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In Re: Indian Companies Act Vii of 1913. Vs. in Re: Darjeeling Bank Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata
Decided On
AppellantIn Re: Indian Companies Act Vii of 1913.
RespondentIn Re: Darjeeling Bank Ltd.
Excerpt:
- orders.r. das, j.1. this application for winding up of the darjeeling bank ltd. (hereinafter referred to as the company) has been brought on before me for directions in the following circumstances:2. the petitioner, satis chandra bose, is a creditor of the company in respect of several sums due upon several accounts, namely current account, savings bank account and fixed deposit accounts. on 7-1-1947 the petitioner served on the company a notice, addressed to the general manager, darjeeling bank, ltd., 31, ashutosh mukherjee road, which is the registered office of the company, demanding payment of rs. 2250 out of his savings bank account and rs. 414 out of his current account for which he had issued 2 cheques and threatening to take legal steps. on 7-1-1947 one of his fixed deposit.....
Judgment:
ORDER

S.R. Das, J.

1. This application for winding up of the Darjeeling Bank Ltd. (hereinafter referred to as the company) has been brought on before me for directions in the following circumstances:

2. The petitioner, Satis Chandra Bose, is a creditor of the company in respect of several sums due upon several accounts, namely Current Account, Savings Bank Account and Fixed Deposit Accounts. On 7-1-1947 the petitioner served on the company a notice, addressed to the General Manager, Darjeeling Bank, Ltd., 31, Ashutosh Mukherjee Road, which is the registered office of the company, demanding payment of Rs. 2250 out of his savings bank account and Rs. 414 out of his current account for which he had issued 2 cheques and threatening to take legal steps. On 7-1-1947 one of his fixed deposit accounts matured for payment and on the same day the petitioner served a similar notice demanding payment of the sum of Rs. 16,000 for principal and Rs. 400 for the interest due upon the said fixed deposit account.

3. Perhaps apprehending that the petitioner might move for the winding up of the company on the expiry of 21 days after the date of his demand notices the company on 20-1-1947 presented before me a petition under Sections 153 and 153A, Companies Act, and prayed for leave to convene meetings of its creditors and shareholders to consider and, if thought fit, to approve, with or without modification, a scheme of amalgamation with Mahaluxmi Bank Ltd. (a scheduled bank) and for payment of its liabilities in the manner proposed in that scheme. The proposed scheme, broadly speaking, was that the company would transfer all its assets and liabilities to the Mahaluxmi Bank Ltd. and the latter would take them over and pay the creditors in the manner following, namely, 25% by allotment of shares in Mahaluxmi Bank Ltd. and in default of such allotment of shares within one year by payment in cash after the 10th year and the remaining 75% in three equal instalments of 25% payable in cash of all accounts other than fixed deposit accounts, within 6 months, one year and two years respectively from date of sanction; 75% of the amounts due on fixed deposit accounts would be renewed for the same period for which they were deposited and would be paid in two equal half yearly instalments after maturity after renewal. It is not necessary to refer to the other terms of the proposed scheme. In the petition in support of the scheme it was shown that at the end of the year 1945 the subscribed capital of the company was Rs. 19,58,100 and the paid up capital was Rs. 10,44,619. The arrears of call and/or uncalled capital we're therefore about Rs. 9,14,000. The company had at that time 14 branches. It was further shown that the total liabilities to the depositors and others were Rs. 72,81,708 while its total assets came up to Rs. 77,86,821 leaving a surplus of about Rs. 5 lacs. The difficulties of the company were attributed to the abnormal situation prevailing in the country which adversely affected many banking concerns. A copy of a letter dated 14-1-1947 written by the Managing Director of Mahaluxmi Bank Ltd. was annexed to the petition. It was stated in that letter that the last mentioned Bank might be prepared to amalgamate the company with themselves on the terms proposed or with such modifications as might be suggested by their auditors after scrutiny of the assets and liabilities of the company. Reading the letter carefully it will appear that the Mahaluxmi Bank Ltd. did not commit themselves in any way but I cannot say' that the suggestion of amalgamation with a scheduled Bank did not in any way induce me to grant leave to the company to convene the meetings of its creditors and shareholders. On the presentation of the petition. I fixed the dates of the meetings which I gave leave to be convened and gave the usual directions for advertisements and service of notices on individual shareholder and appointed a member of the Bar as the Chairman of the meetings. Seeing that it was proposed that the auditors of Mahaluxmi Bank Ltd. would examine the accounts and that his report would be available before the meetings I did not think it necessary to appoint an independent auditor to investigate into the affairs of the company as I usually do in applications of this kind.

4. On 29-1-1947 the company applied for an order staying all suits and proceedings until the disposal of the scheme application. Having granted leave to convene meetings of creditors and shareholders and in view of the possible amalgamation of the company with Mahaluxmi Bank Ltd., which would become infructuous if creditors levied execution I felt bound to give protection to the company by directing stay of all suits and proceedings. As I had not directed the affairs of the company to be investigated into by an independent auditor and as I did not know what charges might be made against the management by persons whose suits and proceedings were being stayed I added in my order that those persons would have liberty to apply to Court for vacating the stay order. Again I cannot say that the possibility of amalgamation with a scheduled bank did not in any way induce me to grant the stay order at all.

5. On 10-2-1947 the present petitioner applied before me asking, first, that the stay order be modified and leave be granted to him to present the winding up petition and secondy that the company be wound up by the Court and thirdly that a Provisional Liquidator be appointed forthwith. In the petition serious allegations had been made against B. Mukherjee, the Managing Director. It was alleged that by placing his relations, some of whose names were given, in key positions the Managing Director had been following a course of conduct in relation to the affairs of the company which had been highly detrimental to the interests of the company, its numerous creditors and shareholders with the result that the company was commercially insolvent and was unable to meet its current liabilities and demands since November 1946. The charge was made that the Managing Director had with' the company's funds bought properties in the name of his wife and did not transfer it to the company's name until he was forced to do so by the peremptory order of the Reserve Bank of India, that he sold the company's Puri properties to a concern of which one P. K. Bose, the Manager or Agent of the Lind. 'say Street branch of the company, was the 'Managing Director and that this sale was in violation of a resolution of the Board requiring the sanction and confirmation by the Board of all offers made by intending purchasers, that he allowed overdrafts to firms or companies with which he was closely connected and in many cases on wholly insufficient security or in some cases without any security, that he compounded the company's claims by giving up substantial amounts for no apparent reason. On the presentation of the petition I made an interim order restraining sale of the company's immovable property and directed notice to be given to the company for 12-2-1947.

6. On 12-2-1947 certain draft minutes of an order that should, be made was presented before me. The draft minutes opened with the following reservation: 'Without the Bank admitting any of the allegations made in the petition of Satish Chandra Bose and without prejudice to the contentions of the Bank with respect thereto.' Then followed seven clauses. I made an order in terms of the draft minutes, Clause 1 to 8 and 7 being order of Court simpliciter and Clause 4 to 6 being order of Court by consent. The net result was that I admitted the winding up petition but deferred giving directions for advertisement until the disposal of the scheme application, but the winding up application was directed to appear on the list on 5-5-1947 immediately after the scheme application and that the company avoided the appointment of a Provisional Liquidator by agreeing that all moneys realised including sale proceeds of any property would be deposited in Mahaluxmi Bank Ltd., that no accounts would be settled or adjusted nor any moveable property be sold or any establishment charges would be paid out unless jointly authorised by B. Mukherjee and Dwijen Bose the son of the petitioner. Liberty was given to the parties to mention.

7. On 5-3-1947 the petitioner wrote to the Managing Director enquiring as to what steps had been taken for the audit of the company's account and what progress had been made regarding the audit. The Managing Director replied on 11-3-1947 that the work concerning the amalgamation had been progressing satisfactorily.

8. On 18-3-1947, however, a petition was presented before me on behalf of two persons named Bankim Chandra Banerjee and Syed Ehsan Kabir, claiming to be two of the creditors of the company, proposing a different scheme of arrangement and asking for directions for convening meetings of creditors and shareholders of the company to consider this fresh scheme or alternatively praying that this fresh scheme be considered at the same meetings which had been directed to be convened to consider the amalgamation scheme. The proposed fresh scheme was, broadly speaking, that the claims of all creditors would be paid in full in 4 instalments payable within six months, one year, two years, and three years from, in case of creditors other than fixed depositors, the date of sanction and, in case of fixed depositors, the date of respective maturity; that the paid up share capital would be reduced by 80% and the management would be taken over by a Board of ten directors of whom six would be elected by the creditors and that the Board might appoint one of themselves as the Managing Director. It was stated that the notices and advertisements directed by me on 20-1-1947 on the presentation of the amalgamation scheme had not been issued or published and that the same would be issued and published a week thereafter. It struck me at that time that the company was more concerned with getting protection against creditors than with getting along with the proposed scheme. However, I felt myself tied to a certain extent by reason of the previous orders I had made and yet in the belief that the amalgamation scheme might come through I directed that the fresh scheme be also included in the advertisement and notices along with the amalgamation scheme and considered at the same meetings.

9. The meetings were held. Speeches were delivered by the Managing Director of Mahaluxmi Bank Ltd., Mr. J.C. Moitra the learned counsel who moved the application before me and who is a director of Mahaluxmi Bank Ltd. and also a creditor of this company, the Managing Director of this company (B. Mukherjee) and by the petitioner. The proposed fresh schema with some modifications was approved by the requisite majority of creditors and share-holders. The main modifications were: that 20% of the claim would be satisfied by allotment of shares in this company within one year and, in default, by payment in cash after the 80% would be paid in full; that 80% would be paid in three instalments within two years from the date of sanction or date of maturity as the case may be, that the paid-up capital would be reduced by 90%; that the reconstituted board would consist of 14 members of whom 13 would be elected by the creditors. A clause being Clause 42 was added authorising the directors appointed under the scheme to convene separate meetings of creditors and share-holders within two months from the submission of the report by the auditor appointed by Mahaluxmi Bank Ltd. for the purpose of considering and if thought fit of approving the scheme of amalgamation that might be suggested by the Mahaluxmi Bank Ltd. At the meetings were elected 13 creditor-directors including Mr. J.C. Moitra and one Mr. S.C. Roy and one share-holder director who was no other than B. Mukherjee the old Managing Director of the company. The chairman made his report to the Court that the fresh scheme as amended had been passed by the creditors and share-holders. The company thereupon moved the Court for sanction of this amended scheme which application was supported by some creditors including the present petitioner and on 5-5-1947 Edgley J. was pleased to accord sanction to this fresh scheme as amended as aforesaid. The present petitioner's application for winding up of the company which also appeared on the list was not disposed of but was adjourned sine die.

10. By a letter dated 16-5-1947 the Mahaluxmi Bank Ltd., declined to consider any proposal of amalgamation of the company with themselves. At or about this time or shortly thereafter Mr. J.C. Moitra and Mr. S.C. Roy two of the creditor directors resigned from the newly constituted board after B. Mukherjee the old Managing Director who had been elected as director by the share-holders under the scheme was appointed the Managing Director.

11. The fact that Mahaluxmi Bank Ltd. had declined to entertain any scheme of amalgamation was apparently unknown to the present petitioner. On 30-6-1947 the petitioner's attorney wrote to the Managing Director of the company enquiring whether audit of the books of the company had been completed and whether anything' had been' decided as to the proposal for amalgamation. By his reply dated 7-7-1947 the Managing Director wrote saying that as regards the scheme of amalgamation the directors would decide finally on 26-7-1947 and that the petitioner would be informed about it there, after. The fact that Mahaluxmi Bank Ltd. had by their letter of 16-5-1947 already declined to entertain the proposal for amalgamation was suppressed by the Managing Director of this company from the petitioner. On 2nd July the petitioner's attorney also wrote to the Managing Director of Mahaluxmi Bank Ltd. enquiring whether audit of the books of this company had been completed and whether his bank had decided anything finally as to the proposed amalgamation. No reply was given to that letter by the Mahaluxmi Bank Ltd. In reply to a reminder by the petitioner's attorney dated 22-8-1947 the Managing Director of Mahaluxmi Bank Ltd. on 27-8-1947 wrote to the petitioner that the question of amalgamation had not materialised and that his bank had no concern with the company. On 31-8-1947 a resolution was passed by the board of directors of the company to the effect that as the Mahaluxmi Bank Ltd. had by their letter dated 16-5-1947 declined to amalgamate, the general meeting of creditors of the company under Clause 22 of the scheme be dropped and the Eeserve Bank of India beintimated accordingly. On 24-9-1947 the petitioner's attorney wrote to the Managing Director of the company asking for information as to the affairs of the company under several heads but no reply was given to him. Attempt was thereafter made, apparently without success, to obtain copies of statutory statements and returns. Being baffled in his endeavour to obtain any information the petitioner has now moved the Court on an affidavit for obtaining directions on his application for winding up which is pending, having, on 5-5-1947, been adjourned sine die.

12. After setting out the history of the whole matter and reiterating and reinforcing his charges against B. Mukherjee and pointing out that the scheme has failed the petitioner submits that the scheme should be set aside and the company should be wound up by the Court. Mr. Chaudhuri who previously appeared for the two creditors who had proposed the fresh scheme and who now appears for the company has taken a number of technical points, as he is entitled to do, urging that no directions ought to be given on the petition which is defective in form and which, in the circumstances that have happened, is no longer maintainable.

13 Mr. Chaudhuri's first objection is that the present application does not comply with Rules 3 and 4 of our company rules in that it has not been made on a petition but on an affidavit. In the order of 12-2-1947 liberty was given to the parties to mention. The petition for winding up is pending and the petitioner only asks for direction on that petition and the present application is not an independent application and at any rate is founded on the original petition for winding up. The petitioner has filed an affidavit only giving reasons why, in spite of the scheme, the winding up petition should be proceeded with. Further, in the circumstances of this case, I would be prepared, were it necessary to do so, to treat this affidavit which is properly signed and verified as a petition.

14. Mr. Chaudhuri's second objection is that the original winding up petition is not in order in that it does not comply with Rule 52 and form No. 13 and the requisite note has not been inserted at the fact of the petition. It is certainly desirable that the rules and forms prescribed by the Court should be followed but in a proper case the Court may under the rules condone mere irregularities. I certainly think that this is a case where irregularities, if any, in this petition which has been admitted by consent without any objection as to its form should be condoned. The reservation of 'without prejudice' was with regard to contentions of the company with respect to the allegations in the petition which were not admitted. Further Mr. P.C. Basu has, with my leave, put in a separate affidavit verifying the petition and also stating that it is intended to serve the petition on the company.

15. Mr. Chaudhuri next contended that the demand notices set out in the petition do not comply with the requirements of Section 163 in that they are addressed to the General Manager and not to the company. It is not necessary to decide this point, because the invalidity, if any, of the notices will only prevent the petitioner from getting the benefit of the presumption as to the company's inability to pay its debts but the petitioner may prove such inability as a fact aliunde. There is sufficient averment of such inability in the petition. Further the petitioner also relies on the just and equitable ground.

16. The fourth objection broadly urged by Mr. Chaudhuri is that the scheme having been sanctioned the winding up petition does not lie at all and the petitioner's only remedy is under the scheme. A similar extreme contention was negatived by me in In the matter of Noakhila Loan Corporation Ltd. ('47) 51 C.W.N. 791.

17. Mr. Chaudhuri distinguishes that case first on the ground, that there is in the present case no prayer for setting aside the scheme as there was in In the matter of Noakhila Loan Corporation Ltd. ('47) 51 C.W.N. 791, I do not think it is strictly necessary. Further in para. 24 of the petitioner's affidavit he has asked, for setting aside the scheme and, therefore, the distinction sought to be made does not exist. In the second place, Mr. Chaudhuri argues, on the strength of that case, that a scheme having been sanctioned the petitioner cannot maintain a winding up petition on the ground of the company's inability to pay its debts. In In the matter of Noakhila Loan Corporation Ltd. ('47) 51 C.W.N. 791, no time had been fixed by the scheme for payment to the creditors and I held that the scheme must be construed to have contemplated payment within a reasonable time and a reasonable time having elapsed there was a default on the part of the company to carry out the scheme. There was also evidence that the realisations of the company's dues were extremely meagre and unsatisfactory and there was no chance of the scheme being implemented at any time. I pointed out that a company might be wound up in any of the circumstances mentioned in the six several clauses of Section 162 and I held that in the circumstances of that case it was just and equitable that the company should be wound up. As I based my decision on the just and equitable ground under Clause (vi) of Section 162 it was not necessary for me to give any definite ruling as to whether a creditor bound by a scheme could at all, in default of payment under the scheme, maintain a winding up petition on the ground of the company's inability to pay its debts and I said that assuming that he could not rely on that ground he was entitled to rely on other grounds, e.g., the just and equitable ground. My decision in that case does not and was not intended to go any further. As long as the scheme is carried out by the company by regular payment in terms of the scheme the petitioner who is bound by the scheme may not ordinarily be entitled to maintain a winding up petition founded only on the company's inability to pay its debts all at once. This is so because the petitioner is bound by the scheme and cannot demand any payment otherwise than under the scheme and the instalment due up to date under the scheme being paid nothing is presently payable to the petitioner until the due date for the payment of the next instalment arrives and consequently the next instalment not being due no demand can be made on that claim and no statutory notice can be served in respect thereof and the company cannot be said to be unable to pay its debts as and when they fall due and, therefore, no winding up petition can be founded on a claim which is not yet due for payment. But if the company makes default in payment of an instalment under the scheme on its due date there is a debt presently due by the company and I do not see why such a debt, if it is more than the statutory minimum fixed by the Companies Act, will not entitle the creditor to present a winding up petition on any of the grounds mentioned in the several clauses of Section 162 including the inability of the company to pay its. debts as and when they fall due. I do not see why the position of a creditor who is bound by a scheme providing for payment at Stated intervals and who is not paid in terms of the scheme should be different from and worse than the position of an instalment bond creditor whose instalment has not been paid inspite of maturity. A scheme, when sanctioned by the Court, becomes binding on the company and the creditor and if any amount due under the scheme remains unpaid there appears to be nothing in principle or logic to prevent the creditor from presenting a winding up petition against the company in respect of the amount due under the scheme if that is more than Rs. 500. In the original petition there is sufficient averment of the company's inability to pay its debts. The scheme and the failure to pay in terms of the scheme will, to my mind, be cogent and sufficient evidence of the company's inability to pay its debts as they fall due. In any case the petitioner can, like the petitioner in In the matter of Noakhila Loan Corporation Ltd. ('47) 51 C.W.N. 791, rely on the just and equitable ground. In the third place, Mr. Chaudhuri points out that in In the matter of Noakhila Loan Corporation Ltd. ('47) 51 C.W.N. 791, the winding up petition was taken out after the company had made default in payment under the scheme. His argument is that on the happening of a default in payment under the scheme a new cause of action, as it were, accrued in favour of the creditor who is not paid so as to entitle him to present a winding up petition but that such default does not revive his original debt and he cannot proceed with a winding up petition which was presented before the scheme was sanctioned and which was foundled on his original debt in respect of which he had served a statutory notice before the scheme. There occur to me several answers to this argument. First of all, the company should have, on the scheme being sanctioned, got the winding up application to be dismissed or struck out and should not have acquiesced in its being adjourned sine die. Secondly, the scheme does not create a new debt. The original debt is simply made payable in the manner and to the extent prescribed by the scheme. To take an example, suppose A is to get Rs. 1000 from the company and then a scheme is sanctioned by the Court under Section 153 which provides that every creditor shall give up say 25% and the balance of 75% should be paid in three annual instalments of 25% commencing from the date of sanction. The effect of the scheme is not to create in favour of As new debt for Rs. 750 and to make this reduced original debt payable by three annual instalments of Rs. 250 each. The original debt remains although it is reduced as to the amount and modified as to the time of payment. Thirdly suppose A presents a winding up petition claiming to be a creditor in the sum of Rs. 1000 and suppose the company admits that only Rs. 750 but not Rs. 1000 is due to A, surely the company cannot be heard to say that A cannot maintain his petition because he claims Rs. 1000 when only Rs. 750 was due to him. The admitted debt of Rs. 750 being above the statutory minimum is sufficient as a petitioning creditor's debt. Again suppose A claiming to be a creditor for Rs. 1000 filed a winding up petition and thereafter the company pays Rs. 250 to a and promises to pay the balance in 3 weekly instalments of Rs. 250 and the winding up petition is adjourned for 4 weeks. Suppose the company fails to pay any of the instalments and at the adjourned hearing A proceeds with his application. Surely the company cannot be heard to say that by agreeing to receive payment by instalments all of which remain unpaid A has forfeited his right to proceed on his application but must begin on a fresh petition. Is there any difference between the cases I have mentioned and the present case? I see none. Here the petitioner claimed to be creditor for a large sum and presented his winding up petition and during the pendency of his petition his claim, by reason of the scheme, has been reduced and modified but the amount presently due to him under the scheme on account of the first instalment is yet greater than the statutory minimum. I do not see why, in such circumstances, the petitioner should not be allowed to proceed with his petition which was not dismissed in view of the scheme but was adjourned inspite of the scheme.

18. I now come to the question whether the petitioner has made out sufficient grounds on merits to proceed with the application. Mr. P.C. Basu says that the proposed amalgamation with Mahaluxmi Bank Ltd., a scheduled bank, was the ultimate objective that was held out before the creditors. The creditors agreed to the scheme as a tentative or interim measure and as the proposed scheme of amalgamation has fallen through the sanctioned scheme must also fall with it. Reference is made to the speeches made at the meeting of creditors in support of this contention. Mr. Chaudhuri, on the other hand, contends that amalgamation with Mahaluxmi Bank Ltd. was not an inducement at all, nor was it made a condition of the sanctioned scheme. The letter of Mahaluxmi Bank Ltd., which was annexed to the petition was not an unconditional agreement to amalgamate but was only a tentative offer dependent on the result of audit. The speech of the Managing Director of the Bank at the meeting made it clear that there was not much hope of amalgamation. Mr. Chaudhuri further urges that if the sanctioned scheme were a mere tentative measure it would not have provided for payments spread over such a long time but would have been expressly limited upto the date of the decision of Mahaluxmi Bank Ltd., about amalgamation. The sanctioned scheme, Mr. Chaudhuri maintains, is, on the face of it, a comprehensive scheme providing for reconstitution of the Board of Directors, alteration of the Memorandum and Articles each of which provisions suggests finality and self sufficiency. While I feel the force of these arguments I cannot overlook all the attending circumstances. The first scheme proposed was amalgamation with Mahaluxmi Bank Ltd. When the second scheme was proposed 'it was not suggested that the first scheme had fallen through but the second scheme was sought to be placed before the creditors along with the first scheme. The alluring prospect of full payment in 3 years' time was held out in the second scheme. At the meeting the Managing Director of Mahaluxmi Bank Ltd. and Mr. J.C. Moitra another director of that Bank were present. While Mahaluxmi Bank Ltd. did not give out any definite hope of amalgamation, yet they did not in so many words say that there was no chance of amalgamation. That was the insidious part of this business. That the amalgamation idea was not given up altogether is amply shown by Clause 22 added to the second scheme and the second scheme with that additional clause was approved by the creditors. The scheme was sanctioned on 5th May 1947. Then after only 10 days after the scheme was sanctioned by Court, Mahaluxmi Bank Ltd. refused to amalgamate and two prominent persons including Mr. J.C. Moitra resigned from the Board immediately or shortly after B. Mukherjee, the Managing Director under the old management, was appointed the Managing Director and was firmly re-established in the saddle. The fact that Mahaluxmi Bank Ltd. had declined to amalgamate, which fact took place on 16th May 1947, was deliberately suppressed from the petitioner until the end of August 1947. All these facts clearly appear to me now to establish that the sanctioned scheme was a part of a bigger and deeplaid and more insidious scheme which was to hoodwink the creditors and to firmly establish and consolidate the position and authority of the Managing Director. That insidious scheme worked according to plan. The proposed amalgamation misled me into giving leave to convene meetings of creditors and shareholders although the letter of Mahaluxmi Bank Ltd. did not commit themselves in any way and to grant stay of proceedings without any safeguard as to investigation by' an independent auditor and I have no doubt it was calculated to mislead and did in fact mislead many creditors and certainly the petitioner before me. Having thus secured the sanctioned scheme, the pretence of amalgamation was thrown off in about 10 days' time. It is said that independent directors have been elected by the creditors themselves and those directors being in majority B. Mukherjee cannot do any mischief. The provision in the scheme providing for the preponderance of directors to be elected by creditors is, in my experience, a paper safeguard, for creditors generally take no interest and do not waste time and further money in attending meetings and keeping a watch over the management and the old management always manages to get back into power and office through friendly creditors who are generally the employees and relations of persons in management and, therefore, available to dominate and vote at the meetings of creditors. The very fact that B. Mukherjee has been appointed as the Managing Director is ample proof of this. I need not, however, dilate further on this point for it is not necessary for me to base my decision on it alone and I pass on to the next ground urged by Mr. P.C. Basu which I also find to be solid and sound.

19. Mr. P.C. Basu points out that assuming that the sanctioned scheme is to be regarded as an independent scheme and a proper scheme the company has not carried it out and there is no chance of its being carried out. Under Clause 3A (a) 25% of the dues was to be paid within six months from the date of sanction which was 5th May 1947. In other words the 25% was payable on 5th November 1947 at the latest. That has not been done. All that the company has done is to offer 6 1/4% to some of the creditors including the petitioner. The petitioner, of course, did not accept it. Under Clause 3B (a) the amounts in fixed deposit accounts were to be transferred to current account and 25% of that amount was to be paid within the time mentioned in the scheme. That has not been done. Mr. P.C. Basu also relies on the fact that no step has been taken to get sanction of the Central Government to issue shares under Clause 4 and the articles have not been changed as required by Clause 11. I do not think these two charges are well founded, for under Clause 4 the company has a year's time which has not yet expired and the company has in fact changed its articles as appears from the minute book produced by Mr. Chaudhuri. But the company has not complied with the provisions of Clause 12 by reducing its capital and no application has been made to Court at all The company's explanation, that it has not been done in the hope that on forfeiture of shares it would not be necessary to do so, is not at all convincing and at any rate amounts to altering the scheme without any authority. Payment also has not been made in terms of Clause 6 or Clause 15. The company in its affidavit in opposition has suggested that the reason for its failure to carry out the scheme is the political situation in the country brought about by the division of India into two Dominions and partition of the province of Bengal and the fact that as no Courts were functioning in Eastern Pakistan the company's dues could not be realised. The reasons do not appear to me to be convincing at all. Further those reasons will continue for a long time and there is no bright prospect in future. Mr. Chaudhuri then referred me to the resolution of the Board of Directors passed on 6th September 1947 authorising the Managing Director to contest the winding up petition and to take steps for extension of time and 'urged that the directors are representatives of the creditors and the Court should respect the wishes of the creditors. No step has been taken for extension of time. Indeed the Court cannot extend the time. It can only be done after the creditors and shareholders have agreed to an extension of time as a new scheme. In the circumstances detailed above I do not regard the directors who could in the face of the allegations entrust the management to B. Mukherjee as Managing Director as real representatives of real creditors. Mr. Chaudhuri urged that the petitioner has not acted in good faith and his objection has been to secure preferential payment. This is denied and the whole circumstances relating to securing his claim has been stated in his affidavit in reply. Further a winding up will effectively prevent preferential payment. It is also said that the petitioner's son Dwijen Bose has been director in charge and as such knows all the affairs of the company and has been guilty of divers misconduct and the acts now complained of were done with his knowledge and connivance. Dwijen Bose has filed an affidavit repudiating the charges. He says that the highsounding title of director in charge was conferred on him but his principal business was to go about securing fresh depositors. Be that as it may, the malfeasance and misfeasance if any, of the management are not any the less because they were committed with the connivance of the petitioner's son. The son's sins should not be visited on the father. Besides, I have to guard the interests of the general body of creditors. In my opinion the petitioner has made out a prima facie case also on just and equitable ground and should be allowed to proceed with his petition. 1, therefore, fix the date of hearing of the petition 6 weeks hance and direct advertisements to be published once in the Calcutta Gazette, once in the Statesman and once in the Ananda Bazar Patrika at least a fortnight before the date fixed for hearing. The charges made against the past management are serious and require investigation. There has been suppression of information by the company from the petitioner. The scheme has not been carried out. The assets have to be collected and protected. I do not consider of safe to leave the affairs of the company and particularly the books of account in the hands of the Managing Director. I, therefore, appoint Mr. H. P. Khandelwall, chartered accountant and failing him Mr. R. Singhee, chartered accountant, as the provisional liquidator on usual remuneration and on security, for the present, of Rs. 50,000 to the satisfaction of the Registrar. The premium to be paid out of the assets. The Provisional Liquidator to act on counsel's endorsement before security is furnished. I direct this order to be drawn up expeditiously.


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