UMA INVESTMENTS PVT. LTD. Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) The facts appear in the judgment. By this Judge's Summons, the State of Tamil Nadu (hereinafter referred to as "the State") seeks to vacate the ex-parte order dated Oct. 11,1974 and as modified by an order dated Oct. 14, 1974. The ex-parte orders were obtained under section 391(6) of the Companies Act, 1956, by M/s. Uma Investments Private Limited (hereinafter referred to as "the company") in an application filed by it under section 391 for sanction of a scheme of compromise with certain classes of creditors.

(2.) The background of the case is that the Company was incorporated on Jan. 13, 1965. The Registered Office of the Company is in Bombay. The authorised capital of the Company is Rs. 5,00,000 divided into 5000 Equity shares of Rs. 100 each and the subscribed and paid up capital is Rs. 1,00,000 divided into 1000 equity shares of Rs. 100 each. From its inception the Company carries on chit business. According to the Company, from the month of Oct. 1973, it faced financial difficulties and was unable to meet its requirements and particularly the amounts payable to the non-prized members at the termination of the chits. Several reasons are given. One of them is that in the States of Tamil Nadu and Kerala misleading and incorrect news items appeared. The newspaper "Dina Thanti" published in Tamil Nadu circulated false reports. Another cause was that the Company's discharged employees had spread imaginary and false stories among the public. The Company's Managing Director Acharath Vasu Appukutta Gupta was illegally detained for two days by the Police of Madras in connection with a subscriber's complaint to the police regarding a cheque for Rs. 50,000 towards his dues. For all these reasons, the members of the chits started demanding payment of their dues. Many of them took legal proceedings against the Company and obtained orders of attachment before judgment. In these circumstances, the Company's business and its liquid resources were seriously affected. The daily reports from the administrative office at Madras showed that every day many proceedings were adopted against the Company and attachment before judgment were obtained in many such proceedings.

(3.) In these circumstances, the Company has proposed a scheme of arrangement between itself and three classes of creditors, namely, (1) creditors who were subscribers to terminated chit groups, (2) creditors who are the subscribers of the existing chit groups, and (3) other general creditors of the Company. The said scheme, it appears, is restricted to the creditors in the States of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh and Maharashtra, excluding the State of Madhya Pradesh and West Bengal and Nagpur City where the Company intended to remain a going Company.