided to have expert report with a view to ascertaining the condition of the second-hand reconditioned machinery purchased and installed in the Mills, the building and other structures erected and to assess the further requirements of plant and machinery and buildings for the mills to run on an economic basis; it was also decided to have the assistance of an expert for enquiring into the financial and other allied aspects of the case.

11. Accordingly at the request of the Government of Orissa, two technical officers of the Government of India inspected the machinery etc. at the mill site on August 30, 1956 and furnished a report forwarded by the Government of India (sic.) which they received from the Textile Commissioner (Ext. 3). In the report the technical experts reported, inter alia, that there was complete lack of planning; that there was wrong selection of site in that it was bad and unsuitable as there is no yarn market in the vicinity and for other reasons fully stated in the report; that maintenance of machineries in the mills was poor; that there was unnecessary purchase of surplus materials not required for spinning unit.

12. As regards financial position, the experts made an adverse report the relevant portion of which is quoted as follows:

'The concern is highly under-capitalised and it is apparent that before starting on the venture, no planning for the finance was done. Even, if the entire issued share capital had been paid up, that would not have been sufficient to meet the barest minimum capital expenditure involved in the erection of an unit with 10,000 spindles. The entire funds of the Company have been depleted and if the mills have to start production, necessary finances for meeting the needs of capital equipment and also working capital, have to be brought in.'

xx xx 'The additional amount that has now to be invested in the project......... has been shownhereafter to be of the order of about 32 lakhs of rupees for bringing the project up to the ultimate capacity of 10,000 spindles.' XX XX

On the financial side of the matter the expertsuggested that an amount of Rs. 17 lakhs for plantand machinery and Rs. 15 lakhs for working capitalwill be required for running the mill on an economic basis; that if the State Government is keenupon running the mill, arrangements will have toto be made for bringing in the necessary funds.

In the concluding Chapter of the Report the experts suggested that as a first step the call in arrears of Rs. 3 lakhs due from the Orissa Government may be paid up now; that the balance of Rs. 29 lakhs may be borrowed from one or otherof the Financial Corporations. The experts, however, by way of caution noted the position that if it is taken into consideration that the Financial Corporation normally insist on a margin of 50 per tent the mills will not have enough security to be offered against the loan; that the present book value of the assets of the Mills is about Rs. 12 lakhs which along with the building, plant and machinery proposed to be acquired now at a cost of Rs. 17 lakhs will qualify only for a loan of Rs. 14 to Rs. 15 lakhs; that there will be no difficulty in the matter of (sic) a Financial Corporations agree to increase the margin on the condition that the entire amount of the loan is guaranteed by the Orissa Government; if not some other arrangements for the funds will have to be made.

With particular reference to the proposed loan of Rs. 8 lakhs from the Industrial Finance Corporation for which the company had applied and the Industrial Finance Corporation had also agreed to advance the loan on condition of guarantee by the Orissa Government as aforesaid,-- the experts expressed the opinion that they do not think that this meagre sum of Rs. 8 lakhs will be of any help to the Mills and that the amount (Rs. 8 lakhs) may be lost unless at the very outset arrangements are made for providing the entire amount of Rs. 32 lakhs.

13 As regards the part played by the Managing Agents in the rearing of this Company from its very birth, the experts reported that the Managing Agents had utterly failed in their responsibility to start production in the Mills and put it on a sound footing; that the Managing agents had not sufficient technical knowledge of the textile industry, with the result that planning both technical or financial was very imperfect; that therefore it would have been in the fitness of things for the Managing Agents to withdraw from the concern. Presumably by reason of the provisions of Section 330 of the Companies Act, 1956 which had by then come into force, the experts suggested that the present managing agents may be allowed to continue till 1960, because under the said section the term of the office of the existing Managing Agents was to terminate on August 15, 1960. In the meanwhile the Orissa Government was advised to have a stricter control over the activities of the Managing Agents; the experts also suggested that the Managing Agents may be pursuaded to agree to curtail some of their rights so that complete powers for the day to day running of the Company may vest in the Board of Directors.

14. The report of the textile experts after inspection in August 1956 as aforesaid,-- which was forwarded to the Government of Orissa in February 1957-- was followed by the Government bf Orissa insisting on the immediate unconditional resignation of the Managing Agents on whose knowledge and management the expert had made adverse comments in the report as aforesaid. Thereupon, there was correspondence and discussion between the State of Orissa and the Managing Agents.

It appears that at a meeting on June 28, 1957, where the managing agents were also present theaffairs of the company were thoroughly discussed with particular reference to the management and finance. Presumably on the basis of the expert report it was expressed on behalf of the Government of Orissa that one of the reasons why they might have hesitated in the past in giving financial assistance to such concern including this Company was that the Government of Orissa had no direct hand in the management of these concerns, and presumably because of the legal difficulties as aforesaid, were not in a position to take over the management, it they are dissatisfied with the present management. After full discussion it was decided that the managing agents would voluntarily retire and the company would be managed directly through the Board of Directors; further that in view, however, of the considerable experience of 'the Managing Agents in the running of industries, they could help the management as Managing Directors under the full control of the Board of Directors, where the Government would have the predominating voice being the major share-holders.

The Managing Agents present at the said discussion promised to consult their other Directors and to take final decision in the matter which was to be communicated (to?) the State Government at an early date.

It was also decides at the said discussion that after the voluntary retirement of the Managing Agents, the Board of Directors would be reconstituted and the State Government would give the necessary financial assistance, for the successful running of the concern. In 1958 the Government of Orissa intimated the Managing Agents that their resignation was to be entirely voluntary and unconditional. The question of appointing a nominee of the Managing Agents as Managing Director was, however, left open; the appointment was to be made on merits at the appropriate time.

In reply to the same, the Managing Agents intimated that they were prepared to submit unconditional resignation letter but they wanted to know how the affairs of the company would be managed and how their (the Managing Agents') dues from the Company would be realised; the Managing Agents also pointed out that the State of Orissa had not paid their uncalled share money by reason of which the company is stated to have suffered losses.

15. The matter, however, rested there until November 19, 1959 when it was agreed that the Managing Agents would retire at the next Board meeting which was contemplated to be held at an early date. When nothing materialised for three months thereafter, the State of Orissa, on February 26, 1960 filed the present application for winding up in which this Court passed an interim order directing the Managing Agents not to issue special notice for payment of balance call money until disposal of the application. The winding up petition was opposed on behalf of the Company and the Managing Agents.

16. The main questions for consideration in this application are these:

(a) Whether the petition for winding up of the Company by the State of Orissa, who is an unpaid share-holder is maintainable.

(b) Whether the Company has not commenced its business within a year from its incorporation as required by law.

(c) Whether it is just and equitable that the Company should be wound up.

(d) Whether some other remedy is available to the petitioner and whether the petitioned is acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

17. On the question of maintainability, the company's point is that a petition for winding up of a Company by the State of Orissa, as an unpaid share-holder,-- who, at the date of such presentation, was in arrear of payment of calls due from it to the Company,-- should on that ground alone be dismissed. In support of this contention the company relied on a certain English decision in In re, European Life Assurance Society, (1870) 10 Eq. 403 decided by Lord Justice James. The correctness of the above view was however doubted by the learned Justice himself, in Re, Diamond Fuel Co., (1879) 13 Ch D 400, where on this point the same learned Judge made the following observations:

'This objection cannot be maintained. I think that in (1870) 10 Eq 403, I was rather supplementing the Act than interpreting it.'

In the later decision it was held that the fact that a share-holder is in arrear of calls is not an absolute bar to his petition for winding up order. The position,-- that English Courts continued to look upon such an unpaid share-holder with disfavour.-- is apparent from the fact that they pursued this view, though holding that it was not an absolute bar in that a petition for winding up of a company, presented by a share-holder who is in arrear of payment of calls of his shares, ought not to be absolutely dismissed; but as a general rule the court will not hear the petition until the calls have been paid or at any rate paid into court, and the court would decline to hear such petition except upon an undertaking of the petitioner to submit to any order which the court might think to make as to payment of calls (In re, Crystal Reef Gold Mining Co., (1892) 1 Ch 408). In the present case the learned Advocate General appearing for the petitioner State of Orissa offered to pay the call money in court if so ordered.

18. The Indian law on the point of maintainability under the new Companies Act of 1956 appears to be different. Section 439 provides that an application for winding up may be made by, among others, by contributory or contributories. Sub-section (3) of Section 439 proves (provides?) that a contributory shall be entitled to present a petition for winding up a Company, notwithstanding that he may he the holder of fully paid up shares. The word 'notwithstanding' in the provision is significant, purporting to show that the fact that the petitioner is a fully paid up share-holder is not a bar. Section 428 defines that the term 'contributory' means every person liable to contribute to the assets of the company in the event of its being wound up and includes the holder of any shares which are fully paid up; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of the personswho are to he deemed contributories, includes any person alleged to be a contributory. Though the holder of fully paid up shares was not a contributory within the meaning of the term as defined in Section 158 of the old Companies Act of 1913, he was held entitled to present a petition for winding up in the same way as a contributory.

There was however a conflict of opinion among the High Courts in India on the question as to the circumstances in which, he could present such petition. The new Companies Act of 1956, however, includes a fully paid share-holder within the meaning of the term 'contributory' defined in Section 428 as aforesaid and also removes the conflict by adopting the accepted view as expressed in Section 439(3) stated above. No such provision is to be found in the English Act of 1948.

19. Thus, it is clear that under the new Indian Companies Act, 1956, petition by State of Orissa, an unpaid share-holder, is maintainable; the fact, that the petitioner has not paid the calls in arrears, is no bar.

20. Then coming to the next question, one of the grounds,-- taken in the petition, but faintly pressed in course of hearing of this application,--was that the Company had not commenced its business so far, that is to say, it had not commenced its business within a year from its incorporation as required by law. Section 413(1)(c) provides that, one of the circumstances in which the company may be wound up by the court if the company does not commence its business within a year from its incorporation or suspends its business for a whole year. The Company will not be so moribund as to warrant winding up under Section 433(1)(c) unless it has ceased to carry on all of its main objects or has never carried any of them. In discovering what is the company's business, regard must be had to its memorandum of association alone, and if ifs memorandum contains several main objects, the Company will not be wound up, even if some of its objects have not yet been attained; on the other hand, a company does not carry on business, unless it genuinely attempts to achieve the objects for which it was formed, so that it will not carry on business merely by its Directors holding board meetings, nor by them exercising the ancillary powers set out in the objects clause of its memorandum; even if the company's memorandum provides that each of the powers in the objects clause shall be deemed a main object, the court will discover what objects the company was really formed to attain, and will wind it up if they have been abandoned. If it is obvious that the company will never have sufficient resources to commence business, the court will wind it up within the year. Moreover, even if the company has not carried on business for a year, the court will not wind it up if there are reasonable prospects of its doing so at not too remote a date, and there are good reasons for the delay.

21. In the present case, it cannot be said that the company did not commence its business. It was contended, on behalf of the Company opposingthe application for winding up, that commencement of business does not necessarily mean only going into production, and that in fact in the present case there was demonstration of some yarn in the presence of the Deputy Director, Production, Government of India, when he visited the mills.

It is clear from the memorandum of association of the company that the objects for which the company was established were, inter alia, establishment and erection of mills, factories and works; acquisition of lands for agriculture etc. and other objects as fully stated therein. The Company,--after it obtained from the Registrar, Joint Stock Companies, the certificate of commencement of business on June 19, 1947,-- had taken settlement of 402 acres of Khas land of the State of Mayurbhanj; additional plots of lands were purchased by the 'Company for construction of roads, bunds, bridges and water works etc.; the Company constructed and laid out a 6 mile long road; factory buildings were completed and the requisite block of machineries, and about 3800 spindles had reached the mill site and the machineries had been erected; capital worth Rs. 17,15,250/- had been subscribed. Thus, it cannot be said that the Company had not commenced its business, as alleged. The Company cannot, therefore, be wound up on the ground, taken in the petition for winding up.

22. However, the fact,-- that the Company had not done the business or ceased to have done any business during about 12 years, prior to the presentation of the winding up petition,-- is one of the several circumstances, which is available to be taken into consideration on the question whether it is just and equitable that the Company should be wound up.

23. This leads me to the main question whether it is just and equitable that the Company should be wound up, in the circumstances of the case. The words just and equitable are words of the widest significance and do not limit the jurisdiction of the court to any case. It is a question of fact and each case must depend on its circumstances. No general rule can be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase 'just and equitable' for purposes of winding up. The decisive question must be the question whether at the date of the presentation of the winding up petition there was any reasonable hope that the object of running the mills at a profit, with a view to which the company was formed, could be attained.

There is obviously a great difference between a question of positive fact, such as the pecuniary position of a trading company at a particular date and a question of the prospects of such a company in the future, a matter which must depend on all sort of view? as to the state of market, the confidence of the public and such other points which depend very largely on infinitly (sic) of other considerations -- very difficult to summarise or to define. It is not the function of a court to determine such a matter on its own views as to the probable success or failure, but to form the best opinion it can upon the expert advice given by persons witha practical knowledge of the trade in question. Where a petition is filed for winding up of a company on the ground that it is just and equitable to do so, the onus is on the petitioner.

24. The question now is whether the petitioner had discharged the onus of proving that it is just and equitable that the company should be wound up. It was strongly urged,-- on behalf of the Company, opposing the petition for winding up,-- that the probable success or failure of the business can-not be taken into consideration in a winding up petition. The mere fact,-- that the petitioner apprehends that the unpaid share money if paid will be frittered away and that loss instead of gain would result from the company continuing to work,-- is no ground for winding up the company.

The company's point is 'that if the State of Orissa had paid the arrear share money it would have made the position better; that the only problem for the company was one of finance; that there was no charge of misappropriation of money by the Managing Agents. It was contended that if Rs. 3 lakhs (arrear share money) was paid by the State of Orissa, the question of finance would not be unsurmountable; there was reasonable hope of tiding over the temporary difficulty; it was not that the produce of cotton yarn will not be profitable; it could not be said that the substratum was pone; the putting in of further money in the company would have given a fresh start which would have graduated its speed towards progress.

The company further claimed that the report of the experts was in favour of the company in that experts recommended that with further investment of money the company could get on. It was submitted that the position of the court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the company; that the ultimate desires & hopes of the ordinary share-holders should not be disregarded merely because there is a strong interest in favour of liquidation naturally felt by the State of Orissa who had not paid the unpaid share money. The company's point is that there is no evidence that as early as in 1949 or 1950 there was no reasonable chance of the company attaining its object or that the Company would not run at a profits; that according to the company, with strong patronage and with reasonable financial support, the company had fair prospects of commercial success; that it was not the experts' opinion that the business had no future at all; that the audited balance-sheets do not show fraud or misappropriation by those in management of the company. It was broadly on this line of reasoning that the petition for winding up was contested on behalf of the company.

25. These arguments arc mainly based on a misconception about the scope of enquiry by court in an application for winding up. The Court is to examine the factual position as it is on the date of the presentation of the petition for winding up, that is to say, as to what actually then the position is, and not what the position should have been on could have been. It is not for the court in a winding up petition to assess or apportion the blame by reason of which the company bad been brought to such a position that it has become just and equitable that the company should be wound up.

in the present case, the fact remains that the company was in utter financial difficulty, and as it appears from the report of the experts it was immediately necessary to invest Rs. 32 lakhs it the Company is to be run as an economic unit. The question is where is the money to come from? The State of Orissa's stand is that even if the unpaid share money of Rs. 3 lakhs had been paid, it would be useless unless further finance was forthcoming. The decisive question in the present case was finance.

26. It was on this point that the Privy Council in D. Davis and Co. Ltd. v. Burnswlck (Australia) Ltd., AIR 1936 PC 114 had upheld the decision of the appellate Court refusing to make an order for winding up. The distinguishing feature,-- by reason of (which?) their Lordships came to take a view against winding up,-- was that, in the Privy Council case, the expert with his wide knowledge of the trade declined to take the view that there was no future for the business in question and their Lordships on consideration of the expert opinion and the circumstances therein saw no reason for doubting that with improved conditions and with reasonable financial support, the business of the Company had, at the date of hearing, fair prospects of commercial success, that is to say, the company might ultimately achieve commercial success provided it was afforded sufficient financial support; moreover, their Lordships had formed the view that there was no reason, having regard to the evidence therein, to believe that the necessary financial assistance would not have been forthcoming. It was in these circumstances that the Privy Council expressed the opinion that the petitioners for winding up in that particular case had not discharged the onus that was upon them showing that it was just and equitable that the Company should be wound up.

27. In the present case, however, the expert report (Ex. 3) read as a whole gives a picture of the position of the Company as it stood at the time of inspection in August 1956. The report strongly emphasised the staggering circumstance that the Company from its very inception had been highly under-capitalised and that it is apparent that before starting on the venture no planning for the finances was done. The purport and contents of the report have been fully discussed above. The report expressly cautioned that any investment of a meagre sum of Rs. 8 lakhs, applied for to the Indian Finance Corporation, if obtained, may be lost unless at the very outset arrangements are made for providing the entire amount of Rs. 32 lakhs The question is where is this necessary fund of Rs. 32 lakhs to come from.

In the present case the experts,-- unlike the expert in the Privy Council case,-- did not give an encouraging report that the company might ultimately achieve commercial success nor did the experts express any hope that the necessary financial assistance would be forthcoming for the Company to attain its object, For whatever the reasons are, thecompany is in such a predicament that there is no reasonable hope of the Company running its business. For want of finance, the attainment of the main object of the Company has become impracticable. In such a case, share-holders may fairly claim that they ought not to be forced to risk their property in going on, particularly when it is impossible to carry on the business of the company except at a loss.

28. Lastly, on the question of alternative remedy, it was contended, on behalf of the company, that the court should refuse to make an older of winding up, when some other remedy is available to the petitioner and that the petitioner is acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy, and the company relied on Section 443(2) of the Indian Companies Act, 1956.

The company's point is that the experts in their report had suggested two alternatives left for the Orissa Government, namely, either winding up of the show or to proceed with the venture by sinking in more funds as fully discussed in the report. The company's stand is that when an alternative course is open, namely, to proceed with the venture by investing more funds, the petitioner is acting unreasonably in seeking to have the company wound up instead of pursuing the other alternative remedy.

29. What Section 443(2) contemplates is some ether remedy available to the petitioner. The experts, in their report, suggested alternative schemes or courses as stated therein. After the State of Orissa received the experts' report in February 1957, the State of Orissa (petitioner herein), while keeping in view the recommendations and suggestions in the report, had explored all the possibilities of running the business of the company and attaining its objects. Indeed, the State of Orissa made all its efforts to get finances for the company but due to the lack of initiative or those in the management of the Company, nothing ultimately materialised. The position was that the Managing Agents could not be got rid of, except by their voluntary retirement which they refused as aforesaid.

The Managing Agents had the right to be in their office until their term, by operation of law, terminated on August 15, I960. In the meantime, the petition for winding up was made in February 1960. It must be said that, in spite of all that the Managing Agents had done for the company, they appear to have been somewhat obstructing to the giving of effect to the scheme which the State of Orissa had in view by reconstitution of the Board of Directors with Government control in it so that the company may attain its objects. Due to lack of foresight and want of a little more tact the facilities, which the State of Orissa, at a certain stage, offered to give to the Company, were not availed of, with the result that there was a deadlock which ensued and ultimately culminated in the petition by the State of Orissa for winding up of the company.

It cannot be said that, under the circumstances, any other remedy is available to the petitioner or that the petitioner is acting unreasonably in seeking to have the company wound up. In fact, theState of Orissa offered to stand as guarantee for loans and also to pay their unpaid share money, provided the Company on its part showed its initiative in raising funds from other sources. Unfortunately there was no effective response to the said gesture made by the State of Orissa. In this view, the company's stand on the plea of alternative remedy based on Section 443(2) is of no avail.

30. In these circumstances, I am of opinion that it is just and equitable that the Company should be wound up. I would accordingly, order that the Company called the Mayurbhanj Spinning and Weaving Mills Ltd. be wound up. The official liquidator appointed by the Government of India,-- being the Additional Assistant Registrar of this Court,-- is directed to function as the Liquidator and to proceed, according to law, with the administration of the Company in liquidation and take such steps as may be necessary in accordance with the provisions of the Indian Companies Act.

31. Costs of and incidental to the applicationto be paid out of the assets of the Company.Hearing fee Rs. 250/- .

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