1981 (2) TMI 188 - HC - Companies Law

Summary

Issues Involved:
1. Locus Standi
2. Maintainability under Section 446 of the Companies Act
3. Validity of the Decrees
4. Limitation
5. Invocation of Sections 457 and 531 of the Companies Act

Analysis:

1. Locus Standi:
The court examined whether the applicants had the standing to challenge the decrees. Vivek Kumar, neither a judgment-debtor nor a shareholder, had no interest in the company's assets. His claim based on the HUF shareholding was inadequate as the assets belonged to the corporate entity, not the shareholders. The same applied to his mother. Surender Kumar, although a guarantor, lacked standing to challenge the decrees against the company. The court concluded that none of the applicants had the necessary locus standi to challenge the decrees or their execution.

2. Maintainability under Section 446 of the Companies Act:
The court considered whether the applications were maintainable under Section 446. The applicants argued under Section 446(2)(a) and (b), but the company, being in liquidation, could only initiate proceedings through the official liquidator. There was no averment that the official liquidator was a wrongdoer. The court also dismissed the argument under Section 446(2)(d), stating that the validity of the decrees did not relate to the winding-up and arose during execution proceedings. The court held that the applications were not maintainable under Section 446.

3. Validity of the Decrees:
The court addressed whether the decrees could be challenged as nullities. It was established that a decree is not a nullity merely because it is wrong or contrary to law. The decrees were passed with the company's consent, and Section 290 of the Companies Act validated the board's actions despite any defects in their constitution. The allegations against Surender Kumar did not render the decrees nullities. Thus, the challenge to the decrees was not maintainable.

4. Limitation:
The court analyzed the timing of the applications. The first decree was passed in 1966, and the second in 1971. Challenges to these decrees were barred by time. However, the execution application filed in 1976 provided a fresh cause of action. C.A. No. 441/79 filed in 1979 was within time, but C.A. No. 144/80 filed in 1980 was out of time. Therefore, C.A. No. 144/80 was dismissed on the ground of limitation.

5. Invocation of Sections 457 and 531 of the Companies Act:
The court explored whether the applicants could void the decrees under Sections 457 or 531. Section 457 enumerates the liquidator's powers, none of which supported the applicants' proceedings. Section 531 deals with fraudulent preference but was inapplicable as the winding-up petition was filed in 1973, and the acts complained of occurred in 1966 and 1971. Thus, the decrees were outside the reach of Section 531.

Conclusion:
The court dismissed C.A. No. 441/79 and C.A. No. 144/80 due to lack of locus standi and maintainability under Section 446. Consequently, CAs. Nos. 134/80 and 406/80, which sought transposition, were also dismissed. The execution proceedings were scheduled for further directions. Each party was ordered to bear its own costs.