SEETHAI MILLS LIMITED Vs. N PERUMALSAMY

JUDGEMENT

(1.) THIS is an appeal against the order of Ramaprasada Rao J., as he then was, dated 6th October, 1977, made in Company Petition No. 96 of 1974 directing the winding up of the appellant-company under the provisions of the Companies Act, 1956, hereinafter referred to as the Act. The facts are not in controversy. The first respondent herein obtained a decree in the City Civil Court, Madras, against the appellant. herein in O. S. No. 3032 of 1966 for a sum of Rs. 17, 093.06 with further interest. The first respondent issued a notice as contemplated in s. 434(1) of the Act. The first notice was returned as "left" and to a second notice issued to the appellant, there was a reply that the original decree under Ex. P-1 was only an ex-parte decree and that efforts were being made to have the same set aside. However, at the time when the matter came to be disposed of by the learned judge, it was not in dispute that the attempt to have the ex parte decree set aside had failed and that the said decree had become final and effective. In view of this, the point that was urged before the learned judge was that since the first respondent had obtained a decree, it had to proceed under s. 434(1)(b) of the Act and not under s. 434(1)(a) of the Act and that in this case the requirements of s. 434(1)(b) had not been satisfied, since the decree had not been put into execution. The learned judge held that even a person who had obtained a decree against a company can take proceedings under s. 434(1)(a) of the Act, that he was not constrained to proceed only under s. 434(1)(b) and that consequently the company petition filed by the first respondent under s. 434(1)(a) of the Act was maintainable.

(2.) IT is the correctness of this conclusion of the learned judge that is challenged in the present appeal.Section 433 of the Act states that a company may be wound up by the court in the circumstances enumerated in cls. (a) to (f). One of the circumstances mentioned therein is "if the company is unable to pay its debts"[s. 433(e)]. Section 434 deals with the question as to when a company shall be deemed to be unable to pay its debts.

(3.) IT is true that s. 434(1)(a) deals with the case of a creditor to whom the company is indebted in a sum of exceeding Rs.500 then due and his serving on the company a demand under his hand requiring the company to pay the sum so due and the company neglecting to pay the sum or to make satisfactory arrangement to secure the same within a period of three weeks thereafter. As against this, s. 434(1)(b) states that if execution or other process issued on a decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part, the company shall be deemed to be unable to pay its debts. The question for consideration, therefore, is whether, simply because a creditor has instituted a suit against a company and obtained a decree, he has no remedy under s. 434(1)(a) and he has to confine his remedy only under s. 434(1)(b) of the Act. We are of the opinion that there is no such mutually exclusive dichotomy between s. 434(1)(a) and s. 434(1)(b) of the Act. From the very language of s. 434(1)(b), it may be stated that it does not even contemplate a money decree or order for payment of money and, it generally uses the expression" if execution or other process issued on a decree or order of any court in favour of a creditor of the company