1996 (4) TMI 423 - HC - Companies Law

Company when deemed unable to pay its debts Winding up - Company when deemed unable to pay its debts Petitioner to effect service Petition for winding up

Issues Involved:
1. Jurisdiction of the High Court.
2. Suppression and misrepresentation of material facts.
3. Compliance with procedural rules for winding up petitions.
4. Appealability of the order of admission and advertisement.
5. Consequences of public advertisement of the winding-up petition.

Issue-wise Detailed Analysis:

1. Jurisdiction of the High Court:
The primary issue was whether the High Court of Gujarat had jurisdiction to entertain the winding-up petition. According to Section 10 of the Companies Act, 1956, the High Court having jurisdiction in relation to the place where the registered office of the company is situated has the jurisdiction. The appellant's registered office was in Calcutta, thus only the High Court of Judicature at Calcutta had jurisdiction. The respondent misled the court by not disclosing this fact and suggesting that the records were available with the Registrar of Companies, Gujarat State, Ahmedabad.

2. Suppression and Misrepresentation of Material Facts:
The appellant argued that the respondent obtained the order for publication by suppression and misrepresentation of material facts. The respondent knew that the appellant's registered office was in Calcutta but failed to disclose this, misleading the court into believing it had jurisdiction. The court noted that the respondent addressed the statutory notice to the registered office in Calcutta, indicating awareness of the true facts.

3. Compliance with Procedural Rules for Winding Up Petitions:
The court examined whether the petition complied with the Companies (Court) Rules, 1959. Rule 95 mandates specific disclosures in the petition, including the registered office's location and the company's capital structure. The respondent failed to provide these details. The court emphasized the importance of these disclosures for determining jurisdiction and the company's financial status. The petition's failure to comply with these requirements and the improper service of notice rendered the process defective.

4. Appealability of the Order of Admission and Advertisement:
The court addressed whether the order of admission and advertisement was appealable. Section 483 of the Companies Act allows appeals from any order made in the matter of winding up. The court referenced precedents, including the Bombay High Court's decision in Western India Theatres Ltd. v. Ishwarbhai Somabhai Patel, which held that such orders are appealable due to their serious consequences. The Supreme Court's decisions in Shankarlal Aggarwala v. Shankarlal Poddar and Golcha Investment P. Ltd. v. Shanti Chandra Bafna further supported this position.

5. Consequences of Public Advertisement of the Winding-Up Petition:
The court discussed the severe implications of public advertisement of a winding-up petition. It noted that such an advertisement could cause irreparable harm to a solvent company. The court cited the Supreme Court's observation in Hind Overseas (Pvt.) Ltd. v. Raghunathprasad Jhunjhunwalla that the interest of the shareholders and other stakeholders must be considered before admitting such a petition. The court concluded that the respondent's failure to provide necessary material to demonstrate the company's commercial insolvency and the misrepresentation of jurisdictional facts warranted setting aside the order.

Conclusion:
The High Court of Gujarat concluded that it lacked jurisdiction to entertain the winding-up petition, as the appellant's registered office was in Calcutta. The respondent's suppression and misrepresentation of material facts, along with non-compliance with procedural rules, invalidated the petition. The court allowed the appeal, rejected the main company petition, and awarded costs of Rs. 10,000 to the appellant.

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