Judgment :- This is an application taken out by the official liquidator of Raka Corporation Private Ltd., under section 535(1) of the Companies Act, 1956, read with rules 11(b) and 263 of the Companies (Court) Rules, 1959. The applicant is seeking to disclaim a contract regarding the allotment of 11, 513 equity shares of Rs. 10 each in the Raka Chemicals and Food Products Limited, the respondents herein, which according to the applicant, is an onerous contract. The Raka Corporation Private Limited, hereinafter called the company, was directed by an order dated April 8, 1966, passed in Company Petition No. 54 of 1965, to be wound up. On November 18, 1966, the respondents called upon the applicant to pay a sum of Rs. 46, 052 being the first call at Rs. 4 per equity share of 11, 513 shares of Rs. 10 each, which, according to the respondents, were allotted and held by the company in liquidation. The applicant, in his letter, exhibit R-1 dated December 27, 1966, expressed certain administrative difficulties and stated that he was not still aware of the exact position as to the affairs of the company and requested the respondents to furnish details of the allotment of 11, 513 shares to the company in liquidation. He has also stated as follows "In the circumstances, in order to obtain the directions of the High Court in the matter after ascertaining the particulars of the investment of Raka Corporation in your company, I request you to extend the time for payment of the first call by two months from January 1, 1967, the date prescribed in the notice, under article 65 of your articles of association." * Apparently, on a reminder by the respondent company, the applicant again wrote exhibit R-2 dated February 17, 1967, stating that it will take some more time for him to examine the position with reference to the statement of affairs and asked for further time for payment of the first call towards the shares. The applicant points out certain discrepancies in the matter of the actual amount paid by the company to the respondents as and towards the share value; but this is a matter which is not very necessary for purposes of arriving at a conclusion in the main matter in controversy in this applicationThe applicant states in his report that the investment of 11, 513 shares of Rs. 10 each in the respondents is of no benefit to the company, its creditors or shareholders. The shares are not quoted in the stock exchange. According to him, the financial position of the respondents is far from satisfactory. There is no possibility of getting any return from the investment made. The applicant characterises the company as a holding company of the respondents and also avers that the company has been financing from time to time the respondent-company as well. After scrutiny of the statements of affairs filed by the ex-directors, the applicant states that the assets of the company are not sufficient to meet the claims of the creditors and as such, it is not feasible to make any further payment on calls to be made on the 11, 513 shares. The company has no sufficient funds even to pay its creditors in full and therefore the applicant is of the view that the future liability under the above contract is burdensome to the company. He therefore prays for permission to disclaim the onerous contract of the allotment of 11, 513 equity shares of Rs. 10 each in the respondents on which Rs. 2 per share has been paid up and Rs. 4 per share has been called up by the respondents The respondents in their counter affidavit state that the application for disclaimer is not maintainable as the applicant by his letters, exhibits R-1 and R-2, has asked for extension of time on the basis of his adoption of the contract. One other contention of the respondents is that it increased its share capital as it was obliged to do so when applying for a loan to the Madras Industrial Investment Corporation and that the allotment of shares made in favour of the company was directly connected with their attempt to secure a loan from the Madras Industrial Investment Corporation and therefore the Madras Industrial Investment Corporation is a necessary party as a person interested. Respondents do not seriously dispute the statement of the applicant that the financial position of the respondent-company is not sound, but throws the blame on the company which promised help but did not in fact render such help. Respondents do not seriously dispute the statement of the applicant that the financial position of the respondent-company is not sound, but throws the blame on the company which promised help but did not in fact render such help. The respondents also state that they are debtors to the company and if the disclaimer is allowed, the respondents will not be able to adjust the said amount from the amounts which they expected the company to pay to them as a result of the contract of allotment as above. Their contention is that this application seems to have been filed only for the purpose of claiming the moneys due by the respondents and disown the liabilities of the company to the respondents. They conclude by saying that the contract to take shares is complete and there is a legal obligation on the part of the applicant to respect the contractThe official liquidator in his further report in reply reiterates what he has stated in the opening affidavit and contends that the application is maintainable. He is emphatic that, as far as he could gather, no information is available from the records of the company about any application to the Madras Industrial Investment Corporation for a loan to the respondents and thus he states that the Madras Industrial Investment Corporation is not a necessary party. As the interests of the body of creditors of the company is paramount to him, he states that the company should not be further burdened with any liability arising out of the onerous contracts The main issue which arises, therefore, for consideration is whether the contract is onerous and whether the applicant by any act of commission or omission on his part precluded himself from filing this application for leave to disclaim the contract and whether the Madras Industrial Investment Corporation is a necessary party to this application If the Madras Industrial Investment Corporation, which is a public body, sanctioned a loan to the respondents on the foot of the company taking up shares in the respondents-company and without taking such other safeguards as are necessary for the advancement of the loan by them to the respondents-company, it is for the Industrial Investment Corporation to look to their interests; it appears to me that the Corporation has taken a heavy risk in making such investment. If a creditor advances moneys to a debtor on the representations made by the debtor along with persons who are interested in co-ordinating with him that they are financially sound and/or they would invest more moneys in the enterprise for which moneys were required from the creditor and if the creditor believes in the representations of the debtor and his confederates, it does not necessarily follow that the creditor would be a necessary party to proceeding in which the confederate who has become a bankrupt, seeks to avoid his obligation by adopting a process known to law. Under section 535(3), the court, before or on granting leave to disclaim, may require such notices to be given to persons interested. The official liquidator says that from the records made available to him, he could not gather any information about any application to the Madras Industrial Investment Corporation for a loan to the respondents. Factually also, there is no proof before me that any such representation was made by the company in liquidation and that the Corporation acted upon such a representation. The respondents have not taken any steps to file any document to substantiate their contention that the Corporation is a necessary party. They are pleading the cause of the Madras Industrial Investment Corporation without placing before the court such necessary and essential material to satisfy this court that the Corporation has sanctioned loan on the strength of the company's representations or any acts on their part. Wild averments in a counter affidavit stating that the Corporation is an interested person by themselves would not suffice to bring to court the Industrial Investment Corporation, who according to me, must have taken all necessary precautions at the time when they advanced the loan. The persons interested referred to in section 535(3) should be persons who are not only commercially interested, but should also be interested directly and substantially in the issue raised in the application for disclaimer. It is not easy to conceive that the Corporation, at the time of granting loan to the respondents, relied mainly on the anticipated shareholding of the company in the respondents-company. It is not easy to conceive that the Corporation, at the time of granting loan to the respondents, relied mainly on the anticipated shareholding of the company in the respondents-company. I am not satisfied, on the evidence placed before me, that the Madras Industrial Investment Corporation is a necessary party or a person interested within the meaning of section 535(3) of the Companies ActThe other contention of the respondents is that this application is not maintainable in law. They rely upon exhibits R-1 and R-2 and section 535(4) in support of their contention. Section 535(4) reads as follows "The Liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the court, given notice to the applicant that he intends to apply to the court for leave to disclaim; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, he shall be deemed to have adopted it." * There is an interdict on the liquidator to disclaim a contract if the liquidator after an application is made by any person interested in the contract requiring him to decide whether he will or not disclaim the contract within a period of twenty-eight days after receipt of the application, and the liquidator does not give notice of such application that he intends to apply to the court for leave to disclaim. Exhibits R-1 and R-2 which are the only documents filed before me by the respondents do not disclose by themselves that the respondents did make an application in writing under section 535(4) requiring the official liquidator to decide whether he will or will not disclaim. On the other hand, exhibits R-1 and R-2 taken together, would refer to a call made by the respondents on the applicant asking him to pay the first call towards the shares in question. On the other hand, exhibits R-1 and R-2 taken together, would refer to a call made by the respondents on the applicant asking him to pay the first call towards the shares in question. It does not appear to me that an application as such under section 535(4) has been made so as to evoke an answer one way or the other from the official liquidator. As the applicant was pressed and called upon to pay the call money, he requested for time to pay the same. But he took the precaution under exhibit R-1 to state that he would like to obtain the directions of the High Court in the matter after ascertaining the particulars of the investment of the company in the respondents. Even exhibit R-2, which refers to exhibit R-1, was a bare request to extend the time for payment of the first call by two months. These representations by the official liquidator cannot by themselves be equated to a non-disclaimer of the contract within the meaning of section 535(4). The deeming provision in section 534(4) of the Companies Act is not attracted resulting in the notional adoption of the contract by the liquidator. The matter, however, does not rest here. One has to look into section 535(1) of the Act to find out whether the application for disclaimer notwithstanding the writings as disclosed in exhibit R-1 and exhibit R-2 is maintainable by the official liquidatorSection 535 deals with disclaimer of onerous property, including contracts in case of a company which is being wound up. It says "Where any part of the property of a company (including a contract) which is being wound up consists of ...... unprofitable contracts; the liquidator of the company, notwithstanding that he has ...... done anything in pursuance of the contract, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property." * The corresponding section in the Companies Act of 1913 is section 230A. It does not contain this parenthesis "or done anything in pursuance of the contract". It does not contain this parenthesis "or done anything in pursuance of the contract". Whatever may be the reason for the omission of this clause in the old Act, the significant departure therefrom and the inclusion of the clause in the new Act has special signification and has to be fully given effect to. The company was wound up by an order dated April 8, 1966. The official liquidator has filed an application for disclaimer on March 7, 1967. This is well within twelve months after the commencement of the winding-up. The non-obstante clause in section 535 envisages that, although the liquidator has done anything in pursuance of the contract, it does not preclude him from applying to the court for disclaiming an unprofitable or onerous contract. I have already held that Exhibits R-1 and R-2 cannot be a pointer to the contention of the respondents that the liquidator should be deemed to have adopted the contract by requesting time for payment of the call money. Even if it were to be assumed that exhibits R-1 and R-2 might fairly lead to that conclusion, yet that act of omission or commission on the part of the liquidator does not prevent him from applying to the court under section 535(1) for disclaiming the contract. In my view, section 535(1) overrides 535(4). Notwithstanding the operation of the statutory fiction contemplated in section 535(4) to the effect that the liquidator should be deemed to have adopted the contract in the circumstances stated therein, yet section 535(1) enables him to apply to this court to disclaim the same provided he could satisfy the court that the contract is onerous, unprofitable and not for the benefit of the body of creditors. It may be that in certain circumstances the liquidator might have felt bona fide that a contract, though prima facie unprofitable, may be accepted by him and worked out. In the course of working out of the said contract, he might be confronted with various obstacles which he could not visualise at the time when he accepted the same or deemed to have adopted the same. In such circumstances, the liquidator is not helpless. Section 535(1) may be pressed into service by him. In the course of working out of the said contract, he might be confronted with various obstacles which he could not visualise at the time when he accepted the same or deemed to have adopted the same. In such circumstances, the liquidator is not helpless. Section 535(1) may be pressed into service by him. Even though the liquidator has done anything in pursuance of the contract, he may, with the leave of the court, disclaim the contract if he is able to satisfy that the contract has to be disclaimed in the manner provided for in section 535. I am therefore unable to accept the argument of the learned counsel for the respondents that this application is not maintainableThe last of the contentions essentially deals with the merits. The case of the applicant is that the contract is one which will not be of any benefit to the company, its creditors or shareholders. It is not in dispute that the financial position of the respondents-company is not very bright. These shares being those in a private limited company, cannot even be quoted publicly. The liquidator is positive that there is no possibility of getting any return from the investment and the future liability under the contract is bound to be onerous to the company and burdensome. Excepting for a certain self-serving statement in the counter affidavit, the respondents have not chosen to disprove such bona fide statements made by the liquidator in his report. The argument of the respondent that if the disclaimer is allowed, they will not be in a position to adjust the amount due and owing by the company is one without any substance. They are begging the question if such an argument were to be advanced in support of their contention that the disclaimer ought not to be allowed. Their case is that the contract is complete and therefore the company is bound to take up the shares. This again is an argument ad misericordiam and without any basis. Any contract which is found to be unprofitable and onerous, even if undertaken to some extent by the official liquidator can be disclaimed by the official liquidator with the leave of the court. This again is an argument ad misericordiam and without any basis. Any contract which is found to be unprofitable and onerous, even if undertaken to some extent by the official liquidator can be disclaimed by the official liquidator with the leave of the court. It is the official liquidator who is now in charge of the affairs of the company and it is to him that the court should look forward for any workable and practical suggestion in the matter of purchase of these shares. The official liquidator himself has certified in unqualified terms that it would be a heavy burden on the company if this contract were to be implemented and the burden if thrown on his shoulders, compelling him to purchase 11, 513 shares from a company which, according to him, is not having a solid foundation for its own working, there is no possibility of getting any returns from the investments made. As pointed out by Gower in Modern Company Law, second edition, at page 592, "Disclaimer is ......... a method whereby the members and the creditors as a whole benefit by ridding the company of something which, on balance, is a liability rather than an asset, thereby greatly facilitating the conclusion of the winding up." * As it is the duty of the official liquidator, as also of this court, to see that the interests of the body of creditors and the shareholders of the company have to be safeguarded in full and as this is the primary sine qua non for the court to accept the request of the official liquidator for a disclaimer of an onerous contract, I am satisfied that, on the evidence placed before me, the contract in question is certainly onerous and burdensome and to refuse to allow the disclaimer would clearly hamper the course of the liquidation and therefore leave should be granted to the applicant to disclaim the same. Accordingly, prayer 1 is ordered and leave granted to disclaim the same by September 30, 1967.