1999 (12) TMI 819 - HC - Companies Law

Summary

Issues:
Jurisdiction of District Court under Companies Act, 1956 - Interpretation of Section 437 - Abuse of process of the Court.

Analysis:
The petition sought direction for the District Court at Kolhapur to continue proceedings in a winding-up petition. Petitioners, contributories of respondent No. 1, filed the petition under sections 433 and 434 of the Companies Act, 1956. However, it was later realized that District Court's jurisdiction is subject to a notification under section 10. The High Court was asked to confer jurisdiction on the District Court to continue the case.

The counsel for respondent No. 17 argued that the petition was an abuse of court process and not maintainable under section 437. He contended that the High Court cannot confer jurisdiction on a court lacking inherent jurisdiction. Referring to a Kerala High Court decision, it was emphasized that District Court's jurisdiction can only be granted by the Central Government through notification as per section 10(2).

The High Court agreed with the Kerala High Court's interpretation, stating that the power to confer jurisdiction on District Courts lies with the Central Government under section 10(2). The language of section 437 does not allow the High Court to grant jurisdiction to a District Court without the necessary notification. Even if a notification is issued, territorial jurisdiction may still be lacking, allowing the High Court to direct proceedings in cases of irregular invocation of jurisdiction.

The Court noted that both the company petition and the present petition were not taken out bona fide. The petitions were deemed an abuse of the court process as they affected only certain parties, mainly respondent Nos. 13 to 17, who were creditors and government entities. The petitions resulted in a stay on recovery of amounts due, indicating misuse of the legal process.

Consequently, the High Court dismissed the petition, emphasizing that the District Court lacked jurisdiction without the required notification. The judgment highlighted that the petitions were misconceived and an abuse of the court process. However, the dismissal did not prevent the petitioner from filing a company petition in a competent court in the future.