Das Gupta, J.
1. This appeal is against the order made by Banerjee J, on the application of a paid up shareholder of the Davco Products Ltd. to wind up the Company. The grounds on which the order was asked for were that the Company had suspended business for more than a year, that it was unable to pay its debts and that as the substratum of the Company was gone, it was just and convenient that the Company should be wound up. The application was contested by the Company. It was supported by two other paid-up share-holders and also by two persons who claimed to have been employed by the Company and to have obtained decrees for arrears of salary due to them against two of the Directors and claimed to be the creditors of the Company. Of the other creditors, the Imperial Bank of India, claiming dues of over Rs. 1,50,000/- for which a suit was pending in the Court of the Subordinate Judge, Alipore, appeared and denied certain allegations made against them by the applicant but did neither support nor oppose the application for winding up.
2. At the hearing of the application, nobody appeared to oppose the same. The learned Judge held that this was an application on behalf of the share-holders to wind up a company and was supported by several creditors, that the company had practically done nothing during the last 4 or 5 years, that the company was insolvent and that it was just and equitable to make the winding up order.
3. The main point urged on behalf of the appellant is that as the application is by a fully paid up share-holder, he is bound to allege and prove, in the first place, that on the winding up there will be such a surplus available for distribution to the fully paid up share-holders and that the applicant has a tangible interest in the matter.
4. Before I consider this contention which is the appellant's main line of attack against the order made, it is necessary to consider some of the points that were urged. The first of them was that the application was not in proper form not being a verified application supported by a separate affidavit. The defect alleged is however one that the Court can excuse and we cannot interfere with the order that was made on this ground.
5. Next it was urged that the verification of the application itself was defective. The affirmation was in these words:
'I Rameswar Sadhani the petitioner above-named solemnly affirm and say that the statements contained in all the paragraphs of theforegoing petition save and except those as are ascertained from searches which are believed by me to be true and those as are expressly made as submissions to this Hon'ble High Court are true to my knowledge.'
It cannot be made out on a perusal of the petition which of the statements have been ascertained from searches, and, so it is impossible to know which statements are affirmed by the deponent to be 'true to his knowledge'. Solemn affirmations of the nature are worse than useless. They are really attempts to mislead the Court that certain facts are being affirmed to be true to the deponent's knowledge while really no facts are being so affirmed. The deponent is in the happy position that he cannot be touched in criminal proceedings for having made a false affirmation, for he has made no affirmation of fact. This kind of affirmation cannot be too strongly condemned and were it not for the fact, that the Company itself has admitted several facts I would have been inclined to accept Mr. Chowdhuri's contention on behalf of the appellant that no order should be made on an application verified in this unsatisfactory and deceptive manner. As however there are several admitted facts, I do not think it right to interfere with the order that has been made on this ground.
6. The admitted facts may be briefly summarised thus: 'The Davco Products was incorporated in July 1946 under the provisions of the Indian Companies Act as a public Limited Company. The present authorised capital is Rs. 25,00,000/-, the issued and paid up capital is Rs. 12,50,000/-. Soon after its incorporation the Company obtained a lease of about 40 bighas of land at Panihati for a period of 75 years and erected thereupon a factory. There is a condition in the lease that the lessor will have the right of re-entry if the Company be wound up.
7. The balance sheet of the company for 1947 showed a loss of Rs. 21,705/- and showed that it had spent more than Rs. 2,00,000/- for plant and machinery in the said factory, about Rs. 85,000/-on development expenses, about Rs. 61,000/- for furniture and fittings, about Rs. 33,000/- for machine tools, Rs. 21,00/- for Motor Cars and lorries and Rs: 77,000/- on stores and spare parts. It appears to be the Company's own case that more than 3 lacs were spent on the erection of the factory itself. A good part of the 12 1/2 lacs that had been received appears to have been thus spent in fixed capital.
8. For carrying on its business the Company had to take advances from the Imperial Bank of India. At the end of February 1950 the Company was indebted to the extent of about 3 lacs of Rupees; and for the recovery of this debt the Imperial Bank filed a suit in the Original Side of this Court on the 8th of March 1950. On the 28th of March 1950 an order was made by this Court by which the Official Receiver was appointed Receiver of the assets, stock-in-trade, good debts, plants and machinery of the Company. In April 1950, the Official Receiver took possession of all the goods, stock-in-trade, plants and machinery at the company's factory and show room and its registered office and locked the said factory, the show room and the registered office of the Company. On the 5th of May 1950 a decree was made in the suit in favour of the Imperial Bank of India without contest by the Company of the amount claimed in the suit declaring a charge over the goods, stock-in-trade, plant and machinery of the Company and its factory and show room and for sale thereof. Pursuant to the decree, the Official Receiver has sold all the goods, stock-in-trade, plant and machinery of the Company in June 1951. The position is that since possession was taken by the Official Receiver in April 1950, the Company did not carry on any business whatsoever.
9. It must be held on the admitted facts that the substratum of the Company is gone. The principal object of the Company was the manufacture of tubular furniture, childrens' toys and similar other goods. It has become impossible to carry out such manufacture after the stock-in-trade, plants and machineries of the Company were sold out in execution of the decree obtained by the Imperial Bank. The only assets since then have been the factory building and the leasehold interest in the land on part of which the factory stands.
10. In paragraph 8 of the affidavit which Nar-singdas Bagree, a Director of the Company has sworn, on behalf of the Company it is stated that after the Imperial Bank had instituted its suit in the Alipore Court for the realisation of Rs. 1,50,000/-
'the Company through its director NarsingdasBagree tried to procure funds for paying off thedebts of the Imperial Bank and to run thefactory again'
and that even after certain negotiations failed,
'the said Narsingdas Bagree is trying his level best to procure funds from some other quarters to pay off the debts of the Imperial Bank and to start the business of the Company again.'
It is admitted, however, that he has not beensuccessful in his attempts.
11. Looking at the entire position I think the irresistible conclusion is that the substratum of the Company is gone and that there is no reasonable chance of the Company starting business again. There is a long line of cases in which the Courts have held that in such circumstances, it is just and convenient that the Company should be wound up.
12. There remains for consideration Mr. Chowdhuri's main contention that the application of a fully paid up share-holder must be rejected unless he alleges and proves that there are assets of the Company of such an amount that in the event of a winding up he would have a tangible share of surplus to receive. For this contention Mr. Chowdhury relied on the statement of the law on the subject by Jessel M. R. -- 'In re: Rica Gold Washing Co.', (1879) 11 Ch D 36 (A). In that case there was a petition by the holder of seventy five fully paid up shares. It was dismissed by Hall V. c. on the ground that it was not a bona fide petition. The appeal was dismissed by a Bench consisting of Jessel, M. R., Bramwell L. J. and Brett L. J.
In dismissing the appeal the learned Master of the Rolls made the following observations which appear at p. 42 of the report:
'Now I will say a word or two on the law as regards the position of a petitioner holding fully paid up shares. He is not liable to contribute anything towards the assets of the Company, and if he has any interest at all, it must be that after full payment of all the debts and liabilities of the Company there will remain a surplus divisible among the share-holders of sufficient value to authorise him to present a petition. That being his position, and the rule being that the petitioner must succeed upon allegations which are proved, of course the petitioner must show the Court by sufficientallegation that he has a sufficient interest to entitle him to ask for the winding up of the Company. I say 'a sufficient interest' for the mere allegation of a surplus or of a probable surplus will not be sufficient. He must show what I may call a tangible interest. I am not going to lay down any rule as to what that must be, but if he showed only that there was a surplus as, on being fairly divided, irrespective of the costs of the winding-up, would give him L. 5/- I should say that would not be sufficient to induce the court to interfere in his behalf.'
Bramwell L. J. concurred with the opinion expressed by the learned Master of the Bolls; Brett L. J. observed:
'With regard to what the Master of the Rolls has said as to whether the Court would order a winding-up on the application of a fully paid up share-holder where the company has no assets except moneys to be recovered under a case of fraud alleged and proved, I for the present, with great deference, decline to give an opinion, because I think the question is not raised in this case.'
13. The learned Master of the Rolls reiterated his proposition in -- 'Re: Vron Colliery Co.', (1882) 20 Ch D 442 (B). He stated there that a fully paid up share-holder
'has no 'locus standi' to apply for a winding up order unless he alleges that there is a surplus, and gives some evidence in support of the allegation, for otherwise he has no interest in the winding up.'
14. In 1908 the English Companies Act was amended to introduce the provision which we now find in section 225 of the English Companies Act and Section 170 of the Indian Companies Act that the Court shall not refuse to make an order for winding up merely on the ground that there are no assets. Two years after that in the year 1910, the Court had to consider -- 'In re: Kalso-Slogan Mining and Financial Corporation Ltd.', 1910 W N 13 (C), a petition by the holders of 5000 fully paid up share-holders for a compulsory winding up order on the ground that the Company had no assets and was insolvent and the whole of the substratum of the Company was gone.
Reliance was placed on behalf of the Company and a large body of share-holders on the rule laid down in -- 'Rica Gold Washing Co., In re (A)' and other cases. For the petitioner it was pointed out that all the cases were decisions before the Act of 1908 and it was submitted that under the new section 141 which contained the provision mentioned above, the absence of assets was not a sufficient objection to an order. The judgment of Neville J. was in these words: 'I think that the petition ought to be dismissed. It is a petition by a fully paid up shareholder and he alleged that the Company has no assets and is insolvent. Under these circumstances the petition must be dismissed with costs.
15. While it would seem that the objection of a large body of share-holders to an order being made up weighed with the learned Judge, it is clear that in the opinion of the Judge, the rule that the application of a fully paid up shareholder should be rejected if it be shown that he has no tangible interest in the order asked for was good law.
16. The Rule as laid down in -- 'Rica Gold Washing Co., In re (A)', was followed by East Punjab High Court in -- 'Bharat Bank Ltd. v. Lajpat Rai Sawhney', AIR 1950 E P 328 (D), but-- 'In re: Cine Industries and Recording Co., Ltd.', AIR 1942 Bom 231 (E), where chagla J. dismissed the petition of a fully paid up shareholder for winding up on the merits, there is an observation that as the law stands to-day the shareholder is under no obligation to satisfy the .Court that on a winding up there would be surplus assets.
17. It was urged on behalf of the respondent that in view of the provisions of law mentioned above that a petition for winding up shall not be rejected merely on the ground that there are no assets, the court need not consider at all on a petition by a fully paid share-holder or by anybody else whether there would be surplus assets. It was also urged in view of the provisions mentioned above that the rule laid down in -- 'Rica Gold Washing Co., In re (A)' is no longer good law.
18. I am not impressed by the argument. The section does not debar the Court from taking into consideration that there are no assets. It is a sound rule that the Court should not in any matter make an order on the application of a person who has no interest therein, for, when a person asks for an order without any tangible interest in the result there is ordinarily good ground for thinking that the application is for ulterior purpose and not a bona fide application.
19. The provision in law that a petition shall not be refused merely on the ground that there are no assets does not make it any the less necessary for the Court to be vigilant, that the Court's process is not abused. I am, therefore, not prepared to accept the contention that the rule laid down by Jessel M. R. is not good law.
20. I do not however think that that makes any difference in the present case. As was laid down by the learned Master of the Rolls, himself in -- '(1882) 20 Ch D 442 (B)' mentioned above, the rule that the application by a fully paid up share-holder must be rejected unless he alleges and proves that there would be surplus assets and that he has a tangible interest will not operate where the creditors have come and supported the application. At p. 447 of the report appear these observations of the learned Master of the Rolls:
'There is no allegation in the petition that there will be a surplus, and the petitioner is not a creditor, so the petition was demurrable. Creditors however came and supported it and a winding up order was made. I think that the petition ought to have been amended by joining a creditor as a co-petitioner before an order was made upon it; but we are not now concerned with the validity of that order, which is not under appeal and I am of opinion that in substance it was right.'
21. The present application of the fully paid up share-holder, was as has been stated above, supported by two persons, whose claim to be creditors of the Company, has not been controverted. I hold that these former employees are creditors of the company, and as they have supported the application, the application is in substance a creditor's application. Treating the application thus, the Court has to apply the rule laid down in --'In re, Crigglestone Coal Co. Ltd.', 1906-2 Ch D 327 (F).
22. In that case the Court had to consider a creditor's petition for a winding up which was opposed by the debenture-holders, and by the Company on the ground that there were no assets available for the unsecured creditors. It was held that the onus was on the respondent to provethat there was no reasonable possibility of any benefit accruing to the unsecured creditors from the winding up and unless that onus was discharged the petitioner was entitled to a winding up order. In affirming the decision Collins M. R. said:
'This case appears to me to depend on the truth of the appellants' assertion that in no possible case would the petitioners gain any benefit from a winding up order. Is there any possibility of the creditors reaping any profits out of it? It occurs to me that the onus is clearly on the debenture holders to negative that possibility .....'
Cozens-Hardy L. J. observed:
'I think that the costs ought not to be astute in endeavouring to support the contention that there is no possibility of any surplus being got for the unsecured creditors.'
23. Applying this Rule to the facts of the present case, I am of opinion that it is not at all clear that there would be no such surplus. Admittedly there is a condition in the lease under which the landlord will be entitled to cancel the lease, if a winding up- order is made. On such cancellation the Liquidator will have the right to remote the factory building. It may be that if the building has to be demolished and the materials removed the Liquidator is not likely to get more than perhaps a few thousand Rupees. But it seems reasonable to think that as the lessor will also be anxious to get the factory building, it will be passible for a careful Liquidator to get first a price only slightly less than the figure at which it has been valued by Messrs. Ballardie Thompson & Mathews. Whether this valuation be Rs. 10,28,000/- as stated by the Company, or Rs. 7,95,068/- as shown in the Balance Sheet, it is not unreasonable to think that a cancellation of the lease, the Liquidator may be able to obtain first a sum well above Rs. 5,00,000/-.
24. According to the Company there is no big creditor apart from the Imperial Bank. The dues to the Imperial Bank are near about Rs. 1,50,000/-. It is not known what the total dues to the other creditors are. I find therefore that it has not been proved that the creditors have no reasonable chance of reaping any benefit out of an order for winding up.
25. It has to be mentioned that before us the Imperial Bank of India appeared to support the appeal. As already stated it appeared in the Court below, but did neither support nor oppose the application. It is, therefore, not possible to take serious notice of its opposition to the winding up order.
26. I have, therefore, come to the conclusion that the order for winding up was rightly made and that the appeal should be dismissed.
P.N. Mookerjee, J.
27. I agree that this appeal should fail. As, however, some of the points, involved in this case, are of considerable importance I propose to deliver a separate judgment.
28. The broad question that arises in this appeal is whether the 'winding-up order', made by Banerjee J., against the Appellant Company, is Justified in law in the circumstances of the present case.
29. The undisputed facts leading to this appeal are as follows:
30. The Appellant Company (Davco Products Ltd.) was incorporated on 10th June 1948 as a Limited Liability Company with an authorised capital of Rupees Five lacs, divided into 50,000 (fifty thousand) shares of Rs. 10/- (Rupees Ten) each. The capital was fully subscribed and the 50,000 shares were duly and fully paid up. On 6th February 1947, the authorised capital of the Company was raised from Rupees Five lacs to Rupees Twenty five lacs by creating one lac new ordinary shares of Rs. 10/- (Rupees Ten) each and 10,000 (Ten thousand) 5 per cent, tax-free Redeemable Preference shares of Rs. 100/- (Rupees one hundred) each, redeemable by 31st July 1950. The whole of the authorised capital was, however, not subscribed and the total subscribed capital of the Company at the relevant date, namely, the date, of the application, on which Banerjee J. passed the 'winding up order', stood at Rs. 5,000 (Five thousand) fully paid up Redeemable Preference shares, representing Rupees five lacs, and 75,000 fully paid up ordinary shares, representing Rupees seven lacs and a half, aggregating to a total subscribed capital of Rupees Twelve lacs and a half. The objects of the Company were inter alia manufacture of perambulators, tubular furniture, children's cycles, toys and other novelties etc., as set out in its Memorandum of Association, and it had its registered office at P31 Mission Row Extension, Calcutta.
31. In March 1947, the Company took lease of the property, known as 'Tagore Terrace', -- about 40 bighas of land and a bungalow, standing thereon, -- at Sodepur, 24 Parganas, for a term of 75 years which included a fairly long optional period and on the said land it built a factory and therein-installed certain machineries and plants -- all in the course of the said year 1947. The balance sheet of the Company for the period, ending 31st October 1947, disclosed a loss of Rs. 21,705/2/2 and the Company had to incur debts to the extent of over Rupees Three lacs from the Imperial Bank of India on hypothecation of its assets.
In the year 1950, the Imperial Bank instituted Suit No. 1140 of 1950 on the Original Side of this Court for recovery of their dues & in that suit the Official Receiver was appointed to take charge of the Company's assets etc. &, eventually, pursuant to the decree, passed therein in favour of the Imperial Bank of India, the goods, stock-in-trade, plants and machineries of the Company were all sold by the Official Receiver in or about June 1951. The sale proceeds were, however, insufficient to pay off the Bank's dues and, for about a lac and half that still remained outstanding, the Imperial Bank filed another suit against the Company at Alipore, claiming a charge on the Company's above leasehold land and the factory building etc., standing thereon. That suit is still pending.
32. Sometime in June 1950, one of the shareholders applied to this Court for a 'winding-up order' against the Company. That application, however, was eventually withdrawn but the situation did not improve; and, on 27th December 1951, the present application was filed by another shareholder under Section 162 of the Indian Companies Act, praying 'inter alia' that the Company be wound up by this Court. Banerjee J., by his order, dated 12th March 1952, allowed the said application holding 'inter alia'-
(a) that 'the Company has practically done nothing during the last 4/5 years';
(b) that 'it is not carrying on any business';
(c) that 'its indebtedness is daily swelling up';
(d) that 'the Company is insolvent'; and
(e) that 'it is just and equitable to make the winding-up order.'
33. The Company has now appealed and in the appeal it seeks reversal of the above 'winding-up' order, made against it by Banerjee J. The propriety of that order has been vigorously challenged before us by the Appellant's, that is, the Company's learned Counsel, Mr. S. Chowdhury, and several points have been urged by him in support of this appeal which I shall presently notice and discuss below.
34. Mr. Chowdhurys first contention raises a purely technical plea, namely, that the respondent's application under Section 162 of the Indian Companies Act was not made in conformity with the relevant Rule 52 and Form No. 13 of Appendix 7 of the Original Side Rules of this Court which, according to Mr. Chowdhury, require an application and a separate supporting affidavit and not merely one single verified application as was filed in the present case, and he has asked us to throw out the application on this ground. By this argument, however, I am left wholly unimpressed. The defect, pointed out by Mr. Chowdhury, is, at the most, a formal and technical defect and no Appellate Court would be justified in allowing the appeal against the 'winding-up order' merely on this ground. I am also of the opinion that, in the circumstances of this case, Rule 11 of the same Appendix 7 would protect the 'winding-up application' from being thrown out on this ground. The case of -- 'Japan Cotton Trading Co. Ltd. v. Jajodia Cotton Mills Ltd. : AIR1927Cal625 , cited by Mr. Chowdhury, is distinguishable, the defect there being of a different and much more serious character. This point of Mr. Chowdhury must, therefore, fail.
35. Mr. Chowdhury next contended that even the verification, appended to the respondent's application, was not a proper verification, acceptable in law, and he argued that Banerjee J. ought to have refused to entertain the application with such a defective verification. I would not say that there is no force in this contention and, perhaps, a proper affidavit ought to have been insisted upon before admitting the petition. When, however, the 'winding-up order' was made there were before the Court certain admitted or undisputed materials, as disclosed by the affidavits of the parties, --namely, of the applicant-respondent and of the Appellant Company as well, -- which broadly supported the petitioner's allegations and, as the Court's 'winding-up order' is, in my view, sus-tainable on the merits on those materials, I am not prepared -- &, in my opinion, it will not be proper to upset that order in appeal on the ground of defective verification of the 'winding-up application'. Accordingly, the second point of Mr. Chowdhury also cannot succeed.
36. The third point, urged by Mr. Chowdhury, raises an interesting question of iaw. Pounding himself on a dictum of Sir George Jessel, the celebrated Master of the Rolls, Mr. Chowdhury argued that the respondent's petition or 'winding-up application' should be dismissed, as it was, admittedly, made by a fully paid-up share-holder and there was no allegation in the said petition nor any proof that there would be any available surplus left for the benefit of the applicant in case a 'winding-up order' was made.
The dictum, relied on by Mr. Chowdhury, appears at pp, 42-43 of the report of the well-known case of -- '(1879) 11 Ch D 36 (A)', where the Master of the Rolls expressed himself as follows:
'Now I will say a word or two on the law as regards the position of a petitioner holding fully paid-up shares. He is not liable to contribute anything towards the assets of the Company, and, if he has any interest at all, it must be that after full payment of all debts and liabilities of the Company there will remain a surplus divisible among the shareholders of sufficient value to authorise him to present a petition. That being his position, and the rule being that the petitioner must succeed upon allegations which are proved, of course the petitioner must shew the Court by sufficient allegation that he has a sufficient interest to entitle him to ask for a winding-up of the Company. I say 'a sufficient interest' for the mere allegation of a surplus or of a probable surplus will not be sufficient. He must shew what I may call a tangible interest. I am not going to lay down any rule as to what that must be, but if he showed only that there was such a surplus as, on being fairly divided, irrespective of the costs of the winding-up, would give him 5, I should say that would not be sufficient to induce the Court to interfere in his behalf.'
Brett L. J. reserved his final opinion on this point: vide at p. 48 of the Report though he and Bramweli L. J. agreed with the Master of the Rolls in dismissing the appeal before them, that is, in dismissing the 'winding-up petition' in that case.
37. 'Prima facie', the words, employed by Jessel M. R., support Mr. Chowdhury's contention but there are three major considerations against its acceptance which I shall presently discuss.
38. In the first place, the absolute form of the dictum in which Mr. Chowdhury wanted us to apply it in this case was modified by the Master of the Rolls himself in the later case in -- '(1882) 20 Ch D 442 (B)', where he expressed the view that (to?) a creditor's 'application for winding-up' -- and such application would, in his view, 'too, include for this purpose an application by a fully paid-up share-holder, supported by creditors -- the above dictum would not apply (Vide at p. 447 of the Report). The present case falls, in my opinion, within this exception as the respondent's application is supported by at least two creditors, Anil Kumar Ghosh and Lakshmi-narain Hazra, who were employees of the Company and to whom certain amounts are, on the materials before us, outstanding on account of unpaid salaries for a part of the year 1950. The fact that they have obtained decrees not against the Company but against some of its directors for the said outstanding amounts under the Payment of Wages Act does not, in my opinion, relieve the Company of its liabilities for the same or make them, that is, the said two persons, any the less its creditors. The dictum of Sir George Jessel does not, therefore, operate to the petitioner's (respondent's) prejudice.
39. In the second place, it is to be observed that in -- '(1906) 2 Ch 327 (P)', doubts were cast on the universal applicability of the principle, underlying the said dictum, by 110 less a company Judge than Buckley J. and the Appeal Court also does not appear to have accepted there the said principle as an absolute bar of universal applicability to a fully paid-up shareholder's 'winding-up application'. In that case Buckley J. considered and explained the two other cases of -- In re St. Thomas's Dock Co.', (1876) 2 Ch D 116 (H), and -- 'In re Chapel House Colliery Co.', (1883) 24 Ch D 259 (I), which apparently proceeded on the principle, underlying the above dictum of Sir George Jessel,and contained some indications as if the said principle represented an absolute rule of law and was of universal application; and Buckley J.'s exposition of the law was substantially -- it not wholly -- accepted by the Court of Appeal.
It is true that in -- '1906-2 Ch D 327 (P)', the case of -- '(1879) 11 Ch D 36 (A)' does not appear to have been cited in argument and the above dictum of the Master of the Bolls does not also appear to have been expressly or specifically considered but, even then, it is quite plain that neither Buckley J. nor any of the learned Judges of the Court of Appeal in the -- '(1906) 2 Ch D (P) case' above cited, was inclined to accept the principle, underlying the said dictum, as an absolute and universal rule of law. In such circumstances, I am not prepared to throw out the respondent's application on the authority of the above dictum, particularly when in this instant case before us, there is no clear or satisfactory proof -- as was apparently the position in vide -- '1906-2 Ch D 327 at p. 338 (F)', per Romer L. J., -- that there will be no surplus assets in case a 'winding-up order' is made, remembering, in this connection, that, even according to the appellant's own case, the Company's 'assets are many lacs more than its liabilities' (Vide paragraph 10 of the Affidavit of Narsinghdas Bagree, filed on 26-2-52).
This is also sufficient for the rejection of Mr. Chqwdhury's third contention, but in my view, there is a still stronger objection to this part of the appellant's case which I shall at once state and proceed to discuss below.
40. Section 170 (1) of the Indian Companies Act expressly provides that 'the Court shall not refuse to make a winding-up order on the ground only that.....the company has no assets.' This statutory provision which applies, in general, to all applications for the compulsory winding-up of a company clearly contemplates a case where there would be no surplus assets, available for the applicant's benefit, -- and such applicant may well be a fully paid-up share-holder, -- but it enjoins that merely on that ground the 'application for winding-up' should not be dismissed. It is to be remembered also that this section, namely, Section 170 (1), of the Indian Companies Act was borrowed from the corresponding English Statute where, as far back as the year 1907, --that is, shortly after -- '1906-2 Ch D 327 (F)', -- a similar provision was to be found duly incorporated (Vide Section 29 of the English Companies Act of 1907). That provision has ever since been continued in the English Statute as will appear from Section 141 (1) of the Act of 1908, Section 171 (1) of the Act of 1929 and Section 225 (1) of the present English Companies Act of 1948.
It seems, therefore, that, neither in England nor in this country, the legislature has accepted the above dictum of the Master of the Rolls --not, at any rate, in the absolute form in which Mr. Chowdhury wants us to apply it in the present case. It is necessary to mention here that our attention was drawn in this connection to the arguments and the decision in the English case in -- '(1910) WN 13 (C)', which was decided when the said Section 141 (1) of the English Companies Act of 1908 was in force. True, this latter case apparently followed Sir George Jessel's dictum, quoted above, as an absolute rule of law of universal applicability even in the year 1910 notwithstanding the statutory provision, referred to above, namely, Section 141 (1) of the English Companies Act of 1908 but, with all respect to the learned Judge (Neville J.) who decided the said case, I am bound to say that his very short judgment of only three sentences gives no reasons for the decision and, even apart from all other matters, it contains no indication that the effect of the statutory change, since the said dictum was pronounced in the year 1879, was considered in all its bearings.
It appears further that in that case -- and in the -- '(1879) 11 Ch D (A)' case too -- a large body of share-holders opposed the 'winding-up application.' The decision of Kapur J. also in -- 'AIR 1950 EP 328 (D)', does not appear to-have taken sufficient notice of the provi-sions of Section 170(1) of the Indian Companies Act and, in my view, Chagla J., as he then was rightly observed in -- 'AIR 1942 Bom 231 at p. 238 (E)' that 'as the law stands today' he (the fully paid-up share-holder) is under no obligation, 'as he at one time was, to satisfy the Court that on a winding-up there would be surplus assets'. Clearly, therefore, the dictum, relied on by Mr. Chowdhury, cannot be accepted as an absolute rule of law of universal application.
41. The view, just above expressed, is also to be found in the Sixteenth Edition (1952) of Palmer's Company Precedents, Part II, at pp. 49, 50 and 53 and Halsbury's Laws of England (Hailsham Edition), Volume 5, page 616, footnote (r), and I have no doubt in my mind as to its correctness. On this ground also the third contention of Mr. Chowdhury must fail.
42. There is also another aspect from which the matter may be looked at. The dictum of Jessel M. R., quoted above, may be construed as laying down a general test -- not universal or conclusive -- for determining the question of bona fides or mala fide of the 'winding-up application'. Thus construed, -- and such construction is justified by the opening and the closing paragraphs of the judgment of the learned Master of the Rolls vide --'(1879) 11 Ch D 36 at pp. 42 and 46 (A)' -- the dictum would still be valid and may be usefully employed in appropriate cases. In the case before us, however, it would be of no assistance to the appellant as J am not satisfied, in the circumstances disclosed in the affidavits, that the respondent's 'winding-up application' is mala fide, even assuming that there is no allegation therein that there would be any surplus, available for the petitioner's (Respondent's) benefit in case of a winding-up, and no proof of any such surplus. Mr. Chowdhury's third argument must, therefore, fail on this ground too.
43. Before concluding my discussion on this part of the case I must also, in fairness to Mr. Chowdhury, refer to the position taken up by him in his reply that though the above dictum of Sir George Jessel could not strictly be said to be an absolute rule of law yet it was a rule of law yet it was a rule of prudence which ought not to be departed from, save under exceptional circumstances. Granting that this position is correct, I am still inclined to think that, in the circumstances of this case, the rule of prudence, spoken of by Mr. Chowdhury, would not entail the dismissal of the respondent's application. The circumstances of the present case are of an exceptional nature and I do not feel justified to throw out, as a matter of prudence, the respondent's 'winding-up application' merely because there is no allegation in his said petition and -- as I shall assume for the present purpose no proof also -- that there will be in case of winding-up, any surplus assets, available for his, that is, the petitioner's, benefit.
44. I may also point out that, even before the Act of 1907, 'winding-up orders' used to be made by the English Courts, even when the Company had no surplus assets: Vide--'In re, Haycraft Gold Reduction Co.', 1900-2 Ch 230 (J) and -- 'In re, Gutta Percha Corporation', 1900-2 Ch 665 (K).
45. For the reasons given above, the third point, urged by Mr. Chowdhury, cannot succeed and I reject the same.
46. I have already referred to the principal findings of the learned Judge (Banerjee J.) who made the 'winding-up order', now under appeal. I shall presently consider the merits of these findings in the light of Mr. Chowdhury's submissions. Banerjee J. found in effect that the Com-pany was insolvent, its substratum was gone and it was not working or carrying on any business and he came to the conclusion that it was just and equitable to make a 'winding-up order' and the Court should, in the circumstances of this case, exercise its discretion in favour of the applicant. These findings and conclusions of the learned Judge have been subject to severe criticism by the appellant's learned counsel. In my view, however, this criticism, though not without some force, must fail in the ultimate analysis.
47. On the materials placed before us the position appears to stand as follows:
1. It has become impracticable to pursue the main object of the Company, namely, manufacture of 'perambulators, tabular furniture and toys, children's bicycles or tricycles and other noval-ties' and the carrying-on of the business of tool-making etc. The market is unfavourable, the machineries, plants, etc., are all gone and there are practically no liquid assets in the hands of the company. As a matter of fact also the Company is not working or carrying on any business.
2. The Company is 'commercially insolvent'. It is unable to pay its debts at least immediately. It has no ready funds to meet the demands of its creditor or creditors; and
3. The liabilities of the Company are increasing in the shape of accumulating interest and advances to meet the landlord's rents.
48. It is, therefore, reasonably clear that the substratum of the Company is gone, that it is commercially insolvent and thus unable to pay its debts within the meaning of Section 162 of the Indian Companies Act and that its business is at a standstill and, for all practical purposes, it has ceased to work. In reaching the above conclusion I have not overlooked -- but have fully considered -- Mr. Chowdhury's submission that the Company has still considerable assets in the leasehold land and the factory and building, standing thereon, and that the so-called main object, sufficiently set out above, is only one of the several independent objects of the Company, as detailed in its Memorandum of Association, and it, namely, the Company, is still trying to work out some of its said other objects and carry on business on that basis. Granting that the Company has still considerable assets, as contended by Mr. Chowdhury, they are, at the best, looked-up assets, not immediately available for meeting the Company's needs, and do not, therefore, affect the conclusion that the Company is 'commercially insolvent'.
True, also, there are, besides what I have described above as the Company's main object, other objects, enumerated in the Company's Memorandum of Association, but, in my opinion, they are, in the proper context of things, really subsidiary objects, notwithstanding the concluding part of Clause III whereby it is declared that
'the objects specified in each paragraph of this clause, unless otherwise expressed in such paragraph, be regarded as independent objects and shall in no wise be limited or restricted by reference to or inference from the terms of any other paragraph or from the name of the company.'
Further, in the circumstances of the present case they are -- even assuming that they are independent objects -- of no practical value or utility to the Company. It must be held, therefore, that the substratum of the Company is gone and that, for all practical purposes, it has ceased to work. This view is clearly supported by the two well-known cases of -- 'In re, Haven Gold Mining Co.', (1882) 20 Ch D 151 (L) and -- 'In re, German Date Coffee Co.', (1882) 20 Ch D 169 (M) and, in these circumstances, the findings of the learned trial Judge must be affirmed.
49. I shall take up now the more serious and difficult question, namely, whether it is just and equitable in this case to make a 'winding-up order' and whether such an order should be made by the Court in the exercise of its discretion under the relevant statute. This question is highly complicated by reason of the presence of the clause in the lease -- under which the Company holds its Sodepur property -- that, in the event of a winding-up of the Company, the lease would be forfeited. Prima facie, this clause appears to Indicate that a 'winding-up order' would be greatly prejudicial to the interests of the creditors and the contributories as well and no such order should, accordingly, be made in the absence of compelling circumstances. The situation is, indeed, highly complex and almost desparate, and this aspect of the matter has caused me immense anxieties. Having, however, studied the situation from all possible points of view, I am inclined to hold that, in the facts of this case, the learned Judge was entirely right in making the 'winding-up order'. It seems to me that, in the circumstances of this Company, a 'winding-up order' is inevitable, sooner or later.
There appears to be no ready market for the Company's leasehold land with the factory and building, standing thereon, -- and this is confirmed by the fact that no arrangement could be made in regard thereto during the fairly long period of over a year and a half since the withdrawal of the earlier application for the Company's winding-up --there is no better prospect for the near future and the liability for rent would continue to accrue and, the greater the delay, the more adversely would it affect the Company's assets. It is also at least open to doubt whether the landlord would, in the present state of things, insist on the strict enforcement of the forfeiture clause. Such Insistence would hardly be of any material benefit to the landlord in the present market and it is not improbable that the landlord would prefer to continue the lease and would not insist on its forfeiture merely for the purpose of spitting or spoiling the Company.
It seems to me further on the materials, placed before us, that the affairs of the appellant Company pre-eminently require a public investigation which can best be obtained by means of a compulsory winding-up and I am clearly of the opinion that, in the circumstances of this case, a 'winding-up order' is eminently desirable or, to quote the words of Buckley J., at least justifiable 'as the means of bringing to an end a vicious career'. In the above view of the matter I would hold that it is just and equitable to make a 'winding-up order' in the present case and, in allowing thepetitioner's application, the learned trial Judge has exercised his statutory discretion in a proper and judicious manner. The conclusions of the learned Judge must, accordingly, be affirmed.
50. I agree, therefore, that this appeal shouldfail and must be dismissed with costs.