Mridula Bhaskar vs Ishwar Ind. Ltd.
1982 Latest Caselaw 362 Del

JUDGMENT

N.N. Goswami, J.

(1) In this petition u/s 433, 434, 439 and 450 of Companies Act, 1956, the winding up of M/s. Ishwar Industries Ltd. ("the Company") has been souglit on 3 grounds. Firstly, that the Company is unable to pay debts, secondly, that the affairs of the Company are being conducted in a manner prejudicial to the interests of the general body of the shareholders and finally, that the financial position of the Company is deteriorating at quite fast pace and this has raised a grave apprehension in the minds of the shareholders and creditors of the company. It is alleged that the Company has even exceeded the maximum borrowing power which according to the resolution of the company is Rs. 1.25 crores.

(2) It is well settled that a prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the Company if ultimately the petition has to be dismissed. In view of that the proceedings of the petition which have been pending for quite sometime are at the stage of only show cause notice as to why the petition be not admitted. [In paras 3 to 8, petitioners allegation and their refutation is noticed and S. 433 of Companies Act is reproduced.]

(3) Admittedly, Clause (a) to (e) of S. 433 are not applicable in the present case and the only clause which remains is clause (f). Taking position of the Company as depicted above the question for consideration is whether it can be said that it is just and equitable to wind up such a company. The Supreme Court in the case of Hind Overseas (P) Ltd. v. Raghunath Prasad, observed that the relief u/s 433(f) based on the just and equitable clause is in the nature of , last resort when other remedies are not efficacious enough to protect the general interests of the company. There must be materials to show that "just and equitable" clause is invoked, that it is just and equitable not only to the persons applying for winding up but also the company and to all its shareholders. The company court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensures between two groups.

(4) In the matter of Cine Industries and Recording Co. Ltd. reported as Air (29) 1942 Bombay 231, Chagla, J. laid down certain tests and explained the term "Commercially insolvent". According to the learned Judge the test for detemining whether the company should be wound up is whether the company is commercially insolvant at the date of the petition for winding up. The expresion "commercially insolvent" means that the existing assets and liabilities of the company are such as to make it reasonably certain, as to make the court satisfied that the existing and probable assets would be insufficient to meet the existing liabilities. The other test is whether at the date of the presentation of the winding up petition, there was any reasonable hope that the object of trading at a profit, with a view to which company was formed, could be attained. It is for the petitioner to prove that the test is satisfied in the case of a particular company which he asks the court to wind up. The substratum of the company must be deemed to be gone so as to entitle the Court to pass a winding up order when (a) the subject-matter of the company is gone, or (b) the object for which it was incorporated has substantially failed, or (c) it is impossible to carry on the business of the company except at a loss which means that there is no reasonable chance that the object of trading at a profit can be attained, or (d) the existing and probable assets are insufficient to meet the existing liabilities. When none of the aforesaid tests can be applied to the facts of a particular case the company cannot be wound up.

(5) I have given my careful consideration in the light of the aforesaid tests laid down by Chagia, J. Taking into consideration the balance-sheet filed by the comany, particularly, the balance-sheet and Profit and Loss Account for the period July 8 1 to June 82, it cannot be said that the aforesaid tests are fulfillled in the present case. The Company has not only a hope of revival but has in fact been revived in as much as it has made profits and has also paid over Rs. 12 lacs to the financial institutions towards its debts. Merely because the company has made losses for a certain period has never been considered to be a ground for winding up of the company. By exercising discretion in favor of the petitioner and winding up the company, I would be putting over 900 persons who are working in the company on road. Admittedly, the Company has enough staff working and no grievance, in this petition, or in any other petition, has been made by the creditors or other shareholders against the Company. The petitioner admittedly belongs to one of the groups of the family which had promoted the company, The group was carrying on the business in the best interests of the family and the other shareholders and at a latter point of time, particularly, after the death of Shri B.N. Bhasker certain difference had arisen in the family and this petition seems to be a result of the same. The interest of the shareholders, financial institutions and the Company cannot be allowed to suffer in a fight for power or for the disputes amongest the members of the family. This is not a forum for the said purpose.