VELJEE SHAMJEE Vs. VELJEE SHAMJEE

JUDGEMENT

(1.) MESSRS . Veljee Shamji and Co., a registered partnership firm, filed Company Petition No. 5 of 1976, under s. 433 read with s. 439 of the Companies Act, 1956 (for short 'the Act') for winding up the Bhavnagar Vegetable Products Ltd. (for short 'the company'). The said company was incorporated in 24th November, 1945, under the Indian Companies Act, 1913, as applicable to the then State of Bhavnagar. The nominal capital of the company is Rs. 50 lakhs divided into 25,000 equity shares of Rs. 100 each and 25,000 ten per cent. cumulative redeemable preference shares of even value. The paid up capital of the company is Rs. 29,98,600 consisting of 17,492 equity shares of the value of Rs. 100 each and 12,494 cumulative redeemable preference shares of Rs. 100 each, full paid up. The redeemable preference shares were redeemable on par on 31st October, 1976, under the special resolution dated 24th June, 1967. There is also a sum of Rs. 575 received on forfeited shares.

(2.) THE company was incorporated to manufacture, extract, refine, prepare for the market, stores, sell, purchase, transport, export, import and generally deal in all kinds of oils and oil products; to carry on all the mechanical and chemical process for extraction of oil from oil -seeds and for refining and dehydrogenating the same; and for the manufacture of vanaspati or vanaspati ghee. Immediately after its incorporation it set up a plant at Bhavnagar and had a promising start. Initially the company flourished and made substantial profits but by about the end of 1974 and the beginning of 1975, it encountered rough weather and was soon on the rocks having been compelled to close its manufacturing activity by about November, 1975. While the going was good, the company built up a high reputation so far as its financial stability and economic viability is concerned and, consequently, attracted large deposits, largely from middle class depositors. Unfortunately, by about the end of 1974, the company faced financial difficulties and lost its reputation in the market. The audited accounts of the company up to the end of October, 1974, reveal liabilities to the tune of Rs. 87,46,095 to sundry creditors. Besides, the company was indebted in the sum of Rs. 58,00,000 (approximately) to Messrs J. H. Rayner and Co., Ltd. The company had obtained loans from banks which were to the tune of Rs. 3,16,00,000. The profit and loss account of the company for the period ending on 31st December, 1975, revealed a loss of Rs. 201.71 lakhs and the total liabilities as and by way of secured and unsecured loans including current liabilities were around Rs. 315.75 lakhs. The result was that the entire capital of the company, its reserves and surpluses were swept away. The inevitable result was cessation of business and manufacturing activity by about the beginning of November, 1974.

(3.) THE said petition came up for admission on 4th February, 1976, when the court directed notice pending admission to issue on the company calling upon it to show cause why the petition should not be admitted. This notice was served on the company on or about 7th February, 1976, but no appearance was entered on behalf of the company till 16th February, 1976, on which date the notice was made returnable. Thereupon, the petition was admitted on 16th February, 1976, and usual advertisements were directed to be published in the Government Gazette and local dailies. The date of hearing was fixed on 29th March, 1976, but before that date, on 8th March, 1976, the official liquidator was appointed provisional liquidator, who immediately took charge of the assets of the company. Shortly thereafter on 20th March, 1976, the court gave directions to invite offers for running the plant during the pendency of the petition. Although the company did not enter an appearance by 29th March, 1976, as the advertisement in the Gujarat Government Gazette was not published in time due to some confusion, advertisement was directed to be issued afresh and the date of hearing was fixed on 13th September, 1976.