M.H.BEG, J. - (1.) THERE are two connected applications before me made under Rule 79 of the Companies (Court) Rules, 1959, read with Section 391(2) of the Companies Act (hereinafter referred to as ' the Act '), each for the sanction of a scheme to liquidate debts.
(2.) THE first application is a sequel of application No. 26 of 1969 made by M/s Premier Motors (P.) Ltd. (hereinafter referred to as 'the Premier Motors') under Section 391(1) of the Act for holding a meeting of its creditors who had lent money to the company under contracts for payment of 12% interest and re -payment of the principal amounts at the end of the periods contracted for. There were 710 such depositors whose deposits amounted to Rs. 33,50,000. The paid up capital of the company was Rs. 7,00,000 divided into equity shares of Rs. 100 each. It was alleged that there had been a continuous loss for four years prior to applying under Section 391(1) of the Act, on May 16, 1967, in the company's business of selling motor cars, trucks, buses and automobile parts on account of substantial cuts in the allotment of quotas of cars and chassis of trucks and buses, the Chinese and Pakistan aggressions, and high taxes. Therefore, the company was said to be unable to meet the demands of its depositors as and when the periods of deposits matured. The second application No. 26 of 1969 under Rule 79 of the Companies (Court) Rules, results from Company Application No. 25 of 1969 made under Section 391(1) of the Act by an allied concern known as M/s Premier Credit and Motors (P.) Ltd. (hereinafter referred to us ' the Credit Motors '). The grounds for the application of the Credit Motors were that there were about 711 similar depositors with various deposits amounting to Rs. 27,50,000 whose deposits could not be paid back. The fully paid up capital of the Credit Motors was Rs. 6,00,000 divided into equity shares of Rs. 100 each. The business 0f this company appears to have been to invest money, to finance merchants, to undertake ' all kinds of financial and commercial operations', and, particularly, to provide credit to persons to purchase motor cars, motor lorries, motor buses, scooters, motor -cycles, coolers, tape -recorders, radios, radiograms and other similar goods on hire purchase system. The Credit Motors alleged that it had suffered a very serious loss due to an embezzlement on a large scale of rupees 14 lakhs committed by one Mr. Lamba who had already been convicted by a criminal court in respect of certain charges of fraud brought by another company. Other causes of losses alleged by the Credit Motors were the abnormally high prices, high taxation, particularly after the Chinese and Pakistani wars, and the failure of customers buying trucks on a hire purchase system to make the stipulated payments. Both the companies appear to have had common sets of directors and shareholders. Both the applications under Section 391(1), made on the same date, were connected and a common order governing both the applications was passed by me on October 8, 1968, for the holding of a meeting of the unsecured creditors of each of the two companies.
(3.) THE first term of the proposed scheme of the Premier Motors, submitted with the application under Section 391(1), was that all unsecured creditors of the company on the date of the filing of the scheme will be paid the contractual rate of interest up to the date of filing of application. But, from the date of the petition the contractual rate of interest was to cease to apply. A full and final discharge of the liability of the unsecured creditors to the extent of 60 per cent. of the amount due was promised in the following manner : (i) 10% within three years of the sanctioning of the petition ; (ii) 25% within one year from the date of the payment of the first instalment ; and (iii) balance of 25% within one year from the date of the payment of the second instalment. ;