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In Re: East Kajoria Collieries Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Matter C.P. No. 28 of 1962 and C.A. No. 112 of 1963
Judge
Reported in[1965]35CompCas180(Cal),69CWN1
ActsMineral Concessions Rules - Rule 37
AppellantIn Re: East Kajoria Collieries Private Ltd.
Advocates:Ranadeb Chaudhuri, Adv. for the objector;R. Lahiri, Adv.
DispositionApplication dismissed
Cases ReferredJapan Cotton Trading Co. Ltd. v. Jajodia Cotton Mills Ltd.
Excerpt:
- .....cent. it is alleged that pursuant to the two agreements, the objector went into possession of the company's colliery and has advanced various sums of money to carry on the colliery of the company and the total amount so advanced is rs. 98,000. it is further alleged that on november 8, 1961, one d. p. swaika, a nominee of the objector, was co-opted in the board of the petitioner, in order to protect the interests of the objector. it is thereafter alleged that disputes arose between the said jogesh chandra datta and a. r. mukherjee on the one hand representing the company and the objector as the former wanted further advances which the latter declined to make until the permission of the state government was obtained to the amalgamation. an application was jointly forwarded to the state.....
Judgment:

B.C. Mitra, J.

1. This is an application for an order for winding up of East Kajoria Collieries (P.) Ltd. (hereinafter referred to as the company) on the ground that the company has failed to pay the petitioner's claim for Rs. 48,007.02 nP. The application has certain strange and peculiar features. The petitioner is a company, which for some time was the managing agent of the company. It is alleged that, as such managing agent, the petitioner lent and advanced to the company diverse sums for the purpose of the company's business. It is further alleged that the sums were advanced in a mutual open and current account. The petitioner's case is that after adjusting the amounts previously paid, the balance due on April 1, 1960, was Rs. 49,490.07 nP. It is also alleged in the petition that the company, through its directors, verbally agreed to pay interest at 9 per cent. per annum. A statutory notice for Rs. 48,143.02 nP. was served upon the company but the company failed and neglected to pay the sum. It is alleged that the amount now due to the petitioner is Rs. 48,oo7'02 nP. The petition is verified by one Jogesh Chandra Dutt, who is a director of the petitioner-company. The same person is also one of the directors of the company. Thus, it is clear that the directors who are controlling the petitioner-company are also controlling the company which is sought to be wound up. The other person who is also a director both of the petitioner-company and of the company is one A. R. Mukherjee, who apart from being a director of both the petitioner and the company, is also a director of another company which claims to be a creditor of the company in the sum of Rs. 2,42,500. This sum, it is alleged, is due to a company known as A. R. Limited of which the said A. R. Mukherjee is also a director. In effect, therefore, this application is the result of a concert between the same group of persons, who are controlling the affairs of the said two companies claiming to be creditors of the company. It is to be noticed, however, that the address of the petitioner is 38, Lake Road, Calcutta, It is admitted that the company is also carrying on business at the same address. The said Jogesh Chandra Dutt in the affidavit affirmed by him on May 15, 1963, stated that he is a tenant at No. 38, Lake Road, and allowed the debtor company to occupy a portion of the premises.

2. After receipt of the statutory notice, a reply to the same was sent by the company's secretary on November 3, 1962. In this letter, the secretary of the company obligingly admitted the indebtedness of the company for the sum of Rs. 49,490-02 nP. and further admitted the inability of the company to pay the sum. This admission by the company of the debt and also of the inability to pay is of some importance because the learned advocate for the petitioner placed great reliance upon this admission by the company of the debt and also of the inability of the company to pay the same.

3. The petitioner is relying upon a copy of the accounts which has been set out in the annexure to the petition. In this account, it appears that on April 1, 1960, there was a debit balance against the company for Rs. 49,490-02 nP. Thereafter, various payments appear to have been made by the company and ultimately the balance due to the petitioner is shown at Rs. 48,007.02 nP. It is curious, however, that this account does not show how the moneys were advanced by the petitioner to the company and how the debit balance of the sum of Rs. 49,490.02 nP. was arrived at on April 1, 1960. Apart from this evidence of indebtedness, the petitioner has not produced any other evidence of the indebtedness of the company. In paragraph 6 of the petition, it is alleged that, between the years 1947 and 1960, various sums were advanced by the petitioner to the company. No particulars of such advances have been set out either in the body of the petition or in the accounts annexed thereto. In effect, therefore, there is no evidence before this court of the loans alleged to have been made by the petitioner to the company, other than the debit balance on April 1, 1960.

4. Basanta Kumar Bose, who has described himself as the director and secretary of the company, has affirmed an affidavit on May 15, 1963, in paragraph 4 of which he has stated that the petitioner had advanced a total sum of Rs. 2,40,000 to the company and as the company was unable to pay the same and in order to help it, the petitioner took shares of the value of Rs. 1,90,000 and thereby reduced the debt to a sum of Rs. 50,000. It is again curious that these facts have not been pleaded in the petition, nor is there anything in the petition to suggest that the petitioner had advanced a much larger sum, the greater part of which was adjusted by allotment of shares by the company to the petitioner.

5. Apart altogether from the question whether this court can in this application for winding up of the company, take notice of any alleged indebtedness in the said affidavit of Basanta Kumar Bose, it is to be seen that the case made by the petitioner in the petition is entirely different from what has been alleged by the company. Then again, in paragraph 5 of the affidavit of Basanta Kumar Bose, it has been alleged that almost all the payments were made by the petitioner to the company by cheques. Accounts for several years have been annexed to the affidavit of Basanta Kumar Bose. The first annexure is an account for 1947 and it appears from the account that excepting for two items all the entries are journal entries. This account is a copy of the ledger of the company and there is no reference to the cash book. The debit balance appears to have arisen by adjustment entries in the journal. In the account for the year 1948 there is again nothing to show the company's liability and indeed nothing to show that payments were made by cheques. In the next annexure, which is the account for the year 1949, it appears that all the payments were made by cash and there is nothing in the accounts as annexed, to show that it is an account of the company, although the name of the petitioner appears at the top of the account. In the account for the year 1950, all the payments were made by cash and again there is nothing to indicate that the petitioner is the creditor of the company. There was not a single payment which has been made by cheque. The same remarks apply to the accounts for the years 1954, 1955, 1956, 1957, 1958, 1959, 1960, 1961 and 1962. It is on this evidence of indebtedness of the company that the petitioner seeks to have the company wound up. I must at once point out, however, that these accounts have not been annexed to the petition, although even if they were so annexed, they would not have advanced the petitioner's case at all. It is again to be noted that in the account for the year 1949, as annexed to the said affidavit of Basanta Kumar Bose, there is no reference at all to the alleged adjustment of a sum of Rs. 1,90,000 by allotment of shares leaving a debit balance of Rs. 50,000 against the company.

6. The application is opposed by the Jaipuria Kajoria Collieries Ltd. (hereafter referred to as the objector). An affidavit has been affirmed on behalf of the objector by one Satya Deo Neotia affirmed on April 10, 1963. It appears from the allegations in this affidavit that the company entered into an agreement with the objector on October 31, 1961, for amalgamation of the colliery of the company with the colliery of the objector which is adjacent to the objector's colliery. This agreement had been signed on behalf of the company by the said Jogesh Chandra Datta and A. R. Mukherjee. It was to take effect after the permission was obtained from the State Government under Rule 37 of the Mineral Concessions Rules. Another agreement was entered into between the company and the objector on the same date, namely, October 31, 1961, by which the objector was to advance to the company a sum of Rs. 2,25,000 which was to bear interest at 6 per cent. It is alleged that pursuant to the two agreements, the objector went into possession of the company's colliery and has advanced various sums of money to carry on the colliery of the company and the total amount so advanced is Rs. 98,000. It is further alleged that on November 8, 1961, one D. P. Swaika, a nominee of the objector, was co-opted in the board of the petitioner, in order to protect the interests of the objector. It is thereafter alleged that disputes arose between the said Jogesh Chandra Datta and A. R. Mukherjee on the one hand representing the company and the objector as the former wanted further advances which the latter declined to make until the permission of the State Government was obtained to the amalgamation. An application was jointly forwarded to the State Government for that purpose and it appears that the same is still pending. It is contended on behalf of the objector by Mr. R. Chaudhuri that having failed to obtain loans from the objector the said two directors of the company have been trying to oust the objector from the possession of the company's colliery and having failed to gain that object, they have caused the petitioner to commence this winding up proceeding in order to remove the objector from the possession of the company's colliery. Mr. Chaudhuri further contended that the Voluntary Amalgamation Committee set up by the Central Government has since approved the amalgamation of the company and has communicated such approval to his client.

7. The company admits the agreements mentioned above but alleges that possession was not voluntarily made over to the objector but that such possession was forcibly taken after a fire had broken out in the colliery of the company. This allegation is also very curious, because if forcible possession of the company's colliery was taken by the objector, one would expect steps to be taken on behalf of the company to recover possession of the colliery or, at any rate, strong protest against the conduct of the objector in forcibly taking possession of the assets. But nothing has been done. No steps whatsoever have been taken on behalf of the company to recover possession of the colliery, nor has any letter been written to the objector pointing out that they have unlawfully and forcibly taken possession of the company's colliery. It seems to me that the objector was given possession of the colliery after the agreements were entered into and in anticipation of the permission of the State Government under the Mineral Concessions Rules. It is also clear that the objector has been permitted to work the mines and has been induced to finance such operation. It is to be noted in this connection that it has been admitted that a sum of Rs. 98,000 has been advanced by the objector in running the colliery of the company. I cannot understand how this admission could be made of monies having been spent by the objector, if possession of the colliery was taken forcibly against the wishes of the company, as is now alleged by the company.

8. Mr. Chaudhuri appearing for the objector first of all submitted that there is no ground for the winding up of the company. There are vague allegations of loans by the petitioner to the company, and the accounts annexed to the petition by no means amount to sufficient evidence of the company's indebtedness to justify a winding up order being made. Mr. Chaudhuri further submitted that in a winding up petition, the grounds for winding up must be made in the petition itself and the court cannot look into any other materials in other affidavits. In support of this contention Mr. Chaudhuri first of all referred to a decision in In re Wear Engine Works Co., (1875) 10 Ch. App. 188. In this case James L.J. held that a winding up petition must allege facts which justify a winding up order. If there is any slip in the statements in the petition, amendment may be allowed. But, subject to that power, there must be sufficient evidence in the petition itself which would justify a winding up order being made.

9. Mr. Lahiri appearing for the petitioner asked for leave to file a further affidavit in support of the indebtedness of the company to the petitioner. He submitted that grounds for winding up are already there in the petition and all that he wanted was a further affidavit to produce further and better evidence of indebtedness of the company to the petitioner. Mr. Lahiri submitted that he should be allowed an opportunity to do so because the company is in involved circumstances and it has stopped carrying on its business. Further, there were a large number of creditors whose demands the company is not in a position to meet.

10. I cannot accept the submissions of Mr. Lahiri that he should be allowed to file a further affidavit to introduce fresh evidence in support of the company's indebtedness.

11. Mr. R. Chaudhuri also referred to a passage in Buckley, 13th edition, page 471, in which it is stated that an order for winding up will not be made if sufficient cause is not stated in the petition, even if such a case is proved in evidence. Mr. Chaudhuri submits that if the petition does not contain sufficient grounds and evidence of winding up, fresh evidence should not be admitted to enable the petitioner to obtain an order for winding up. In this connection, however, reference should also be made to a decision of this court in Ram Kumar v. Buxar Oil & Rice Mills, : AIR1960Cal764 . It was held in this case that, before a winding up order is made on the petition of an alleged creditor, the court must be satisfied that the petitioner is in fact a creditor of the company. In my opinion, the law is well-established that a petitioner, who applies for winding up of a company on the ground that the company is unable to pay its debts, must make out sufficient grounds in the petition itself and if such grounds have not been so made out, the court is not entitled to take notice of other evidence that may be produced in the affidavit of other parties. Nor should the court allow the petitioner an opportunity to introduce further evidence regarding indebtedness by fresh affidavit to be filed by him.

12. Mr. Chaudhuri also referred to another decision of this court in Japan Cotton Trading Co. Ltd. v. Jajodia Cotton Mills Ltd., (1927) I.L.R. 54 Cal. 345. In that case the same point was discussed and it was held that, in an application for an order for winding up of the company on the ground of its inability to pay debts, the balance-sheet of the company produced at the hearing of the petition should not be taken against the company as proof that the company is unable to pay its debts.

13. It seems to me that, in this case, the petition has not been presented for obtaining the winding up order of the company but to take the company's assets, namely, the colliery, out of the possession of the objector. Undoubtedly the objector was introduced into the company's colliery by the directors of the petitioner and also of the company and for some reason or other, into which I need not go in this application, they now wish the objector to vacate the colliery of the company. I cannot overlook the fact that the same group of persons are really controlling both the petitioner and also the company and one of them, besides being a director of the petitioner and the company, is also a director of another company which claims to be a creditor for a large sum of money. The petitioner and the company appear to be carrying on business at the same address. The company has readily obliged the petitioner by sending to it an acknowledgment of its liability and also an admission of its inability to pay debts. Indeed, it is difficult to resist the conclusion that the evidence of collusion in this case is overwhelming. If the machinery of winding up is sought to be set in motion for purposes other than to secure a winding up of the company, and if the real object is something other than winding up, and the claim for winding up is the ostensible but not the real object of the petition, this court will not lend its aid to the petitioning creditor by making an order for the winding up of the company.

14. Apart from the fact that the ostensible object appears to be to wind up the company and the real object is something else, namely, to compel the objector to vacate the company's assets, in my opinion, there is not enough evidence in the petition regarding the company's indebtedness. In order to make an order for winding up, there must be sufficient evidence of indebtedness of the company which will enable the court to come to a conclusion on the question of indebtedness. The evidence that has been produced by the petitioner in its winding up petition is far from sufficient to induce this court to make an order for winding up.

15. Before concluding, I should refer to one other matter, namely, that it was contended by Mr. Lahiri that the company is not opposing this application but that the opposition comes from the objector who has no interest. But I must point out that the fact that the company has raised no objection (on the contrary from the letter from its secretary mentioned above, the company appears to be very eager that it should be wound up), lends strong support to the conclusion that this application is collusive and the real object of the petitioner is not to obtain a winding up order of the company for the benefit of the creditors but something else, namely, to compel the objector to part with possession of the colliery in favour of the official liquidator to be appointed by this court.

16. In my view, this application is an abuse of the process of court and, in holding that, I am fortified by the observations of Vaughan Williams J. in In re A Company, [1894] a Ch. 349. In my view, the coercive machinery of the winding up court should not be allowed to be set in motion at the instance of a creditor whose object is not to obtain a winding up order of the company for the benefit of the general body of creditors but something else, namely, to secure release of the company's assets from occupation and exploitation by a party, whom it has inducted into the company's colliery and who has advanced considerably large sums of money for the working of the company's colliery.

17. For the reasons mentioned above, this application fails and is dismissed. The petitioner will pay the costs of this application to Mr. Chaudhuri's client.

18. Certified for two counsel.

19. Whatever moneys the receiver has spent and whatever sums have been advanced to the receiver will be paid out of the assets of the company including royalty receivable by the company, if any. The receiver will stand discharged subject to the filing of his accounts. The receiver is directed to file his accounts within one month.


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