1986 (8) TMI 384 - HC - Companies Law

Associations and partnerships exceeding certain numbers - Prohibition of, Winding-up of unregistered companies

Summary

Issues:
- Maintainability of winding-up petition under section 583 of the Companies Act, 1956
- Interpretation of section 582(b) of the Act regarding unregistered companies
- Application of section 11 of the Act to associations registered under the Societies Registration Act
- Clarification on the word "association" in the context of winding-up proceedings

Analysis:
The judgment addresses the preliminary objection raised by the respondents regarding the maintainability of the winding-up petition under section 583 of the Companies Act, 1956. The objection was based on the argument that the respondent society did not fall under the definition of an association as per section 582(b) of the Act. Section 582 defines an unregistered company and includes partnerships, associations, or companies with more than seven members for the purpose of winding-up proceedings.

The petitioners contended that their society, registered under the Societies Registration Act and comprising more than 20 members, qualified for the reliefs under Part X of the Companies Act, which deals with the winding-up of unregistered companies. The petitioners emphasized that their society was engaged in trade, business, and manufacturing activities, registered as a medium and small-scale industry, and not a charitable society.

The judgment delves into the interpretation of section 11 of the Act, which pertains to the incorporation of companies and related matters. Section 11 imposes restrictions on the formation of companies, associations, or partnerships with more than 20 members for business purposes unless registered under the Act or formed under another Indian law. However, the court clarified that the prohibitions in section 11 should be viewed in the context of Chapter II, focusing on the incorporation of companies, and should not be applied to Chapter X, which specifically deals with the winding-up of unregistered companies.

The court emphasized that the term "association" in section 582(b) should be understood broadly, not limited by the restrictions in section 11 regarding the formation of business entities. Therefore, the court overruled the preliminary objection, allowing the petition for winding-up against the respondent association registered under the Societies Registration Act to proceed. The petition was admitted, and the petitioners were instructed to advertise the petition for a hearing date in a local newspaper.