2002 (10) TMI 725 - HC - Companies Law

Issues Involved:
1. Whether the winding-up petition under section 433(f) of the Companies Act, 1956, is maintainable.
2. Whether the petitioner has effective alternative remedies available.
3. Whether the respondent-company has engaged in mismanagement or diversion of funds.
4. Whether the cessation of the petitioner as a director was lawful.
5. Whether the failure to pay dividends constitutes grounds for winding up.

Detailed Analysis:

1. Maintainability of the Winding-Up Petition:
The petitioner filed the winding-up petition under section 433(f) read with section 439 of the Companies Act, 1956, on the grounds that it is just and equitable to wind up the respondent-company. The respondent argued that the petitioner has alternative remedies available and has already filed separate proceedings to address her grievances. The court considered whether the petition is maintainable given these circumstances.

2. Availability of Alternative Remedies:
The court noted the statutory provisions under section 443(2) of the Companies Act, which allow the court to refuse a winding-up order if an alternative remedy is available and the petitioner is acting unreasonably by seeking winding up instead of pursuing that remedy. The court highlighted that sections 397 and 398 provide preventive measures against oppression and mismanagement, making them suitable alternatives to a winding-up petition. The petitioner admitted in her petition that she had filed separate proceedings, indicating the availability of alternative remedies.

3. Allegations of Mismanagement and Diversion of Funds:
The petitioner alleged that the respondent-company diverted funds amounting to Rs. 44 lakhs to other businesses, which she claimed was detrimental to the company. The respondent countered that the investments were legal and proper, and the profits from these investments were used for the company's operations. The court refrained from delving into these contentions, given the availability of alternative remedies.

4. Lawfulness of Cessation as Director:
The petitioner claimed that she was unlawfully removed as a director without proper consultation or information. The respondent argued that the petitioner ceased to be a director due to her failure to attend consecutive board meetings, as per section 283(1)(g) of the Companies Act. The cessation was recorded in the minutes and filed with the Registrar of Companies. The court noted that the petitioner did not dispute this in a reply affidavit, and the cessation appeared to be lawful.

5. Failure to Pay Dividends:
The petitioner argued that the company's failure to pay dividends indicated its inability to carry on business constructively. The respondent contended that the decision not to declare dividends was due to the need to conserve resources and the recessionary trends in the industry. The court acknowledged that the Companies Act does not mandate the declaration of dividends, and the decision lies within the discretion of the board and general meeting.

Conclusion:
The court concluded that the petitioner has effective alternative remedies available under sections 397 and 398 of the Companies Act. Given the statutory provisions and judicial precedents, the court held that winding up is a last resort when other remedies are not efficacious. As the petitioner admitted to filing separate proceedings, the winding-up petition was dismissed under section 443(2) of the Act. Consequently, the related company application was also dismissed.

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