Calcutta High Court
East India Wires Limited vs Mohan Lal Ghosh on 11 April, 2003
Equivalent citations: (2003)2CALLT634(HC), [2004]118COMPCAS322(CAL)
Author: Ashim Kumar Banerjee
Bench: Ashim Kumar Banerjee
JUDGMENT A.K. Baneijee, J.
1. East India Wires Private Limited was incorporated in 1990. The founder directors were one Sitaram Poddar and the petitioner. The company was formed for the purpose of setting up a wire factory on a land belonging to the petitioner and his brothers. After the formation of the company the land was leased out by the petitioner and his brothers to the company. The company was incorporated on 18th August, 1990 and the lease was executed on 5th December, 1990. After the formation of the company and after the lease was executed the company applied for necessary Government permission and/or licence. On 20th May, 1992 the Government of West Bengal issued a provisional certificate for setting up the said factory. The validity of the said licence was extended on 24th May, 1994. On 22nd May, 1995 the petitioner resigned from the Board of Directors (the said fact was, however, disputed by the learned counsel appearing for the petitioner).
2. Dispute and differences arose between Poddars and Ghoshes which had resulted in Civil litigation being T.S. No 40 of 2000 pending before the 3rd Civil Judge, Alipore inter alia for recovery of possession of the land in question.
3. The petitioner made this application on 25th July, 2000 before this Court inter alia praying for winding up of the said company on two grounds:--
(i) The company had not commenced its business since incorporation.
(ii) The company had not complied with the statutory requirements by holding annual general meeting and by filing balance sheet and other statutory documents with the Registrar of Companies, West Bengal.
4. In support of the second allegation the petitioner had relied on a certificate issued by the Registrar of Companies on 18th April, 2000 appearing at page 33 of the petition to the effect that the said company had not filed any annual report and balance sheet since its incorporation. Opposing the said application the said Sitaram Poddar being one of the Founder Director filed an affidavit on behalf of the company. In the Affidavit-in-Opposition Poddar admitted the first allegation and contended that due to protracted litigation relating to the land in question the company could not commence its business. The other allegation of non-compliance of the statutory provisions was categorically denied by Poddar. The relevant paragraph of the Affidavit-in-Opposition in this regard is quoted below:--
The said company has maintained its accounts and audited balance sheets regularly. The said company has filed its statutory requirements with the Registrar of Companies, West Bengal till the year 1999. I shall crave leave to refer to the same at the time of hearing."
5. When the application was first heard by me on 9th January, 2003 in view of such categories denial on the part of the company in respect of the second allegation I directed the Registrar of Companies to submit a detailed report. Accordingly report was filed by the Registrar of Companies being dated 27th January, 2003. From the report it appears that the company after filing the said affidavit filed relevant statutory documents making up the default of the past years. All those statutory documents were field during the period 23rd January, 2001 to 30th October, 2002 save and except three documents with regard to form 18 which had nothing to do with the allegation made in the petition. Hence, upon perusal of the report of the Registrar of Companies. I am convinced that the deponent of the Affidavit-in-Opposition being Sitaram Poddar deliberately made untrue statement in the said Affidavit-in-Opposition.
6. Supporting the application Mr. Sabyasachi Chowdhury, learned counsel appearing for the petitioner, submitted that since the factum of non-commencement of business was admitted by the company the provision of Section 433(c) was attracted in the instant case. In support of his contention Mr. Chowdhury relied on three passages from Bucklay on Companies Act, 14th Edition which are as follows:--
The intention of the Board of Directors regarding continuing or discontinuing the business which the company is formed to carry on is immaterial to the question whether the substratum has gone."
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"Bubble company. If the company never had a proper foundation, and was a mere 'bubble company', it is just and equitable to wind it up."
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'The jurisdiction to wind up a company when it does not commence its business within a year from its incorporation or suspends its business for a year is discretionary, and is to be exercised only where this is a fair indication that there is no intention of carrying on the business. If the delay or suspension is satisfactorily accounted for, an order may be refused."
7. Mr. Chowdhury also relied on the decision of the Patna High Court reported in 45 Company Cases, page 194 (Registrar of Companies, Bihar v. Bihar Wire and Wire Products Pvt. Ltd.) as well as 48 Company Cases, page 611 (Kumarapuram Gopal Krisan Ananthakrishnan v. Burdwan-Katwa Railway Co. Ltd.). Reliance was also placed on the decision reported in 1969(1) Company Law Journal, page-296 (Rupa Bharati Ltd. v. Registrar of Companies). Relying on the aforesaid cases Mr. Chowdhury submitted that since the failure to commence business was an admitted fact this Court should pass an order of winding up under the provisions of Section 433(c) of the said Act, 1956. Mr. Chowdhury further contended that as on the date of filing of the petition admittedly the company did not comply with the statutory requirements. Subsequent compliance of the statutory requirements after the presentation of the petition was not at all relevant for the purpose of consideration of this application as the Court was to consider the facts and circumstances as on the date of presentation of the petition.
8. In the case of Bihar Wire and Wire Products (supra) Patna High Court considering various decisions formulated the proposition of law which is set out as follows:--
"1. That the mere fact that business has not been commenced within a year or that business has been suspended for a whole year or more by itself is not a ground for a Court to order winding up, although they give the jurisdiction to the Court to do so.
2. That it has to be found out whether that non-commencement or suspension of business was for some good reason accounting for it.
3. That the fact of non-commencement or suspension of business is an evidence which indicates that the company has no intention of carrying on business or that it is not likely to do so.
4. That the decisive question is whether there is a reasonable hope the company commencing or resuming business and doing it at a profit, and whether the substratum of the company has disappeared."
9. Winding up is absolutely a discretionary relief. In my view, the Court must use such discretion when the Court is satisfied that the existence of the company would cause immense prejudice to all concern. The order of winding up, in my view, is a death sentence given to a juristic person being corporate entry. Such death sentence should be given in a rarest of rare cases. If there is any slight hope of revival of the said company the Court must not use such discretion directing winding up of the company.
10. In the present case the company being a private limited company was formed by Poddars and Ghoshes to start a manufacturing unit on the land given by Ghoshes. It might be true that from 1990 to 2000 for about 10 years both Poddar Group as well as Ghosh Group did not effectively take any step either for commencement of business or for complying with the statutory requirements in law save and except obtaining a licence from the Cottage and Small Scale Industries as well as from the Professional Tax Authority. Both group accepted such situation till 1999. In 1995 Ghosh tendered his resignation. I have compared the signature of Ghosh along with the admitted signature in the petition. I do not find any scope of doubt in that regard. Mr. Chowdhury appearing for the petitioner also in his usual fairness did not seriously dispute the signature. He, however, contended that the said letter might have been typed out on a blank sheet of paper signed by Ghosh at the time of incorporation.
11. Be that as it may, on the date of filing of the petition there had been serious disputes between Ghoshes and Poddars resulting in a Civil Litigation pertaining to the said land in question. Hence on the date of filing of the petition the company was prevented from sufficient cause for setting up the factory on the land in question. More so, the petitioner was responsible for such obstruction as he and his co-owners initiated proceedings for eviction of the company from the said land in question. Hence, I am satisfied that there had been sufficient cause on the date of presentation of the petition which prevented the company from commencing business as on that date.
12. On the issue of non-compliance of the statutory requirements feel that the persons responsible for such compliance are punishable under the appropriate laws of the land and on the said ground alone the order of winding up should not be passed.
13. The matter can be viewed from another angle. The petitioner along with his co-owners filed litigation for eviction of the company and thereafter approached this Court for winding up the company. Hence, in my view, the winding up petition wad filed by the petitioner for collateral purpose inasmuch as if the company is wound up it would help the petitioner to obtain possession of the land in question without waiting for a decree from the appropriate Civil Court. If the order of winding up is passed today the petitioner would apply under Section 535 of the said Act 1956 for recovery of possession and in most likelihood the petitioner would be able to obtain such relief from this Court by way of summery proceeding.
14. Since I am convinced that the petition was made for such oblique purpose the petition should not be entertained. If the company wins the eviction proceeding it may commence its business on the said land in question for which the company was formed and this Court should not pass any order of winding up prior to the disposal of the eviction proceeding. If the order of winding up is passed today the resistance now faced by the petitioner in Civil Litigation would be absent.
15. Considering the above I do not feel it appropriate to admit the winding up petition. The winding up petition is thus dismissed.
16. There would be, however, no order as to costs.
17. This order of dismissal would however not preclude the petitioner from taking appropriate step for protection of his interest as a shareholder as well as co-owner of the land in question before the appropriate forum at the appropriate stage.
18. Before I conclude I wish to deal with two aspects which, in my view, should not be overlooked.
19. The relevant extract of the Affidavit-in-Opposition quoted (supra) would ex-facie show that the said statement was made by Sitaram Poddar knowing it to be untrue. Such deliberate untrue statement was made by the deponent to mislead this Court. Such statement of the deponent was completely belied by the report of the Registrar of Companies filed in Court. Mr. Pradip Ghosh, learned senior counsel appearing for the company, could not offer any sufficient explanation for such untrue statement. In my prima facie view, the deponent had not only committed perjury by adducing false evidence before this Court on oath but also had committed contempt of this Court by interfering with this Court of Justice by making deliberate untrue statement on oath before this Court. I, therefore, issue rule calling upon the said Sitaram Poddar having his office at 64, Sarat Bose Road, Kolkata to show cause why an appropriate proceeding should not be initiated against him for making such deliberate untrue statement in the affidavit and thereby causing interference with Court of justice. Such rule is made returnable 8 weeks hence before the appropriate Division Bench taking up such matters.
20. The Registrar of Companies accepted such belated returns as well as balance sheets and other statutory documents in 2001-02 being about 11 years after the date of commencement. Even then no proceeding had been initiated by the Registrar of Companies. At least report did not speak of any such proceeding. This act on the part of Registrar of Companies is deprecated by this Court. Registrar of Companies is directed to initiate proceeding against the defaulting Directors and Officers of the company at once.
Let a copy of this order be sent to the Registrar of Companies, West Bengal for taking appropriate action.
There would be stay of operation of this order for a period of 2 weeks from date.
Urgent xerox certified copy will be given to the parties, if applied for.
Winding up petition dismissed