KAPILA TEXTILES MILLS LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) In this application under rule 164 of the Companies (Court) Rules, 1959 , the applicant -State Government of Mysor appeals against an order of the official liquidator dated 26th November, 1963, totally rejection its claim for payment to it, out of the assets of the company in winding up, of a sum of Rs. 62,817.01 as a preferential claim.

(2.) The claim is described as guarantee commission payable to the State Government on account of the Government having guaranteed due repayment by the company of a loan of Rs. 10,00,000 advanced to it by the Bank of Mysore on the mortgage of its immovable property and hypothecation of its machinery and other movable.

(3.) Among the facts stated in. he order of the official liquidator under appeals, there is no dispute regarding the following facts : Late in 1948 , the company appears to have approached the State Government for a loan in aid of the industry it was contemplated to set up. The Government , however, did not themselves grant the loan but agreed to stand as guarantors in respect of the secured loan if granted by the Bank of Mysor on certain terms and conditions. The conditions on which the Government agreed to guarantee the loan are set out in an order of the Government bearing No. D. 8925-7 dated June, 16, 1949 . Omitting the preamble, which is of no relevance , the operative portion of the order read as follows : " After carefully considering the request of the management of the Kapila Textiles Ltd., the Government are pleased to direct as follows :