1. This is an application under Section 439 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), filed by the Orissa Trunks and Enamel Works Ltd. (hereinafter referred to as ' the company ') for winding up the company. This company was incorporated in April, 1959, as a joint stock company (private) limited by shares. Its nominal capital is Rs. 3,00,000, divided into three lakhs equity shares of rupee one each. The amount of capital paid up or credited as paid up is Rs. 1,45,000. The objects for which the company was established are to run the business of manufacture of trunks, suitcases and enamel products as a pilot project for the development of small-scale industries and to do all such other things as are incidental thereto.
2. It is alleged that the ex-managing director, Sri S. F. Haque, furnished fraudulent accounts to the board of directors and furnished a list of sundry debtors most of whom were found to be fictitious. Besides, he did not hand over the records and books of the company for which reason accounts could not be finalised, with the result that after submitting the profit and loss account of the company for the year ending 3Ist March, 1963, further balance-sheets could not be prepared and statutory reports required to be submitted to the Registrar of Companies could not be submitted. The company also suspended business from November, 1964. In view of the above-mentioned facts, the company passed a special resolution at a general body meeting held on 18th June, 1971, to apply for winding up of thecompany. It is in pursuance of this resolution that the present application was filed.
3. Notice of the application having been issued as required under the Act and the Rules, the ex-managing director put in appearance and denied the allegations made against him in the petition. He stated that the company earned some profits as shown in the balance-sheet for the year ending March 31, 1963. But, thereafter, due to official interference and opposition from the official directors, the managing director could not work properly. The official directors, thereafter, removed the managing director and took over charge of records and all assets of the company and in order to cover up their lapses, they instituted a false criminal case against the managing director, which, however, ended in his acquittal. After taking over charge from the managing director, the other directors sold all assets of the company and closed down the factory, though it was a prosperous and profit earning concern. He also alleged that he was not given notice of the meeting held on 18th June, 1971, in which the resolution for applying for winding up of the company was passed.
4. In the rejoinder filed by Sri S. T. P. S. Jagannathacharyulu, who was authorised by the resolution dated 18th June, 1971, to file the present application, he refuted the allegations made by the managing director in his affidavit. It was asserted by him that due notice of the meeting held on June 18, 1971, was issued to the ex-managing director who after ceasing to be managing director still continued to be one of the directors of the company, but that he deliberately avoided to attend the meeting. It is asserted further in his rejoinder that the company is not in a position to revive its business due to the following reasons :
(a) that there are no existing assets of the company ;
(b) that there are no funds available at present adequate for running the business of the company ;
(c) that the State of Orissa which has contributed the major shares in the company is not prepared to advance capital for revival of the unit ; and
(d) that in view of misappropriation of huge sums of money and maintaining fictitious accounts by the ex-managing director and due to gross mismanagement by him, the company has lost its goodwill.
5. The circumstances under which a company may be wound up by the court are enumerated in Section 433 of the Act. One of such circumstances is where the company by special resolution resolves that it should be wound up by the court. One other circumstance is where the company has suspended its business for a whole year. The company can also be wound up if the court is of opinion that it is just and equitable to do so. There is no dispute between the parties that the business of the company has beensuspended since November, 1964, that is, more than six years before the application was presented in court. It is also clear from the averments made by the parties that the affairs of the company have been mismanaged. Whether the mismanagement has been brought about due to the lapses of the ex-managing director as alleged in the petition or whether it is brought about by several acts of omission and commission of the other directors as alleged by the ex-managing director is immaterial. The assertions made by the petitioner in his rejoinder that at present there are no assets of the company, that adequate funds are not available to run the business and that the State of Orissa which has contributed major shares is not prepared to advance further capital for the revival of the company are not denied. I, therefore, find that there was mismanagement of the affairs of the company and that there is no practical possibility of remedying it. It, therefore, appears to me also just and equitable that the company should be wound up apart from the fact that the directors have by special resolution resolved that it should be wound up.
6. I would, accordingly, order that the company be wound up. The official liquidator of this court should act as liquidator of the company and forthwith take charge of the properties and effects of the company. The official liquidator is directed to cause a sealed copy of this order to be served on the company by pre-paid registered post. The petitioner is directed to advertise within fourteen days a notice in the prescribed form of the making of this order in two local dailies Samaj and Prajatantra. Costs of the winding up be taxed and paid out of the assets of the company.