1994 (3) TMI 315 - HC - Companies Law

Winding up Power of court to assess damages against delinquent directors, etc. and Applications under sections 542 or 543

Summary

Issues Involved:
1. Legal competence of a summons filed under section 543(1) of the Companies Act, 1956, without stating grounds.
2. Whether omission to state grounds in the summons is fatal and warrants rejection.
3. Interpretation of rules 260 and 261 of the Companies (Court) Rules, 1959, in the context of Form No. 121.

Issue-wise Detailed Analysis:

1. Legal Competence of a Summons Filed Under Section 543(1) Without Stating Grounds:
The court addressed whether a summons filed under section 543(1) of the Companies Act, 1956, which does not state the grounds for the application, is legally competent. The official liquidator filed applications in the prescribed Form No. 121, seeking declarations against the directors for misfeasance and breach of trust. However, the applications did not set out the grounds for these declarations.

2. Whether Omission to State Grounds in the Summons is Fatal and Warrants Rejection:
The respondents argued that the applications should be rejected as they did not disclose any grounds for the relief sought, making them vague and ambiguous. They cited the Supreme Court's decision in *Official Liquidator v. Raghawa Desikachar* [1975] 45 Comp Cas 136, emphasizing that misfeasance charges require a detailed narration of specific acts of commission and omission. The court, however, noted that while it is desirable to state the grounds in the application, the omission is not necessarily fatal. Rule 261 allows the court to direct the applicant to state the points of claim, thus providing an opportunity to rectify such omissions.

3. Interpretation of Rules 260 and 261 of the Companies (Court) Rules, 1959, in the Context of Form No. 121:
The court interpreted rules 260 and 261, which govern applications under section 543(1). Rule 260 requires the summons to state the nature of the declaration or order and the grounds of the application. Rule 261 provides the court with the discretion to direct the applicant to state the points of claim and the respondent to state the defense. The court concluded that the omission to state the grounds in the initial application should not result in its outright rejection, as the court can issue directions to clarify the claims and defenses.

The court referenced the decision in *Official Liquidator v. Joginder Singh Kohli* [1978] 48 Comp Cas 357, where the Delhi High Court held that while it is desirable to state the grounds, the omission does not automatically render the application invalid. The court also noted that procedural laws should facilitate justice and not obstruct it, as emphasized by the Supreme Court in *State of Punjab v. Shamlal Murari*, AIR 1976 SC 1177.

Conclusion:
The court rejected the preliminary objection that the applications should be dismissed for not stating the grounds. It directed the applicants to file a detailed statement of claims within three weeks, and the respondents to file their defense within three weeks thereafter. The applications were scheduled for further hearing on May 2, 1994.