IN RE: NARASIMHAN & OTHERS Vs. STATE

JUDGEMENT

(1.) THE main, and, to my mind, the sole question in this winding up petition is whether the petitioners are, as they claim to be but is denied by the company which vehemently opposes the petition, creditors of the company whose winding up they seek. Or, rather, since the winding up court, jealous that its process should not be abused as a means of enforcing doubtful claims, will not ordinarily adjudicate on such a question when there is a bona fide dispute, whether the dispute by the company is a bona fide dispute. If the petitioners are, in truth, creditors I think a winding up order should follow as a matter of course. For, they would, in that case, be creditors to whom more than Rs. 500/ - is presently due by the company and whose demand under Ex. P1 dated 1 -2 -1965 remained unsatisfied when this petition was brought on 10 -3 -1965 and still remains unsatisfied. It is no doubt said in the counter -affidavit filed by the company that Ex. P.1 does not satisfy the requirements of section 434(l)(a) of the Companies Act. But no attempt has been made to show in what respect it is wanting and the point has not been pressed at the hearing. The company's debts amount to about Rs. 2,60,000/ - and the petitioners claim as much as Rs. 75,000/ - and odd as due to them. It is true that 947 out of a total number of 2778 creditors to whom a total sum of Rs. 1,07,000/ - and odd is due have entered appearance to oppose the petition. Then there is one other person, V.K.R V. Vaidyanatha Iyer by name, a director of the company, who is the mainspring of the opposition and who claims to be a creditor in the sum of Rs. 45,000/ -. But it is said that he has assigned his debt to some other person and is no longer a creditor. However that might be, assuming that V.K.R.V. Vaidyanatha Iyer also is a creditor and that the majority of the creditors in value though not in number are opposed to the winding up, these creditors have only repeated parrot -like the objections taken by Vaidyanatha Iyer in the counter -affidavit he has sworn to on behalf of the company and have not chosen to explain how, if the company is really unable to pay its debts, it would be beneficial to the interests of the creditors as a whole if the company is allowed to continue. The opposition from these creditors may therefore be ignored. Indeed, it seems to me, that a winding up is inevitable and that, if for any reason this petition be dismissed, the company will have to go into liquidation of its own accord or, if an application is made in that behalf, will have no defense to put forward. The company admittedly stopped business on 27.11.1963 and has not resumed business since. There was a previous winding up petition against the company, C.P. No. 25 of 1963, filed on 20.11.1963. That was by a Hindu joint family whom the present petitioners 2 and 3 represent, and it was brought on the foot of the same debt that they now claim. That petition was dismissed on 9.12.1964, and, although it is said that the company was unable to resume business because of some interlocutory order made in that petition, it is pertinent to note that it has made no attempt whatsoever to resume business even after the dismissal. The present petition was, as we have seen, brought on 10.3.1965. A provisional liquidator was appointed on 24.6.1965, and he has sold the stock in trade and the raw materials of the brush manufacturing concern which was the sole undertaking of the company. It is not suggested that the company will be in a position to revive this undertaking or embark on some new business - it has not the necessary finances and these are hardly times when fresh finances would be forthcoming for a moribund company - and it would therefore appear that, whatever might be the fate of this petition, the company will never be able to resume business. I am satisfied that the company's denial of the debt claimed by the petitioners its case is that there was no debt due to the petitioners and that, if there was, it is barred by time -far from being bona fide is downright dishonest. In fact the debt claimed by the petitioners arose out of the same transaction as the debts which the company proclaims to be due to three of its directors including Vaidyanatha Iyer. It is only when it comes to the petitioners that there is a denial.

(2.) PETITIONERS 2 and 3 are brothers and are the heads of the two branches of the Hindu joint family which they represent in this petition. That joint family doing business in the name and style of V.V. Krishnier Sons, and, under that name, was one of the four partners of a firm called the United India Distributors. This firm (hereinafter referred to as the firm) was the sole selling agent of the company, and, in that connection, had made an agency deposit with the company. It would appear that on 1.6.1950 the amount of this deposit was Rs. 1,09,000/ -, and on that day the firm wrote to the company by Ex. P. 7 that they would not demand the return of this deposit until the company's liability of Rs. 2,00,000/ - to the Madras Industrial Investment Corporation Limited was discharged, The agency agreement is not in evidence and the terms and conditions subject to which the deposit was made are not disclosed either by the pleadings or the evidence but it would appear from Ex. P. 7 that the deposit was not an ordinary loan but was a deposit payable on demand subject to the terms and conditions of the contract of agency. The sole selling agency determined on 27.3.1961, and on 22.4.1961, the company at a meeting of its Board passed a resolution, Ex. P. 13 (a), deciding to pay interest at 9% per annum on the deposit (which by that date had increased to Rs. 1,50,000/ -) made by the firm in view of their undertaking to keep the money in deposit until the company's liability to the Madras Industrial Investment Corporation Limited was discharged. On 26 -4 -1961, the firm wrote to the company the letter, Ex. D.1, by which they said that, notwithstanding that their selling agency had determined, they were willing to treat their agency deposit of Rs. 1,50,000/ - as a fresh deposit bearing interest at 9% per annum payable monthly. To this the company replied by Ex. D. 2 of the same date agreeing to treat the amount of Rs. 1,50,000/ - as fresh deposit as and from 27 -3 -1961 bearing interest, payable monthly, at 9% per annum. It is now the common case that the undertaking in Ex. P.7 did not attach to this fresh deposit although the contrary was one of the main planks of the company's opposition in the earlier winding up petition, C.P. No. 25 of 1963. And since nothing was said regarding the term of the deposit it must be regarded as a deposit payable on demand. Indeed, as Ex. P.7 shows, the earlier deposit was a deposit repayable on demand, and the fresh deposit being a renewal of that deposit must be likewise deposit payable on demand.

(3.) THE principal contention of the company is that the petitioner's claim was barred by limitation when this petition was brought on 10 -3 -1965 - in this connection it is interesting to note, as a measure of the bona fides of this plea, that one of the principal contentions raised by the company in the previous petition, C.P. No. 25 of 1963, was that there was no debt presently due since, in view of the undertaking in Ex. P.7, the money was repayable only after the liability to the Madras Industrial Investment Corporation Limited was discharged, something that has not happened as yet. However that might be, as we have seen, there was a fresh deposit by the firm as on 27 -3 -1961 free of the undertaking in Ex. P.7. This deposit was split up between the four partners of the firm and by Exs. P. 11 (a) dated 1 -4 -1963 and P.II(b) dated 31 -7 -1963 the amounts due on that account to V.V. Krishnier Sons, Rs. 59,000/ - as principal and Rs. 8744.54 as interest were entered in the suspense account in the books of the company. This was ratified by the resolution of the Board, Ex. P. 14 (a) dated 28 -8 -1963, so that I should think that there was, on that day, a fresh deposit by V.V. Krishnier Sons of the sums due to them. The winding up petition having been brought on 10 -3 -1965, within three years of that date, the debt was not by then barred by limitation.