PETITIONER:
\nNATIONAL CONDUITS (P) Ltd.<\/p>\n
Vs.<\/p>\n
RESPONDENT:
\nS. S. ARORA<\/p>\n
DATE OF JUDGMENT:
\n01\/09\/1967<\/p>\n
BENCH:
\nSHAH, J.C.
\nBENCH:
\nSHAH, J.C.
\nSIKRI, S.M.
\nSHELAT, J.M.<\/p>\n
CITATION:
\n1968 AIR 279 1968 SCR (1) 430
\nCITATOR INFO :
\nR 1983 SC1272 (22)
\nACT:
\nCompanies Act, (1 of 1956) Ss. 433 and 439–Compulsory wind-
\ning up–Petition admitted–Advertisement–If Court bound.
\nCompanies (Court) Rules, 1959, rr. 9, 24(2) and 96.<\/p>\n
<\/p>\n
HEADNOTE:
\nIn an appeal to this Court, the High Court’s view that on
\nthe admission of a petition under ss. 433 and 439 of the
\nCompanies Act, 1956 for compulsory winding up of a company,
\nthe Court is bound forthwith to advertise the petition, was
\nchallenged.
\nHeld: A petition for winding up cannot be placed for hearing
\nbefore the Court, unless the petition is advertised: that is
\nclear from terms of r. 24(2) of the Companies (Court) Rules,
\n1959. But that is not to say that as soon as the petition
\nis admitted, it must be advertised. If the petition is
\nadmitted, it is still open to the company to move the Court
\nthat in the interest of justice or to prevent abuse of the
\nprocess of Court, the petition be not advertised. Such an
\napplication may be made where the Court has issued notice
\nunder the last clause of r. 96, and even when there is an
\nunconditional admission of the petition for winding up. The
\npower to entertain such an application of the company is
\ninherent in the Court and r. 9 iterates that power. [432C-F]
\nIn re. A. Company (1894) 2 Ch. D. 349 applied.
\nLord Krishna Sugar Mills Ltd., v. Smt. Abnash Kaur A.I.R.
\n(1961) Punj. 505 approved.<\/p>\n
<\/p>\n
JUDGMENT:
\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 1082 of 1967.
\nAppeal from the judgment and order dated March 7, 1967 of
\nthe Delhi High Court in Company Appeal No. 3 of 1967.
\nA. N. Khanna and Harbans Singh, for the appellant.
\nP. C. Khanna and Maharaj Krishan Chawla, for the respon-
\ndent.
\nThe Judgment of the Court was delivered by
\nShah, J. The appellants private limited Company-is engaged
\nin the manufacture of electric conduit pipes. The respon-
\ndent who is a director of the Company presented a petition
\nin the High Court of Delhi under ss. 433 and 439 of the
\nCompanies Act, 1956, for an order for compulsory winding up
\nof the Company. The respondent claimed that it was “just
\nand equitable” within the meaning of s. 443(f) of the
\nCompanies Act, 1956, to make an order for compulsory winding
\nup, because one of the three factories of the Company had
\nbeen closed, that the accounts of the Company were not being
\nshown to the respondent, that no meeting of the Company had
\nbeen held, no balance-sheet had been prepared and a letter
\nof resignation purported to be signed 430
\n431
\nby the respondent had been forged. On July 18, 1966,
\nCapoor, J., directed that notice of the petition be issued
\nto the appellant Company. The order has not been formally
\ndrawn up, and it is not clear whether by that order it was
\nintended to call upon the Company to show cause why the
\npetition should not be admitted, or that by the order the
\npetition was admitted and notice under r. 96 of the
\nCompanies (Court) Rules, 1959 was issued.
\nThe appellant Company filed its reply controverting the
\nallegations made by the respondent. The Company also filed
\nan application that the winding up petition filed by the
\nrespondent be taken off the file and be dismissed and that
\nthe petition in the meantime be not advertised.H. R. Khanna,
\nJ., held that the appropriate remedy of the respondent on
\nthe allegations of mismanagement of the affairs of the
\nCompany and oppression of the minority shareholders by the
\ngroup of Anandi Lal was to file a petition under ss. 397 and
\n398 of the Companies Act. The learned Judge further held
\nthat the petition for winding up was instituted with a view
\n“to unfairly prejudice the interests of the shareholders of
\nthe Company”, respondent having set up a rival factory in
\nthe name of his son for manufacturing electric conduit
\npipes. The learned Judge directed that the petition be not
\nadvertised and be. dismissed.
\nIn appeal against the order passed by H. R. Khanna, J., the
\nHigh Court of Delhi held that under the Companies (Court)
\nRules, 1959, once a petition is admitted to the file, the
\nCourt is bound forthwith to advertise the petition. The
\ncompany challenges that order in this appeal.
\nRule 96 of “The Companies (Court) Rules, 1959” framed by
\nthis Court provides :
\n“Upon the filing of the petition, it shall be
\nposted before the Judge in Chambers for
\nadmission of the petition and fixing a date
\nfor the hearing thereof and for directions as
\nto the advertisement to be published and the
\npersons, if any, upon whom copies of the
\npetition are to be served. The Judge may, if
\nhe thinks fit, direct notice to be given to
\nthe company before giving directions as to the
\nadvertisement of the petition.”
\nRule 24 which relates to advertisement of petitions provides
\n“(1) Where any petition is required to be
\nadvertised, it shall, unless the Judge
\notherwise orders, or these, Rules otherwise
\nprovide, be advertised not less than fourteen
\ndays before the date fixed for hearing, in one
\nissue of the Official Gazette of the State or
\nthe Union Territory concerned, and in one
\nissue each of a daily newspaper in the English
\nlanguage and a daily newspaper in the
\nregional
\nlanguage circulating in the State or the Union
\nTerritory concerned, as may be fixed by the
\nJudge.
\n432
\n(2) Except in the case of a petition to wind
\nup a company, the Judge may, if he thinks fit,
\ndispense with any advertisement required by
\nthese Rules.”
\nWhen a petition is filed before the High Court for winding
\nup of .a company under the order of the Court, the High
\nCourt (i) may issue notice to the Company to show cause why
\nthe petition should not be admitted; (ii) may admit the
\npetition and fix a date for hearing, and issue a notice to
\nthe Company before giving directions about advertisement of
\nthe petition; or (iii) may admit the petition, fix the date
\nof hearing of the petition, and order that the petition be
\nadvertised and direct that the petition be served upon
\npersons specified in the order. A petition for winding up
\ncannot be placed for hearing before the Court, unless the
\npetition is advertised that is clear from the terms of r.
\n24(2). But that is not to say that as soon as the petition
\nis admitted, it must be advertised. In answer to a notice
\nto show cause why a petition for winding up be not admitted,
\nthe Company may show cause and contend that the filing of
\nthe petition amounts to an abuse of the process of the
\nCourt. If the petition is admitted, it is still open to the
\nCompany to move the Court that in the interest of justice or
\nto prevent abuse of the process of Court, the petition be
\nnot advertised. Such an application may be made where the
\nCourt has issued notice under the last clause of r. 96, and
\neven when there is an unconditional admission of the
\npetition for winding up. The power to entertain such an
\napplication of the Company is inherent in the Court, and r.
\nNothing in these Rules shall be deemed to
\nlimit or otherwise affect the inherent powers
\nof the Court to give such direction or pass
\nsuch orders as may necessary for the ends of
\njustice to prevent abuse of the process of the
\nCourt”,
\niterates that power. In in re. A. Company(1) it was held
\nthat if the petition is not presented in good faith and for
\nthe legitimate purpose of obtaining a winding-up order, but
\nfor other purpose such as putting pressure on the Company,
\nthe Court will restrain the advertisement of the petition
\nand stay all further proceedings -upon it. We may state
\nthat the High Court of Punjab in Lord Krishna Sugar Mills
\nLtd. v. Smt. Abnash Kaur(2) was right in ,observing that
\nthe Court in an appropriate case has the power to .Suspend
\nadvertisement of a petition for winding up, pending disposal
\nof an application for revoking the order of admission of the
\npetition, though we may hasten to state that we cannot agree
\nH.R. Khanna,, J., was apparently satisfied that the petition
\nwas not a, bona fide petition and the respondent in
\npresenting
\n(1) (1894) 2 Ch. D. 349.
\n(2) A.L.R. 1961 Punjab 505.
\n433
\nthe petition was acting with ulterior motive and his attempt
\nto obtain an order for winding up was “unreasonable”.Before
\nthe High Court directed that the petition for winding up be
\nadvertised,the High Court was bound to consider whether the
\nview expressed by H. R. Khanna,, J., was right.
\nFor reasons already set out, in our judgment, the High Court
\nerred in holding that a petition for winding up must be
\nadvertised even before the application filed by the Company
\nfor staying the proceeding for the ends of justice, or to
\nprevent abuse of the process of the Court. The view taken
\nby the High Court that the Court must, as soon as the
\npetition is admitted, advertise the petition is contrary to
\nthe plain terms of r. 96. Such a view, if accepted, would
\nmake the Court an instrument, in possible cases, of
\nharassment and even of blackmail, for once a petition is ad-
\nvertised, the business of the Company is bound to suffer
\nserious loss and injury.
\nThe appeal is allowed. The High Court has disposed of the
\nappeal on a ground of procedure and has not considered
\nwhether the view of H. R. Khanna, J., that in the exercise
\nof the inherent power for the ends of justice and for
\nprevention of the abuse of the process of Court, the
\npetition should not be advertised, is correct. The case is
\ntherefore remanded with the direction that the High Court do
\ndeal with and dispose of the appeal according to law. There
\nwill be no order as to its costs in this Court. The costs
\nin the High Court will be costs in this appeal.
\nY.P. Appeal allowed.
\n434<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
PETITIONER: NATIONAL CONDUITS (P) Ltd. Vs. RESPONDENT: S. S. ARORA DATE OF JUDGMENT: 01\/09\/1967 BENCH: SHAH, J.C. BENCH: SHAH, J.C. SIKRI, S.M. SHELAT, J.M. CITATION: 1968 AIR 279 1968 SCR (1) 430 CITATOR INFO : R 1983 SC1272 (22) ACT: Companies Act, (1 of 1956) Ss. 433 and 439–Compulsory wind- ing up–Petition admitted–Advertisement–If Court bound. … Read more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4928],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29828"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=29828"}],"version-history":[{"count":0,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29828\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=29828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=29828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=29828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}