TaxTMI 
TaxTMI 
1965 (9) TMI 37
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....osed in its balance-sheet ending 30th of June, 1962, the company is unable to pay its debts. The application was resisted, inter alia, on the ground that the company's position was sound and, in particular, after the demise of its previous managing director, the company has been put on a sound basis because the shares were now held by the members of the same family, being two brothers and their mother, that there were no longer any dissensions amongst the shareholders and that the expenses have been cut down and all the creditors are quite satisfied with the present working of the company which has started showing profits. It was further prayed that the citations may not be issued because that would adversely affect the credit of the compan....
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....vits of Kapur Chand and Fateh Chand to whom Rs. 4,983 were due were put in to the effect that they were quite happy with their investment. Out of the unsecured creditors, the affidavit of Gobind Ram was produced to the same effect. To him the company owed Rs. 5,000. The company also put on the record copies of its balance-sheets as on 30th of June, 1964, and 30th of June, 1965, which they had filed with the Registrar. Dharam Chand, accountant of the company, appeared as R.W. 3 and, inter alia, stated that in the general meeting of the company held on 22nd of February, 1965, the capital of the company was increased from Rs. 2,00,000 to Rs. 3,00,000, and that this additional capital of Rs. 1,00,000 was contributed in cash and has been paid....
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....exceeding Rs. 500 has served on the company a demand requiring the company to pay the sum so due which the company has failed to meet within three weeks thereafter, nor has any execution or process issued by a court in favour of a creditor against the company been returned as unsatisfied. Consequently, the company can be said to have been unable to pay its debts only if it is otherwise proved to the satisfaction of the court that the company is not able to pay its debts. The only argument of the learned counsel for the Registrar is that even the balance-sheets as on June, 1964, and June, 1965, disclose that the assets of the company are less than its liability and for that reason alone it is urged that it is a fit case in which the compa....
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....d at by adding this interest to the principal amount and then it is divided by the number of instalments. Thus, the interest, which, in fact, is to be paid over a period of 24 months, is treated as a liability of the company from the very beginning. Consequently, in the balance-sheet the pre-paid interest is always shown as assets. I feel the explanation given seems to be a reasonable one. However, even taking the assets at a figure of Rs. 2,90,000, these assets are short of the liabilities by nearly Rs. 1,76,000. The balance-sheet as on 30th of June, 1965, discloses a better financial position. On the side of the liability the following are the figures: Rs. (i) Secured loans 3,49,000 (ii) Unsecured loans 62,000 ....
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....to the witness box and categorically stated that they are happy with the working of the company, So far as the unsecurred creditors are concerned, no doubt, no meeting of theirs has been formally called and no resolution is before the court indicating what their position is. A document, which purports to be signed by 24 of the unsecured creditors, was placed on the record stating that they feel that their investments in the company are safe. This document ha3 not been properly proved and we do not know how these signatures were secured and by whom. However, although in 1964 a sum of Rs. 1,27,000 was due to the unsecured creditors, according to the latest balance-sheet the amount due to the unsecured creditors has been reduced to Rs. 62,000.....
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.... immediately. They are payable over a period of two years or so, during which, as the company is a working company, it can make profits and out of which it can meet its liability irrespective of the fact whether its assets are equal to its total liabilities, present and future. In A.C. K. Krishnaswami v. Stressed Concrete Constructions Private Ltd. was stated in the affidavit of the Registrar that as on 30th of June, 1962, the realisable assets were of the value of Rs. 5,51,253 as against the liabilities of Rs. 14,59,260, yet it was observed "but it does not necessarily follow from it that the company is unable to pay its debts. A company may have liabilities more than its assets; but still may have, in particular circumstances, the capacit....