1988 (5) TMI 304 - HC - Companies Law

Shares Allotment of, Winding up Definition of contributory, Copy of winding up order to be filed with Registrar, Power of Tribunal to make calls, Application for stay of winding up proceedings

Issues Involved:
1. Recall or modification of the order dated December 11, 1986.
2. Stay of winding up proceedings.
3. Mismanagement and financial discrepancies by parties involved.
4. Validity of new share allotments post-winding up order.
5. Legal standing and procedural compliance regarding notice to creditors.

Issue-wise Detailed Analysis:

1. Recall or Modification of the Order Dated December 11, 1986:
The judgment addresses multiple applications and petitions seeking either the recall or modification of the order dated December 11, 1986, which stayed the winding up proceedings of the company for three years. The court found that neither Shri Duleep Singh nor Shri Harjinder Singh and his associates abided by the conditions of the order. They did not pay the petitioning creditors through the official liquidator and engaged in financial mismanagement. Consequently, the court dismissed C.A. No. 123 and C.A. No. 189 of 1987, which sought modifications to the order.

2. Stay of Winding Up Proceedings:
The stay of the winding up proceedings was initially granted to allow the company to resume business and settle financial matters. However, the court noted that the parties involved misused this stay, failing to cooperate and comply with the conditions set forth. The official liquidator's report highlighted significant financial discrepancies and lack of cooperation among the parties. As a result, the court recalled the order dated December 11, 1986, and directed the official liquidator to take over the company's affairs and proceed with the winding up.

3. Mismanagement and Financial Discrepancies by Parties Involved:
The official liquidator's report revealed substantial financial mismanagement by Shri Duleep Singh and Shri Harjinder Singh. Discrepancies included unverified expenses, unauthorized share allotments, and failure to deposit funds in the company's bank account. Both parties failed to provide documentary evidence for their financial claims, leading the court to conclude that they did not act in good faith. The court emphasized that the company should be represented by the official liquidator, especially after a winding up order is passed.

4. Validity of New Share Allotments Post-Winding Up Order:
The court found that the new share allotments made by Shri Duleep Singh and his associates were unauthorized and did not comply with the statutory requirements under the Companies Act. Specifically, the allotment of 13,539 shares at Rs. 25 per share was not deposited in a scheduled bank as required. The court expressed doubt about whether these new shareholders could be treated as contributories liable to satisfy the company's debts.

5. Legal Standing and Procedural Compliance Regarding Notice to Creditors:
The petitioning creditors in C.P. No. 56 of 1982 argued that they were not given notice of C.P. No. 125 of 1986, violating the mandatory provisions of rule 116 of the Companies (Court) Rules, 1959. The court agreed, noting that the creditors were not afforded an opportunity to be heard before the order staying the winding up proceedings was passed. This oversight deprived the creditors of the benefits of their legal battle, leading the court to find merit in their application and recall the order dated December 11, 1986. The court dismissed C.P. No. 24 of 1986 filed by Shri Gurdial Singh, a contributory, as he had no right to notice under rule 116.

Conclusion:
The court concluded that the parties involved did not comply with the conditions of the stay order and engaged in financial mismanagement. The order dated December 11, 1986, was recalled, and the official liquidator was directed to proceed with the winding up of the company. The bus with the new chassis and body was ordered to be handed over to the financiers to settle the secured loan. No costs were awarded in any of the applications and petitions.

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