1981 (3) TMI 204 - HC - Companies Law

Summary

Issues:
1. Revival of two applications under the Companies Act, 1956.
2. Eligibility of a member to file an application under section 391(1) after a winding-up order.
3. Consideration of staying the winding-up order and proposing a scheme to creditors.

Revival of Applications:
The case involved applications C.A. No. 297 of 1980 under section 391(1) and C.A. No. 298 of 1980 for a stay of the winding-up order. The company in question was found unable to pay its debts and had suspended its business, leading to the winding-up order. The petitioner sought to revive the applications post the refusal of a stay by a Division Bench. The petitioner's opposition was based on the argument that a member loses the right to file under section 391(1) after a winding-up order.

Eligibility of Member to File Application:
The crux of the issue was whether a member retains the right to file under section 391(1) post a winding-up order. The argument centered on the definitions of "contributory" and "member" under the Companies Act. The judgment clarified that a member remains a member even after a winding-up order, supported by legal provisions. The court rejected the contention that a member ceases to be a member post winding-up, emphasizing that a member is distinct from a contributory.

Consideration of Staying Winding-Up Order:
The court deliberated on the possibility of staying the winding-up order and proposing a scheme to creditors. The judgment emphasized that no valid grounds existed for staying the order, especially since the company was commercially insolvent and engaged in prohibited activities. The court highlighted that allowing the company to resume operations could lead to illegal activities. Additionally, the court noted that the company's commercial insolvency and inability to conduct lawful business activities were significant factors in rejecting the plea for revival of the applications.

In conclusion, the court dismissed the application for revival of the applications, emphasizing that the company's commercial insolvency and inability to engage in lawful activities were crucial factors in the decision. The judgment highlighted the need for adherence to legal provisions and the protection of creditors' interests in cases of winding-up orders.