PREMIER MOTORS (P.) LTD. Vs. ASHOK TANDON

JUDGEMENT

(1.) THERE are two connected applications before me made under Rule 79 of the Companies (Court) Rules, 1959, read with Section 391(2) of the Companies Act (hereinafter referred to as ' the Act '), each for the sanction of a scheme to liquidate debts.

(2.) THE first application is a sequel of application No. 26 of 1969 made by M/s Premier Motors (P.) Ltd. (hereinafter referred to as 'the Premier Motors') under Section 391(1) of the Act for holding a meeting of its creditors who had lent money to the company under contracts for payment of 12% interest and re -payment of the principal amounts at the end of the periods contracted for. There were 710 such depositors whose deposits amounted to Rs. 33,50,000. The paid up capital of the company was Rs. 7,00,000 divided into equity shares of Rs. 100 each. It was alleged that there had been a continuous loss for four years prior to applying under Section 391(1) of the Act, on May 16, 1967, in the company's business of selling motor cars, trucks, buses and automobile parts on account of substantial cuts in the allotment of quotas of cars and chassis of trucks and buses, the Chinese and Pakistan aggressions, and high taxes. Therefore, the company was said to be unable to meet the demands of its depositors as and when the periods of deposits matured.

(3.) THE first term of the proposed scheme of the Premier Motors, submitted with the application under Section 391(1), was that all unsecured creditors of the company on the date of the filing of the scheme will be paid the contractual rate of interest up to the date of filing of application. But, from the date of the petition the contractual rate of interest was to cease to apply. A full and final discharge of the liability of the unsecured creditors to the extent of 60 per cent. of the amount due was promised in the following manner :