Creditors' voluntary winding up procedure must be complied with; remedial notices, creditors' meeting and suspension of liquidator's further action ordered.
Where statutory procedure for a creditors' voluntary winding up was not followed, the court directed remedial steps requiring immediate notice and advertisement, convening of a creditors' meeting, and directors to present a full statement of affairs with a list of creditors and estimated claims; the existing liquidator was restrained from progressing the winding up except to receive and remit premiums and to draw necessary funds to enable compliance, pending creditors' decisions on nomination of a liquidator and appointment of a committee of inspection. The court considered analogous English practice confirming liquidators subject to creditors' approval.
Issues: Whether, where the statutory procedure for a creditors' voluntary winding up (sections 209 and 209-A to H of the Companies Act) was not followed by oversight, the Court should direct remedial steps and suspend further winding-up proceedings pending compliance and a creditors' meeting.
Analysis: The Court examined the statutory distinction between a members' voluntary winding up and a creditors' voluntary winding up under section 203 and section 207 and the procedural requirements set out in sections 209 and 209-A to H, including the requirement to call and notify a meeting of creditors and the consequences for default in section 209-A(6). Noting that no specific provision prescribes the fate of the winding-up where the procedural default has occurred, the Court considered analogous practice under the English Companies Act, 1929, where courts have confirmed company-appointed liquidators subject to creditors' approval. The Court directed that notices and advertisement as required by section 206(1) be effected, that a creditors' meeting be convened, that the directors lay before the meeting a full statement of affairs and a list of creditors with estimated claims, and that the existing liquidator refrain from proceeding with the winding up except to receive and remit premiums, pending the creditors' decisions on nomination of a liquidator and appointment of a committee of inspection under sections 209-B, 209-C and 209-D to H.
Conclusion: The Court ordered remedial directions: a creditors' meeting to be held on 27th May 1940 with immediate notice and advertisement as specified; directors to furnish the creditors with a full statement of affairs and list of creditors and claims; directors to appoint one of their number to preside at the meeting; the present liquidator restrained from proceeding further except to receive premiums to be paid into the company's bank account; the liquidator permitted to draw funds to enable compliance with these directions; and the application adjourned for one month.
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