LALCHAND SURANA Vs. HYDERABAD VANASPATHI LTD

JUDGEMENT

(1.) This petition is filed by three share-holders of "Hyderabad Vanaspathy Ltd.", a Public Limited Company, having its registered office at Hyderabad for winding up the company on the ground that it is unable to pay its debts, within the meaning of clause (e) of Section 433 of the Companies Act, 1956. The Kespondent-Company has raised an objection as to the maintainability of the petition.

(2.) The petitioners say that tne Respondent-Company was incorporated in June, 1970. The share capital of the company is Rs. 50 Lakhs, divided into 10,000 cumulative redeemable preference shares of Rs. 100/- each, and 4,00,000 equity shares of Rs. 10/-each. The three petitioners hold 1,000; 1800, and 2,200 redeemable cumulative preference shares respectively, of a total value of Rs.5 Lakhs. These shares, carrying a dividend of 9. 5%, were issued on 7-1-1971 and were redeemable at par after 15 years from the date of allotment. The date of allotment is 8-2-1971. When the petitioners asked for redemption of the shares, the Board of Directors, instead, of redeeming the same, decided to postpone the payment for five years. They convened a General-Body meeting on 29-3-1986, whereat a special resolution was passed by the Equity-Shareholders extending the period of redemption of redeemable cumulative shares by five years. A letter was addressed to the preference shareholders requesting them to agree to the said extension, which they refused. Ultimately, the petitioners gave a legal notice dated 19-11-1986 calling upon the company to pay the amounts due, which the Company has tailed to comply with. The balance-sheet of the company shows that its financial position is not happy; it has bean incurring losses; it has leased out its factory since 1977; the losses are steadily mounting no audit is being done, and no efforts are being made to revive the Company. It is submitted th-.it the petitioners are in the nature of 'creditors' and hence entit'ed to ask for the winding up of the company under Section 433(e) of the Act. The petition is filed under Sections 433 (e) 434 (1) (a) and 439 (1) (b) of the Act. A counter-affidavit has been filed on behalf of the Company denying the various allegations made in the petition. It is submitted that the petitioners being sharehoders cannot style themselves as 'creditors' and have, therefore, no locus standi to maintain the petition. It is submitted that the petitioners hold only a one-third share-holding interest, and cannot justly ask for winding up of the Company. The allegations with respect to negative financial position and other defaults, are denied.

(3.) The first question that has to be answered is whether tue petitioners being preference share-holders can call themselves 'creditors' and ask for windirgup of the Company under Sec. 433 (e) read with S;c. 434 (l)and Sec. 439 (1) (b) of the Act? Ordinarily speaking, shareholders are not creditors/ But, the contention of Mr. T. Anantha Babu learned counsel for the petitioners, is that (he petitioners are holding preference shares which are redeemable 15 years after the date of allotment. These shares carry a fixed dividend ot 9. 5%. When the petitioners called upon the Company to pay the amount due on the said shares, the Company was unable to pay, which means that the said amounf has become due. The petitioners have thu^; become 'creditors' and the Company has bec.tm: a 'debtor' vis-a-vis the petitioners.