1992 (2) TMI 292 - HC - Companies Law

Circumstances in which a company may be wound up, Winding up Application for, Affidavit verifying petitions

Issues Involved:
1. Whether a constituted attorney has the locus standi to file a petition for winding up under section 433 of the Companies Act, 1956.
2. Whether the power of attorney held by Pravinkumar Gosalia authorized him to institute winding up proceedings.

Issue-wise Detailed Analysis:

1. Locus Standi of Constituted Attorney to File a Petition for Winding Up:
The applicant-company contended that the petition for winding up is liable to be rejected in limine because it was signed and verified by a constituted attorney, which they argued is not maintainable under the law. They relied on sections 433, 434, and 439 of the Companies Act, 1956, and rules 6 and 21 of the Companies (Court) Rules, 1959, to argue that only the specified parties themselves could file such petitions.

Section 433(e) of the Companies Act predicates the inability of the company to pay its debts as a ground for winding up. Section 434 establishes a presumption of inability to pay debts if a creditor has served a demand and the company neglects to pay within three weeks. Section 439 specifies who can present a petition for winding up, including the company, any creditor, any contributory, the Registrar, and others authorized by the Central Government.

The applicant-company argued that the term "any court" in Order 3, rule 1 of the Code of Civil Procedure does not include a company court and that the practice and procedure of a company court are distinct from those of an ordinary court. They emphasized that the affidavit verifying the petition must be made by the petitioner or a principal officer of a corporate petitioner, and leave must be obtained for an agent to file such an affidavit.

However, the court found no express or implied prohibition in the Companies Act against a constituted attorney verifying the petition or filing an affidavit. Rule 21 of the Companies (Court) Rules allows for an affidavit verifying the petition to be made by a duly authorized person with leave from the judge or Registrar. The court concluded that a party could be represented by an authorized agent, provided the authority is clear and unambiguous. Thus, the first contention that constituted attorneys have no locus to present petitions for winding up was rejected.

2. Authorization of Pravinkumar Gosalia to Institute Winding Up Proceedings:
The court examined whether the power of attorney held by Pravinkumar Gosalia authorized him to institute winding up proceedings. The power of attorney included clauses authorizing him to execute agreements, receive payments, demand and recover amounts, file suits or proceedings for recovery, and generally act to give effect to the powers granted.

The applicant-company argued that the power to file suits and/or proceedings for recovery of amounts due does not include the power to institute winding up proceedings, as such proceedings are not merely a lis between the petitioning party and the company but involve broader public interest and the rights of other creditors and contributories.

The court noted that winding up proceedings under section 433 of the Companies Act are a special remedy and cannot be equated with suits for recovery of money. The court held that unless the power of attorney specifically authorized the lodging of company petitions for winding up, it could not be read to include such power. The court found that the power of attorney did not specifically authorize Pravinkumar Gosalia to institute winding up proceedings.

Given the lack of specific authority in the power of attorney, the court held that Pravinkumar Gosalia had no authority to institute the winding up proceedings. Consequently, the petition was rejected, and the judge's summons was made absolute in terms of prayer (a). The parties were directed to bear their own costs.

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