Skip to content


In Re: Rajdhani Grains and Jaggery Exchange Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberC.A. No. 507 of 1980
Judge
Reported in[1983]54CompCas166(Delhi)
Acts Companies Act, 1956 - Sections 17, 39(1), 41, 391, 391(1) and (2), 428, 430, 466, 467, 469(2) and 511
AppellantIn Re: Rajdhani Grains and Jaggery Exchange Ltd.
Cases Referred and Rajendra Prosad Agarwalla v. Official Liquidator
Excerpt:
.....insolvent and which cannot carry on activity in accordance with law - even if winding up order stayed company cannot immediately revive and carry on business activity lawfully - stay may enable company to carry on illegal activities of forward trading - court not justified in reviving company whose object was to carry on illegal activity - held, prayer for staying of winding up order rejected . - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child with her mother was supposed to..........stayed. as i have already observed, on 20th may, 1980, the division bench of this court refused to stay the winding-up order. the winding-up order is the subject of an appeal before the division bench. all the contentions which have been raised before me should have been raised before the division bench. the division bench, after considering all the submissions which had been made on behalf of the applicant, refused to grant stay on 20th may, 1980. to my maid this decision would be binding on me. 13. in any event, even if the decision of the division bench not to grant the stay is not binding, even on the facts, i am not convinced that this is a fit case where the winding-up order should be stayed. it will be seen that a winding-up order, when passed, enures to the benefit of all the.....
Judgment:

B.N. Kirpal, J.

1. This is an application wherein it is prayed that C.As. P/Sc. Nos. 297 and 298 of 1980 should be revived. C.A. No. 297 of 1980 was an application under s. 391(1) of the Companies Act, 1956, and C.A. No. 298 of 1980 was an application for a stay of the winding-up order.

2. M/s. Rajdhani Grains & Jaggery Exchange Ltd., the company in liquidation, was occupying a portion of the building under M/s. Punjab Exchange Ltd. According of M/s. Punjab Exchange Ltd. (hereinafter referred to as 'the petitioner') the said company owed money by way of license fee and damage. A winding-up petition was filed on 22nd February, 1975, being C.P. No. 23 of 1975. The grounds were taken in the petition. The first ground was that the company was unable to pay its debt and the second ground was that it had ceased to do business. By order dated 23rd April, 1980, this court held that the company was unable to pay its debts and was commercially insolvent. The court also held that the company has suspended its business and, thereforee, must be wound up on this ground also. The business of the company was of doing forwards trading in commodities such as grains and jaggery, which business has been prohibited by law, and this prohibition continues till this day.

3. Against the winding-up order an appeal, being Company Appeal No. 14 of 1980, has preferred in this court. An application for staying of the winding-up order was also filed. By order dated 20th May, 1980, a Division Bench of this court refused to grant the stay of the winding-up order. After the stay had been refused applications being C. As. Nos. 297 and 298 of 1980. Were filed By order dated 8th September, 1980, this court adjourned both the applications sine die with liberty to the party to apply revival. The present application has been filed seeking to revive C. As. Nos. 297 of 298 of 1980.

4. The petitioner in the winding-up petition is opposing the present application. According to Mr. Daljit Singh, after the company has been ordered to be wound up, the person who was a member of the company at the time of the winding-up order has right to file an application under s. 391 and, thereforee, the question of C.A. No. 297 of 1980 being revived should not arise. It is further contended by him that the aims and objects of the company being admittedly such that it cannot carry on its business, this court should not stay the operation of the winding-up order. In this connection it is also urged that no valid reason has been given as to why the stay should be granted.

5. Section 391(1), with which we are concerned in this case, reads as under :

'391. Power to compromise or make arrangements with creditors and members. - (1) Where a compromise or arrangement is proposed -

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them :

the court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of class of members, as the case may be, to be called, held and conducted in such manner as the court directs.'

6. The submission of Mr. Daljit Singh is that the applicant is a contributory of the company and a contributory is not entitled to file an application under s. 391(1).

7. In order to decide the aforesaid question it is necessary to refers to two other provisions of the Act. Section 41 of the Act defines a member as being a person who is entered in the register of members. A contributory is defined by s. 428 of the Companies Act.

8. The said section reads as under :

'428. Definition of 'contributory'. - The term 'contributory' means every person liable to contribute to the assets of a 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 persons who are to be deemed contributories, includes any person alleged to be a contributory.

9. Can it be said that a member ceases to be a member after a winding-up order has been passed If a person ceases to be a member after a winding-up order has been passed and, thenceforth, is only a contributory, then, of course, there would be force in the contention of Mr. Daljit Singh that the applicant has no right to file the present application because, unlike sub-s. (2) of s. 391, which makes a reference to the contributory and a member, sub-s. (1) of s. 391 gives no right to a contributory to file an application under s. 391.

10. To my mind the terms 'contributory' and 'member' are not interchageable. By virtue of s. 428 of the Act every member would become a contributory. The converse, however, is not true. Though a member of a company, even of fully paid up shares, would become a contributory by virtue of s. 428, on his death his legal representatives, by virtue of s. 430, would be regarded as contributories. The said legal representatives, however, would not be regarded as members unless and until their names are put in the register of members. No provision of the Act has been shown to me wherein it is provided that a member shall cease to be a member after the winding-up order has been passed. After the passing of the winding-up order the register of members would come into the custody of the official liquidator. The names entered in the register of members are, however, not erased there from. In fact under s. 467 of the Companies Act the court has been given the power, while settling the list of contributories, to rectify the register of members where it is so required in pursuance of the Act. The obviously means that even after the winding-up order has been passed the register of members continues to exist. If this be so, any person whose name is entered in the register of members shall by virtue of s. 41, be regarded as a member thereof. Mr. Satish Chandra has relied, in support of his contention that the present application can be filed by a member of the company, on three decisions which are In re Travancore National and Quilon Bank Ltd. [1939] 9 Comp Cas 14; AIR 1939 Mad 318, Capital Chit Fund (P.) Ltd. v. Official Liquidator [1978] 48 Comp Cas 176 and Rajendra Prosad Agarwalla v. Official Liquidator [1978] 48 Comp Cas 476. In capital Chit Fund's case this question was never raised. In Travancore National and Quilon Bank's case there is an observation that a member can file a petition under the provisions analogous to s. 391. The Division Bench of the Calcutta High Court in Rajendra Prosad's case has also held that a contributory can file an application under s. 39(1). In none of these cases, however, was this question expressly raised, namely, that after the winding-up order is passed no person remains a member of a company. I am of the opinion that the contention raised by Mr. Daljit Singh, though very interesting, is not well founded. As already observed a member would still be member of the company, notwithstanding the winding-up order having been passed, and even under the different provisions of the Companies Act a reference is made to members even though a winding-up order has been passed. (See sections 469(2) and 511).

11. Even though the applicant is entitled to file the application, the next question which would arise for consideration is as to whether the winding-up order should be stayed and whether a scheme should be put to the creditors of the company. Unless and until the winding-up order is stayed no useful purpose would be served in a meeting of the creditors being called to consider any scheme of arrangement. Obviously, the winding-up order and a scheme cannot operate simultaneously. If I am of the opinion that no ground has been made out for staying the winding-up order, and the winding-up order was rightly passed, I would not be inclined to call for a meeting of the creditors to consider the scheme under s. 391.

12. In my opinion, there is no valid ground which has been made out as to why the winding-up order should be stayed. As I have already observed, on 20th May, 1980, the Division bench of this court refused to stay the winding-up order. The winding-up order is the subject of an appeal before the Division Bench. All the contentions which have been raised before me should have been raised before the Division Bench. The Division Bench, after considering all the submissions which had been made on behalf of the applicant, refused to grant stay on 20th May, 1980. To my maid this decision would be binding on me.

13. In any event, even if the decision of the Division Bench not to grant the stay is not binding, even on the facts, I am not convinced that this is a fit case where the winding-up order should be stayed. It will be seen that a winding-up order, when passed, enures to the benefit of all the creditors and the contributories. The court has the power to grant stay only under s. 466 of the Act. It is for the court to be satisfied that a stay of the winding-up order should be directed. If I stay the winding-up order what would be its effect The obvious effect would be that the company would revive and would be entitled to carry on its business. It is, however, an admitted case of the parties that at the present moment the objects of the company do not permit the company to carry on any business activity. The only object of the company is to carry on forward trading. The carrying on of forward training is illegal. I do not think a court would be justified in reviving a company whose object is to carry on an illegal activity. It is represented by Mr. Satish Chandra, and an affidavit to the effect has also been filed, that if the stay order is granted the memorandum of the company would be amended by taking appropriate proceeding under s. 17 of the Companies Act, and new clauses inserted which would permit the company to carry on lawful activities. In the winding-up order it has been found as a fact that the company is commercially insolvent. The company, at the present moment, cannot carry on any activity lawfully. If the applicant is so keen to carry on any other activity it is open to the applicant to promote another company. I see no valid ground having been made out for the revival of the company which is commercially insolvent and which cannot carry on any activity in accordance with law. As already noticed, the winding-up order was also passed on the ground that the company had suspended its business. Even if the winding-up order is stayed the company cannot immediately revive and carry on any business activity lawfully. It is admitted that without an amendment of the memorandum of association business cannot be carried on. Carrying out of the amendment would take considerable amount of time, but that is not the only consideration which has weighed with me in rejecting the prayer for a staying of the winding-up order. The main considerations which have weighed with me, as already noticed above, are that any stay order which is granted may immediately enable the company to carry on its illegal activities of forward trading, may be clandestinely. Furthermore, the company is commercially insolvent and it is not known as to how it will become a viable unit in the near future. If the appeal filed by the company against the winding-up order is allowed the company or its members would be entitled, at that stage, to move an appropriate application under s. 391. At the present moment I am not inclined to revive the aforesaid applications. This application is dismissed. The parties to bear their own costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //