1990 (11) TMI 322 - HC - Companies Law

Issues Involved:
1. Binding nature of the family arrangement dated March 11, 1987, on the company.
2. Acknowledgment of liability by the company in its balance sheets.
3. Privity of contract between the petitioner and the company.
4. Arbitration clause and its impact on the winding-up petition.
5. Pendency of a civil suit and its effect on the winding-up petition.
6. Authority of the company's managing director to bind the company.
7. Doctrine of ultra vires and its applicability.

Detailed Analysis:

1. Binding Nature of the Family Arrangement:
The central issue was whether the family arrangement dated March 11, 1987, was binding on the company. The petitioner argued that the company was bound by the agreement, citing earlier proceedings up to the Supreme Court where the company consistently lost. The agreement aimed to settle disputes among the Bandekar family members, involving various companies and shareholdings. The company, however, contended that it was not a party to the agreement and thus not bound by it.

2. Acknowledgment of Liability:
The petitioner pointed to the company's balance sheets for the years ending June 30, 1986, and June 30, 1987, which showed amounts payable under the family settlement as current liabilities. The petitioner argued that this constituted an acknowledgment of liability. The company's response was that acknowledgment in the balance sheet merely renewed liability rather than creating it, and claimed the liability was accepted by individuals, not the company.

3. Privity of Contract:
The company argued there was no privity of contract between it and the petitioner, asserting that the liability was personal to the family members and not the company. The petitioner countered that the company's actions and acknowledgments in the balance sheets indicated acceptance of liability.

4. Arbitration Clause:
The company argued that the existence of an arbitration clause in the agreement rendered the winding-up petition misconceived. The petitioner responded that winding-up could not be resolved through arbitration, and the company could not simultaneously claim it was not a party to the agreement and invoke the arbitration clause.

5. Pendency of a Civil Suit:
The company highlighted that a civil suit was pending regarding the same issues, suggesting that the winding-up petition was premature. The petitioner argued that the suit was filed to avoid the claim being barred by limitation and that the pendency of a civil suit was not a valid ground to oppose the winding-up petition.

6. Authority of the Managing Director:
The company claimed that any acknowledgment of liability by Narayan Rajaram Bandekar, the managing director, was in his personal capacity. The court examined whether the managing director had the authority to bind the company and whether the company had ratified the agreement.

7. Doctrine of Ultra Vires:
Late in the proceedings, the company raised the doctrine of ultra vires, arguing that acknowledging liability was beyond the company's objects. The court rejected this contention, noting it was not properly raised in the affidavit-in-reply and was a mixed question of fact and law.

Conclusion:
The court concluded that the company was bound by the family arrangement based on several factors:
- Previous judicial findings that the agreement was binding on the company.
- The company's balance sheets acknowledged the liabilities.
- The company's actions indicated acceptance of the agreement's terms.
- The company failed to provide a satisfactory explanation for the balance-sheet notations.

The court found the company's denial of liability to be in bad faith and without justifiable grounds, leading to the decision to admit the winding-up petition and appoint an official liquidator. The court also granted a six-week stay on taking charge of the company's assets and delaying the advertisement of the winding-up order.

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