IN RE: VADILAL LALDAS PATEL Vs. STATE

JUDGEMENT

(1.) THIS is an application under Section 175 of the Act for the appointment of a Provisional Liquidator of the Andhra Paper Mills Ltd., a Company having its registered office at Rajahmundry. The main petition is fixed for hearing on the 22nd instant. This application came before me first on the 27th of August, when I directed notice to issue to the company. The company has been duly served and is now represented before me by counsel. In addition, the trustees for the holders of the First Debentures issued by the Company are represented by counsel, and one shareholder appears by counsel.

(2.) THE company was registered in January, 1929, and has an authorised capital of Rupees 23 lakhs divided into 20,000 ordinary and 3,000 preference shares, each of the face value of Rs. 100. The issued capital is 11,290 ordinary shares and 1,162 preference shares all of which except to a small extent of Rs. 120 are fully paid. Thus the paid -up capital of the Company amounts to Rs. 12,45,200. The petitioner is a creditor of the company for a capital sum of Rs. 1,06,465 odd plus interest. On the 15th July, he served a statutory notice demanding payment but apart from a payment on account of Rs. 25,000 the Company has failed to meet that demand. Prima facie therefore this is a case in which a compulsory winding up order will be passed ex debito justitiae.

(3.) THE company has never paid any dividend on its shares and no interest has been paid on the first debentures which were issued prior to 31st March, 1935, or on the second debentures issued in 1940. The amount due on debentures is Rs. 11 lakhs with outstanding interest of over 4 lakhs of rupees. In addition to this, the balance sheet shows that the company has other debts amounting to over 23 lakhs of rupees. The debentures are secured by a mortgage of the buildings, machinery and plant. That charge does not extend to the, manufactured stock, raw materials and furniture said to be worth about 11 lakhs of rupees. It is common ground that the company's. Mills were closed on the 24th May this year and that since that date no business has been done. Counsel for the trustees of the first debenture -holders has explained that his clients took over the control of the business on the 14th February, 1947, for non -payment of interest. It was then arranged between the Board of the Company and the trustees that the trustees would work the mills for three months and would defer bringing their security to sale for that period. Counsel described this as a last effort to see whether the company could be run profitably. The money required (about 2 lakhs of rupees) to work the company for the three months was put up by the petitioner who was then or had previously been in the service of the trustees. That three months' working resulted in a loss, and on the 2nd May, 1947, the debenture holders at a duly convened meeting decided to take over their security. The result was the closing down of the Mills on the 24th May. The petitioner has not set out these circumstances in full in the petition but I do not regard this as due to any want of frankness.