PANCHMAHALS STEELS LIMITED Vs. UNIVERSAL STEEL TRADERS

JUDGEMENT

(1.) BY these two applications a new dimension is being added to the varied jurisdiction enjoyed by a Company Judge in Company matters and a question of considerable importance and magnitude has been raised which on investigation is found to be not hedged in by any precedent. A brief statement of facts relevant to the topic would be sufficient to focus the attention not only on the legal but also economic social and sociological aspect of the question raised herein.

(2.) Panchmahals Steel Limited hereinafter referred to as the Company was incorporated under the Companies Act 1956 on 12th September 1972 initially as a private limited company but has been subsequently deemed to be a public limited company limited by shares. The registered office of the company is situated at G.I.D.C. estate Kalol District Panchmahals. The authorised capital of the company is Rs. 15 lacs divided into 1 lac equity shares of Rs. 10 each and 5 0 cumulative redeemable preference shares of Rs. 100 each. The issued subscribed and paid up capital of the company is Rs. 12 40 0 consisting of 76 0 equity shares each of Rs. 10 fully paid out of which 3 580 equity shares each of Rs. 10 fully paid were allotted for consideration other than cash; 51 428 equity shares of Rs. 10 each fully paid were allotted to the promoters for payment towards the expenses incurred by them prior to incorporation and 4800 91/2% redeemable cumulative preference shares of Rs. 100 fully paid held by the Gujarat Industrial Investment Corporation Ltd. (hereinafter referred to as GIIC). Gujarat State Financial Corporation (hereinafter referred to as GSFC) has advanced a big loan. Amongst various objects the principal object for which the company was formed was to set up a modern mini-steel plant having rolling mills plant for producing steel and alloy ingots etc. Selection of the site for the location of the mini-steel plant was motivated and purposive namely to push the pace of industry allocation into rural areas so as to provide job opportunities to the local rural population. The Government of India in order to defuse and decentralize large industries gave subsidy to this company so as to encourage it to set up a plant in the area largely inhabited by members of scheduled castes and scheduled tribes. With this most laudable object in view the plant was set up at Kalol in Panchmahals District largely inhabited by the members of scheduled castes and scheduled tribes. Accordingly this company set up a most modern rolling mill and commenced business. It so happened that there was a marked change in the market condition for the products of this company and gradually the company started making losses while perusing its commercial activity. Ancillary measures for strengthening economy undertaken by the Central Government had a direct impact and adverse effect on the sale of the products of this company. To illustrate ban imposed on construction of multi-storied buildings luxury buildings cinema and commercial buildings coupled with the shortage in the supply of cement adversely affected the sale of the company. Consequently the prices fell and the company was forced to sell at a loss. In short by the end of financial year 30th September 1974 the accumulated loss was Rs. 26 82 608 p. and it may as well be stated in passing that the figure must have swollen up by the time we come to the stage when the company closed its manufacturing activity on 18th May 1975 It may be mentioned here that GIIC and GSFC between themselves have advanced on the first equitable mortgage of the plant of the company a sum of Rs. 46 lacs. The State Bank of India has advanced a loan of Rs. 38 50 0 for facility on the hypothecation of stocks and current assets under the personal guarantee of two of the directors both of whom admittedly are non-resident Indians. There are sundry creditors. Interest liability and other standing charges are piling up. Admittedly on 18th May 1975 the wheels came to a stand-still and the production stopped and workers since then are unemployed.

(3.) Messrs Universal Steel Traders hereinafter referred to as petitioning creditor claiming to be unsecured creditor of the company to the tune of Rs. 6 27 511 served a notice under sec. 434 of the Companies Act on 25th March 1975 calling upon the company to pay the amount within 21 days failing which a petition for an order for winding up the company would be filed in the High Court of Gujarat. The company failed to pay the amount as also neglected to reply to the statutory notice whereupon the creditor filed Company Petition No. 32 of 1975 on 24th April 1975 under sec. 433 read with sec. 439 praying for an order for winding up the company.