Madhusudan Gordhandas & Co. Vs.
Madhu Woollen Industries Pvt. Ltd.  INSC 297 (29 October 1971)
CITATION: 1971 AIR 2600 1972 SCR (2) 201
Companies Act (1 of 1956), ss. 433(c) and
557--Principles for ordering winding up of company.
The appellants filed a petition for winding
up of the respondent company, on the grounds : (1) that the company was unable
to pay the debts due to the appellants, (2) that the company showed their
indebtedness in their books of account for a much smaller amount, (3) that the
company was indebted to other creditors, (4) that the company was effecting an
unauthorised sale of its machinery, and (5) that the company had incurred
losses and stopped functioning, and therefore the substratum of the company
disappeared and there was no possibility of the company doing any business at
The High Court dismissed the petition.
Dismissing the appeal to this Court,
HELD : The rules for winding up on a
creditor's petition are if there is a bona fide dispute about a debt and the
defence is a substantial one, the court would not' order winding up.
The defence of the company should be in good
faith and one of substance. if the defence is likely to succeed on a point of
law and the company adduced prima facie proof of the facts on which the defence
depends, no order of winding up would be made by the Court. Further under s.
557 of the Companies Act, 1956, in all matters relating to winding up of a
company the court may ascertain the wishes of the creditors. If, for some good
reason the creditors object to a winding up order, the court, in its
discretion, may refuse to pass such an order. Also, the winding up order will
not be made on a creditor's petition if it would not benefit the creditor or
the company's creditors generally. [207 D, G-H;
208 C-D] (1) In the present case, the claims
of the appellants were disputed both in fact and in law. The company had given
prima facie evidence that the appellants were not entitled to any claim. The
company had also raised the defence of lack of privities and of limitation.
[208 D-F] (2) One of the claims of the appellants was proved by the company to
be unmeritorious and 'false, and as regards the admitted debt the company had
stated that there was a settlement between the company and the appellants that
the appellants would receive a lesser amount and that the company would pay it
off out of the proceeds of sale of the company's properties. [208 F-G] (3) The
creditors of the company for the sum of Rs. 7,50,000 supported the company and
resisted the appellants' application for winding up. [209 G] (4) The cumulative
evidence in support of the case of the company is that the appellants consented
to any approved of the sale of the machinery. As shareholders, they had
expressly written that they had no objection to the sale of the machinery and
the letter was issued in order to enable the company to hold an extraordinary
general meeting on the subject. The company passed a resolution authorising the
sale. The 256 Sup.Cl/72 202 appellants themselves were parties to the proposed
sale and wanted to buy the machinery. Where the shareholders had approved of
the sale it could not be said that the transaction was unauthorised or
improvident.[209 A-F] (5) In determining whether or not the substratum of the
company had gone, the objects of the company and the case of the company on
that question would have to be looked into.
In the present case, the company alleged that
with the proceeds of sale the Company intend to enter into some other
profitable business. Such as export business which was within its objects. The
mere fact that it had suffered trading losses will not destroy its substratum
unless there is no reasonable prospect of it ever making a profit in the
future. A court would not draw such an inference normally.
One of its largest creditors, who opposed the
winding up petition would help it in the export business. The company had not
abandoned the objects of its business. Their-,fore, on the facts and
circumstances of the present case it could not be held that the substratum of
the company had gone.
Nor could it be held that the company was
unable to meet the outstanding of any of its admitted creditors. The company
had deposited money in court as per the directions of the Court and had not
ceased carrying on its business. [211A-G] (6) On the facts of the case it is
apparent that the appellants had presented the petition with improper motives
and not for any legitimate purpose. The appellants were its directors, had full
knowledge of the company's affairs and never made demands 'for their alleged
debts. They sold their shares, went out of management of the company and just
when the sale of the machinery was going to be effected presented the petition
for winding up. [211 A; 212 A-C] Amalgamated Commercial Traders (P.) Ltd. v. A.
C. K. Krishnaswami & Anr., 35 Company Cases 456, London & Paris Banking
Corporation, (1874) L.R. 19 Eq. 444, Re. Brighton Club & Norfold Hotel Co.
Ltd., (1865) 35 Beav. 204, Re. A. Company, 94 S.J. 369, Re. Tweeds Garages
Ltd., (1962) Ch.406, Re. P. & J. Macrae Ltd., (1961) 1 All. E.R. 302, Re.
Suburban Hotel Co. (1867) 2 Ch. App. 737 and
Davis & Co.v. Burnswick (Australia) Ltd., (1936) 1 A.E.R. 299, and Mann
& Am-.v. Goldstein & Anr., (1968) 1 W.L.R. 1091, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1113 of 1970.
Appeal from the judgment and order dated
April 3, 1970 of the Bombay High Court in Company Appeal No. 1 of 1970.
V. M. Tarkunde, R. L. Mehta and 1. N. Shroff,
for the appellant.
M. C. Chagla and S. N. Prasad, for Creditors
Nos. 1, 3 to 6 and 10.
A. K. Sen and E. C. Agrawala, for creditor
The Judgment of the Court was delivered by
Ray, J. This is an appeal by certificate, from the judgment dated 3 April, 1970
of the High Court of Bombay confirming 203 the order of the learned Single
Judge refusing to wind up the respondent company.
The appellants are a partnership firm. The
partners are the Katakias. They are three brothers. The appellants carry on
partnership business in the name of Madhu Wool Spinning Mills.
The respondent company has the nominal. Capital
of Rs. 10,00,000 divided into 2000 shares of Rs. 500 each. The issued
subscribed and fully paid up capital of the company is Rs. 5,51,000 divided
into 1,103 Equity shares of Rs. 500 each. The three Katakia brothers had three
shares in the company. The other 1,100 shares were owned by N.C. Shah and other
members described as the group of Bombay Traders.
Prior to the incorporation of the company
there was an agreement between the Bombay Traders and the appellants in the
month of May, 1965. The Bombay Traders consisted of two groups known as the
Nandkishore and the Valia groups. The Bombay Traders was floating a new company
for the purpose of running a Shoddy Wool Plant. The Bombay Traders agreed to
pay about Rs. 6,00,000 to the appellants for acquisition of machinery and
installation charges thereof. The appellants had imported some machinery and
were in the process of importing some more. The agreement provided that the
erection expenses of the machinery would be treated as a loan to the new
company. Another part of the agreement was that the machinery was to be erected
in portions of a shed in the compound of Ravi Industries Private Limited. The
company was to pay Rs. 3,100 as the monthly rent of the portion of the shed
occupied by them. The amount which the Bombay Traders would advance as loan to
the company was agreed to be converted into Equity capital of the company.
Similar option was given to the appellants to
convert the amount spent by them for erection expenses into equity capital.
The company was incorporated in the month of
The appellants allege that the company
adopted the agreement between the Bombay Traders and the appellants. The
company however denied that the company adopted the agreement.
The appellants filed a petition for winding
up in the month of January, 1970. The appellants alleged that the company was
liable to be wound up under the provisions of section 43 3 (c) of the Companies
Act, 1956 as the company is unable to pay the following debts.
204 The appellants claimed that they were the
creditors of the company for the following sums of money :A.(a) Expenses
incurred by the appellants in connection with the erection of the plant and
machinery. . . Rs. 1,14,344.97 (b) Interest on the sum of Rs. 1,14,344.97 from
1 April, 1966 till 31 December, 1969 at 1% per mensem. Rs. 51,453.13 (c)
Commission on the sum of Rs. 1,14,344. 97 due to the appellants at the rate of
Ipercent per mensem from 1 April 1966 till 13 December,1969. Rs. 51,453.12 B.
(a) Compensation payable by the company to the appellants at the rate of Rs.
3,100 per month for 22 months and 14 days in respect of occupation of the
portion of the shed given by the appellants to the company on the basis of
leave and licence. . . Rs.69,600.00 (b) Interest on the amount of compensation
from time to time by the said company to the appellants till 12 April, 1967.
Rs. 7,857.00 (c) Further interest on compensation from 13 April, 1967 to 31
December, 1969. Rs. 21,576.00 C. (a) Invoices in respect of 3 machines. Rs.
85,250.00 (b) Interest on Rs. 85,250 Rs. 37,596.00 (c) Commission at the rate
of 1% per cent or Rs.85,250 Rs. 37,596.00 The appellants alleged that the
company failed and neglected to show the aforesaid indebtedness in the books of
account save and except the sum of Rs. 72,556.01.
The other allegations of the appellants were
these. The company incurred losses upto 31 March, 1969 for the sum of Rs.
6,21,177.53 and thereafter incurred further losses. The company stopped
functioning since about the month of September, 1969. The company is indebted
to a Director and the firms of M/s Nandkishore & Co. and M/s Bhupendra
& Co. in which some of the Directors of the company are interested.
The in-, debtedness of the company to the
creditors including the appellant's claim as shown by the company at the figure
of Rs. 72,556.01 is for the sum of Rs. 9,56,829.47. The liability of the
company including the share capital amounted to Rs. 14,98,923.3 3. The
liability excluding the share capital of the company is Rs.
9,56,829.47 and the assets of the company on
the valuation put by the company on the balance sheet amount to Rs.
8,81,171.96. The value of the current and
liquid assets is about Rs. 2,74,247.38. The appellants on these allegations
alleged that even after the proposed sale of the machinery at Rs. 4,50,000 the
company would not be in a position to discharge the indebtedness of the
company. The proposed sale, of machinery for the sum of Rs. 4,50,000 was at a
undervalue. The market value was Rs. 6,00,000. The Board did not sanction such
It was alleged that the substratum of the
company disappeared and there was no possibility of the company doing any
business at profit. The company was insolvent and it was just and equitable to
wind up the company.
205 When the petition was presented to the
High Court of Bombay the learned Single Judge made a preliminary order
accepting the petition and directing notice to the company. When the company
appeared all the shareholders and a large number of creditors of the company of
the, aggregate value of Rs. 7,50,000 supported the company and opposed winding
The company disputed the claims of the
appellants under all the heads save the two amounts of Rs. 14,650 and Rs.
36,000 being the amounts of the second and third invoices. The company
produced-books of account showing a sum of Rs. 72,556.01 due to the appellants,
as on 31 March, 1969. The company alleged that the appellants had agreed to
reduction of the debt to a sum of Rs. 14,850 and to accept payment of the same
out of proceeds of sale of the machinery.
The learned Single Judge held that the claims
of the appellants were disputed save that a sum of Rs. 72,556,.01 was payable
by 'the company to the appellants and with regard to the sum of Rs. 72,556.01
the company alleged that there was a settlement at Rs. 14,850 whereas the
appellants. denied that there was any such compromise. The learned Single Judge
refused to wind up the company and asked the company to deposit the disputed
amount of Rs. 72,556.01 in court.
The further order was that if within six weeks
the appellants did not file the suit in respect of the recovery of the amount
the company would be able to withdraw the amount and if the suit would be filed
the amount would stand credited to the suit.
The High Court on appeal upheld the judgment
and order and found that the alleged claims of the appellants were very
strongly and substantially denied and disputed.
The first claim for erection of plant and
machinery was totally denied by the company. The defences were first that the
books of the company showed no such transactions;
secondly, there was no privities between the
company and the persons in whose names the appellants made the claims;
thirdly, the alleged claims were barred by
limitation; and, fourthly, there was never any demand for the alleged claims
either by those persons or by ,the appellants. The alleged claims for interest
and commission were therefore equally baseless according to the defence of the
The second claim for compensation was denied
on the grounds ,that the appellants were not entitled to any compensation for
use of The portion of the shed 'and the alleged claim was barred by imitation.
As to the claim for compensation the company relied on the resolution of the
Board of Directors at which the Katakia brothers were present as Directors The
Board resolved 206 confirmation of the arrangement with M/s Ravi Industries for
use of the premises for the running of the industry at their shed at a monthly
rent of Rs. 4,250: Prima facie the resolution repelled any claim for compensation
or interest on compensation.
With regard to the claim of invoices the High
Court held that the first invoice for Rs. 34,600 was paid by the company to the
appellants. The receipt for such payment was produced before the learned trial
Judge. The appellants also admitted the same. As to the other two invoices for
Rs. 14,650 and for Rs. 36,000 the amounts appeared in the company's books.
According to the company the claim of the appellants was for Rs. 72,556.01 and
the case of the company was that there was a settlement of the claim at Rs.
The High Court correctly gave four principal
reasons to reject the claims of the appellants to wind up the company as
creditors. First, that the books of account of the company did not show the
alleged claims of the appellants save and except the sum of Rs. 72,556.01.
Second, many of the alleged claims are barred by limitation. There is no
allegation by the appellants to support acknowledgement of any claim to oust
the plea of limitation. Thirdly, the Katakia brothers who were the Directors
resigned in the month of August, 1969 and their three shares were transferred
in the month of December, 1969 and up to the month of December, 1969 there was
not a single letter of demand to the company in respect of any claim. Fourthly,
one of the Katakia brother was the Chairman of the Board of Directors and
therefore the Katakias were in the knowledge as to the affairs of the company
and the books of accounts and they signed the balance sheets which did not
reflect any claim of the appellants except the two invoices for the amounts of
14,650 and Rs. 36,000. The High Court
characterised the claim of the appellants as tainted by the vice of dishonesty.
The alleged debts of the appellants are
disputed, denied, doubted and at least in one instance proved to be dishonest
by the production of a receipt granted by the appellants.
The books of the company do not show any of
the claims excepting in respect of two invoices for Rs. 14,650 and Rs.
36,000. It was said by the appellants that
the books would not bind the appellants. The appellants did not give any
statutory notice to raise any presumption of inability to pay debt. The
appellants would therefore be required to prove their claim.
This Court in Amalgamated COmmercial Traders
(P) Ltd. v.A. C. K. Krishnaswami and Anr. (1) dealt with a petition to wind up
the company on the ground that the company was indebted to the petitioner there
for a sum of Rs. 1,750 being the net dividend (1) 35 Company cases 456.
207 amount payable on 25 equity shares which
sum the company failed and neglected to pay in spite of notice of demand.
There were other shareholders supporting the
winding up on identical grounds. The company alleged that there was no debt due
and that the company Was in a sound financial position. The resolution of the
company declaring a dividend made the payment of the dividend contingent on the
receipt of the commission from two sugar mills. The commission was not received
till the month of May, 1960.
The resolution was in the month of December-,
1959. Under section 207 of the Companies Act a company was required to pay a
dividend which had been declared within three months from the date of the
declaration. A company cannot declare a dividend payable beyond three months.
This Court held that the non-payment of dividend was bona fide disputed by the
company. It was not a dispute 'to hide' its inability to pay the debts.
Two rules are well settled. First if the debt
is bona fide disputed and the defence is a substantial one, the court will not
wind up the company. The court has dismissed a petition for winding up where
the creditor claimed a sum for goods sold to the company and the company
contended that no price had been agreed upon. and the sum demanded by the,
creditor was unreasonable (See London and Paris Banking Corporation (1). Again,
a petition for winding up by a creditor who claimed payment of an agreed sum
for work done for the company When the company contended that the work had not
been done properly was not allowed. (See Re. Brighton Club and Norfold Hotel
Co. Ltd. (2) Where the debt is undisputed the court will not act upon a defence
that the company has the ability to pay the debt but the company chooses not to
pay that particular debt (See Re.
A Company 94 S.J. 369). Where however there
is no doubt that the company owes the creditor a debt entitling him to a
winding up order but the exact amount of the debt is disputed the court will
make a winding up order without requiring the creditor to quantity the debt
precisely (See Re. Tweeds Garages Ltd. (3) The principles on which the court
acts are first that the defence of the company is in good faith and one of
substance, secondly, the defence is likely to succeed in point of law and
thirdly the company adduces prima facie proof of the facts on which the defence
Another rule which the court follows is that
if there is opposition to the making of the winding up order by the creditors
the court will consider their wishes and may decline to make the winding up
order. Under section 557 of the Company Act 1956 (1)  L.R. 19 Eq. 444.
(3)  Ch. 406.
(2)  35 Beav. 204.
208 in all matters relating to the winding up
of the company the court may ascertain the wishes of the creditors. The wishes
of the shareholders are also considered though perhaps the court may attach
greater weight to the views of the creditors. The law on this point is stated
in Palmer's Company Law, 21st Edition page 742 as follows : "This right to
a winding up order is, however, qualified by another rule, viz., that the court
will regard the wishes of the majority in value of the creditors, and if, for
some good reason, they object to a winding up order, the court in its
discretion may refuse the order'. The wishes of the creditors will however be
tested by the court on the grounds as to whether the case of the persons
opposing the winding up is reasonable; secondly, whether there are matters
which should be inquired into and investigated if a winding up order is made.
It is also well settled that a winding up order will not be made on a
creditor's petition if it would not benefit him or the company's creditors
generally. The grounds furnished by the creditors opposing the winding up will
have an. important bearing on the reasonableness of the case (See Re. P. &
J. Macrae Ltd.(1).
In the present case the claims of the
appellants are disputed in fact and in law. The company has given prima facie
evidence that the appellants are not entitled to any claim for erection work,
because there was no transaction between the company and the appellants or
those persons in whose names the appellants claimed the amounts. The company
has raised the defence of lack Of privity. The company has raised the defence
of limitation. As to the appellant's claim for compensation for use of shed the
company denies any privity between the company and the appellants. The company
has proved the resolution of the company that the company will pay rent to Ravi
Industries for the use of the shed. As to the three claims of the appellants
for invoices one is proved by the company to be utterly unmeritorious.
The companyproduced a receipt granted by the
appellants for the invoice amount. The falsehood of the appellants' claim has
been exposed. The company however stated that the indebtedness is for the sum
of Rs. 14,850 and the company alleges the agreement between the company and the
appellants that payment will be made out of the proceeds of sale. On these
facts and on the principles of law to which reference has been made the High
Court was correct in refusing the order for winding up.
Since the inception of the company Jayantilal
Katakia a partner of the appellants was the Chairman of the company until 22
August, 1969. His two brothers were also Directors of the company since its
inception till 22 August, 1969.
The Bombay group had also Directors of the
(1)  1 A.E.R. 302.
209 The company proved the unanimous
resolution of the Board at a meeting held on June, 1969 for sale of machinery
of the company. The Katakia brothers were present at the meeting.
The Katakia brothers thereafter sold their
three shares to the Valia group. The cumulative evidence in support of the case
of the company is not only that the Katakia brothers consented to and approved
of the sale of machinery but also parted with their shares of the company. The
three shares were sold by the Katakia Brothers shortly after each of them had
written a letter on 27 July, 1969 expressly stating that they had no objection
to the sale of the machinery and the letter was issued in order to enable the
company to hold an Extra-ordinary General meeting on the subject. The company
relied on the resolution of the Board meeting on 24 October, 1969 where it was
recorded that the Valia group would sell their 367 shares and 3 other shares
which they had purchased from the appellants to the Nandkishore group and the
appellants would accept Rs. 14,850 in settlement of the sum of Rs. 72,000 due
from the company and the company would make that payment out of proceeds of
sale of the machinery.
The Board at a meeting held on 17 September,
1969 resolved that the proposal of R. K. Khanna to purchase the machinery be
accepted. On 20 December, 1969 an agreement was signed between R. K. Khanna and
the company for the sale of the machinery. At the Annual General Meeting of the
company on 8 January, 1970 the Resolution for sale of the machinery was
unanimously passed by the company.
It is in this background that the appellants
impeached the proposed sale of the machinery as unauthorised and improvident.
The appellants themselves were parties to the proposed sale. The appellants
themselves wanted to buy the machinery at a higher figure. These matters are
within the province of the management of the company. Where the shareholders
have approved of the sale it cannot be said that the transaction is
unauthorised or improvident according to the wishes of the shareholders.
It will appear from the judgment of the High
Court that the creditors for the sum of Rs. 7,50,000 supported the company and
resisted the appellants' application for winding up.
There was some controversy as to whether all
the creditors appeared or not. At the hearing of this appeal the company gave a
list of the creditors and notices were issued to the creditors. Apart from the
appellants, two other creditors who supported the appellants were Ravi
Industries Ltd. whose name appears as one of the creditors as on 2 August, 1971
in the list of creditors furnished by the company and K. S. Patel & Co.
with a claim for Rs. 44,477.56 though their name does not appear in the list.
Among the creditors who 210 supported the company the largest amount was
represented by Nandikshore and Company with a claim for Rs. 4,95,999. The two
creditors who supported the claim of the appellants in regard to the prayer for
winding up were Ravi Industries Ltd. with a claim for Rs. 2,97,500 on account
of rent and K. S. Patel & Co. of Bombay with a claim for Rs.44,477.56. It
may be stated here that this claim of Rs. 44,477.56 was made on account of
erection work of machinery and this identical claim was included in the list of
expenses claimed by the appellants on account of erection work. The company
disputed the claim. The High Court correctly found that the appellants could
not sustain the claim to support winding up. It is surprising that a claim of
the year 1965 was never pursued until it was included as an item of debt in the
petition for winding up the company. With regard to the claim for rent, the
company pursuant to an agreement between the company and Ravi Industries
Private Ltd. credited Rowe Industries with the sum of Rs. 1,52,000 with the
result that a sum of Rs. 1,45,500 would be payable by the company to Ravi
Industries Ltd. in respect of rent. The company alleges that Ravi Industries
Pvt. Ltd. supported the company in the High Court and that they have taken a
completely different position ill this Court. In this Court the company has
also relied on a piece of writing dated 24 September, 1971 wherein Ravi
Industries Private Ltd.
acknowledged payment of Rs. 1,52,000 to Rowe
Industries Pvt. Ltd. and further agreed to write off the amount of Rs. 1,45,500.
Ravi Industries Pvt. Ltd. is disputing the same.
This appears to be a matter of substantial
dispute. The Court cannot go into these questions to settle debts with doubts.
Counsel for the appellants extracted
observations from the judgment of the High Court that it was never in dispute
that the company was insolvent and it was therefore contended the company
should be wound up. Broadly stated, the balance sheet shows the share capital
of the company to be Rs.
5,51,500, the liabilities to be Rs.
9,77,829.47 and the assets to be Rs. 8,87,177.93. The assets were less than the
liability by Rs. 90,000. Accumulated losses of the company for five years
appear to be Rs. 6,21,17.53. The plant and machinery which are shown in the
balance sheet at Rs. 6,07.544.58 are agreed to be sold at Rs. 4,50,000. There
would then be a short-fall in the value of the fixed assets by about Rs.
1,50,000 and if that amount is added to the sum of Rs. 90,000 representing the
difference between the assets and liabilities the shortfall in the assets of
the company would be about Rs. 2,50,000.
The appellants contended that the shortfall
in the assets of the company by about Rs. 2,50,000 after the sale of the
machinery would indicate first that the substratum of the company was 211 gone
and secondly that the company was insolvent. An allegation that the substratum
of the company is gone is to be alleged and proved as a fact, The sale of the
machinery was alleged in the petition for winding up to indicate that the
substratum of the company had disappeared. It was also said that there was no
possibility of the company doing business at a profit. In determining whether
or not the substratum of the company has gone, the objects of the company and
the case of the company on that question will have to be looked into. In the
present case the, company alleged that with the proceeds of sale the company
in-, tended to enter into some other profitable business. The mere fact that
the company has suffered trading losses will not destroy its substratum unless
there is no reasonable prospect of it ever making a profit in the future, and
the court is reluctant to hold that it has no such prospect.
(See Re. Suburban Hotel Co.(1); and Davis
& Co. v. Brunswick (Australia) Ltd. (2 ) The company alleged that out of
the proceeds of sale of the machinery the company would have sufficient money
for carrying on export business even if the company were to take into
consideration the amount of Rs 1,45,000 alleged to be due on account of rent.
Export business, buying and selling yarn and commission agency are some of the
business which the company can carry on within its objects. One of the
Directors of the Company is Kishore Nandlal Shah who carries on export business
under the name and style of M//'s. Nandkishore & Co. in partnership with
others. Nandkishore & Co. are creditors 'of the company to the extent of
Rs. 4,95,000. The company will not have to meet that claim now. On the
contrary, the Nandkishore group will bring in money to the company. This
Nandkishore group is alleged by the company to help the company in the export
business. The company has not abandoned objects of business. There is no such
allegation or proof. It cannot in the facts and circumstances of the present
case be held that the substratum of the company is gone. Nor can it be held in
the facts and circumstances of the present case that the company is unable to
meet the out standings of any of its admitted creditors. The company has
deposited in court the disputed claims of the appellants. The company has not
ceased carrying on its business. Therefore, the company will meet the dues as
and when they fall due. The company has reasonable. prospect of business and
Counsel on behalf of the company contended
that the appellants presented the petition out of improper motive.
Improper motive can be spelt out where the
position is presented to coerce the company in satisfying some groundless
claims made against it by the petitioner. The facts and circumstances of the
present case indicate that motive. The appellants were Directors. They sold,'
(1)  2 Ch. App. 737.
(2)  1 A.F.R. 299.
212 their shares. They went out of the
management of the company in the, month of August, 1969. They were parties to
the proposed sale. Just when the sale of the machinery was going to be effected
the appellants presented a petition for winding up. In the recent English
decision in Mann & Anr. v. Goldstein & Anr. (1) it was held that even
though it appeared from the evidence that the company was insolvent, as the
debts were substantially ,disputed the court restrained the prosecution of the
petition as an abuse of the process of the court. It is apparent that the
appellants did not present the petition for any legitimate purpose.
The appeal therefore fails and is dismissed
with costs. The company and the supporting creditors will get one hearing fee.
The amount of Rs. 72,000 which was deposited in court will remain deposited in
the court for a period of eight weeks from this date and if in the meantime no
suit is filed by the appellants within eight weeks the company will be at liberty
to withdraw the amount by filing the necessary application. In the event of the
suit being filed within this period the amount will remain to the credits of
V.P.S. Appeal dismissed.
(1)  1 W.L.R. 1091.