Case: Harinagar Sugar Mills Limited Vs. M.W. Pardhan

(2) A few facts giving rise to this appeal maybe stated. The company was incorporated in January 1938 and its authorized capital consists of 12500 equity shares of Rs. 100 each and 25000 equity shares of Rs. 10/each. The issued and subscribed capital of the company concise of the 7500 shares of Rs. 100/each 25000 equity shares of Rs. 10/each. All these shares are fully paid up. Out of this subscribes capital of the company 788, equity shares of The 100 each and 14265 equity shares to Rs. 10 each stand is the name of Narayanal Bansila who is the chairman of the Board of the Directors of he company. Naraylal Bansilal is also the karta and manager of joint Hindu family consisting of himself his sons and daughters and the shares standing intake name of Naraynalal Bansilal were purchased in out of the funds belonging to the joint family. According to the court Receiver who was appointed Receiver High Court suit No. 224 a of 1961and who presented the petition for winding, up a large also o number of other shares of the company were also purchased out the fund belonging to the joint family and wee taken in the names of kishanlal Murlidhar Jayakrishans Gangadas and sevaram Ranchhoddas as the Benamidars for the joint family.(2a) It appears that prior to the 8th of March 1956 the joint family of Narayanlal Bansilal owned a sugar farm at Harinagar in the state of Bihar. On 8th March 1956 by a registered conveyances made between Narayanlal Bansilal and his sons Balkrishna Narayanalal Naraynalal on the hand and the company on the other, the said sugrances farm with the all the crops, buildings agricultural equipments bridges, tool pumping livestock carts et. Was sold to the company for Rupees forty Lakhs out of this price of Rupees Forty lakhs, it appears the company paid to the vendors (Narayanalal and his threes sons) a sum of Rs. Ten lakhs on 31st January 1956 and it was agreed that the balances of Rupees thirty lakhs should be paid by quartile installments of Rs. 2,50,000/each the first of such quarterly installment being payable at the end of the subsequent installments were payable at the end the each subsequent quarter. The register d conveyance dated 8th March 1956 further provided that if the company failed to pay the vendors any oft said installment of Rs. 2,50,000/on the company should pay interest the at the rate of 5 percent t per annum to the vendors on the amount of the unpaid installments. It future paper that after the execution of the conveyances the company paid to the vendors on two installments of Rs. 2, 50,000/each but failed up to pay the remaining installment aggregating to Rupees twentyfive lakhs and this is the debt which was claimed by the petitioner [the court receiver] under a statutory notice upon neglect to pay the same a winding up petitions was presented by the petitioner under following circumstances.(3) In or about July 1961 Madhusudanlal, one of the sons of Narayanalal filed a partition suit on the Original side the this court and being suit No. 224 of 1961 against Narayanlal and others claiming certain share in the joint others claiming certain against share the joint family properties and the after the filing the suit madhustandal took out a Notice of Motions for appointment of court Receiver as the Receiver of joint family propitious. On 20th October 1961 the Court appointed the court Receiver as the Receiver of all the joint family proper ties with all powers under Order XL Rule 1 Clause 9d) of the Civil procedure Code. After the court receive thus came on the scene the court Receiver issued statutory notice on 28 the June 1962 an under section 434 of the Indian companies act to the company requiring the company to make payment of Rupeeslakhs with interest to the Additional Collector of Bombay and by that the notice the court Receiver further stated the if the said payment was not made within 21 days of the receipt of the notice proceeding for winding up of the company will be adopted without any further intimation. On 17th July 1962 the company sent a reapply of the court Receiver raising several contention. In was contend that a sum of Rupees twentyfive lakhs and odd was not but that a per the company balancesheet the said amount was due and payable to Narayuanlal bansilal and his three sons who were the vendors under the conveyed that the conveyances dated 8th July 1956 . It was further contend that in the installment due under the registered conveyances court not be paid by the company on accept of a notice of attachment dated 24th July 1956 that had been issued and served upon the company be the Additional Incometax officer, section v. Central Bombay under section 46 (5A) of the Indian Incometax officer Act 1922. The company further contended that in any event the claim for the Rupees twentyfive lakhs had become barred by the law of limitation. In view of the these contentions the accompany pointed out that the there was no question of payment of the said amount of Rupees twentyfive lakhs to Additional Collector of Bombay as required to by the court receiver an the company further informed the court receive that the inspire oft these facts being brought his notice if any steps of these fact being up to the company were taken. Since the statutory notice that the issued by the court Receiver on 28th June 1962 was not complied on with by the winding company the Court Receiver presented a winding up petition being company petition No. 4 of 1964 on 10th January 1964. After the petition was accepted notice was issued to the company and the company put in affidavit in the reply showing cause against the petition. After hearing the parties. The learned judge by the his order dated 22n September 1964 admitted the petition and directed that advertisement be given in newspapers mentioned in this order and the Gazette. It is against the judgment and order that has been passed by the learned judge the present appeal has been preferred by the company before us.

Court's reasoning:
(6) In out view in this case we are not called upon to decide the question as to whether a proceeding which is commenced by filing a windingup petition is a normal or proper mode realization of a debt or not. What we are really concerned with is as to the whether such a proceeding is proceeding "for realization of property" It is true as has been pointed out by Mr. Banaji that the main or dominate object of windingup petition its ensure the equitable distribution of the property to debtor. But is cannot be forgotten that before the there could be any equitable distribution of the property of the debtor amongst his creditors this and property must be first got in i.e. realized and it cannot be disputed that the property the debtor of realized by filing the windingup petition. It is not doubt true that the dominate object of suit o realize a particular debt, while that of windingup petition is the equitable distribution of the debtors property amongst his creditors of he debtors property amounts must necessarily be preceded by the getting in of all such debtors property and realization of all such property. It cannot be disputed that the necessary is consequence of filing a windingup petition is the realization of the all the property of debtor ad thereafter commences. In this view of t he matter it is clear that the proceedings which is commenced by filing a windingup petition s proceeding for realization of the property and therefore when the court Receiver was clothed with the all the court power under Order XL R 1(1) (d) of the code of civil procedure it must be file a windingup petition for he purpose to realizing the property the benefit of the which would endure to all the creditors of the company. We are, therefore, unable of accept Mr. Banaji contention that the court the Receiver in the present case has no power to present a windingpetition.(8) In our view the position in India is more clear and unambiguous, order XL of the Civil procedure Code deals with appointment of receivers and under Rule 1 a receiver could be empowered to bring and defend actions and for it realization management, protection preservation and improvement o f the property. It is well settled that one a receiver is appointed in by a court under O. XL r. 1 of the code of Civil Procedure with all the power mentioned is clause (d) of subtle (1) the property in respect whereof such a receiver is appointed in is custody legislature and party to the litigation except where of such receiver is appointed in he custody receiver is entitled to deal with the property of which he is entitled to file suit inches own name. If necessary we may refer to the decision of the supreme court reported In vendetta Mallayya v. Ramaswami and co. where their Lord ships of the supreme court have pointed out that "a receiver authors to collect the debt" is empowered to institute suit therefor and a suit instituted by the Receiver in his own name is perfectly competent. A decision of out court reported in Achut, v. Shivajirao, 39 Bom LR 224 (AIR 1937 Bom 224) has also taken the same view. Though it is true that the same time it is clear that the receiver s appointed is entitled to maintain action in his own name. In this view of the matter it is clear that the though the debt in respect whereof a statuary notice was issued byte court Receiver was really due to the members of the joint family the court Receiver who has been management and administration of the e entree joint family properties for the benefit of such parties who may ultimately by found entitled thereto, would be good petititonig creditors for the purpose of filing a windingup petition since in out view if the clear on authorities an action in this receiver is entitled to maintain an action in his own name. Reading the provision an action I his own name. Reading the provisions of Ss. 434 and 439 of the companions Act along with the provisions of O. XL R 1 civil procedure code we are be opinion that the court Receiver would be creditors of the company and as such was entitled to present the windinge are unable to accept this contention of Mr. Banaji for the simply reason that the section nowhere requires to that such notice the creditor should make a demand upon the debtor to make payment of the debt to himself. It is perfectly competent for the creditor to direct his debtor to make payment to a third party under such notice. Further we fail to appreciates as to how by issuing a notice in question the court Receiver put it beyond the reach in of he company to secure or company for the debt of the satisfaction of the court Receiver. On receipt of such notice from the notice court Receiver it would have been computed for debt of he reasonable satisfaction of the court Receiver if the company were so minded to do. On the the hand, what we find is that the company by its reply, dated 17the July 1962 raised various disputed with regard to their liability of the said debt or containing that debt was not due to the joint family or Narayanalal and others but that it was due and payable to the four individuals from whom the company and purchased a sugarcane farm. Significantly enough, we may point out by Mr. Banaji has not evenstated b the 17th July 1962. In has nowhere been stated by the company in its reply that because of the manner in which the had notice has been given the company had been deprived of its right to the company to secure to compound for the debtors the reasonable satisfaction of the court receiver. It clear onto facts of the case that the under the conveyances a sum of Rs. Twentyfive lakhss and odd was payable by the company to Narayanala Bensilal and his sons. There is no dispute that the income tax lakhs of rupees were due and payable of Narayanalal Bansilal to the income tax authorities and in the at behalf debt in the thanes to the company had been attached by the Additional Income = tax officer. This fact is even referred to byte court Receiver in this statutory notice. After referring to the fact the company a has been called upon the by court Receiver to make payment of the debt due to the Additional Collector of Bombay obviously to the purpose of liquidating the incometax dues. In theses circumstances it is difficult to accept Mr. Banajis contention that the notice that has been issued by the court receiver is defective or is not in accordances with the provisions of section 434 of the India companiesour view the facts of the present case was are clearly distinguishable from the facts which obtained intake case decided the [1886] 2 Eq. 521. In the first palce from the fact which have been recited in the report it appears that the court considered to the amount due by the banking company to the creditor a bevy in considerable amount secondly the fact that the petitioners debt had been attached in Lord Mayors Court was undoubtedly taken in consideration as result of which if was stated. That the attachment had the effect of seizing debt into the hands of Lord Mayos court. In those circumstances it was held that the interest of the petitioners as a creditors was very uncertain is it character and therefore the petition for windingup should be dismissed. In the present case the fact are entirely different. The amount claimed by the court Receiver on behalf of the joint family s not an insignificant amount. Incidentally it may be stated that the petitioners in his petition had referred to several other debts which the company owned to other creditors apart form the this debt of Rs. 25,00,000/which was payable to the joint family or Narayanalal Bansilal and his sons. Further the most important distinguishing feature, the most important distingusing feather statutory notice issued under section 434 the court Receiver had in fact called upon the company to make payment to the income tax authorities for the purpose of liquidating the incometax dues for nonpayment of which the debt had been attached. If by statutory notice the court Receiver had called upon the company to make payment of dues himself in spitted he attachment on that debt, the company would intuit case have been unable to comply with such requisition because of the attachment levied on that debt., due to the additional Collectors the Bombay for the purposes of liquidating the incometax dues forth pose non = payment of which the attachment had been levied. In these circumstances it is difficult to accept Mr. Banajis contention it that because of subsisting attachment on the debt at the insane of the income tax authorities, the company was unable to comply with the requisitions contained in the statutory notice issued byte court Receiver. On the other hand direct, comliances of the statutory notice would have resulted in the payment of the Incometax dues and the attachment obviously would have fallen to the ground. As we have pointed out earlier without putting forth any all sorts of contentions against the liability to all sorts o contentions against the for us to accept Mr. Banaji contention that there as was no neglect as the part of the company to make payment as in contemplated by the provisions of section 434 of the Indian companies act.(14) In our view, the learned trial judge was right in coming to the conclusion that none of the technical points that had been urged before him on behalf of the company headythe facts of the case we do find that there were dispute between the father on the one hand and the sons on the other and the other nominees of the father, but it apart from preventing the sons from getting and any hand the management of the company is also trying to fight his personal disputes with his sons and is taking shelter under both his dual capacity, one as a chairman of the Board of Directors of the company and the other as Karta and manager of the joint Hindu family as and when the occasion arises. In this behalf it is an admitted position has that several litigation are pending between the father on the one hand and the sons of the other and several suits have also been filed by the court Receiver against thebenamidars of the father in respect of shareholding in the company. But quite apart from this position, there could be no dispute that the company has failed nd neglected to pay the debt that was claimed by the Receiver under a statutory notice during the preside period of 21 days and therefore a right undoudtely accrued to the court Receiver a creditor to a file winding up petition against the company. Even apart from this debt, in the windingup petition the court Receiver has referred t several other debts which are due and payable by the company to the third parties. For instance there is a reference to debt to the tune of Rs. 8,00,000/owned by the company to the Bank of India in respect whereof the Bank of India in had obtained a decree against the company and amongst several ground that have been forward be the court receiver in his winding = up petitioner there are principally two on which the petitioner was pressed, first that the company was unable to pay its debts and secondly it was just and equitable that the company should be wound. In this regard it would justice shaggy to the observations of chief Justice Chalga to in Bachharaji Factories Ltd v. Hirjee Mills Ltd. where the learned chief justice has pointed out that the learned chied has pointed out that once a party had put proper matters before the court making out a prima facie was for winding up consideration was presented would be irrelevant. The relevant observations appear at p. 392 of the report (Bom LR) (at p. 361 of AIR) which run ashave not permitted Mr. .Mathalone to go into the mertis of these allegations about out opinion these allegations are entirely in reliant. If the petitioner have made out accuse for the winding up of the company it they have placed materials before the court which satisfy the court that the company if they have placed materials before the court which satisfy the court that the substratum of the company is gone it is difficult to understand what the motive of the petitioners has got to do with the question whether a order of winding up should be made or not." It is true that in that case the petitioners had placed sufficient materials before the made the court to show that the substratum of the company had gone and it was not possible for the company to carry on its business without difficult in the present case we may point out that apart form the several debts that are owed by the company to several credits which have not been satisfied by the Company a suggestion was made to by us to Mr. Banaji that if the company were also be by of any guarantee through any bank or Insurance Company, the windingup petition may not be proceeding further and Mr. Banaji had taken time to consider that the suggestion and even after adjourning the matter once or twice nothing has been done by the company intuit behalf of secure the amount of Rs. 25/lakhs and odd to the Incometax authorities to the satisfaction of those authorities. In these circumstances we do not feel that the there is any substances I the contention urged by Mr. Banaji tht the petition is actuated by Mala fides and therefore, the suit ought by to have been admitted by the learned trial judge.