S V ANGIDI CHETTIAR Vs. NATARAJA TEXTILES LTD

JUDGEMENT

(1.) This matter has now been fully argued by counsel. It is established beyond any controversy that though the definition of 'contributory' would raise a doubt as to whether a fully paid up share-holder would come within the term, he is a 'contributory' and can, under Section 166 of the Indian Companies Act, file a petition for winding up as any other contributory. Apart from the English decisions, Indian Courts have placed this beyond any dispute. In 'Sabapathi Press Co. Ltd. v. Sabapathi Rao', 53 Mad 38, with reference to a similar argument raised on the definition of 'contributory' in Section 158 of the Indian Companies Act, a Bench of this Court held that a petition for winding up is maintainable by a fully paid up share-holder. It was however observed in that decision that the petitioners, who are fully paid up shareholders, have a tangible interest in the surplus assets. 'Parshottam Das v. Official Liquidators Gorakhpur Electric Supply Co. Ltd.', AIR (25) 1938 Ail 613 is another case on the point.

(2.) The point for determination, however, is whether a petitioner, who is a fully paid up share-holder, can ask for a winding up and maintain a petition, if he is unable to plead and show 'prima facie' that there will be a tangible surplus, which, will be available to him towards payment of his share capital That seems to be the view taken by the English Courts in the decisions which have been referred to at length in 'Bharat Bank v. Lajpat Rai', AIR (37) 1950 E P 328. The question is whether the statement of the law as expounded in the said decisions and, in particular the observations of Jessel M.R. in 'IN RE VRON COLLIERY CO.', (1881) 20 Ch. D 442 could still be said to be the correct position under the provisions of the English Companies Act of 1948 whatever may be the case prior to the enactment of Section 225 of the English Companies Act of 1948 and the corresponding provision in the earlier Companies Act. Section 225 was introduced for the first time in the Companies Consolidation Act of 1908 (VIII Edward VII p. 69) as Section 141. Under the Indian Act, this provision is incorporated and that section corresponds to Section 170 of the Indian Companies Act. Under this Section, on hearing the petition for winding up, the Court "shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets." If the interest of a fully paid up share-holder to maintain a petition could only be his certain chance of getting paid from the surplus assets of the company, he must show that he has got not merely a nominal but a tangible interest in the surplus. It would amount to saying that a fully paid up share-holder cannot maintain a petition for winding up at all. But this conclusion would be against the recognition of a fully paid up share-holder as a contributory under Section 166 and yet he would not be able to maintain a petition. At the same, such a petition cannot be dismissed simply on the ground that the company has no assets; in short, on the ground that there will be no surplus. If a petition for winding up could not be dismissed on the ground of want of assets and a winding up order could be passed in spite of non-existence of assets, or where the assets would not be sufficient even to pay off any secured claim, there is no special reason to allow such a petition, if filed only by a creditor or a partly paid up share-holder, and not by a fully paid up share-holder. Whatever may be the position of a fully paid up shareholder even in English Law prior to the enactment of Section 141 of the English Companies Consolidation Act of 1908, after such enactment, it could not be said that such a restriction should be placed on a fully paid up shareholder in maintaining a petition, so as to make him allege and prove that he has a tangible interest in the surplus assets.

(3.) Reference is, however, made in so far as the English law is concerned to 'Re KASLO SLOGAN MINING AND FINANCIAL CORPORATION LIMITED', 1910 W N 13, which is a case of a petition by the holder of 5000 fully paid-up shares in the company asking for a compulsory winding-up order, on the ground that the company had not assets and was insolvent, and that the whole substratum of the company was gone. With reference to the objection by the company that the petition was demurrable and that it was settled that a fully paid-up shareholder was not entitled to an order, where there were no assets unless he could show some tangible interest, learned counsel for the petitioner submitted that the cases which laid down that proposition are decisions before the Act of 1908 and that Section 141 applies to every winding-up petition and that want of assets is not now a sufficient objection to an order. Neville, J. in a short judgment of four lines dismissed the petition, it is obvious that the point was not considered! by the learned Judge and this is pointed out in Palmer's Company Precedents, 15th Edition page 56: