Patna High Court
Registrar Of Companies vs Bihar Wire And Wire Products Pvt. Ltd. on 9 April, 1974
Equivalent citations: [1975]45COMPCAS194(PATNA)
JUDGMENT Madan Mohan Prasad, J.
1. This is an application tinder Clauses (c) and (f) of Section 433 read with Sub-section (5) of Section 439 of the Companies Act, 1956.
2. It is said that the company, namely, Bihar Wire and Wire Products Private Ltd., was incorporated on the 7th July, 1958, as a private limited company. Its registered office is situated in Kadamkuan, one of the quarters of the town of Patna. The main object of the company was to carry on "business of steel melters, primary producers, re-rollers, wire drawers, iron founders, mechanical engineers, manufacturers of boot, shoe grindary, wire and wire products, suit case, etc. " The authorised capital of the company is Rs. 3,00,000 divided into 3,000 equity shares of Rs. 100 each. The subscribed and paid up capital is, however, Rs. 1,94,500 being the value of 1,945 equity shares of Rs. 100 each. There are only six shareholders of the company holding the aforesaid 1,945 equity shares. There are four directors, three of them owning 620 equity shares.
3. It is further said that the reserve and surplus of the company is nil. The company has not been doing any business and had suspended business for more than a year. On that account it has been suffering losses year after year. As per balance-sheet ending on the 30th September, 1967, the losses were Rs. 28,260. During 1967-68 alone it was Rs. 7,902 and odd. It is further said that the directors' report for the years in question clearly admit that the business of the company had been suspended and it had ceased to function. In this view of the matter, on the basis of the balance-sheet as on the 30th September, 1968, a notice was issued to the company asking it to show cause why the company should not be wound up. This notice was refused. The Registrar then asked the Regional Director to sanction the filing of an application on the facts aforesaid. The Regional Director issued a notice to the company to show cause. A reply was given which was, however, not found to be satisfactory and the Regional Director, therefore, accorded sanction for the filing of the application. Hence this application.
4. The company has entered appearance and resisted the prayer of the Registrar. It is said that although the company had not done the business stated above which has been termed as its main object, it had the hope of doing the business and that in fact in the year 1971-72 it had done some business as a result of which it had got some profit. The business carried on during the year is said to be "some manufacturing work " and " investing and dealing with the monies of the company not immediately required ", which also is said to be one of the objects of the company. The company is said to have advanced a sum of Rs. 2,84,711 to different debtors who have agreed to pay interest. These debtors are no other persons but the directors of the company themselves. The company has thus, it is said, only diverted its line of business because it was felt that the manufacture of wire products would not be a profitable business for the present.
5. In reply, the Registrar has placed some more facts, namely, that the company's business had remained suspended not only during the years 1966-67 and 1967-68, but even thereafter as would appear from the balance-sheet ending with September, 1969, 1970, 1971 and 1972. During these years the company had suffered losses respectively of Rs. 8,668, Rs 9,049 and odd and Rs. 15,349 and odd. The directors' report for these years would show that the business of the company had ceased to function. It is further said that the business of money-lending is not the main business of the company and besides that the investment of the amount had been made because they were not required for immediate use and that does not amount to carrying on business of money-lending. The balance-sheet would show that the company had got by way of interest a sum of Rs. 14,790 and that on this account there was a net profit of Rs. 7, 151 and odd. If the amount of interest were not taken into consideration, it is obvious that even during that year the company had suffered a loss of Rs. 7,639.
6. By a supplementary affidavit it is said by the company that all the shareholders and the directors of the company belong to one family and no outsider is interested in the company and all the shareholders want that the company should not be woundup.
7. The questions which thus arise are : (1) whether the company has suspended its business ; and (2) whether an order for winding up the company should be passed.
8. On the first point the facts are not much in dispute. It is not disputed that the company had suffered the losses mentioned above during the several years. The application was based on the balance-sheet as at the 30th September, 1969. There can be little doubt that the business of the company had ceased for more than a year as understood by the directors themselves. They had not done the work of manufacturing wire products or any other work within its objects during the period beginning with October, 1967, and ending with September, 1971. It will be relevant to mention that the report of the directors for the year 1966-67 said " prospect of the business does not seem bright and apart from selling out the finished goods of last year and together with negligible production of the current year by working the raw materials in hand, the company's production has almost stopped". For the period 1967-68, the report states " unlike previous years the business of the company has practically ceased to function". For the year 1968-69 it says exactly the same thing. Thereafter also the position does not appear to have improved. For the years 1969-70 and 1970-71, the reports say the same thing as above. It is also relevant to state that after the year 1966-67 the company did not have any production or sale. There can thus be little doubt that the business of the company had remained suspended during these years.
9. It is said by the company's directors that the business had remained so suspended because the Government had not granted the quota of raw materials and it was not then profitable to carry on the business of manufacturing wire products, etc., in the absence of a quota from Government. They were trying to obtain the quota and, in the absence of it, they had decided to purchase raw materials from the open market and carry on the business.
10. The fact that the company did business from 1958 to 1966-67 is not disputed. There appears to be a suspension of the business for four years. Again, the fact that the company did some manufacturing business in the year 1971-72, after having purchased raw materials from the open market, is not disputed by the petitioner. The balance-sheet as at the 30th September, 1972, shows that raw materials, namely, wire of the value of Rs. 5,000, have been consumed. The other expenses relating to production are wages to the extent of Rs. 500, factory expenses to the tune of Rs. 485.90 and machine hire of Rs. 500. It will thus appear that the company did some business of manufacturing wire products in the year 1971-72. The petitioner has, however, pointed out that even during this year the company had suffered a loss inasmuch as if the amount earned by way of interest were not taken into consideration there was loss to the company in its business to the extent of nearly Rs. 7,000. That is, however, another matter. The fact remains that the company did the business of manufacturing wire products.
11. Another business alleged to have been done by the company is the business of money-lending. It appears from the balance-sheet aforesaid that in the year 1971-72, tbe company had earned an interest of Rs. 14,790. It is, said on behalf of the company that Clause 10 of the memorandum of association (annexure "A") would show that one of the objects of the company is " to carry on the business of borrowing, raising or taking up money-lending or advancing money ..... " The question is whether the business alleged comes within the objects of the company. It is said in the petition filed by the company showing cause that "it is investing and dealing with the monies of the company not immediately required " (vide paragraph 11), It appears further from its own statements that the money which was not required for use, the business of the company having come almost to a standstill, was advanced to no other persons than the directors themselves. It is also significant that the company constitutes of only six members of the family and four of them are the directors. It is obvious thus that it is not the business of money-lending which the company has started. In fact it is not a business at all. It amounts merely to an arrangement, that the directors keep the money with them and give the company certain amount of interest on the money lying with them. The petitioner has alleged that they have thus diverted the business of the company to money-lending. It may, however, be mentioned that in none of the reports of the directors it has been stated that the company had decided to divert its business from manufacturing wire products to money-lending. In fact there is no evidence that money-lending has been started as a business by this company. Business requires actions in pursuance of a certain scheme and repetition of the action as such. If the company were able to show that it had been granting loans to several persons repeatedly as a result of a scheme in order to earn profit, it could very well say that it had diverted its business to money-lending. There is no such evidence in the present case. It is difficult, therefore, to say that the company has now started doing the business of money-lending as mentioned in the memorandum of association. In the view which I have taken I am supported by the decision in In re Metropolitan Railway Warehousing Co. Ltd., [1867] 17 LT 108.
In that case the question was whether the company had commenced its business within a year. The company had placed the greater part of the money which had been paid upon their shares on deposit at interest with a financial company. It was said that this amounted to doing a business which was one of the objects of the company. In that case also one of the objects was " to make, obtain, procure and negotiate deposits and advances of money ". Lord Justice Lord Cairns said in this respect :
" I think it is quite a misinterpretation of words to say that that was, in any shape, carrying on the business of the company. It is true that one of the objects of the company, in the midst of a great number of general matters, was to make, obtain, procure and negotiate deposits ; and it may very well be that the making of deposits would be entirely intra vires of the company, if such a making of deposits means something different from putting money at their bankers. Although that is one of the objects of the company it is impossible to say that it is a carrying on of the business of the company. "
12. The circumstances in the present case are more or less similar to those before his Lordship.
13. In the result, it must be held that the company had suspended its business during the years 1967-68 to 1970-71 and thus obviously for more than a year.
14. The next question is whether on this account an order for winding up the company should be passed. Clause (c) of Section 433 of the Companies Act provides that a company may be wound up if the company does not commence its business within a year or suspends its business for a whole year. The question as to what the expression "suspends its business" means has been discussed in In re Tomlin Patent Horse Shoe Co., [1886] 55 LT 314 Chitty J. said :
"Although there may be a suspension of the business of a company for the space of one year, the court will not make an order, under sob-section (2) of Section 79 of the Companies Act, 1862, to wind up the company unless it is satisfied that there has been an intention on the part of the company to abandon its business or inability to carry it on."
15. The learned judge said that the phrase " suspended its business " did not mean the same thing as that " business has been suspended ". He further said that "upon the question of intention the court will have regard to the opinion of the majority of the shareholders. " Reliance was placed on the decision in the case of Middlesborough Assembly Rooms Company, [1880] 14 Ch D 104 (CA). In that case the company had been incorporated in the year 1874 for the purpose of purchasing a Quakers Meeting House, converting it into assembly rooms and using and letting the rooms for any legal purposes productive of profit. The meeting house and some lands had been purchased plans for building obtained, a contract for excavating the grounds and bringing the building up to the level of the street had been entered into and carried out, but it was found that the completion of the building according to the plans would be more expensive than had been expected and the directors, therefore, took time to consider the plans. In 1876 there came in depression and it continued and, in view of this, the directors considered it desirable to wait for better times and as a result no steps were taken towards completing the building. A shareholder filed a petition for the winding up of the company on the ground that it had suspended its business for more than a year. The Vice-Chancellor passed an order of winding-up. Lord Justice Cotton said that if the petitioner " could satisfy the courts that the business of the company had been suspended on account of inability to carry it on or by reason of an intention to abandon the undertaking, the case would be very different. It is true that there is no evidence that the company will proceed with their building within any given time, but I cannot look upon the delay as arising from anything but a wish to wait for a time when the business can be carried on more profitably than at present." In this case the majority of the shareholders opposed the winding-up and this matter was also taken into consideration and the petition disallowed. In the case of Metropolitan Railway Warehousing Co., [1867] 17 LT 108Lord Cairns L.J. observed in respect of non-commencement of business as follows :
" Now it is to be observed that the Act of Parliament does not make the fact that the company has not commenced its business within a year from its incorporation anything in the nature of an offence, or an act which gives to the shareholders a vested right to say that the company shall be wound up."
And again :
" Now the scheme of the Act, as has often been observed before, is this : to assign under different heads certain acts, or certain sets of circumstances, which are to be taken as a test, or as evidence of the company being in a state in which the winding-up order ought to be made. These sets of circumstances are not laid down as absolutely leading to the winding-up of the company ; hut they are given as matters of evidence upon which the court, if it thinks that the evidence is sufficient, and is not in any way negatived, may act. Therefore, the court has perfect power to wind up a company which has not commenced its business within a year, but I apprehend that that is so if it thinks that the fact of its not having commenced business within a year is, in the circumstances of the case, a fair indication that the company has no intention of carrying on business, and is not likely so to do."
16. In the case of D, Davis & Co, Ltd. v. Brunswick (Australia) Ltd., [1936] 6 Comp Cas 227, 239, 240, 241 (PC) their Lordships of the Judicial Committee were considering the question as to whether it was just and equitable to wind up a company and observed :
"..... the decisive question must be the question whether at the date of the presentation of the winding-up petition there was any reasonable hope that the object of trading at a profit, with a view to which the company was formed, could be attained.....If there was at the relevant time a reasonable hope of tiding over the period of deep depression and of emerging into a region in which the company might reasonably expect to carry on at a profit, there would seem to be no sufficient reason why the court, regard being had to the essential character of the bargain made between the parties on the formation of the company, and considering the matter from much the same standpoint as if the company were a private partnership, should wind up the company under the just and equitable clause."
17. In respect of the question of the reasonable hope of trading at a profit in the future, their Lordships said :
" It is not the function of a court to determine such a matter on its own views as to probable success or failure, but to form the best opinion it can upon the evidence given by persons with a practical knowledge of the trade in question and the local conditions where these affect the matter."
18. It is not necessary to mention that the language employed by the Indian legislature in Clauses (c) and (f) of Section 433 of the Companies Act is absolutely similar to the language of the corresponding clauses of Section 79 of the English Companies Act of 1862, subsequently Clauses (3) and (6) of Section 129 of the English Companies (Consolidation) Act, 1908 [8 Edward VII, c. 69 (1908)], which is now Section 222 of the English Companies Act of 1948.
19. I now turn to some of the cases on the point of the Indian courts. In the case of 0. P. Basra v. Kaithal Cotton and General Mills Co. Ltd., [1961] 31 Comp Cas 461, 464 (Punj) the company had done no active business of any kind till the date of the petition and the question was whether it should be wound up on that ground. Tekchand J. held as follows :
" Where the past delay is sufficiently accounted for and where the court is satisfied that there is a likelihood of the business being resumed, it may not exercise its discretionary power against the company, but if the court is satisfied that no business has been or is likely to be commenced, it should pass an order for the winding-up of the company on the petition of the shareholders. Suspension of a business for a whole year is usually deemed as an indication of absence of intention to carry on the business, unless suspension has been satisfactorily accounted for."
20. In In re Cine Industries and Recording Co. Ltd., [1942] 12 Comp Cas 215 (Bom) Chagla J. held that a company ought to be wound up if the substratum of the company was gone and that it is deemed to be gone when the subject-matter of the company is gone or the object for which it was incorporated has sufficiently failed or it is impossible to carry on the business of the company except at a loss which means that there is no reasonable hope that the object of trading at a profit can be attained or the existing and probable assets are insufficient to meet the existing liabilities. In another case, Murlidhar Roy v. Bengal Steamship Co. Ltd., [1920] ILR 47 Cal 654, the company had suspended its business for some time and the question was whether it could be wound up on that ground. It was held that if the suspension of the business was satisfactorily accounted for, it did not prove that the objects of the company could not be fulfilled.
21. A long line of decisions on the point thus establish, among others, the following propositions of law :
(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 the 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 of the company commencing or resuming business and doing it at a profit, and whether the substratum of the company has disappeared.
22. There is yet another consideration in the matter of order for winding up and that is taking into consideration the wishes of the majority of the shareholders. In the case of Middlesbrough Assembly Rooms Company, [1880] 14 Ch D 104, 109 (CA) a shareholder had filed a petition for winding up. Majority of the shareholders opposed the winding-up. Lord Justice James said :
" But the Act directs the court to have regard to the wishes of the contributories. Here a great majority of the shareholders are opposed to a winding up, and desire to be left to manige their affairs for themselves. We ought not to disregard the wishes of so large a majority unless we see in their conduct something unreasonable, something like tyranny.
something amounting to an injury of which the minority have a right to complain."
23. In the case of Tomlin Patent Horse Shoe Co. Ltd.,[1886] 55 LT 314. also, Chitty J. held that upon the question of intention on the part of the company to abandon its business or inability to carry it on, the court will have regard to the opinion of the majority ot the shareholders. In the case of Metropolitan Railway & Warehousing Co., [1867] 17 LT 108 the majority of the shareholders were in favour of prosecuting the undertaking of the company and this was taken into consideration. In In re London Suburban Bank, [1871] 6Ch App 641 Lord Justice James refused a petition for winding-up as it could not be for the benefit of the company. In In re British Oil and Cannel Co., [1866] 15 LT 601. 29 out of 42 shareholders wished to continue the business and a compulsory winding-up was refused. In In re Suburban Hotel Co. [1867] 2 Ch App 737, 743 a petition for winding-up was made on the ground that the business had been discontinued for a year and that it could not be carried on at a profit. An overwhelming majority of the shareholders were in favour of going on with the company but an order for winding up was passed by the Vice-Chancellor. On appeal Lord Cairns L.J., commenting on the character of the contract into which the shareholders entered, said that :
".....subject to the wishes of the majority (of the shareholders) and subject to the occurrence of any of those tests which are mentioned in the Act, I apprehend that the contract means that the shareholders will supply the specified amount of capital for the purpose of carrying on the business as long as it can be carried on."
24. A few cases which may be noticed, on the other hand, lay down that the court is not bound by the wishes of the majority of the shareholders and a winding-up order may still be made if circumstances so compel. In In re Haven Gold Mining Company, [1882] 20 Ch D 151 (CA) it was held that where the substratum of the company for which the company was formed has substantially ceased to exist, the court will make an order for winding-up the company although the large majority of the shareholders desire to continue to carry on the company. In this case the company was established to work a gold mine and it turned out that it had no title to the mine and no prospect of obtaining possession. It was held that it was impossible to carry on the business for which the company was formed and the wish of the majority of the shareholders was, therefore, disregarded. In In re Tumacacori Mining Company, [1874] LR 17 Eq 534 the majority of the shareholders opposed the order for winding up, still such an order was made in the circumstances of the case.
25. It may be useful to refer to some decisions of the Indian courts as well on the point. In In re Standard Aluminium and Brass Works Ltd., AIR 1929 Bom 8, 10 11 a shareholder had filed a petition for winding up the company which had incurred heavy losses but it was opposed by a great majority of the shareholders who alleged that the loss was due to previous mismanagement of the company's affairs. The learned judge referred to the remarks of Kekewich J. in In re Bristol Joint Stock Bank, [1890] 44 Ch D 703 (Ch D) that :
".....in cases where a contributory petitions for winding up, two matters must from first to last be kept in view. The first is the unwillingness of the court to interfere with the shareholders in the management of their own affairs, including the question whether the business shall be continued or not, and the second is that there is, in fact, jurisdiction in an extreme case to wind up a company at the instance of a contributory, notwithstanding that he is not supported by a majority of the shareholders."
26. The learned judge then said :
" I doubt whether the court would be justified in interfering, so long as the company has, with the capital which remains, whether already paid up or still uncalled, a chance of producing profit in the way in which it was intended to be produced. If, however, the attainment of the objects of the company have become impossible or obviously impracticable, there would appear to be no reason why the court should not order a winding-up.
Similarly, where a majority of the shareholders are using their power unfairly, or where there is something in the management and conduct of the company which shows the court that the minority are being oppressed, it would be just and equitable to interfere."
27. In the case of F. G. Robson v. Dawsons Bank Ltd., [1932] 2 Comp Cas 371, 376 (Rang) Page C.J., while considering the effect of Section 174 of the Act of 1913, said :
" Of course the wishes of the majority of the creditors are not binding upon the court but in every case the court ought to give them serious consideration..... But whether the court ought to pass such an order depends upon the circumstances obtaining in each case."
28. In the case of M. A. J. Noble v. Bank of Burma Ltd., [1912] 17 IC 853 (Rang) the question related to appointment of an official liquidator. In this respect the wishes of the majority of the creditors were expressed. The learned company judge having considered the same did not accept it though it was pressed and reliance was placed on Section 140 of the Indian Companies Act of 1882. He said that there is no bounden obligation on the court to accept the same. There was an appeal against the said, order and the learned judges who heard the same said that Section 140 of the Act did not impose the duty of complying with the wishes of the majority. They placed reliance on the decision in In re London Quays and Warehouses Company, [1868] 4 Ch App 394 in which the appointment by the primary judge was upheld although opposed by the large majority of those interested.
29. The cases cited above thus clearly establish the proposition that in the matter of winding up the wishes of the creditors and contributories have to be taken into consideration and they have to be given due regard. If there be no other compelling reason and the majority of the shareholders wish to continue the business of the company an order for its winding-up would not be made. It is, however, equally true that the wishes of the majority of the contributories are not binding on the court and where there are other good reasons the court would disregard their wishes.
30. Learned counsel for the petitioner has urged that the decisions in the English cases are of no avail now because the provision of law asking the courts to have regard to the wishes of the creditors and contributories contained in Section 145 of the English Act of 1908 and Section 288 of the English Act of 1929 have been deleted from the subsequent English Act of 1948. This is based on a misreading of the Act of 1948. Section 149 of the English Companies Act of 1862 provided that the court will have regard in all matters of winding-up for the wishes of the creditors and contributories and to ascertain the same, may direct their meeting to be called. In the English Companies (Consolidation) Act of 1908, Section 145 provided as follows :
" The court may, as to all matters relating to a winding-up, have regard to the wishes of the creditors or contributories as proved to it by any sufficient evidence. "
31. There was a similar provision contained in Section 201 of the Act in respect of winding-up subject to supervision of court. Section 219 of this Act provided that the court may for the purpose of ascertaining such wishes direct a meeting of the creditors or contributories to be called. Then came the English Companies Act of 1929. The provisions of Sections 145 and 219 of the Act of 1908 came to be contained in Section 288 of this Act. It appears next that in the English Companies Act of 1948 Section 346 provided for the matter contained in Section 288 of the Act of 1929. It will be relevant to mention what is stated in Halsbury's Laws of England, 3rd edition, volume VI, at page 552, in paragraph 1064. In the footnote (r), it is stated as follows :
"Under the provisions of Section 149 of the Companies Act, 1862 (25 & 26 Vict. c. 89) and of Section 201 of the Companies (Consolidation) Act, 1908 (8 Edw. 7 c. 69), which with Section 145 and Section 219 of that Act were re-enacted by Section 288 of the Companies Act, 1929 (19 & 20 Geo. 5 c. 23) (now Section 346 of the Companies Act, 1948) (11 & 12 Geo. 6 c. 38), the court might have regard to the wishes of creditors or contributories in deciding between a winding-up by the court and a winding-up subject to supervision (see, e.g., In re West Hartlepool Ironworks Company, [1875] 10 Ch App 618) ; this was omitted from Section 288 of the Companies Act, 1,929 (19 & 20 Geo. 5 c. 23) and from Section 346 of the Companies Act, 1948 (11 & 12 Geo. 6 c. 38)....."
32. Similar is the argument with respect to the Indian Act. It is said that the provisions of Section 174 of the Act of 1913 have not been reproduced in the subsequent Act of 1956 and the decisions on this point are, therefore, of no avail. This contention is untenable. It appears that in the Act of 1882, there was a provision, viz., Section 140, in respect of ascertaining the wishes of the creditors and contributories in matters of winding-up and having regard for them. This was on the pattern of Section 149 of'the English Act of 1862. Section 174 of the Indian Companies Act of 1913 provided in exactly similar language what was contained in Section 145 of the English Act of 1908 and its corresponding provision in Section 140 of the Indian Act of 1882. It will further appear that the provision of Section 219 of the English Act relating to meetings of creditors and contributories was enacted in Section 239 of the Indian Companies Act of 1913. Section 223 of the Indian Companies Act of 1913 provided for the same thing as was provided in Section 201 of the English Act of 1908 relating to winding-up under supervision of court. Next came the Companies Act of 1956. It will appear that Section 557 of the Act provides for both the matters, namely, that the court will have regard to the wishes of the creditors and contributories, and, secondly, that the court may call a meeting for ascertaining their wishes. It will be useful to reproduce the provisions of Section 557 aforesaid :
" 557. Meetings to ascertain wishes of creditors or contributories.--(1) In all matters relating to the winding-up of a company, the court may--
(a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence ;
(b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the court directs ; and
(c) appoint a person to act as chairman of any such meeting and to report the result thereof to the court.
(2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor's debt.
(3) When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory. "
33. It will appear therefrom that it has amalgamated the two separate provisions contained in Sections 174 and 239 of the Indian Companies Act of 1913. The cases of the English courts and the Indian courts are, therefore, very relevant to the discussion.
34. In view of the provisions of Section 557 of the Companies Act, 1956, the court may have regard to the wishes of the creditors or contributories of the company. In the present case there are only six shareholders and they are the members of one family, four out of whom are the directors. The shareholders as a whole have filed an application before this court saying that they wish the company to continue. It is also clear from what has been stated earlier that there are no creditors of the company. The question is whether their wishes should be accepted and the prayer for winding-up refused.
35. The entire subscribed capital of the company is divided into 1,945 equity shares and these six shareholders have all the 1,945 equity shares of the total value of the subscribed capital. It is true that the company had to suspend its business for a few years. The explanation for this is that the Government did not allot them raw material and it was not profitable to carry on that business for some time. The directors have said that they are trying to obtain orders of Government for allotment of quota to the company. It appears next that they purchased raw materials from the open market in the absence of Government quota and restarted the business of manufacturing wire products in 1971-72. There is nothing to suggest that the company is insolvent or in debts. The losses have been there as stated earlier, but the shareholders of the company are willing to suffer those losses and hope to do business at a profit. There is nothing to suggest that it is not possible for the company at all or that there is no hope of the company doing business at a profit in the near future. It is also not clear from the mere suspension of business during the few years that the company had abandoned completely the idea of doing business. It seems that they were trying and waiting to get Government quota of raw materials which would have made the business profitable to them. It does not show that the company was not able to do business because of any other reason. As I have said earlier, the shareholders wish to continue the company and it is well settled that a court will be slow to interfere with the wishes of the shareholders in this respect unless there be some compelling circumstance against it. There is no allegation of any mismanagement by the company. It appears that no outsider is going to be affected by the company running at a loss or at a profit. It is only one family which is really concerned with it. It is thus not a matter of public interest. It is true that the Registrar of Companies has a right to make a petition for winding up a company if it has suspended business for a whole year. That does not, however, give him a vested right to have the company wound up. That gives the court the jurisdiction to order winding-up but the court is not bound to order winding-up merely because the business has been suspended. The actual suspension of business is merely an evidence which the court has to keep in mind. Considering all these matters there does not appear to me to be any compelling reason to order the winding-up of the present company.
36. There is yet another consideration which I have in view. If I were to order the winding-up of the company what would be the result ? The assets of the company would be taken over by the official liquidator, some money would be spent over the liquidation proceeding and ultimately the assets of the company would be distributed amongst the very six shareholders who are opposing the order of winding-up. Ultimately, therefore, it will mean only a waste of some money of the company over the liquidation proceeding with no benefit either to the shareholders themselves or to any third party. In view of all these circumstances, I think that the proper order in this case would be to refuse the prayer for winding-up. In my view, it would not be just or equitable either to order the winding-up.
37. Learned counsel for the petitioner has placed reliance on an earlier decision given by me in the case of Registrar of Companies v. Chauhan Brothers Industries Private Ltd., [1973] 43 Comp Cas 525 (Pat). I must state that during the hearing of that case reliance had not been placed on the provision of Section 557 of the Act of 1956 and the decisions bearing on the point, but even if it had been done I would not have taken a different view in the circumstances of that case which are very much different from the present one. In that case I had found that for more than ten years the company had not commenced its business. Secondly, the directors themselves had said in that case that they were not inclined to carry on any business. Thirdly, they were only hoping to start a new business but there was no data furnished or evidence produced to show that they would be able to undertake such a business. There was no satisfactory explanation for the non-commencing of the business for a long period of twelve years. It was further found that the company had the object of doing mining business but the colliery mines had been taken over by Government and the object of the company could not bs promoted in that respect. These distinguishing features are very important and the facts of that case are not on all fours with the present case and the decision given by me in that case is thus not of much avail in the present one.
38. Learned counsel for the opposite party raised another point that in the present case, the petitioner could not ask for winding up under Clause (f)--the just and equitable clause--of Section 433 of the Act. His objection is that the sanction given by the Regional Director was confined to an application under Clause (c) of Section 433 alone. It is unnecessary to go into the point in view of my decision to refuse the prayer.
39. In the result, this application is dismissed, In the circumstances of this case, there will be no order for costs.