1985 (1) TMI 261 - HC - Companies Law

Issues Involved:

1. Maintainability of the petition under sections 397, 398, 402, 403, and 450 of the Companies Act, 1956.
2. Conversion of the petition into a winding-up petition u/s 433(f) of the Companies Act, 1956.
3. Compliance with mandatory requirements of rule 88 of the Companies (Court) Rules, 1959.
4. Locus standi of the workers and principles of natural justice.
5. Applicability of the principle of dissolution of partnership to a company.
6. Existence of an alternative remedy.

Summary:

1. Maintainability of the Petition:
The appellants contended that the petition filed under sections 397, 398, 402, 403, and 450 of the Companies Act was not maintainable due to non-compliance with the mandatory requirements of rule 88 of the Companies (Court) Rules, 1959, and Form No. 43. The respondent failed to obtain the necessary written consent from one-tenth of the issued share capital shareholders, as required u/s 399(3) of the Companies Act, 1956. The court agreed with the appellants, stating that the petition did not fulfill the legal requirements and was prima facie not maintainable.

2. Conversion of the Petition:
The learned company judge converted the original petition into a winding-up petition u/s 433(f) of the Companies Act, 1956. The court held that a petition originally made under sections 397 and 398 could not be converted into a winding-up petition under section 433(f) due to distinguishable features between the two types of petitions. The court emphasized that the principles applicable in the case of dissolution of partnership could not be liberally invoked in the case of a company.

3. Compliance with Rule 88:
The appellants argued that the respondent did not comply with the mandatory requirements of rule 88 of the Companies (Court) Rules, 1959, and Form No. 43, which necessitated written consent from other shareholders. The court found merit in this argument, stating that the petition lacked the necessary consents and was therefore not maintainable.

4. Locus Standi and Natural Justice:
The court highlighted the importance of the workers' locus standi in a winding-up petition u/s 433(f) of the Companies Act, 1956. Citing the Supreme Court's decision in National Textile Workers' Union v. P. R. Ramakrishnan, the court held that the workers have an equal right to appear and oppose the winding up of the company. The court found that the workers were not heard before the order dated August 6, 1984, was passed, thus violating the principles of natural justice.

5. Dissolution of Partnership Principle:
The court rejected the respondent's argument that the principle of dissolution of partnership should apply to the company. The court stated that merely because a company is in the nature of a partnership does not justify its winding up. The respondent must show a lack of probity and oppressive conduct by the other shareholders. The court found no such evidence and held that the principle of dissolution of partnership could not be applied.

6. Alternative Remedy:
The court emphasized the availability of alternative remedies under sections 163, 167, 210, and 220 of the Companies Act, 1956. The court cited the Supreme Court's decision in Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla, which held that the court may refuse to make an order of winding up if an alternative remedy is available and the petitioners are acting unreasonably in seeking to have the company wound up. The court directed the respondent to resort to the alternative remedies available under the Companies Act.

Conclusion:
The court set aside the order dated August 6, 1984, holding that no prima facie case was made out for the trial under section 433(f) of the Companies Act, 1956. The court ruled that no composite petition could be maintainable and tried. Consequently, both appeals were allowed with costs.

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