UNITED COMMERCIAL BANK Vs. JAGATIA PAPER MILLS PVT LTD

JUDGEMENT

(1.) THIS is a petition for winding up of the non -petitioner Company -M/s Jagatia Paper Mills Pvt. Ltd, filed by the UCO Bank.

(2.) BRIEFLY stated, the facts of the case are that the petitioner - -UCO Bank is a nationalised Bank and the non -petitioner Jagatia Paper Mills Pvt. Ltd., is a Company incorporated under the provisions of the Companies Act, 1956 (here in after referred to as the non -petitioner Company). The non -petitioner Company entered into a banking transaction with the Branches of the petitioner Bank at Bhilwara, Jauhari Bazar, Jaipur and Singapore and the Divisional Office at Jaipur. The non -petitioner Company requested the petitioner Bank for giving cash credit facility to it at Bhilwara Branch in the year 1983. This facility was sanctioned in the sum of Rs. 6 lacs. The non -petitioner accordingly executed necessary documents by way of security and collateral security for the purpose of payment of such outstanding as may remain unpaid. These documents were renewed on 29th June, 1985. At the time of renewal, the petitioner Bank bad executed on 29th June, 1985, confirmation letter acknowledging and admitting the balance as on 29th June, 1985, for a sum of Rs. 9,07,843.18 in favour of the petitioner Bank. By this letter, the respondent Mills also admitted as having given by way of hypothecation securities in respect of the properties as mentioned in Schedule A, to the said letter. There was also a letter of hypothecation by which the non -petitioner Mills agreed to hypothecate the goods and the movable property mentioned in the Schedule for the purpose of securing payment of any outstanding that may remain due and payable by it in favour of the petitioner Bank in the cash credit account. It is further stated by the Bank that as per the account books a debit balance of Rs. 6,19,854.34 remained outstanding against the respondent Company as on 1st January, 1986. Apart from the cash credit account, which the non -petitioner Company opened at Bhilwara Branch, it also applied for establishing letters of credit account at Singapore with one M/s Ringler PTE Limited, Suit 15D, Stamford House; 39, Stamford Road, Singapore 0617, as beneficiaries for the purpose of importing waste paper from Singapore with Ringler PTE Limited as Exporter Two letters of credit were established on the applications having been moved by the non -petitioner Company. One such application was moved by the non -petitioner Company on 22nd February, 1985, by which the non -petitioner Company requested the Bhilwara Beanch to arrange for establishing the letter of credit account, inter alia, with the following conditions: 8.1 Valid for final settlement March 31, 1985, 8.2 Negotiation until April 15, 1985, 8.3 Available by draft at 180 days from the date of Bill of Landing/ sight drawn at the said Mills for 100 percent of Invoice cost, which was supposed to be accompanied by certain documents including the bill of lading.

(3.) IT is, thus, submitted by the Bank that the non -petitioner Company is unable to pay its debt within the meaning of Section 434 of the Companies Act and, therefore, it is liable to be wound up. The petitioner Bank has also stated that the non -petitioner Company has lost complete substratum of its business and, there fore, also it is liable to be wound up.