TaxTMI 
TaxTMI 
1973 (1) TMI 51
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....of the company was found unsatisfactory on a scrutiny of the balance-sheet of the company for the period ending March 31, 1969. The company had been incurring losses since its incorporation. During the years ending March 31, 1966, March 31, 1967, March 31, 1968, and March 31, 1969, the company incurred losses of Rs. 24,173.42, Rs. 19,264.25, Rs. 8,341.40 and Rs. 10,602.61 respectively. The total losses of the company thus accumulated to Rs. 62,881.77 on March 31, 1969, as against the paid-up capital of Rs. 5,600 only. The net tangible assets of the company on March 31, 1969, were valued at Rs. 1,86,492.70 while the liabilities amounted to Rs. 2,44,409.47 leaving a deficit of Rs. 57,916.77. From these figures, which have been taken from the ....
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....ed January 1, 1971. That order was sent to the Registrar of Companies and has been produced in original and has been marked as exhibit P-17. The signatures of the Regional Director on this order have been proved by the witness. I, therefore, hold that the order granting sanction to the Registrar of Companies to file the winding-up petition is in order and issue No. 1 is decided against the respondents. Issue No. 2 : This is the crucial issue in the case. It has been stressed by the learned counsel for the petitioner that the balance-sheets of the company exhibit a very sad state of affairs and it is clear beyond doubt that the company has been incurring losses and is unable to meet its liabilities. It was, however, admitted by the onl....
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....rest 94,007.40 Total 5,80,787.40 Payments Refund 3,75,000.00 Prizes 75,000 00 Total 4,50,00000 Total income at the end of Scheme- 50 months 5,80,787.40 Less expenses 4,50,00000 Profit 1,30,787.40 Calculation in other similar EPS 1. 30x1 1,30,787.40 2. 10x1 43,595.80 3. 25x1 1,08,989.50 4. 10x2 87,191.60 5. 10x1 43,595.80 Gross profits after 50 months 4,14,16010 One year profit 1,03,540.10 Approximate expenses for one year 25....
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.... or frivolous. It is not a mere formality to receive the explanations from the company and dismiss them as unsatisfactory without getting the doubts cleared. If the position exhibited by the balance-sheet of a company only is considered to be a sound reason for filing a petition for its winding-up, the provisions made in sub-sections (5) and (6) of section 439 for sanction by the Central Government lose all meaning and significance. Something more is required to be gone into and that is why the provision for an explanation by the company has been enacted. The spirit of this provision was completely lost sight of by the Regional Director who passed his order granting leave to the Registrar of Companies to file the present petition mechanical....
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....he only witness for the petitioner has admitted that no creditor of the company has made any complaint to the Registrar's office from which it can be reasonably inferred that the company has not been able to meet its liabilities whenever they accrued. In order to determine whether a company is unable to pay its debts, the first matter to be considered is whether the company is able to meet its liabilities as and when they accrue due. Section 434 of the Companies Act enumerates the exigencies in which the company is deemed to be unable to pay its debts, and admittedly none of those exigencies are found in the present case. It has been admitted by Krishan Kumar, witness for the petitioner, that no complaint from any creditor of the company....
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.... a winding-up order is, therefore, not made out". Reference may also be made to the judgment of Harbans Singh J. (as my Lord the Chief Justice then was) in S. Krishnamurthy, Registrar of Companies, Punjab v. Rohtak Hissar Transport Company (P.) Ltd. [1966] 36 Comp. Cas. 9 , 14 (Punj.) to the following effect: ".... the mere fact that the company's assets are less than its liabilities is, by itself, no ground for sending the company to winding up. The test laid down is that the company should be commercially solvent which means that the company should be in a position to meet its liabilities as and when they arise". As I have said above, the only basis for the conclusion of the Registrar of Companies that the company is unable to pa....