Decided on April 26,1957



- (1.) These are two connected matters and may be disposed of by one order. C. M. No. 99 of 1956 is a petition on behalf of the Patiala Starch and Chemical Works Limited, Rajpura, made under sections 391 and 394 of the Companies Act, 1956 . C. M. No. 141 of 1956 is an application presented on behalf of the Registrar of Companies, PEPSU and Himachal Pradesh, Patiala, under section 439 of the Companies Act, 1956 , for winding up of the Patiala Starch and Chemical Works Limited, Rajpura, under the orders of the court.
(2.) The Patiala Starch and Chemical Works Limited (hereinafter to be referred to as the Company) was incorporated as a public limited company under Patiala Companies Act, 1996 Bk on 21st January, 1944 with its registered office at Rajpura. The issued, subscribed and paid up capital of the company is Rs 11,24,630 consisting of Rs. 1,12,463 ordinary shares of Rs. 10 each. The company met with reverses from the very start. The report of the Directors to the shareholders of the company for the period ended 31st March, 1946 showed that the manufacture of starch was stopped pursuant to the freezing of the stock of maize in consequence of the decision of the Government. The factory has remained idle ever since and no starch seems to have ever been manufactured by it. In the year 1947, the company decided to instal an oil crushing mill as a subsidiary industry, as it was then believed that the oil industry, offered a good scope. The oil mill was put up in 1947 and it appears that on the one hand the starch plant remained idle and so far as the oil crushing activity was concerned the company suffered heavy losses, as is amply clear from the annual balance-sheet. According to the report of the Directors to the shareholders of the Company dated 25th July, 1953 the company had incurred a total loss amounting to Rs. 4,07,403 as appeared from its balance-sheet. It was stated - "Taking into consideration the present heavy indebtedness and daily growing losses, the Directors of the Company have very reluctantly come to a decision that it is no longer possible for the company to continue its business and that it is advisable to wind it up voluntarily."
(3.) Shareholders of the company were required to take decision on this issue at an extraordinary general meeting of the company which was called on 31st October, 1953. It was ultimately decided that the company should not go into liquidation but an attempt should be made to revive it by raising a sum of Rs. 10,00,000/- by the issue of the mortgage debentures. The scheme was that the present starch equipments which had hardly been used should be modernised by replacement with machinery imported from abroad. This was the view of the directors as expressed in their report for the year ended 31st March, 1954. According to the report of the next year, it was stated that an application for a loan of Rs. 10,00,000/- against the security of the fixed assets of the company was made to the Ministry of Rehabilitation, Government of India, and, the Rehabilitation Department was willing to advance money required for purchasing new machinery for modernisation, provided, that the capital asets of the company should be free from any encumbrance which meant, that the loans which had been taken by the Company from the Bank of Patiala should be repaid. These schemes never materialised and the indebtedness went on mounting. According to the company's balance-sheet, as on 31st March, 1956, the total loss has risen to nearly Rs. 5,00 000/- and the net assets of the company after depreciation, etc., amounted to a little under Rs. 12,50,000/-. In its written statement dated 24th September, 1956, in para 5, the company stated, that the market value of its assets was hardly equal to fifty per cent of the value as shown in the balance-sheet. Strong exception is taken by the objectors to the above statement and they contend that this is an attempt to deliberately under-estimate the assets of the company in order to coerce them into accepting the same.;

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