Mahomed v Kazi's Agencies (Pty), Ltd and Others

• Jurisdiction: South Africa
• Judge: Hathorn JP, Carlisle J and Broome J
• Judgment Date: 03 December 1948
• Citation: 1949 (1) SA 1162 (N)
• Court: Natal Provincial Division

Broome, J.:

This is an appeal from two orders made by a single Judge (DE WET, J.), in the Durban and Coast Local Division. The first respondent company carries on business in Durban as general dealers and manufacturers' representatives. Its authorised and issued capital is £2,500 in £1 shares all of which are fully paid. 2,250 shares are held by M. A. Kajee, who is also a director and a creditor in the sum of about £7,200, and the balance by three other members of the Kajee family including E. E. Kajee to whom reference is made later. The company got into difficulties early in 1946 because of large purchases of goods which could not be realised at a reasonable margin of profit. As at 30th June, 1947, the company's accounts showed its stock at about £24,000 and its gross profit for the previous twelve months, on a turnover of about £37,700, at £262 only. A stock-taking on 25th November, 1947, showed the stock at about £13,000 and by 5th December, 1947, the trading since 1st July, 1947, has resulted in a gross loss of about £4,200. In these circumstances the third respondent, Desai, who is a creditor of the company in the sum of £2,000, instituted proceedings for judicial management and on 5th December, 1947, the judicial managers, who are the second respondents, assumed control

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under a provisional order which was made final on 19th January, 1948. The above facts as to the company's affairs are taken from the judicial managers' report under sec. 196 of the Companies' Act which is dated 28th February, 1948. The report also stated that the judicial managers were not satisfied that the company's books reflected its true position, that a complete investigation would require some time and would present some difficulty, that they were forced to the conclusion that during the period 30th June to 25th November, 1947, there was a deficiency in stock or cash of at least £4,000 in addition to any previous deficiencies, that they had not yet ascertained whether any disposition of property had been made which might be set aside under sec. 197, and that they understood that an offer of compromise was likely. An offer of compromise was in fact made and it is dated 23rd February, 1948. It was made by E. E. Kajee, a small shareholder in the company and a creditor in the sum of about £980, and was guaranteed by E. I. Kajee, a creditor in the sum of £150. The offer was to purchase the stock-in-trade and book debts for the sum of £4,000 payable in twenty equal monthly instalments as from 30th June, 1948, subject to the following conditions:

'(a)

That the costs of the application for an order placing the said company under judicial management, the costs of administration of the said company while under judicial management and the costs of any legal proceedings taken in terms of sec. 103 of Act 46 of 1926 to be paid out of the said sum of £4,000.

(b)

That thereafter the balance of the said sum of £4,000 be distributed pro rata among the creditors of the company.

(c)

That the offer is accepted in full and final settlement of their claims against the said company by all the secured and unsecured creditors or a majority in number thereof representing three-fourths in value, in which latter event, the offer is subject to the sanction of the Supreme Court of South Africa.

(d)

The order placing the company under judicial management is cancelled.

(e)

The creditors referred to in this offer are those who prove their claims with the judicial managers.'

This offer was circulated on 5th April, 1948, to the creditors who, when they received it, had already had an opportunity of studying the judicial managers' report which had been circulated to them on 19th March. On 22nd March the Durban and Coast Local Division made an order, at the instance of Desai, ordering the judicial managers to summon a meeting of creditors for the purpose of considering and, if thought fit, approving the compromise in terms of sec. 103. The meeting took place on 28th April when

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twenty-seven creditors to the value of about £17,000 voted for the acceptance of the offer and five creditors to the value of about £4,000 voted against it. The chairman of the meeting, one of the judicial managers, thereupon declared the offer duly accepted. In the meantime on 26th April, two days before the meeting, the Durban and Coast Local Division had granted a rule nisi, at the instance of the appellant Mahomed, calling upon all persons interested to show cause on 25th May why the judicial management order should not be cancelled and why the company should not be placed under compulsory liquidation. On the return date, viz. 25th May, there was also before the Court an application by Desai for an order sanctioning the compromise. Mahomed's application was opposed by Desai and Desai's by Mahomed, the two being heard together. The Court granted Desai's application and discharged Mahomed's rule for compulsory liquidation, and the correctness of these orders is the subject of the present appeal. It is common cause that the judicial management shall cease; the dispute is whether it is to be superseded by a compulsory liquidation, as the appellant Mahomed claims, or by an order sanctioning the compromise, as the third respondent Desai claims and as DE WET, J., decided. The active parties to the appeal are thus Mahomed and Desai. There was no appearance for the first and second respondents, the company and the judicial managers respectively.

Mr. Friedman, who appeared in this Court for Desai, took an objection in limine to the appeal being heard on the ground that no appeal lies against either order. In his argument he referred to all the relevant legislative enactments and...