1948 (2) TMI 22 - HC - Companies Law

Application to Convene Creditor and Shareholder Meetings Denied - Jurisdictional Issues Raised

The court denied the application under sec. 153 of the Indian Companies Act for convening meetings of creditors and shareholders to consider a proposed ... - Issues:1. Application under sec. 153 of the Indian Companies Act for liberty to convene meetings of creditors and shareholders to consider a scheme of arrangement for payment of debts.2. Depletion of company's assets due to withdrawals by depositors before the partition of British India.3. Proposed scheme of arrangement for gradual payment of debts.4. Company's financial status and assets in India.5. Concerns regarding the fairness and practicality of the proposed scheme.6. Jurisdiction of the Court to entertain the application due to the company's registered office being in Dacca.Analysis:1. The application under sec. 153 of the Indian Companies Act seeks permission for the company to convene meetings of creditors and shareholders to consider a scheme of arrangement for the gradual payment of debts. The company, facing financial difficulties due to significant withdrawals by depositors before the partition of British India, proposes a scheme outlining the payment schedule for various categories of creditors and shareholders.2. The company's financial strain resulted from the withdrawals of depositors, particularly those opting to leave for Pakistan post-partition. This led to a substantial depletion of the company's cash and liquid assets, further exacerbated by losses incurred due to the liquidation of another bank to which a significant sum was transferred.3. The proposed scheme of arrangement includes provisions for the payment of sundry liabilities, deposits up to a certain amount, and the restructuring of the board of directors. However, concerns arise regarding the practicality and fairness of the scheme, especially in light of the company's limited paid-up capital and the potential challenges in attracting new depositors under the proposed arrangement.4. The court scrutinizes the company's financial status and assets in India to assess the feasibility of the proposed scheme. A detailed analysis of the company's liabilities and assets in India reveals a precarious financial position, casting doubt on the sustainability of the scheme and the company's ability to meet its obligations effectively.5. The court expresses reservations about the fairness and practicality of the proposed scheme, emphasizing the need for a comprehensive assessment of the company's assets and liabilities, both in India and Pakistan. Concerns regarding the distribution of assets among creditors in different jurisdictions and the overall viability of the scheme prompt the court to reject the application.6. Additionally, the court deliberates on the jurisdictional aspect of entertaining the application, given the company's registered office in Dacca, outside the court's jurisdiction. While arguments are presented in favor of the court's jurisdiction, the court refrains from making a definitive ruling on this issue due to the rejection of the application based on the scheme's merits.In conclusion, the court denies the application for convening meetings of creditors and shareholders to consider the proposed scheme of arrangement, citing concerns about the scheme's practicality, fairness, and the company's financial standing. The judgment highlights the importance of a thorough assessment of a company's assets and liabilities in formulating a reasonable scheme and raises jurisdictional considerations regarding applications involving companies with registered offices outside the court's jurisdiction.