(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 Ss. 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 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 o 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 them 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 share-holders 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. " Share-holders 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 assets 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 had 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.
(3.) IT will be proper at this stage to give the broad features of the scheme, which the company wants me to sanction. According to the scheme of arrangement the company shall be amalgamated with the Modi Spinning and Weaving Mills Co. , ltd. , and reduced. The members of the transferor company (The Patiala Starch and Chemical Works Limited, Raj-pura) shall be allotted one share of Rs. 10 in the capital of the transferee company for every ten shares of Rs. 10 fully paid up by them in the transferor company. Share-holders, holding-less than ten shares will be issued coupons of the face value of Re. 1 for one share held in the transferor company. The transferee company shall issue one fully paid share in exchange of such ten coupons or shall pay Re. 1 in cash for every coupon at the option of the member. The whole of the undertaking, property and liabilities of the transieror company shall be transferred to the transferee company from the date the scheme is finally sanctioned. By order dated the 4th July 1956, on the company's application under s. 391 of the Companies Act, Gurnam Singh, J. , gave directions that a meeting of the members-of the Company be called on the 25th August 1956, at the registered office of the company, to consider and if thought fit to pass the proposed scheme of arrangement with or without modifications. Shri Dara Singh, Advocate, was to preside at the meeting. On the 31st of August 1956, Shri Dara Singh submitted his report of the meeting. It appears from his report, that the meeting was held at 9 a. m. , and there were present 20 persons including shareholders and one nonmember proxy. The first two clauses of the scheme were opposed by two persons but after that, they left the meeting. The remaining clauses of the scheme have been passed unanimously. The first two clauses which were opposed by two share-holders were passed with the requisite statutory majority. Certain proxies were declared invalid as they had not been received within the time allowed. One of these proxies was received from His. Highness the Rajpramukh. It was declared invalid on the ground that it was unstamped and had been received late. It appears, that a telegram had been received from His Highness, who held shares of the value of two lacs in this company to the effect that Shri Dalip Chand, advocate, would act as his proxy and that the confirmation and proxy form had been posted. The telegram was also received within 48 hours of the meeting. It was said that the other proxies were rejected by the Chairman. The total number of notices which were issued were 1,440 out of which 120 notices were received back undelivered.;