The Judgment of the Court was delivered by

Gangadhara Menon, J.:— The appellants who are members of the Alleppey Chamber of Commerce, a Company incorporated in 1930 under the Travancore Companies Act on license under Section 28 of the Act, applied before the District Court of Alleppey in Company Petition No. 7 of 1951 to wind up the Company under Section 162(6) of the Indian Companies Act. The learned District Judge by his order dated 7-11-1951 dismissed their application. They have therefore come in appeal.

2. The objects of the Company as could be gathered from its Memorandum and Articles of Association are mainly to promote and protect the trade, commerce, agriculture and industries of Travancore by collecting and circulating information bearing on the subjects, to watch and protect the well-being of such interests, to adjust controversies between the members of the Association with the help of a court of arbitration to be formed and to do such other things as may be conducive to the extension of trade and commerce. It is also provided that the income and property of the association shall be applied solely towards the promotion of the objects of the association and no portion thereof shall be paid or transferred directly or indirectly to the past or present members. In 1947 the Company under Article 37(c) of its Articles of Association opened a department called the ‘Produce Section’ under its aegis and a set of bye-laws and rules were framed and a committee, duly elected under those bye-laws and rules, was constituted for the working of that department. The objects of the Produce Section as stated in the bye-laws are the following:

“(a) The Produce Section is formed under the aegis of the Alleppey Chamber of Commerce, subject to the objects of the Chamber as defined in its Memorandum, the main objects of the Produce Section are to promote, support and protect the character, status and interests of the merchants in general, and those engaged in Produce Trade in Particular, to define the customs and usages of such trade, and to make rules and regulations conducive to just and honourable practices therein, and to consider all questions affecting the interests of Produce Trade.”

“(b). To adjust controversies, to arbitrate upon and settle disputes of all kinds, to appoint arbitrators, umpires and experts, to make awards and decisions and generally to encourage and stimulate fair and honourable trading.”

“(c). To collect, print, publish and circulate satisfies and other information relating to the Produce Trade, and to do all such things necessary or conducive to the promotion of Produce Trade.”

3. One of the main functions undertaken by the Produce Section was to regulate, supervise and control what are known as Vaida contracts entered into by the members of the Chamber and to arbitrate in cases of disputes between the contracting parties in regard to the fulfilment of the terms of the contract and to give award and decisions which according to the bye-laws and rules are binding on the parties. These Vaida contracts usually related to cocoanut oil and pepper and they were known as “Satha” contracts in ordinary parlance.

4. The petitioner's case is that the conduct of these Vaida contract business through its Produce Section is now the main, if not the sole activity of the company, that these contracts are not genuine commercial contracts but are only dealings in differences in prices and therefore purely wagering contracts void under Section 30 of the Contract Act and further illegal in the town of Alleppey by virtue of the provisions of Travancore Public Gambling Act III of 1071. Thus according to the petitioners the business of the Travancore Chamber of Commerce is illegal, immoral and opposed to public policy and the company has virtually deteriorated into a house for mere gambling in prices. They therefore sought for winding up the Company under the Companies Act or in the alternative for winding up the Produce Section if it could be separated from the other departments of the Company. The Company to whom notice was given contended that there is nothing illegal, immoral or opposed to public policy in the activities of the company or that of its Produce Section, that the Produce Section is not carrying on any trade as such but only regulates the transactions between the members in relation to Vaida contracts, that the Vaida contracts are legal and valid that deliveries are intended to be made and are actually made in pursuance of such contracts and that it is only in cases of failure to deliver the goods as agreed upon or in cases of other disputes between the contracting parties that the committee gives awards and decisions which according to the rules the contracting parties are bound to obey.

5. It is seen from the bye-laws that the business of the Produce Section is managed by a committee with the President of the Alleppey Chamber of Commerce as its Chairman. The other members of the committee are elected annually from among the members of the Produce Section. Members of the Alleppey Chamber of Commerce who desire to join as members of the Produce Section are admitted to membership on payment of an admission fee of Rs. 25/- and an annual subscription of Rs. 5/-. These members enter into what are known as Vaida contracts for the purchase and sale of goods generally of copra, cocoanut oil and pepper. All such transactions are entered into on a party to party basis and the default or failure of other parties under no circumstances affects the rights of the contracting parties. It is stipulated that no more than two Vaidas could be transacted at any time by a member. All such contracts that are entered into between members are to be duly entered in the books of the brokers specifying the particulars of the produce, quality, time of delivery and the rate and the contracting parties in confirmation thereof execute documents evidencing the contract in approved contract forms and exchange the same. Such transactions are to be properly recorded in the prescribed Sotha sheets and filed in the office of the Produce Section. All the transactions are to be for minimum of ten candies or multiples of ten and the members who are entering into contracts have to make specified deposits which are called coupon deposits. Generally, these coupon deposits are refunded only after the expiry of the period for which the coupons are issued. It is stipulated that the delivery in respect of transactions for a Vaida is to be effected before the fifth day of the month succeeding the Vaida month. It is further stipulated that the delivery in all cases is ex-godown of the sellers. The Committee fixes the rate of settlement for clearance every Friday after the close of the business of that day. The rates fixed by the Committee and all the decisions made by the Committee in that behalf are binding on the contracting parties. The Vaida month begins from the first day of every month and ends with 25th day of the succeeding month and delivery is to be effected within five days thereafter at the last clearance rate fixed and for this purpose the seller has to tender delivery by sending the delivery order to the purchaser on the 28th itself. In the event of any dispute between the contracting parties in respect of the contracts or to the quality of goods or with regard to other matters relating to clearance, settlement etc., the committee has the power to decide the issues raised and the decision of the committee is final and binding on all the parties.

6. The above lines in which Vaida contracts are entered into and fulfilled by the parties indicate that these contracts are only forward contracts and that the Produce Section of the Chamber of Commerce is only regulating the business between its members by fixing the clearance rates and settling the disputes between the parties through a committee which functions as a domestic forum in respect of such matters.

7. It is however contended that the scheme as envisaged in the bye-laws and rules is only a camouflage that under cover of these bye-laws and rules which are apparently harmless the business that is carried on is a mere gamble in the rise and fall of prices. As stated by Farran, J. in the case reported in ‘J.H Tod v. Lakhmidas Purushotamdas’, 16 Bom 441.

“there is no law against speculation as there is against gambling. Contracts are not wagering contracts, unless it be the intention of both contracting parties, at the time of entering into contracts, under no circumstances to call for, or give delivery, from, or to, each other.”

8. In the case reported in ‘Sukhdevdas Ramprasad v. Govindass Chathurbhujadass & Co.’, AIR 1928 PC 30 the law is stated as follows:

“The mere fact that contracts are highly speculative is not sufficient in itself to render them void as wagering contracts; to produce that result there must be proof that the contracts were entered into upon the terms that performance of the contracts should not be demanded but that differences only should become payable.”

9. The real test therefore is the intention of partes at the time of the contract i.e, whether the intention is actual delivery of goods or it is only to pay a difference on or after the due date. The several documents produced by the counter-petitioners the genuineness of which was not questioned by the petitioners and which are referred to in detail by the learned Judge in paragraph 4 of his order show beyond doubt that actual delivery of goods was intended by the parties to the Vaida contracts and a large volume of genuine commercial business is being transacted through these forward contracts and whenever delivery was not effected complaints reached the committee regarding failure to deliver the goods in time and the committee interfered and settled the disputes between the parties. Moreover, it is admitted by one of the petitioners that actual delivery is contemplated as per these Vaida contracts. In paragraph 2 of the plaint in O.S 949 of 1951 filed by the present 4th petitioner and others it is stated as follows: (His Lordship quoted the original Malayalam extract: The Malayalam extract may be translated thus)

“As per the bye-law all Vaida business will have to be settled by the 25th of every month and on that day itself oil delivered or taken delivery of. If there is no stock of oil on hand the difference in price between the contract rate and ready rate as on the 25th should be paid or received and the matter closed in that month itself.”

10. In these circumstances it is not possible to infer that the Vaida contracts are not genuine commercial contracts under which delivery of the goods is contemplated and that the intention behind all these contracts is only to gamble in the rise and fall in prices of the commodities. It may be in some stray cases that the parties may never in fend to deliver goods at all but contemplate only to pay or take difference in prices only. This will be but a misuse of the scheme relating to the Vaida contracts envisaged in the bye-laws and rules of the Produce Section. But that in itself is not sufficient to conclude that the entire purpose behind the bye-laws and rules of the Produce Section is a mere gamble in the rise and fall of the prices of the commodities and that the company is privy to this sort of wager so as to justify the extreme step of winding up of the Company under Section 162(6) of the Companies Act.

11. Further from the admitted facts in this case we are inclined to think that the application to wind up the company is not actuated by any good faith. The Produce Section was started in 1947 and till September 1951 Vaida contracts have been entered into by different members and were treated as valid transaction by the contracting parties including the petitioners. The decision given by the committee in all matters relating thereto has also been accepted as binding. The trouble for the first time appears to have arisen on 24-9-1951 when the Secretary of the Produce Section in the exercise of the powers delegated to him closed the market for the day at 2-45 p.m fixing the clearance rate for oil at Rs. 707/- per candy. Protest was made by some members with regard to this decision. The committee met thereafter and finding that there was some artificiality in regard to the Vaida contracts entered on the 24th September 1951 declared those contracts void and also revised and fixed the clearance rate at Rs. 696/-. But even before the decision of the committee the petitioners Nos. 1, 3, 5 and another filed a suit on 25-9-1951 in O.S 920 of 1951 in the Alleppey Additional Munsiff's Court questioning the clearance rate that was fixed by the Secretary as arbitrary and claiming damages from the Alleppey Chamber of Commerce. Along with the plaint they filed an application for injunction to restrain the company from functioning. The court after hearing the parties rejected the petition on 27-9-1951, and allowed the Chamber to function as usual it however gave a direction that the coupon deposits standing in the name of the plaintiffs should be kept intact. Thereafter petitioners Nos. 2 and 4 and some others as plaintiffs filed another suit on 27-9-1951 in O.S 932 of 1951 and moved for an injunction to restrain the Alleppey Chamber of Commerce from dealing with the coupon deposits standing to the credit of the members having dealings with the plaintiffs in respect of certain Vaida contracts. This petition was also dismissed by the court. Then on 29-9-1951 petitioners Nos. 1, 2 and 3 along with two others moved an original petition in this court in O.P 100 of 1951 to restrain the company from distributing or otherwise dealing with the coupon deposits remaining with them. After issue of notice to the company and after hearing the parties this Court dismissed the petition. Thereafter on 1-10-1951 petitioners Nos. 2 & 3 along with another filed O.S 941 of 1951 in the Alleppey Munsiff's Court and moved for an injunction to restrain the Banks in which the money under the coupon deposits was deposited by the company from honouring the cheques issued from the Produce Section as well as the Alleppey Chamber of Commerce. Though the court granted a temporary injunction, on hearing the counter petitioners vacated the injunction order placing some restriction on the Banks in the disbursement of a specified sum including the amounts under the coupon deposits by the plaintiffs in that case. Not being satisfied with that result, the petitioners have now come forward with the present petition for winding up the Alleppey Chamber of Commerce.

12. It is worthwhile to remember that in all the above proceedings the petitioners proceeded on the basis that Vaida contracts are genuine commercial contracts valid in law and their complaint appears to have been that the clearance rate fixed by the Secretary and thereafter by the committee was arbitrary. Not a whisper was made in these proceedings that, in pursuance of these Vaida contracts delivery of goods is not intended by the parties. On the other hand as stated already in the plaint in O.S 949 of 1951 the 4th petitioner expressly stated that delivery was actually intended.

13. Having been frustrated in their efforts to bring pressure on the company to yield to their wishes the petitioners have now come forward on an altogether new ground quite inconsistent with the stand taken by them in prior proceedings that the Vaida contracts are wagering contracts and therefore the company is carrying on a business which is illegal, immoral and opposed to public policy. The motive behind this move is quite apparent. We are constrained to think that the petition absolutely lacks in good faith and that the petitioners are actuated by malice in their present attempt to have the company wound up.

14. As was observed in the ruling resorted in ‘Pioneer Bank Ltd., In Re’, 39 Bom 16: “There is no obligation on the Court to admit a petition merely because it is presented. Not only must a petition allege facts which if proved, would justify an order for winding up a company but even if it alleges such facts the Judge has a discretion to consider whether it is really bona fide.” For otherwise it will lead to irreparable injury to the company concerned. It may also leave the door open to unlimited opportunity for blackmail. The following observation in the case reported in ‘In Re A Company’, (1894) 2 Ch D 349 is relevant in this connection:

“When a petition against a company is presented ostensibly for winding-up order, but really for another purpose, such as putting pressure on a company, the Court has an inherent jurisdiction to prevent such an abuse of process, and will do so, without requiring an action to be commenced, by restraining the advertisement of the petition, and staying all proceedings upon it.”

15. We are therefore of the view that this is a fit case in which the petition has to be dismissed on this sole ground that it is not really bona fide. In the view that we take of the application before us, we do not think that there is any justification for remanding it to the lower court for further enquiry as prayed for by the appellants. We are convinced that the conclusions of the learned Judge are substantially correct and that his order calls for no interference. The appeal is therefore dismissed with costs. Advocates's fee Rs. 150/-.

B/R.G.D

16. Petition dismissed.