1996 (5) TMI 331 - HC - Companies Law

Summary

Issues Involved:
1. Petition for winding up under Sections 433(a), (e), and (f) read with Section 439 of the Companies Act, 1956.
2. Dispute over the allotment of shares and ownership of the company.
3. Allegations of fraud and forgery in the documents and resolutions.
4. Legitimacy of the partnership deed and conversion into a company.
5. Whether the plot of land and hotel are company property.
6. Procedural objections regarding the petition's maintainability.

Detailed Analysis:

1. Petition for Winding Up:
The petition was filed under Sections 433(a), (e), and (f) read with Section 439 of the Companies Act, 1956, seeking the winding up of the petitioner-company. The petitioner initially filed a petition under Sections 397 and 398 before the Company Law Board (CLB), but later sought winding up, claiming disinterest in running the hotel and holding more than 99% of the shares.

2. Dispute Over Allotment of Shares:
The petitioner contended that a sum of Rs. 5,73,000 given to respondent No. 1 was converted into 44,000 shares of Rs. 10 each, making the petitioner the owner of 99% shares. This was vehemently disputed by the respondent, who argued that the allotment of shares was inconsistent with the articles of association and lacked proper notice and resolution.

3. Allegations of Fraud and Forgery:
The respondent alleged that the resolutions and documents presented by the petitioner were fabricated and forged, particularly highlighting that respondent No. 2, who was seriously ill, could not have signed the documents. The petitioner failed to provide substantial evidence to counter these allegations.

4. Legitimacy of Partnership Deed and Conversion into a Company:
The respondent argued that the partnership deed dated 4-3-1992 could not be converted into a company without express consent. Furthermore, the plot of land was not the property of the partnership as no sale deed was executed in favor of the petitioner.

5. Property Ownership:
The court noted that the plot of land was purchased in the name of respondent No. 2 on 9-7-1991, before the incorporation of the partnership and the company. The petitioner failed to provide documents substantiating the claim that Rs. 5,73,000 was given for the hotel's construction. The court found no evidence to treat the hotel property as company property.

6. Procedural Objections:
The respondent contended that the company was not made a respondent in the petition, which is a procedural flaw. The court agreed that the petitioner did not follow proper procedures, including maintaining necessary registers and records as per the Companies Act. The court emphasized that the petition involved disputed facts that should be resolved through a suit for declaration, not a winding-up petition.

Conclusion:
The court dismissed the petition, finding that the petitioner failed to substantiate claims regarding the allotment of shares and ownership of the hotel property. The allegations of fraud and forgery, along with procedural lapses, led the court to conclude that the petition was frivolous and vexatious. The court vacated interim orders and made no order as to costs.