1959 (1) TMI 14 - Commissioner - Companies Law

Winding up of Tripura State Bank Ltd.: Costs borne by opposing contributory

The court ordered the winding up of Tripura State Bank Ltd., appointing State Bank of India as the official liquidator. The costs of the enquiry were to ... Winding up - Company when deemed unable to pay its debts and Winding up – Application for Issues Involved:1. Compliance with procedural rules for winding-up petitions.2. Validity of the demand notice for payment.3. Commercial insolvency and the financial position of the bank.4. Just and equitable grounds for winding up.5. Locus standi of the petitioner to file the winding-up petition.Detailed Analysis:1. Compliance with Procedural Rules for Winding-Up Petitions:The opposing contributory, Shri N.N. Roy, argued that the petition was not in accordance with the rules of the Calcutta High Court, which had been adopted by the Tripura Judicial Commissioner's Court. Specifically, the petition was claimed to be non-compliant with Form No. 11 or Form No. 12 and the affidavit not strictly in Form No. 13. However, the court found that the petition substantially complied with Form No. 12 requirements and the affidavit set out the necessary facts. The court condoned these irregularities, citing precedents like In the matter of Indian Companies Act, 1913 and Davco Products Ltd. v. Rameshwarlal Sadhani, which allow for condoning mere irregularities if the petition has been admitted and no objections were raised by the office.2. Validity of the Demand Notice for Payment:The demand notice was challenged on the grounds that the fixed deposit had not matured and the current accounts required presentation of cheques for withdrawal. The court acknowledged that the fixed deposit was not due for payment on the notice date, but current deposits could be withdrawn anytime. Despite the procedural irregularity in the demand notice, the court emphasized that the petitioner could still prove the bank's inability to pay its debts under section 434(c) of the Companies Act, 1956. The court held that the petitioner, as a creditor, had a valid claim and could rely on the bank's inability to pay its debts, supported by precedents such as Bukhtiarpur Bihar Light Railway Company Limited v. Union of India.3. Commercial Insolvency and the Financial Position of the Bank:The court examined whether the bank was commercially insolvent. Evidence showed that the bank had not engaged in new business for a long time and was unable to pay its debts, including those to the petitioner and other depositors. The auditor's report indicated that the bank's total liabilities exceeded its assets, with a significant loss recorded. The court concluded that the bank was commercially insolvent, as it could not meet its current demands, even though its assets might exceed liabilities if fully realized. This conclusion was supported by the manager's admission and the auditor's report, aligning with the principles in In the matter of Punjab Flying Club Ltd.4. Just and Equitable Grounds for Winding Up:The court considered whether it was just and equitable to wind up the bank. It noted that the bank had ceased doing new business and was incurring ongoing expenses without any prospect of recovery. The court found that the bank's substratum was gone, and there was no reasonable hope of it returning to profitability. The court referenced cases like Vanaspati Industries Ltd. v. Firm Prabhu Dayal Hari Ram and In re Cine Industries and Recording Co. Ltd., which established that a company must be wound up if it is commercially insolvent and has no reasonable prospect of recovery.5. Locus Standi of the Petitioner to File the Winding-Up Petition:At a late stage, the opposing contributory argued that the petitioner, Tripura Administration, was not the creditor of the bank as the amounts owed vested in the Union Government post-merger. The court dismissed this contention, noting that the local administration or bodies under it held the current deposits. The court also highlighted that the Tripura Administration, including the President and Chief Commissioner, was a separate entity from the Central Government under Article 239 of the Constitution. The court concluded that the Tripura Administration had the locus standi to file the petition, as it was a creditor of the bank.Conclusion:The court ordered the winding up of the Tripura State Bank Ltd., appointing the State Bank of India as the official liquidator. The costs of the enquiry were to be borne by the opposing contributory. The judgment emphasized the bank's commercial insolvency, procedural compliance, and the petitioner's legitimate standing, ensuring a thorough analysis of all relevant issues.