HARAKHCHAND HANSRAJ Vs. EMERALD WOOLLEN MILLS PRIVATE LIMITED

JUDGEMENT

(1.) AFTER this petition for winding up was admitted and advertised the company paid in full all its creditors without exception. Thereafter, however, the present applicants claiming to be creditors of the company, have come forward for substitution in place of the original petitioners.

(2.) NOW, substitution, though permissible, is a matter in the discretion of the Court. It is not automatic. It does not follow ipso facto upon a mere application in that behalf or on the mere allegation, unsubstantiated even if it be, that a company is unable to pay its debts. Much depends on the facts and circumstances which would vary from case to case. Discretion, as all judicial discretion, must be exercised one way or the other not arbitrarily or mechanically but for sound and good reason. The Court must see whether a case for substitution is made out and the paramount test is whether the applicant for substitution is one who could have made out a case for admission of petition for winding up if independently filed. I do not see how the ruling of the Patna High Court in (Thakur Papers Mills Limited) A. I. R. 1968 Patna 289, to which my attention was invited by Counsel Mr. Dharamadhikari, helps the applicants here indeed, the said ruling itself indicates that discretion vests in the Court under rule 101 of the Company (Court) Rules 1959 whether or not to grant substitution. My attention was also invited to a ruling of this Court in (Kewal P. Kashyap v. J. H. Jagtiani) A. I. R. 1970 Bombay 5. That however, was a case under the Presidency Towns Insolvency Act and, as rightly submitted by the companys learned Counsel Mr. Cooper, altogether different is the position and procedure under the said Act. This ruling also, therefore, hardly assists the applications here.

(3.) RETURNING then to basis question whether this Court should in its discretion permit substitution let us see the merits. The applicants claim rests at the foot of accounts. Though dealing between the parties had, as per the applicants own case, ceased as early as in February, 1985 no claim was ever made by them against the company. Not even a simple demand notice much less notice under section 434 of the Companies Act. It is no less significant that as per the companys statement of accounts annexed to the affidavit in reply nothing is due to the applicants but on the contrary an amount of Rs. 7900/- and odd is from them to the company. This statement of accounts sent to the applicants as far back as in April 1987 remained uncontroverted. Despite reminders, there was no reply thereto much less any denial thereof.