1940 (12) TMI 21

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.... Of the issued capital Rs. 2,84,870 has been subscribed. Rs. 7-8-0 per share has been called up. The applicant S.N. Bhaduri is a contributory of the company, being the holder of 50 partially paid shares. The application is supported by the Bihar Bank Ltd., which is the holder of 900 fully paid shares. The grounds on which it is sought to wind up the company are two, namely that the company is unable to pay its debts and that it is just and equitable that it should be wound up. Owing to the manner in which the case for the applicant was presented it has not been easy to to ascertain exactly how these grounds are supported. No evidence in support of the allegations in the petition for winding up was given. The learned advocate for the applica....

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.... items, it seems to me, should be taken into account in the present application as the company could not be called upon to pay these sums immediately. There remains therefore three items, namely, loans and advances (Rs. 66,850-12-10), claims outstanding (Rs. 13,492-8-0) and outstanding liabilities (Rs. 2,372-6-0). These amount to Rs. 82,715-10-10. On the asset side of the balance sheet are the following items : Loans, investments, furniture and fittings, motor-cars, library, stock of stationery, balances with agents, outstanding premiums, outstanding interest and deposits, sums remaining unadjusted and cash and bank balances. Now, as I understand the law, when the Court is asked to wind up a company on the ground that it cannot meet its ....

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....ble. Against the debts which the company might have to meet immediately, therefore, amounting to Rs. 82,715-10-10, the amount of cash available is Rs. 16,138-5-1 leaving a deficit of Rs. 66,577-5-9. Even if the amount due to the company on account of loans and unpaid premia and the balances with its agents be immediately available they will still be insufficient to meet this deficit. But on the subscribed capital of the company a sum of about Rs. 70,000 is due which has not yet been called up. The question is whether this should be taken into account in deciding whether the company can pay its debts. In In re National Live Stock Insurance Co. [1858] 53 E.R. 855, an application to wind up a company on the ground that it was unable to pay its....

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.... Where, at the relevant time, there is a reasonable hope of tiding over a period of difficulty and emerging into a region in which the company might reasonably expect to carry on at a profit, there is no sufficient reason why the Court should wind up the company under the just and equitable clause. There is no evidence from persons with practical knowledge of the business in question before me, the case having been founded entirely upon the balance sheet. In this connexion, it is relevant to observe that the Insurance Act of 1938 provides for the appointment of a Superintendent of Insurance whose duty it is to protect the interests of the policy-holders. The powers of a Superintendent are described in Section 33 of the Act. Under clause (5)....

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.... ... 17,962 12 6 Bad debt ... 52,926 2 0   The last item represents a sum misappropriated by a member of the firm of managing agents who has since been convicted of criminally misappropriating this amount. These three sums total Rs. 1,73,916-15-3. As the paid-up capital is only Rs. 1,79,403-3-0 it is contended that all but a sum of Rs. 6,000 of it has been "recklessly" dissipated. There is no proof as to the specific items on which the amount entered as 'organization expenses' has been expended. Whether the expenditure was reckless or not, as alleged in the petition, would appear to be a domestic matter which the share-holders were entitled to raise at the general meeting which adopted this balance sheet.....

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....servation it is argued that the amount in the present case charged as 'organization expenses' no longer represents an asset of the company. In the absence of evidence to show the items on which that money was expended, it is not possible to accept that contention. This is a comparatively new company formed for the purpose of carrying on the business of an insurer. Presumably such a business requires that foundations for success shall be laid in making contract with the public and building up public confidence. Money spent in this way is not, in my opinion, aptly described as "reckless" expenditure. To some extent at least it represents the goodwill which the company's building up and which is an asset. Since the share-holders have passed....