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Savera and Co. Ltd. Vs. Fabulous SkIn Supply Co. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Application No. 10 of 1982 in Company Petition No. 23 of 1982
Judge
Reported in[1985]58CompCas227(Cal)
ActsCompanies Act, 1956 - Section 450(1)
AppellantSavera and Co. Ltd.
RespondentFabulous SkIn Supply Co.
Appellant AdvocateSomenath Chatterjee, Senior Adv., ;T.K. Biswas and ;S.A. Murshed, Advs.
Respondent AdvocateS.P. Mukherjee, Senior Adv. and ;C.R. Das, Adv.
DispositionApplication dismissed
Cases ReferredMadhusudan Gordhandas and Co. v. Madhu WoollenIndustries P. Ltd.
Excerpt:
- .....have already been passed'. in this factual background, mr. 'mookherjee contends that a new winding-up application is not maintainable by the present petitioner.9. in this connection mr. mookherjee draws my attention to a passage inbuckley on the companies acts, 13th edition, page 470, where the followingobservations occur: 'if a creditor knows that a winding-up petition has been presented but fears that it will not be or finds that it is not being prosecuted with diligence, his remedy is to appear at the hearing in support of the petition and ask to be substituted under winding-up rule 37. if, instead, he chooses to present another petition, he does so at the risk of having it dismissed with cost, against him.' 10. mr. mookherjee submits that this principle should be invoked, in.....
Judgment:

Basu, J.

1. This is au application by the petitioner, Fabulous Skin Supply Co., for the appointment of the official liquidator as the provisionalliquidator of Savera and Co. Ltd. (hereinafter referred to as ' the company '). The petitioner is admittedly a creditor of the company having supplied to the company hides and skins, from time to time, over a long period. In fact, it is a curious case where the company, in its statement annexed to the affidavit, has admitted the claim of the petitioner to be larger than what the petitioner itself has claimed in the petition.

2. The grounds on which a provisional liquidator is sought to be appointed do not appear to be very clear. This is because, in para. 31 of the petition, it is stated that the application for the appointment of a provisional liquidator is being moved, inter alia, on the ground that there was a danger to the assets of the company and there was obvious insolvency and the company had admitted that it had no defence to the petition. In so far as the ground as to the danger to the assets is concerned, there does not seem to be any averment except the extract from a certain letter. But I propose to deal with the merits of this case after I have dealt with certain preliminary objections that have been taken.

3. The first preliminary objection that is taken by Mr. S.B. Mookherjee, appearing on behalf of the company, is that the application for the appointment of provisional liquidator is not maintainable at this stage. Reference is made to Section 450 of the Companies Act, 1956, Sub-section (1) whereof provides as follows:

' At any time after the presentation of a winding-up petition and before the making of a winding-up order, the court may appoint the official liquidator to be liquidator provisionally.'

4. It was submitted by Mr. Mookherjee for the company that the expression ' presentation of a winding-up petition ' means the admission thereof by the court. Admittedly, in the facts of this case, there has been no admission of the winding-up petition although it has been presented to the Department.

5. To repel a possible contention that the presentation of the petition in Section 450(1) means presentation in the Department, Mr. Mookherjee drew my attention to Rule 106, sub-r. (1) of the Companies (Court) Rules, 1959, which provides as follows:

' After the admission of a petition for the winding-up of a company by the court, upon the application of a creditor, or a contributory, or of the company, and upon proof by affidavit of sufficient ground for the appointment of a provisional liquidator, the court, if it thinks fit, and upon such terms as in the opinion of the court shall be just and necessary, may appoint the official liquidator to be provisional liquidator of the company pending final orders on the winding-up petition.'

6. According to Mr. Mookherjee, Rule 106(1) makes it quite clear that the expression 'presentation of a winding-up petition' in Section 450(1) of the Act would mean admission of the petition by the court.

7. Having regard to the fact that this application can be disposed of on merits and having further regard to the fact that although this point is very often canvassed, yet Mr. Mookherjee tells me that there is no decided authority on this point, I refrain from expressing any opinion on this question in this case.

8. The next point that was taken by Mr. Mookherjee for the company'is based on the averments in the affidavit in support of the summons affirmed on January 20, 1982. In para. 14 of the affidavit it is stated that many of the creditors of the company have filed winding-up petitions, in some of which orders for winding-up have already been passed by this Hon'ble Court. Reference is made to two petitions being C.P. No. 191 of 1981 and C.P. No. 196 of 1981. In paras. 15, 17 and 18, there are averments about certain orders of instalment payments which were passed by Ramendra Mohan Datta J. in both the applications which, although admitting the winding-up petitions and directing issue of advertisements also, stayed the publication of the advertisements provided those instalments were paid. According to Mr. Mookherjee, the clear case of the petitioner is that it has knowledge of the fact that two winding-up petitions have been presented and in the language of the affidavit in support of the summons 'orders for winding-up have already been passed'. In this factual background, Mr. 'Mookherjee contends that a new winding-up application is not maintainable by the present petitioner.

9. In this connection Mr. Mookherjee draws my attention to a passage inBuckley on the Companies Acts, 13th edition, page 470, where the followingobservations occur:

'If a creditor knows that a winding-up petition has been presented but fears that it will not be or finds that it is not being prosecuted with diligence, his remedy is to appear at the hearing in support of the petition and ask to be substituted under winding-up Rule 37.

If, instead, he chooses to present another petition, he does so at the risk of having it dismissed with cost, against him.'

10. Mr. Mookherjee submits that this principle should be invoked, in the facts of this case and this application should be held to be not maintainable.

11. I do not propose to express any final opinion on this argument also. This is for the reason that it is a well-known proposition that it is only after advertisement of the winding-up petition that the action becomes arepresentative one. Admittedly, on the facts of this case, the advertisement has not been issued. That being so, the principle that a company cannot be wound up more than once will not have any application at the present stage of the company petitions already filed.

12. Secondly, the two orders passed by R.M. Datta J., to which I have referred earlier, provide that in the event of the company paying the instalments that have been ordered by the court with its subsequent modifications, the advertisement would in effect be permanently stayed. Therefore, even if the principle which has been laid down by the English courts is accepted, it would not, in my view, be proper to dismiss the petition on that principle in the facts of this case.

13. Coming to the merits of the application, as I have sought to indicate briefly earlier, the only danger to the 'assets in the petition is to be found in an extract from a letter dated January 7, 1982, written by one S.R. Banerjee, a director of the company, to its managing director. The extracts have been set out in para. 30 of the affidavit in support of the summons. This letter no doubt contains very serious allegations of mismanagement against, the company. The question is whether sufficient reliance can be placed on the allegations contained in that letter in the facts of the present, case for the reasons which I shall indicate briefly.

14. Mr. T.K. Biswas, appearing for the petitioner, laid considerable emphasis on the fact that according to the balance-sheet of the company as on March 31, 1980, the company has made a gross sale for Rs. 1,51,09,643.76. Mr. Biswas made a strong comment on the fact that notwithstanding those sales, the company has shown a loss.

15. Mr. S.B. Mookherjee for the company explained before me with reference to the affidavit that during the severe floods of 1978, a very large quantity of hides and skins which were lying at the company's godowns got completely destroyed. This was really the main reason for the company's temporary setback, coupled with the fact that it was also having considerable labour trouble in its works. It is stated in the affidavit that the company has now turned the corner and has been successful in entering into an agreement with 76 creditors out of a total of 92 creditors of the company, which 76 creditors represent 82% of the total number of creditors and 79.21% of the value of the total debts. By the said scheme of arrangement, these 76 creditors have agreed to get their debts paid in instalments. It is further stated in the affidavit of Abu Zafar Md. Osman Gani affirmed on February 5, 1982, that the first instalment of nearly Rs. 4 lakhs has been paid to these creditdrs.

16. According to Mr. Mookherjee, the present petitioner is one of those recalcitrant creditors who have refused to accept instalments and has madethis application merely as a lever to obtain full payment at once and without any instalment. Mr. Mookherjee submits that this application should be held to be an abuse of process of this court and no order, either interim or final, should be made in this case.

17. Having regard to all the facts and circumstances of this case as disclosed in the affidavits, I am of the view that the contention of Mr. Mookherjee should be accepted. I am fully satisfied that the company went through a temporary period of financial distress. I am further satisfied that the company has turned the corner and will be able to honour its commitments to those creditbrs who have come to an arrangement with the company.

18. A very strong comment was made by Mr. Mookherjee on an aspect of this case which, though not strictly connected with the merits, is a matter touching on the profession and I would like to record my views thereon. From the affidavit in support of the summons, it appears that in the company petition which was moved before R.N. Datta J. , a supplementary affidavit was prepared and a copy thereof was sent to the advocate-on-record of the petitioner who happens to be the advocate-on-record also of the petitioning creditors in those two company petitions. It is also on record that that supplementary affidavit was never allowed to be filed by the learned Judge as it was not considered necessary by him. In the affidavit in support of the summons before me, there are copious references to various facts which have been stated in the supplementary affidavit, which as I have said, was never filed and never became part of the records of this court. It is most regrettable and unfortunate that an advocate-on-record of this court, who is an officer of this court, would allow another client of his to have access to the records of a particular case relating to another client, specially an affidavit which never became part of the records of this court and which nobody would otherwise have ever been allowed access to. I would leave this aspect of the matter at this.

19. Equally strong comment was made on the merits of this case by Mr. Mookherjee on the letter of Mr. S.R. Banerjee, a part of which has been extracted in paragraph 30 of the affidavit in support of the summons. Mr. S.R. Banerjee, the author of that letter, is admittedly a director of that company who is addressing the letter to the managing director of the company. From the copy of the letter, it is quite clear that a copy of the letter was never endorsed to the petitioner in the present case. Indeed it is difficult to think of a reason why a letter from a director to the managing director of a company would be endorsed to a creditor. That being so Mr. Mookherjee, in my view, raised a very pertinent question as to how the petitioner company could get a copy of that letter. From the letter of Mr. S.R. Banerjee which has been annexed to the affidavit-in-oppositionand from the reply of the managing director of the company to that letter dated January 19, 1982, which is annex. C to the affidavit-in-opposition, it is quite clear that there is no love lost between the respective authors of the two letters. Mr. Mookherjee submits that Mr. Banerjee and the managing director have now fallen out and Mr. Banerjee is now openly colluding with the 'creditors of the company and supplying information to them for the purpose of winding-up petitions including a copy of the letter dated January 7, 1982,

20. In ray view, this contention of Mr. Mookherjee should also be upheld. In the facts of this case, I am fully satisfied that a copy of the letter of January 7, 1982, must have been given by Mr. Banerjee to the petitioning creditor or his lawyer. Therefore, this application, in my view, is not a bona fide application. Even before me, it was stated by Mr. Mookherjee on instructions that the company was willing to pay the petitioner's dues by instalments in the manner in which it is being paid to a very large number of other creditors. Mr. Biswas, appearing for the petitioner, stated before me on instructions that his client wanted all the money at once.

21. As I have indicated, I have no manner of doubt in my mind that thisis not a bona fide application but is a mere lever to obtain payment of theentire dues of the petitioner without the benefit of payment in instalmentsto the company. It would follow, therefore, that, in my view, primarilybecause of certain equitable considerations, it will not be proper in this caseto render any assistance to the petitioner by the appointment of a provisional liquidate.

22. Certain authorities were referred to by both the parties. Both the parties relied on a decision of the Supreme Court in the case of Madhusudan Gordhandas and Co. v. Madhu Waollen-Induslries P. Ltd. : [1972]2SCR201 . Both sides relied on paragraph 22 of the report (of AIR) which lays down that it is almost an invariable rule of the company court before making a winding-up order to consider the wishes of the creditors of the company. This paragraph was relied on by Mr. Mookherjee for the purpose of showing that in the facts of this case nearly 80% the creditors in terms of value have agreed to compound their claims and accept instalments. Therefore, this is not a fit case where a winding-up order should be made. Mr. Mookherjee also made this argument that on the wellisettled principle that an interim relief is in aid of a final relief, therein considerable doubt in the facts of this case whether the application for winding-up would be admitted or not. That being the position, I should not pass any interim order.

23. Mr. Biswas referred to Palmer's Company Precedents, p. 101. Mr. Biswas also referred to Madhusudan Gordhandas and Co. v. Madhu WoollenIndustries P. Ltd. : [1972]2SCR201 and relied on para. 22 (of AIR) as an authority for the proposition that the court may, under Section 557 of the Companies Act, 1956, in all matters relating to the winding-up of a company, ascertain the ^wishes of the creditors. I record, this contention and do not propose to express any opinion thereon.

24. Mr. Biswas also relied on William C. Leitch Bros. Ltd., In re [1932]2 Ch 71,Palmer's Company Precedents, Pt. II and Hammersmith Town HallCo., In re [1877] 6 Ch 112 (Ch D). I find it totally unnecessary to deal withthose cases.

25. In the result, this application fails and is dismissed with costs.


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