Patna High Court
Registrar Of Companies vs Shreepalpur Cold Storage Private Ltd. on 21 September, 1973
Equivalent citations: [1974]44COMPCAS479(PATNA)
JUDGMENT Madan Mohan Prasad, J.
1. This is an application filed by the Registrar of Companies, Bihar, under Clauses (c) and (f) of Section 433 of the Companies Act, 1956.
2. It is said that the present company was incorporated on the 15th January, 1969, for the purpose of carrying on business of cold storage, preservation or confectionary concerns. The registered office of the company is situated at Waliganj in the town of Arrah in the district of Shahabad. There were only two directors of the company, one of them, Akshay Kumar Dubey, being the managing director. The last balance-sheet filed by the company was for the year ending 31st December, 1970. It would appear therefrom that the cash in hand which the company had at the relevant date was a sum of Rs. 1,073.80. It is said that the reserve surplus was shown to be nil. Further, that in the year 1969, there was no sale or income and that there was a deficit of Rs. 105 in respect of the first year since the incorporation of the company. In respect of the next and the last year the sale or income is shown to be nil. Further, it would appear that no profit and loss account had been filed when the balance-sheet aforesaid was filed and that the matter was taken up by the Registrar with the company but no reply thereto was received. It has further been stated that the company had not commenced its business within a year of its incorporation and that it had suspended its business for more than a year. Reference has been made to the note of the auditors which shows that although its building was being constructed on a land alleged to have been leased by the owner who is one of the directors, there was no lease agreement executed. It has further been stated that in a letter to the Registrar of Companies dated 8th December, 1971, the managing director had stated that the company was totally closed and that there was no hope of its functioning in the near furture. In such a situation, the Registrar made a prayer to the Regional Director, Company Law Board, to accord sanction for presentation of an application to the High Court for its winding up. The Regional Director issued notice to the company, but no representation was made on behalf of the company, and, accordingly, sanction was given and the present application has been filed.
3. Although several attempts were made to have the notices served on the company and its directors by personal service, the efforts of the petitioner could not succeed. Ultimately, service was made by publication of the notice in an English and Hindi daily newspaper. In spite of these steps there is no appearance either on behalf of the company or the directors concerned. This case has, accordingly, been heard ex parte.
4. The only question for consideration is as to whether an order of winding up the company should be made on grounds mentioned in Clauses (c) and (f) of Section 433 of the Companies Act, 1956.
5. Section 433(c) and (f) are in the following terms:
" A company may be wound up by the court,--......
(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;......
(f) if the court is of opinion that it is just and equitable that the company should be wound up. "
6. It is quite obvious from the facts stated earlier that although the company was incorporated in January, 1969, it did no business whatsoever within a period of one year and there was absolutely no income. Not only that, even in the next year ending December, i.e., in the year 1970, there was no income whatsoever. In the first year, there was an annual deficit of Rs. 105. It appears further that the building itself was under construction although there was no agreement of lease in respect of the land. These facts go to show that the company had not commenced its business at all within a year. In the circumstances of the present case it is not possible even to say that the company is likely to commence its business even hereafter. Taking the facts aforesaid along with the statement of the managing director in the letter to the Registrar mentioned earlier saying that the company was totally closed for about a year, i.e., since about 1970, and that there was no hope of its functioning in the near future, there can be no doubt of the fact that the company had not commenced its business within a year, that it had suspended its business and that there is no likelihood of the company carrying on its business in the near future.
7. Undoubtedly, therefore, the case is covered by the provisions of Clause (c) of Section 433 of the Companies Act, 1956.
8. When such a situation obtains, it is obvious that it would be fair and equitable to order the winding up of such a company in order to be able to protect the interest of the shareholders and others. The substratum of the company must be deemed to have disappeared in the circumstances of the case. In this connection I would refer to the cases of In re Cine Industries and Recording Co. Ltd., [1942] 12 Comp. Cas. 215 (Bom.) and 0. P. Basra v. Kaithal Cotton and General Mills Co. Ltd., [1961] 31 Comp. Cas. 461 (Punj.) These decisions have laid down the propositions that the substratum of the company must be deemed to have gone when : (a) the subject-matter of the company is gone, or (b) the object for which it was incorporated has substantially failed, or (c) it is impossible to carry on the business of the company except at a loss, which has been construed by the Privy Council to mean that there is no reasonable hope that the object of the trading at a profit can be attained, or (d) the existing and probable assets are insufficient to meet the existing liabilities.
9. In the present case the circumstances are telling and there seems to be no doubt that the company, as stated by its managing director, has been closed for more than a year, that there is no hope of its functioning in the future at all, that nobody seems to be interested in running the company and trading in its name. In this connection it may be mentioned that no representation was made to the Regional Director against the sanction asked for, and nobody has taken care to appear on behalf of the company or its directors to contest the present proceedings for winding up. The reserve surplus being nil, the company is not in a position to carry on its business either. Considering all these, I find that it is equitable, just and fair that the company be ordered to be wound up.
10. In the result I allow the application and appoint the official liquidator to take up and carry on with the work of liquidation. He should take charge of the assets and records of the company and proceed with the work of the company's liquidation.
11. In the circumstances of this case, the case being heard ex parte, there will be no order for costs.