STATE OF J&K Vs. HINDUSTAN FOREST CO.

JUDGEMENT

(1.) The subject-matter of appeal relates to a decision of the High Court disposing of an appeal (CP No. 41 of 1990) filed by the appellant from the order passed by a Single Judge on an application filed by Respondent 1 (hereinafter referred to as "the Company") under the Companies Act, 1956.

(2.) The Company had been granted a lease by the appellant for felling trees and for removing and selling the same from a specified area on 4.03.1961. The lease was granted subject inter alia to the Company making payment of royalty in respect of the sold trees at fixed percentage to the appellant. The initial period of the lease was subsequently extended. According to the appellant the Company had failed to make payment of royalty in terms of the lease agreement and a large amount of money amounting to over Rs. 39,56,407.00 was payable by the Company to the appellant. The Company was admittedly in financial difficulties and had a large number of creditors who had initiated proceedings against it during the pendency of the lease period. Without going into the facts in greater detail it is sufficient for the purpose of this appeal, to record that an arrangement was entered into between the Conservator of Forests, the Company and the financial institutions whereby the appellant would supervise and control the sale of the timber. The proceeds from such sales were agreed to be paid to the creditors of the Company, including the appellant, before the balance would be made over to the Company. According to the Company, the arrangement was that the appellant would take over control of the business and management of the entire area including the machinery of the Company by the appellant. It is the further case of the Company that the appellant did not discharge its obligations under this arrangement and did not account for the sale proceeds nor did it account for the stock of timber taken over by it nor did it return the machinery to the Company since the lease period expired in 1972. On the allegation that the Company was, as a consequence of the aforesaid, not able to meet its liabilities and had suffered loss, the Company raised a claim before the High Court of Punjab and Haryana (CP No. 35 of 1975) against the appellant as well as the officers of the Forest Department, the United Commercial Bank and the J&K State Financial Corporation claiming a decree for diverse sums of money during the period the lease was operated by the appellant, accounts for such period, for an extension of the period of lease and payment for the stock of timber taken possession of by the appellant as well as machinery installed, etc., the amount advanced by the United Commercial Bank on account of the Company to the appellant and generally for other consequential losses.

(3.) The defence of the appellant was, inter alia, a denial of liability to pay any loss, a counter-claim for an amount of Rs. 21,26,049.00 calculated up to 31.03.1975, a denial that the appellant or the Forest Department had taken over control of the Company or any of its assets and an assertion that the timber found lying in the leased area had been duly auctioned and whatever money has been recovered in this behalf has been credited and adjusted against the outstanding dues of the Company. The financial institutions also filed a written statement opposing the claimant's claim but it is not necessary to set out the same in connection with the present appeal.