SABAPATHI RAO Vs. SABAPATHI PRESS CO LTD

JUDGEMENT

(1.) I have to deal with this claim in the winding-up proceedings. A creditor, Pola Sankariah by name, applied to the liquidator for payment of his debt, He failed to comply with the request and 1 have now to decide whether the creditor's claim is well founded.

(2.) To make the point at issue clear, I must briefly set forth the course taken by these liquidation proceedings. The petition to wind up this Company (The Sabapathi Press Co., Ltd.) was filed on the 8 of May, 1922. Mr. Justice Kumara- swami Sastri dismissed the petition on 30 November, 1922, holding that no valid grounds existed for making an order of compulsory winding up. Against this order an appeal was filed and, on 5 November, 1924, the Appellate Court set it aside and remanded the petition to the Original Side for fresh disposal. The matter then came up before Mr. Justice Beasley and on the 9 of April, 1927, he made an order referring two questions to the Official Referee. With one of those questions we are directly concerned. That related to the debt now claimed as due by the creditor. It was then pleaded that that debt was discharged either by payment or adjustment on 31 of December, 1921. The Official Referee submitted his report, finding inter alia that the debt due to the applicant was not discharged as alleged. Mr. Justice Beasley (as he then was) accepted the Official Referee's findings, found that the Company's affairs were in a very unsatisfactory state and made an order, dated 16 November, 1927, directing the Company to be compulsorily wound up. Mr. Venkata Rao, by dubious methods (this is the effect of the judgment of Mr. Justice Beasley) acquired a dominant position in the Company and by adopting an aggressive and high-handed attitude, used that position to gain dishonest advantage for himself, his relations and friends. A firm known as "K.V.S.R." which, as the learned Judge observed, was Venkata Rao's own firm, was appointed treasurers of the Company and some of the Company's factories were leased to this firm on terms highly detrimental to the Company. This K.V.S.R. firm in their turn sub-leased the factories making a large profit, to a joint family concern of which the present applicant Pola Sankariah was a member. There were two factories, one at Tadpatri and the other at Adoni. The sub-lessees effected certain repairs to these factories and a large sum became payable to them on this head by the Company. The debt became due before December, 1921. It amounted to about Rs. 25,000. This fact is not disputed. Before proceeding further, I may mention that the winding-up order made by Mr. Justice Beasley was confirmed on the 18 of April, 1929.

(3.) The question to be decided is, whether the debt due to the creditor was discharged by payment on the 31 of December, 1921. Mr. Venkata Rao, I have said, raised this incidental question and it was decided in favour of the creditor. As the liquidator raises the point again, I shall deal with it fully.