SOUTH INDIAN MILLS CO LTD THROUGH ITS MANAGING DIRECTOR, T SRIMAN KANTHIMATHI NATHA PILLAI Vs. BURN AND CO LTDTHROUGH MRFULTON

JUDGEMENT

(1.) IN this case Ayling and Hannay, JJ., ordered the appeal against the winding-up order to be dismissed unless a scheme for the payment of creditors was put forward in six weeks time. This was not done, but when the case came on in March of this year before Ay ling and Tyabji, JJ., the 3rd respondent consented to the case being adjourned to allow of meeting of creditors and share-holders to approve a scheme. The meetings were held and a scheme approved, which came on for approval under Section 203 of the Companies Act of 1882 before this Court, before which the appeal against the winding-up order is pending. On the materials before us we are not satisfied that the scheme was a bona fide or workable one, and we adjourned the case till after the vacation to enable the appellants to show that they were in a position to finance the scheme proposed by them. After a careful consideration of the case we have come to the conclusion that the scheme should not be approved. The mills were acquired in 1909 for a price of over two lakhs. They worked for six months and were then closed in consequence of the mortgagee refusing to advance more money. According to the evidence of the Managing Director it would have required Rs. 1,000 a month to keep the machinery in proper order, but no such expenditure has been incurred for the last three years. It is, therefore, clear that the machinery must have most seriously deteriorated, even if we do not accept the affidavit of the 3rd respondent that it is only of the value of scrap iron. When the winding-up order was made in February 1913, various debts and establishment charges had not been paid although there was and still is Rs. 1,40,000 of uncalled capital. Nothing was done to meet the claims of creditors until the present scheme was put forward this year to give them, in full satisfaction, second debentures payable in five years which must, of course, be postponed to the rights of the mortgagee whose claim now amounts to more than four lakhs, against; which this Company have a counter-claim against him for refusing to advance more money. IN these circumstances the Company now comes forward with three affidavits from persons who profess to be willing, if the order is set aside and the scheme approved, to advance each Rs. 1.5,000 on terms to be hereafter agreed upon between themselves and the Company. We cannot regard this as a serious offer, as it does not appear how in the circumstances of the present Company, any. business man could be willing to make such an advance subject to the claim of the mortgagee and of the existing unsecured creditors pursuant to the scheme we are asked to approve. We cannot attach any weight to the statements of the Manager in his affidavit about other lenders who have not filed affidavits. No serious attempt has been made to show that the sum of Rs. 45,000, even if available, would be sufficient to enable the Company to re-open and carry on their business. It is noteworthy that the only suggestion put before us is to carry on with borrowed money and that nothing has been said about the practicability of calling up the unpaid capital of the Company, a circumstance which we consider highly significant. As regards the creditors who support the scheme, we do not attach much importance to their opinion as they are mostly not business men and some of them are interested in opposing the winding-up order which would make them liable for calls. Messrs. Barn and Company s opinion would be entitled to great weight from a business standpoint, but they have not only got back their machinery but are to receive Rs. 1,500 down under the scheme, and it is, therefore, natural they should refrain from opposing it. On the whole we have come to the conclusion that the proposed scheme put forward at the very late stage is not a bona fide or a workable one and we accordingly refuse to sanction it and dismiss the appeal with costs of the 3rd respondent.