1997 (11) TMI 427 - HC - Companies Law

Summary

Issues: Winding up of a company under sections 433(e) and 433(f) of the Companies Act, 1956 due to loss of substratum and inability to carry on business profitably.

Analysis:
The petitioner, a shareholder of the respondent-company, filed an application for winding up under sections 433(e) and 433(f) of the Companies Act, 1956, citing that the company had lost its substratum and could not operate profitably. The petitioner's husband and the managing director of the company provided evidence supporting the claim that the company ceased business since 1985, had significant liabilities exceeding assets, and was unable to pay debts or employee salaries. The absence of balance sheets since 1985 and the auditor resigning due to lack of remuneration further emphasized the company's dire financial situation. The company's legal counsel acknowledged the lack of grounds for the company's survival.

In determining the grounds for winding up, the court referred to legal precedents such as the case of D. Davis and Co. Ltd. v. Brunswick (Australia) Ltd. and Cine Industries and Recording Co. Ltd., emphasizing the importance of assessing whether there is a reasonable hope for the company to trade profitably. Citing Syndicate Bank v. Printers all (P.) Ltd., the court reiterated that when a company's substratum is lost or its business becomes impossible, winding up is considered just and equitable.

Based on the evidence presented and legal principles, the court concluded that the respondent-company's situation warranted winding up. The official liquidator was directed to take charge of the company's assets, recover debts, and serve the winding-up order on the company and its directors. The petitioner was instructed to advertise the winding-up order in a newspaper and provide a copy to the Registrar of Companies within specified timelines. Consequently, the company petition for winding up was allowed.