Loss of substratum in a banking company can justify winding up despite proposed changes to its objects and name.

A banking company that transfers its banking undertaking and thereafter carries on no substantive business may be treated as having lost its substratum, because the main object of the memorandum has ceased and only incidental activities remain. In that setting, winding up on just and equitable grounds may be justified. The note also states that proposed changes to the company's name and objects, especially where the special notice and explanatory statement appear deficient, do not necessarily defeat a winding-up petition or convert it into an abuse of process. The company's prior stance on voluntary winding up further supported rejection of the abuse argument.

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Issues: (i) Whether the company's substratum had disappeared and its banking business had ceased so as to justify winding up on just and equitable grounds. (ii) Whether the proposed continuance of non-banking activities and the special notice for changing the company's name and objects prevented the winding-up petition from being treated as an abuse of process.

Issue (i): Whether the company's substratum had disappeared and its banking business had ceased so as to justify winding up on just and equitable grounds.

Analysis: The company was a banking company governed by the Banking Regulation Act, 1949, and its memorandum was found to be framed within the limits of section 6 of that Act. The banking business was treated as the paramount and main object, while the remaining clauses were regarded as incidental or ancillary to that business. After transfer of the banking undertaking, assets and liabilities to another bank, the company did not carry on any substantive banking business and retained only the transfer consideration at call and short notice, which did not amount to carrying on an independent business of the kind contemplated by the memorandum or the special statute. On those admitted facts, the main business had gone and the substratum of the company was lost.

Conclusion: The substratum had disappeared and winding up was justified on just and equitable grounds in favour of the Petitioner.

Issue (ii): Whether the proposed continuance of non-banking activities and the special notice for changing the company's name and objects prevented the winding-up petition from being treated as an abuse of process.

Analysis: The proposed resolutions to change the company's name and objects were found, prima facie, not to conform to the statutory requirements governing special notice and explanatory statement. The company's own prior representations contemplated voluntary winding up after transfer of its banking business, and the later attempt to alter its position did not displace the conclusion that the company had already ceased to carry on its real business. In these circumstances, the petition was not viewed as a mere pressure tactic or as an abuse of the court's process.

Conclusion: The petition was not an abuse of process and the company could not rely on the proposed alterations to defeat winding up in favour of the Petitioner.

Final Conclusion: The company was ordered to be wound up, the petition was admitted, and advertisement directions were issued; stay was refused.

Ratio Decidendi: Where a banking company has transferred away its banking undertaking and thereafter carries on no real business within the scope of its statutory objects, the main object is lost, the substratum is gone, and winding up may be ordered on just and equitable grounds notwithstanding proposed alterations of name or objects.

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