Amin Scales Limited and another vs. Md. Yakub, 39 DLR (AD) (1987) 201

Case No: Civil Appeal Nos. 57 and 58 of 1986

Court: Appellate Division ,,

Advocate: Mr. Md. Aftab Hossain,Syed Ishtiaq Ahmed,Mainul Hosein,,

Citation: 39 DLR (AD) (1987) 201

Case Year: 1987

Appellant: Amin Scales Limited and another

Respondent: Md. Yakub

Subject: Company Matter,

Delivery Date: 1987-03-08

Supreme Court of Bangladesh
Appellate Division
(Civil)
 
Present:
Badrul Haider Chow­dhury, J.
Shahabuddin Ahmed, J.
M. H. Rahman, J.
A.T. M. Afzal, J.
 
Amin Scales Limited and another
………..Appellants (In both the appeals)
Vs.
Md. Yakub
.……….Res­pondent (In both the appeals)
 
Judgment
March 8, 1987
 
Companies Act (VII of 1913)
Admission of a winding-up application—
The principle of law as to admission of a winding-up application is that mere filing of an application containing some allegation, such as failure of the company to pay its debts, is not sufficient for its admission along with publication of usual notices. Great care should be taken in admitting an application for winding-up. Admission of the application followed by usual notices in gazette and news-papers is likely to create alarm in the minds of all creditors of the company, divert its customers away and to paralyse its business. …… (7)
 
Cases Referred To-
Ellal Textile Mills Ltd., 38 DLR (AD) 26; Re Sulekha Works Ltd, AIR 1965, Cal. 98.
 
Lawyers Involved:
Syed Ishtiaq Ahmed and Khondkar Mahbubuddin Ahmed, Senior Advocates (Mahmudul Islam, Advocate with him) instructed by Sharifuddin Chaklader, Advocate-on-Record—For the Appellants (In both the appeals).
Mainul Hosein, Advocate (Md. Joynal Abedin, Advocate with him) instructed by Md. Aftab Hossain, Ad­vocate-on-Record—For the Respondent (In both the appeals).
 
Civil Appeal Nos. 57 and 58 of 1986
(From the judgment and order dated 7-8-86 & 3-9-86 passed by the High Court Division, Dhaka, in Company Matter No. 27 of 1986.)
 
JUDGMENT
Shahabuddin Ahmed, J.
 
1.         These two appe­als have been preferred by a private limited company against whom a proceeding for winding up, being Company Matter No. 27 of 1986 is pending before the learned Com­pany Judge of the High Court Division.
 
2.         An application for winding-up on the ground of non-payment of debt was filed by the respondent-petitioner, a businessman, on 29 July 1986 and it was admitted for hearing by the learned Company Judge by an order date 7 August 1986 and the matter was fixed for hearing on 3 September 1986. On the dated thus fixed a petition was filed by the company for dismissing the application for winding-up on the ground of bonafide dispute as to the alleged debt of the company, in the alternative, for staying all further proceedings of the matter including advertisement till disposal of a civil suit filed by the company against the respondent- petitioner in respect of the same claim of debt. The learned Company Judge by an order dated 3 September 1986 rejected both the prayers whereupon the company obtained leave from us and thereby preferred these two appeals challenging the order of admission of the winding-up application, as well as the order refusing to dismiss the application or to stay the proceedings.
 
3.         Respondent in his application for winding-up alleged that the company, Amin Scales Limited, took from him a loan of Tk. 48. 65 lacs in two instalments, the first instal­ment of Tk. 13.65 lacs and the second instal­ment of Tk. 35 lacs, for the purpose of his business of manufacturing and sale of scales on a promise to repay it within a short period. The company then issued two cheques, one dated 21-10-85 and the other dated 10-3-86, in favour of the respondent by way of repay­ment of the loan but both the cheques were dishonoured. Thereafter the company denied the liability altogether, whereupon the respon­dent served a notice under section 162 of the Companies Act upon the company and filed the application for winding-up.
 
4.         The company (respondent No.1) and its managing director (respondent No. 2) who were served with notice of the application entered appearance before the learned Company Judge and denied the debt by filing an affidavit-in-opposition, informed the court that they had already filed a civil suit, T.S. No. 216 of 1986, in the 3rd Court of Subordinate Judge against the petitioner for a declaration of nullity of his claim of loan and contended that in view of this bonafide dispute as to the claim itself the petition for winding up could not be admitted. The learned Company Judge, however, admitted the application for hearing but dispensed with the publication of the notice and advertisement in official gazette and news-media "at the present moment". On the date for hearing, that is, 3-9-86, the appellants reiterated their contention as to bonafide dispute regarding the alleged debt and pressed for either dismissing the winding up petition or for stay of further proceedings. The learned Company Judge took the view that when an application for winding-up had already been admitted for hearing it could neither be dismissed in limini nor could it be put into cold storage any longer, that is, farther proceedings of the matter could not be stayed sine die. The learned Judge rejected both the prayers and directed publication of usual notices in newspapers and official gazette.
 
5.         Syed Ishtiaq Ahmed, learned Advocate for the appellants, has drawn out attention to the plaint of the Title Suit No. 216 of 1986 in which the company and its managing director explained the circumstances in which the two dishonoured cheques, (Exts. A and B) as refer­red to above, were signed by the managing director on behalf of the company. In their plaint they explained that under an unofficial arrangement with the Manager of the Sonali Bank, Malibagh Branch, in which both the company and the respondent-petitioner had Accounts, temporary loans were raised by the bank manager for the company from different persons including the petitioner and for that purpose a signed cheque-book along with a signed letter-pad of the company were kept in custody of the bank manager so that he could issue necessary cheques as security against loans taken from different persons. The bank manager then acting in collusion with the respondent issued the two cheques to make out a false claim of loan; no money was received from the respondent in respect of these two cheques. The company and the managing director further explained that Receipt of the amount of Tk. 35 lacs (Ext. C.) was typed by the bank manager on the letter-pad containing the managing director's signa­ture. The appellants, however, admitted that a sum of Tk. 9,25,000/- (including interest) was taken as loan from different lenders including the petitioner and that they were ready to repay that amount only. They challenged all writings in the two dishonoured cheques and the receipt, Ext. C, as "forged" except the signatures of the managing director thereupon. In their affidavit they contended that the winding-up petition was filed to put pressure upon the company to satisfy the res­pondent's false claim. The learned Counsel for the appellants has contended that in view of these facts and materials the Company Judge ought to have held that there was a bonafide dispute as to the claim of debt and to have refused admission of the winding-up petition.
 
6.         Mr. Mainul Hosein, learned Advocate for the respondent, had contended that in view of the two dishonoured cheques and the rece­ipt containing admitted signatures of the man­aging director (Exts. A, B and C), particularly in view of admission of part of the claim, to the extent of Tk. 9. 25 lacs, the court was per­fectly justified in rejecting the contention as to bonafide dispute. The learned Counsel has also pointed out that the appellants filed the Title Suit after receiving the notice of the win­ding-up application.
 
7.         The principle of law as to admission of a winding-up application is that mere filing of an application containing some alle­gation, such as failure of the company to pay its debts, is not sufficient for its admi­ssion along with publication of usual notices. Great care should be taken in admitting an application for winding up, Admission of the application followed by usual notices in ga­zette and newspapers is likely to create alarm in the minds of all creditors of the company, divert its customers away and to paralyse its business. This Court made a similar obser­vation in Ellal Textile Mills Ltd., 38 DLR (AD) 26 in the following terms:
 
"The winding-up matter is a serious affair which is evident from the perusal of the entire Part V of the Act and in this connection the anxiety of the Privy Council in the case of unjustified winding-up order may be noticed. "
 
In Halsbury's Laws of England (Vol. 6, 538), as has already been referred to by Syed Ishtiaq Ahmed, it hus been stated that ''a winding-up order will not be made on a debt which is bonafide disputed by the company but the court must see that the dispute is based on a substantial ground; if here is a genuine dis­pute the petition may be dismissed or staved and an injunction may be granted restraining the advertisement of the petition".
 
8.         The learned Counsel for the appellants has submitted that in admitting this application for winding-up, the learned Company Judge did not specifically state that he had considered the appellants' contention as to a bonafide dispute regarding the debt. While admitting the application, the learned Judge dispensed with the concomitant advertisement "at the moment". This shows that the learned Judge was hesitant in admitting the matter in view of the disputed claim. As to the second order dated 3-9-86, the learned Company Judge observed that when the petition for winding-up was already admitted it could neither be dismissed in limini nor could the proceeding be stayed for an indefinite period. This obse­rvation, so far as the 'stay' is concerned, is not correct exposition of law regarding winding-up matter. For, even after admission of the application, if the court finds from materials submitted before it that there is a bonafide dis­pute regarding the debt or intention of the petitioner seeking winding-up is malafide, such as to pressurize the company into submission to an unjust demand or where the proceeding started is a clear abuse of the process of the court, then the court has got inherent jurisdi­ction to stay further proceedings till the dispute is adjudicated in a proper forum. The Court has also got inherent power to stay further proceedings "for ends of justice" irrespective of the fact that the application was rightly admitted for hearing. Similar views have been taken by Calcutta High Court in Re Sulekha Works Ltd, AIR 1965, Cal. 98, on which reliance has been placed by the learned counsel for appellants. In the instant case, in view of the covert transaction between the parties including the bank manager and partial admis­sion of the claim as well as tie admitted sign­atures of the company's managing director in Exts. A, B and C, it seems no interference is called for at this stage. But though it has been admitted the company court got necessary power even during the hearing to pass any order including order of stay of further proce­eding to meet the ends of justice. We do not find any ground to interfere with either of these two orders.
 
The appeals are dismissed without however any order as to costs.
 
Ed.