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In Re: New Era Manufacturing Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKerala High Court
Decided On
Case NumberC.P. No. 3 of 1965
Judge
Reported in[1967]37CompCas796(Ker)
AppellantIn Re: New Era Manufacturing Co. Ltd.
Advocates: Mani J. Meenattoor and; C.M. Devan, Advs. for the Contributories of the Company,;
DispositionPetition allowed
Cases ReferredKashinath v. New Akot Ginning and Pressing Co. Ltd.
Excerpt:
company - winding-up - petitioners creditors of company - demand of creditors remained unsatisfied - winding-up petition brought within three years - debt not barred by limitation - petition for winding-up of company allowed. - - 500 is presently due by the company and whose demand under exhibit p-1 dated 1st february, 1965, remained unsatisfied when this petition was brought on 10th march, 1965, and still remains unsatisfied. vaidyanatha iyer also is a creditor and that the majority of the creditors in value though not in number are opposed to the winding-up, these creditors have only repeated parrot-like the objections taken by vaidyanatha iyer in the counter-affidavit he has sworn to on behalf of the company and have not chosen to explain how, if the company is really unable to..........represent in this petition. that joint family is doing business in the name and style of v. v. krishnier sons, and, under that name, was one of the four partners of a firm called the united india distributors. this firm (hereinafter referred to as the firm) were the sole selling agents of the company, and, in that connection, had made an agency deposit with the company. it would appear that on 1st june, 1950, the amount of this deposit was rs. 1,09,000 and on that day the firm wrote to the company by exhibit p-7 that they would not demand the return of this deposit until the company's liability of rs. 2,00,000 to the madras industrial investment corporation limited was discharged. the agency agreement is not in evidence and the terms and conditions subject to which the deposit was.....
Judgment:

P.T. Raman Nair, J.

1. The main, and, to my mind, the sole question in this winding-up petition is whether the petitioners are, as they claim to be, but is denied by the company which vehemently oppose the petition, creditors of the company whose winding-up they seek. Or, rather, since the winding-up court, jealous that its process should not be abused as a means of enforcing doubtful claims will not ordinarily adjudicate on such a question when there is a bona fide dispute, whether the dispute by the company is a bona fide dispute. If the; petitioners are, in truth, creditors, I think a winding-up order should follow as a matter of course. For, they would, in that case, be creditors to whom more than Rs. 500 is presently due by the company and whose demand under exhibit P-1 dated 1st February, 1965, remained unsatisfied when this petition was brought on 10th March, 1965, and still remains unsatisfied. It is no doubt said in the counter-affidavit filed by the company that exhibit P-1 does not satisfy the requirements of Section 434(1)(a) of the Companies Act. But no attempt has been made to show in what respect it is wanting and the point has not been pressed at the hearing. The company's debts amount to about Rs. 2,60,000 and the petitioners claim as much as Rs. 75,000 and odd as due to them. It is true that 947 out of a total number of 2,778 creditors to whom a total sum of Rs. 1,07,000 and odd is due have entered appearance to oppose the petition. Then there is one other person, V. K. R. V. Vaidyanatha Iyer by name, a director of the company, who is the mainspring of the opposition and who claims to be a creditor in the sum of Rs. 45,000. But it is said that he has assigned his debt to some other person and is no longer a creditor. However that might be, assuming that V. K. R. V. Vaidyanatha Iyer also is a creditor and that the majority of the creditors in value though not in number are opposed to the winding-up, these creditors have only repeated parrot-like the objections taken by Vaidyanatha Iyer in the counter-affidavit he has sworn to on behalf of the company and have not chosen to explain how, if the company is really unable to pay its debts, it would be beneficial to the interests of the creditors as a whole if the company is allowed to continue. The opposition from these creditors may therefore be ignored. Indeed, it seems to me, that a winding-up is inevitable and that, if for any reason this petition be dismissed, the company will have to go into liquidation of its own accord or, if an application is made in that behalf, will have no defence to put forward. The company admittedly stopped business on 27th November, 1963, and has not resumed business since. There was a previous winding-up petition against the company, C. P. No. 25 of 1963, filed on 20th November, 1963. That was by a Hindu joint family, whom the present petitioners 2 and 3 represent, and it was brought on the foot of the same debt that they now claim. That petition was dismissed on 9th December, 1964, and although it is said that the company was unable to resume business because of some interlocutory order made in that petition, it is pertinent to note that it has made no attempt whatsoever to resume business even after the dismissal. The present petition was, as we have seen, brought on 10th March, 1965. A provisional liquidator was appointed on 24th June, 1965, and he has sold the stock-in-trade and the raw materials of the brush manufacturing concern which was the sole undertaking of the company. It is not suggested that the company will be in a position to revive this undertaking or embark on some new business--it has not the necessary finances and these are hardly times when fresh finances would be forthcoming for a derelict company--and it would therefore appear that, whatever might be the fate of this petition, the company will never be able to resume business.

2. I am satisfied that the company's 'denial of the debt claimed by the petitioners--its case is that there was no debt due to the petitioners and that, if there was, it is barred by time--far from being bona fide is downright dishonest. In fact the debt claimed by the petitioners arose out of the same transaction as the debts which the company proclaims to be due to three of its directors including Vaidyanatha Iyer . It is only when it comes to the petitioners that there is a denial.

3. Petitioners Nos. 2 and 3 are brothers and are the heads of the two branches of the Hindu joint family which they represent in this petition. That joint family is doing business in the name and style of V. V. Krishnier Sons, and, under that name, was one of the four partners of a firm called the United India Distributors. This firm (hereinafter referred to as the firm) were the sole selling agents of the company, and, in that connection, had made an agency deposit with the company. It would appear that on 1st June, 1950, the amount of this deposit was Rs. 1,09,000 and on that day the firm wrote to the company by exhibit P-7 that they would not demand the return of this deposit until the company's liability of Rs. 2,00,000 to the Madras Industrial Investment Corporation Limited was discharged. The agency agreement is not in evidence and the terms and conditions subject to which the deposit was made are not disclosed either by the pleadings or the evidence but it would appear from exhibit P-7 that the deposit was not an ordinary loan but was a deposit payable on demand subject to the terms and conditions of the contract of agency. The sole selling agency determined on 27th March, 1961, and, on 22nd April, 1961, the company at a meeting of its board passed a resolution, exhibit P-13(a), deciding to pay interest at 9 per cent, per annum on the deposit (which by that date had increased to Rs. 1,50,000) made by the firm in view of their undertaking to keep the money in deposit until the company's liability to the Madras Industrial. Investment Corporation Limited was discharged. On 26th April, 1961, the firm wrote to the company the letter, exhibit D-1, by which they said that, notwithstanding that their selling agency had determined, they were willing to treat their agency deposit of Rs. 1,50,000 as a fresh deposit bearing interest at 9 per cent, per annum payable monthly. To this the company replied by exhibit D-2 of the same date agreeing to treat the amount of Rs. 1,50,000 as afresh deposit as and from 27th March, 1961, bearing interest, payable monthly, at 9 per cent, per annum. It is now the common case that the undertaking in exhibit P-7 did not attract to this fresh deposit although the contrary was one of the main planks of the company's opposition in the earlier winding-up petition, C. P. No. 25 of 1963. And, since nothing was said regarding the term of the deposit it must be regarded as a deposit payable on demand. Indeed, as exhibit P-7 shows, the earlier deposit was a deposit repayable on demand, and the fresh deposit being a; renewal of that deposit must be likewise a deposit payable on demand.

4. It would appear from exhibit P-14(a), the proceedings of the board at a meeting held on 28th August, 1963, that on 31st July, 1963, the firm had written a letter to the company--the letter itself is not in evidence--and that by some agreement between the company and the firm the amounts due to the individual partners of the firm had been determined and the deposit split up between them. Accordingly, in the books of the company the amounts so due by way of principal on 1st April, 1963, and by way of interest accrued due up to 31st July, 1963, to the three partners of the firm other than V.V. 'Krishnier Sons were transferred to their respective accounts--see exhibit P-11(a) and exhibit P-11(b), while the balance of Rs. 59,000 by way of principal and Rs. 8,744.54 by way of interest was transferred to a suspense account. This was duly ratified by the board by exhibit P-14(a). It necessarily follows that, the amounts transferred to the suspense account were amounts due to V.V. Krishnier Sons. Indeed, the company was admittedly paying interest from 1956 up to 27th January, 1962, on the sum of Rs. 59,000 representing V.V. Krishnier Sons' share of the deposit, to the 1st petitioner to whom it is said V.V. Krishnier Sons had assigned that share by way of security for a loan and it is plain that the contention now raised by the company that the money in deposit is due to the firm and not to any individual partner thereof is absolutely without bona fides--in the earlier winding-up petition the principal contention of the company was that the amount was due to the 1st petitioner and not to V.V. Krishnier Sons and it was as a consequence of that contention being upheld that that petition in which the present 1st petitioner had not joined was dismissed. It is to obviate any such difficulty that the present demand has been made and the present petition brought by the three petitioners jointly, the demand expressly stating that payment may be made to all or any one of the petitioners in full discharge.

5. The principal contention of the company is that, the petitioners' claim was barred by limitation when this petition was brought on 10th March, 1965--in this connection it is interesting to note, as a measure of the bona fides of this plea, that one of the principal contentions raised by the company in the previous petition, C.P. No. 25 of 1963, was that there was no debt presently due since, in view of the undertaking in exhibit P-7, the money was repayable only after the liability to the Madras Industrial Investment Corporation Limited was discharged, something that has not happened as yet. However that might be, as we have seen, there was a fresh deposit by the firm as on 27th March, 1961, free of the undertaking in exhibit P-7. This deposit was split up between the four partners of the firm and by exhibits P-11(a) dated 1st April, 1963, and P-11(b) dated 31st July, 1963, the amounts due on that account to V.V. Krishnier Sons, Rs. 59,000 as principal and Rs. 8,744.54 as interest were entered in the suspense account in the books of the company. This was ratified by the resolution of the board, exhibit P-14(a) dated 28th August, 1963, so that I should think that there was, on that day, a fresh deposit by V.V. Krishnier Sons of the sums due to them. The winding-up petition having been brought on 10th March, 1965, within three years of that date, the debt was not by then barred by limitation.

6. Even if the date of the deposit is to be taken as 26th April, 1961, the date of exhibits D-1 and D-2, I do not think that there is any question of limitation. It is said that by exhibit D-3 dated 31st May, 1961, the firm demanded repayment of the principal and interest due to them and that this is the starting point for limitation under article 22 of the Limitation Act, 1963. But then I should think that exhibit P-14(a), the resolution of the board duly signed by the chairman of the meeting by which the entries in the suspense account of the amounts in fact due to V.V. Krishnier Sons were ratified amounts to an acknowledgement of liability under Section 18 of the Limitation Act. The person authorised to sign minutes of meetings of the board on behalf of the company is the chairman of the particular meeting, and, therefore, exhibit P-14(a) must be regarded as an acknowledgement of liability made in writing and signed by the company itself. No question as to whether the chairman of the meeting was an agent duly authorised within the meaning of Explanation (b) to Section 18 seems to arise, for, it seems to me that when a human being who is authorised to act for a company--and a company can act only through some human being--does so act within the terms of his authority, in other words, does something which is intra vires, his act is the act of the company itself, not that of a mere agent. He is a limb of the company. All this apart, it is readily demonstrable with reference to the books of the company that the liability of Rs. 68,328.12 shown in the balance-sheet exhibit P-4(r) for the year ending 31st March, 1964, under the head, 'Liability for other finances' includes the liability under the supense account due, as we have seen, to V.V. Krishnier Sons. That balance-sheet was signed by the directors of the company--the objection that only a copy has been filed cannot be entertained since the copy was marked by consent as proof of the original, the accuracy of which was undisputed, and the decision in K.S. Wani v. New Akot Cotton Ginning and Pressing Co. Ltd., A.I.R. 1958 S. C. 437 has no bearing--and, as held in Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Co. Ltd., [1952] 22 Comp. Cas. 1 constitutes an acknowledgement of liability sufficient to give a fresh starting point for limitation. With the observation to the contrary in Kashinath v. New Akot Ginning and Pressing Co. Ltd., [1950] 20 Comp. Cas. 225 in paragraph 18 of the report I am with great respect unable to agree, and, it seems to me, that that has been impliedly overruled by the Supreme Court in the decision just referred to.

7. I allow the petition and order that the company be wound up. The petitioners will get their costs from the assets of the company.


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