TaxTMI 
TaxTMI 
1965 (1) TMI 16
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.... company on Wednesday, December 30, 1959. In the circular annexed to the notice, it was state that "your directors feel that they must advert to the facet that our principals, the Indian Sugar and Refineries Ltd., and the Salar Jung Sugar Mills Ltd., have unjustifiably and unaccountably with held commission accruing to us as from 1st January, 1959, and have not remitted any part of IT, in spite of repeated demands. We have, therefore, been put to inconvenience and have not been able to make our tax payments in time. The authorities have served on our principals notices for collection of out taxes from them". It was further added that "as on September 30, 1959, we compute that after making payment of taxes on our account to the Government, the balance payable to us by our principals will roughly amount to over Rs. 1,90,000. You will note that the disbursement of the proposed dividends to our shareholders will depend on our being able to collect outstandings from our principals." On December 30, 1959. a dividend was declared and it was resolved "that dividend of Rs. 100 per share (taxable) on the equity shares be paid to such shareholders as appear on the register of members as on d....
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....ividend was and the basis of his claim. He further gave a statutory notice under section 434 of the Companies Act, to pay the dividend of Rs. 1,750 within the space of 21 days, and also the sum of Rs. 7,605.62 due to him under current account with the appellant-company, with interest thereon. He also threatened that otherwise he would take further steps under section 439 of the Companies Act. On June 10, 1960, the company replied to this letter and reiterated that the company had not received some important documents including the minute books, from its previous directors and that his letter would be dealt with as soon as the books were received. On May 17, 1960, A.C.K. Krishnaswami made a similar demand for Rs. 11,620 in respect of 166 shares held by him on December 30, 1959. On the same date he demanded Rs. 6,300 in respect of 90 shares held by Factors Private Limited on December 30, 1959. On May 24, 1960, the managing director of the appellant-company replied to A.C.K. Krishnaswami demanding the return of minute books and other documents which were with him. By another letter addressed to A.C.K. Krishnaswami, Parasrampuria claimed that the 216 shares were purchased by him with t....
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....s relating to the incorporation of the company and the objects of the company, it was stated in the petition that the company was indebted to the petitioner in the sum of Rs. 1,750 being the net dividend amount payable on 25 equity shares and the petitioner applied to the company for payment of this debt by his notice of demand dated May 27, 1960, but the company had failed and neglected to pay the same or any part thereof. It was further alleged that the company was unable to pay its debts and the petitioner prayed that the appellant-company be wound up by the court under the provisions of the Companies Act. C.V. Ekambaram filed an affidavit supporting the petition. He alleged that the company had not paid Rs. 3,500 being the net dividend payable to him on 50 shares held by him. He asserted that the company had failed to pay in spite of his demand. A.C.K. Krishnaswami also filed an affidavit supporting the petition. He alleged that Rs. 11,620 being the net dividend payable on 166 shares held by him had not been paid in spite of demand. On September 14, 1960, C. Hariprasad, acting as a duly constituted agent of Mrs. Godavaribai, also filed an affidavit stating that the company was ....
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....conditions mentioned in the judgment. It is not necessary to refer to these conditions because nothing turns on them. Three appeals were filed before the High Court, O.S.A. No. 70 of 1962 by Factors Private Limited and A.C.K. Krishnaswami, O.S.A. No. 18 of 1962 by C. Hariprasad and O.S.A. No. 37 of 1962 by Mrs. Godavari Bai, against the judgment of Veeraswami J. These three appeals were disposed of by a common judgment on November 19, 1963. The Division Bench accepted the appeals and directed the winding up of the company on the ground of its inability to pay its debts, but at the same time directed that the order be kept in abeyance for a period of three weeks in order to enable the company to pay up the dividends to the two creditors, namely, A.C.K. Krishnaswami and C. Hariprasad, for the year 1959. No order as to the payment to Mrs. Godavari Bai was made as she had not made a statutory demand. It was further directed that in default there would be winding up of the company and further proceedings would ensue. The Division Bench of the High Court arrived at the following findings : (1) That Veeraswami J. erred in holding that so long as the company is commercially solvent, it c....
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.... should have ascertained the wishes of the other creditors and contributories ; (5) That section 433, read with section 434, gives a discretion to the court to wind up a company or not and the Division Bench should not have, on the facts of the case, ordered the winding up of the appellant-company ; and (6) that on the facts of the case it is clear that the debt was bona fide disputed by the appellant-company and that there were substantial questions about the invalidity of the resolution dated December 30, 1959, and the Division Bench should have dismissed the petition on this ground alone. As there is substances in the last contention of Mr. Pai, it is not necessary to deal with the other contentions. Mr. Pai put his case thus. Section 207 of the Companies Act, at the relevant time, required a company to pay dividend which had been declared within three months from the date of the declaration. It is obvious, he says, that a company cannot declare a dividend to be payable beyond three months. If it does that, the declaration would be a nullity. He further contends that such a resolution would not be severable. He then says that that is what has happened in this case. The resolu....