THE NEW KERALA CHITS & TRADES (P) LTD. Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THE appellant is the New Kerala Chits and Trades(P)Ltd .,Press Club Building,Quilon,represented by its Managing Director.The above said company was incorporated under the Companies Act,1956 as a private company limited by shares on 30th August,1971,the regi­stered office of the company being situated at Andamukkom,Kerala State.The objects of the company were to carry on business of chit funds by enrolling members from the public.The company was incorporated with three share -holders.Subsequently,7 other share -holders were admitted.The company was carrying on chit fund business through its branches at various places in the States of Kerala,Tamil Nadu,Karnataka and Orissa.The business of the company did not show any progress.The subscribers to chit funds started interfering with the day -to -day management and began to press for the amounts they had subscribed.Suits were also filed against the company and in a few cases,attachment before judgment of the properties was also ordered.Attempts were being made by certain subscribers to forcibly take away the properties of the company.Criminal proceedings had also been instituted against one of the Directors.Since May,1978 the Directors of the company found it difficult to carry on the business of the company effectively.The share -holders of the company,therefore,decided to wind up the business of the Company.On 13th July 1978,a unanimous resolution was passed at an extraordinary general meeting of the company that the High Court should be approached for the winding up of the company.The Managing Director and two other Directors were authorised to present a petition before this Court.Accordingly,Company Petition No.14 of 1978 was filed.The first petitioner therein was the New Kerala Chits and Trades(P)Ltd.The second petitioner was the Managing Director.Petitioners 3 and 4 were the Directors of the company.After the defects in the petition were cured,the petition was admitted on 22nd August 1978.Since another petition,CP.12 of 1978 had already been filed by a creditor for the winding up of the same company,the two petitions were directed to be posted together.On a separate application filed by the petitioners "Company Application No.431 of 1978,the Court appointed the Official Liquidator as provisional Liquidator.The Provisional liquidator was directed to take steps under section 456(1 -A)of the Companies Act to inform the concerned Executive District Magistrates to keep watch of the promises of the branches of the company situated in the different States and to take charge of the assets forthwith.The petitions for winding up stood posted to 23rd October 1978.On 23rd October 1978,the petitioners were directed to file a statement of all the moveable and immoveable properties of the company wherever situated and also to deliver all the books and papers up -to -date and also to file an affidavit.A statement of the affairs of the company as on date was also directed to be filed.Three weeks time was granted for the above purpose.The petition was adjourned from time to time and on 21st December 1978,since no statements or documents were filed,the court posted the case for disposal to 10th January 1979.Thereafter,it was adjourned to 22nd February 1979.On that day,the learned single Judge passed the following order: "The directions of this court are not complied with in spite of sufficient time being given.There is not even an excuse for this attitude.The company petition is therefore dismissed.Costs will await report of the provisional liquidator." The appeal is filed against this order.

(2.) The reports filed by the provisional liquidator would go to show that the articles available in some of the branches have been taken delivery of by the Official Liquidator.Directions were being issued from time to time on reports of the Official Liquidator regarding what he should do with the moveables.It was while the matter was stood like this that the court dismissed the petition.It is noted that CP.12/78 which was pending at the time the dismissal of the above petition was posted for disposal to 5th March 1979.Being not pressed,it was dismissed on that day.

(3.) The contention raised on behalf of the appellant is that the order of dismissal is not substainable in law.The argument is that once the company by its resolution decides to wind up and files a petition for that purpose,it is incum­bent that the Court should proceed with the winding up and it is not proper to dismiss the petition,for the default of its Directors.The further case put forward is that the ground on which dismissal is ordered is not one contemplated in law.It is pointed out that the Companies Act itself pro­vides the penalty for disobedience of orders of Court in relation to filing of statements by the Directors and the Court should have followed the said provisions instead of dismissing the petition itself.