NATARAJA TEXTILE MILLS LIMITED Vs. ANGIDI CHETTIAR
HIGH COURT OF MADRAS
NATARAJA TEXTILE MILLS LIMITED
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VENKATARAMA AIYAR J. -
(1.) THESE appeals arise out of proceedings instituted for the winding up of a company called the Nataraja Textile Mills Ltd. The said company was incorporated under the provisions of the Companies Act, 1913 on August 28, 1946, its object being the establishment of a mill for spinning yarn, manufacturing gauze, lint, etc. It appears that the Government declined to grant the necessary permits for importing spindles with the result that there was no commencement of business as provided in Section 103 of the Act. No general meeting of the company was convened within the time specified in Section 76 nor was the balance sheet or profit and loss account placed before it as laid down in Section 131. On June 20, 1948, the Assistant Registrar of Joint Stock Companies, Ramanathapuram, issued a notice to the directors why proceedings should not be taken against them for default in compliance with the requirements of Sections 76 and 131 of the Act. To this there was a reply on July 6, 1948, by the respondent and by another director of the company that as no business had been done by the company it might be struck off the register under Section 247 of the Act. On January 4, 1949, a meeting of the general body of the company was held at which it was resolved without any opposition to wind up the company. The respondent thereafter presented a petition under Section 162 of the Act, O.P. No. 409 of 1949, for liquidation of the company on the ground that it was not possible to carry on business and that the general body had passed a resolution for winding up the concern. In the meantime acting on the memorandum of the directors dated July 6, 1948, the Registrar of Joint Stock Companies passed an order on July 19, 1949, striking off the company under Section 247 of the Act. The appellants thereafter filed a statement in O.P. No. 409 of 1949 that as the company had been struck off and was no longer in existence the application for winding up was not maintainable. They also contended that as the petitioner was a fully paid up shareholder he was not entitled to apply for winding up. The respondent, then filed O.P. No. 49 of 1951 under Section 247(6) of the Act for setting aside the order dated July 19, 1949, on the ground that when he applied to the Assistant Registrar on July 6, 1948, to strike off the company he acted in ignorance of the "intricate provisions of the company law", and that he filed O.P. No. 409 of 1949, "bona fide believing that there was no impediment in its way". It was accordingly prayed that the company might be restored to the register. This application was resisted on the ground that as the order dated July 19, 1949, was passed on the invitation of the petitioner he was not a person aggrieved by it and was, therefore, not competent to apply under Section 247(6). By his order dated August 13, 1951, KRISHNASWAMI NAYUDU J. directed that in the interests of justice the company should be restored to the register. O.S.A. No. 31 of 1952 has been preferred against this order O.P. No. 409 of 1949 for winding up the company then came up for hearing and holding that the respondent was entitled to maintain the application as a contributory, KRISHNASWAMI NAYUDU J. ordered that it was just and equitable that the company should be wound up. O.S.A. No. 1 of 1952 has been presented against this orderThree contentions have been urged on behalf of the appellants (1) the respondent was not entitled to apply for winding up under Section 166 of the Act as he was a fully paid up shareholder (2) The respondent was not entitled to apply for restoration of the company under Section 247(6) as he was not a person aggrieved and (3) if the order of restoration made in O.P. No. 49 of 1951 was erroneous, then O.P. No. 409 of 1949 was liable to be dismissed on the ground that there was no company in existence which could be wound up under Section 162
(2.) THE first question that arises for determination is whether a fully paid up shareholder is entitled to present a petition for liquidation of a company and if so, under what conditions. That a fully paid up shareholder is a contributory and is as such entitled to apply for winding up was settled early in In re National Savings Bank Association and In re Anglesea Colliery Company and these decisions were followed in this court in Sabapathi Press Co. Ltd. v. Sabapathi Rao. THE further question for decision is, under what conditions he is entitled to present an application. Two of the earliest decisions on the subject are those of ROMILLY M.R. in In re Patent Artificial Stone Co. Ltd. and In re Lancashire Brick and Tile Co. Ltd. In the latter case the learned Master of the Rolls held that though a fully paid up shareholder was not disqualified from presenting a petition he must, to get an order, satisfy the court that there would be a surplus available for distribution among the shareholders. In In re Rica Gold Washing Co., it was held that
"a fully paid up shareholder who presents a petition to wind up the company must both allege in his petition and show by evidence that there are assets of the company of such an amount that in the event of a winding up he would have a tangible share or surplus to receive." *
In In re Diamond Fuel Co., the position was thus stated by THESIGER L.J. :-
"I quite agree that when a fully paid up shareholder is seeking to wind up a company it is necessary for him to show that there is likely to be some tangible surplus in the event of the company being wound up and its asset collected." *
(3.) IN IN re Vron Colliery Company, JESSEL M.R. observed
"Then he says he is a shareholder, but he is a fully paid up shareholder, and has no locus standi to apply for a winding up order unless he alleges that there is a surplus and gives some evidence in support of the allegation, for otherwise he has no interest in winding up. There is no allegation in the petition that there will be a surplus, and the petitioner is not a creditor, so the petition was demurrable." *;
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