N P V RAMASWAMY UDAYAR SUDARSHAN TRADING CO LIMITED Vs. ALL INDIA SUBSCRIBER ASSOCIATION:THE OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) How far could we protect the interests of subscribers who had subscribed to a chit run by a subsidiary company of the appellant ordered to be wound up when allegedly subscriptions were made good by them not merely out of their hard savings but also of sums got by even, pledging and selling the jewelleries and ornaments of their wives, in the fond hope of getting a lump sum amount on a future date, to meet the expenses of marriages in the family or health hazards of family members and the like, is the issue that really bothered us at the hearing of the appeals.

(2.) About 15 years ago the subsi diary company under winding up, diverted the amount of rupees ten crores received by it by way of chit subscriptions to its holding company (the appellant) resulting in its inability to pay the subscribers, when they be entitled to get the prize amounts. When some of the subscribers ap proached the High Court and succeed ed in getting the subsidiary company wound up, the appellant holding com pany appeared in Court and prayed for an opportunity to be given to it to revive its subsidiary company. That prayer was accepted by a Division Bench of the Kerala High Court in the case of Sudarshan Chits (India) Ltd. vs. G. S. Pilai, ILR (1983) 1 Kerala 700. The Division Bench approved the scheme of compromise and arrangement under S. 391 of the Companies Act. Conse quently, it ordered the winding up order to be held in abeyance on condition that the holding company shall execute a security bond to cover subsidiary com panys liability to the extent of a sum of Rs. 10.40 crores owed to its subscribers. It also directed the holding company to pay off that amount within a period of five years. Restriction was also placed on alienation of any property by the holding company without obtaining prior permission of the Court. Ar rangement was made for managing affairs of the appellant-company as well. Apart from the Board of Directors an Additional Director was nominated to supervise and keep a watch on the affairs of the company. Since then the appellant-company is run as directed by the High Court but neither the subs cribers are paid, as a body of creditors, nor the entire amount of rupees ten crores and odd is paid by the appellant to the subsidiary company. True, that out of nearly one lakh subscribers, twenty nine thousand and odd subs cribers only remain unpaid. But, that is hardly satisfactory. Regret is that more than one third of the subscribers remain unpaid even after ten years from the date the High Court ordered the winding up to be in abeyance. Payment of rupees two crores and odd by the hold ing company which had the benefit of ten crores and odd rupees for the last 15 years, which amount by any standard is equivalent to fifty crores of rupees of today, we must state, is a poor consola tion, for the holding company to claim that all steps to discharge its obligations are taken.

(3.) Having noticed in brief, how matters have proceeded, we shall advert to the dispute which has arisen in res pect of an offer now made by the holding company to sell 20.79 acres of land for paying the creditors. Whatever that be, one situation which has been brought about is, its successful attempt in involving many subscribers who had formed themselves into a creditors as sociation and an owner of a factory adjoining the disputed land, in litiga tion which has reached this Court more than once. It is unfortunate that a, company which had volunteered to pay ten crores of rupees within a period of five years has successfully evaded the payment by offering a pittance. From the date of offer in 1987 six years have elapsed but no amount worth consi deration, appears to have been paid to the subscribers. We consider it unneces sary to recount in detail the offer made by Ramaswamy Udayar, the appellant in other appeal, counter offer made by the creditors association, delay in pay ment by the association, extension of time by this Court for payment by the association, withdrawal of offer by the holding company in the meantime as the High Court had after detailed exa mination accepted the offer of creditors association for purchase of disputed land and rejection of the claim of Udayar. Nor, do we consider it necessary to deal with rival submissions made by the learned senior counsel appearing for respective parties, al though we heard them at length, as in our opinion that rupees fifty two lakhs and odd the total amount for which the land has to be sold could hardly be sufficient to relieve the agony of the body of subscribers for whose benefit the entire exercise was undertaken by the High Court.