1999 (1) TMI 408 - HC - Companies Law

Summary

Issues Involved:
1. Substitution of a creditor for the original petitioner under Rule 101 of the Companies (Court) Rules, 1959.
2. Determination of the Coffee Board's status as a creditor.
3. Applicability of Sections 433, 434, and 439 of the Companies Act, 1956.
4. Discretionary power of the court to allow substitution.
5. Procedural aspects following substitution under Rules 102 to 104.

Detailed Analysis:

Issue 1: Substitution of a Creditor for the Original Petitioner
The appeal was directed against the order allowing substitution of the Coffee Board as a petitioner in the winding-up petition under Rule 101 of the Companies (Court) Rules, 1959. The original petition was filed by two creditors, and the Coffee Board sought to substitute itself as the petitioner after the original creditors abandoned the petition.

Issue 2: Determination of the Coffee Board's Status as a Creditor
The court examined whether the Coffee Board qualifies as a "creditor" under Section 434 of the Companies Act, 1956. The company had accepted certain claims of the Coffee Board while making counterclaims against it. The court found that the Coffee Board is a "creditor" within the meaning of Section 434, thus satisfying the requirements for substitution under Rule 101.

Issue 3: Applicability of Sections 433, 434, and 439 of the Companies Act, 1956
Sections 433 and 434 outline the circumstances under which a company can be wound up, including its inability to pay its debts. Section 439 specifies that a winding-up petition can be presented by any creditor. The court analyzed these provisions to determine the legitimacy of the Coffee Board's claim and its right to be substituted as a petitioner.

Issue 4: Discretionary Power of the Court to Allow Substitution
Rule 101 provides the court with discretionary power to substitute any creditor or contributory who has the right to present a petition. The court emphasized that this power is broad and can be exercised upon terms deemed just. The court found that the Coffee Board made a prima facie case for substitution, satisfying the conditions of Rule 101.

Issue 5: Procedural Aspects Following Substitution under Rules 102 to 104
Following the substitution, Rule 102 mandates the amendment of the petition, and Rules 103 and 104 outline the procedures for filing affidavits in opposition and reply. The court noted that the appellant company had not filed an affidavit in opposition as required under Rule 103, which further supported the decision to allow substitution.

Conclusion:
The court upheld the order allowing the substitution of the Coffee Board as the petitioner, finding that the Coffee Board met the criteria of a "creditor" and that the substitution was justified under Rule 101. The appellant company was given the opportunity to file an affidavit in opposition under Rule 103. The appeal was dismissed, and no order as to costs was made.