2004 (9) TMI 388 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent-company should be wound up under Section 433(f) of the Companies Act, 1956, on the grounds that it is just and equitable to do so.
2. Whether the petitioners have an alternative remedy under Sections 397 and 398 of the Companies Act, 1956.
3. Whether the petitioners' conduct and motives affect the maintainability of the petition.
4. Whether the respondent-company's financial and operational status justifies winding up.

Issue-wise Detailed Analysis:

1. Just and Equitable Grounds for Winding Up:
The petitioners argued that the substratum of the respondent-company was lost, its losses outweighed its capital, and it was not carrying on any business for which it was formed. They claimed the company was insolvent and mismanaged, citing defaults in complying with B.I.F.R. orders, unauthorized asset sales, and financial discrepancies. They relied on several legal precedents to support their claim that the company should be wound up on just and equitable grounds.

2. Alternative Remedy under Sections 397 and 398:
The respondent-company contended that the petition was not maintainable as the petitioners had an alternative remedy under Sections 397 and 398 of the Companies Act, which deal with oppression and mismanagement. The court noted that the petitioners could approach the Company Law Board for relief under these sections and that the petitioners had not exhausted these remedies before seeking winding up.

3. Petitioners' Conduct and Motives:
The court observed that the petitioners had previously filed Company Petition Nos. 200 and 201 of 2001 under Section 433(e) of the Companies Act, which were withdrawn after the respondent-company satisfied their dues. The court found that the petitioners' conduct in filing the present petition after their dues were settled indicated mala fide intentions and a lack of bona fides.

4. Respondent-Company's Financial and Operational Status:
The court found that the respondent-company had not lost its financial substratum, as evidenced by its ability to satisfy the petitioners' dues in the earlier petitions. The company was carrying on warehousing business, which was profitable, and had plans to resume textile processing. The court noted that the company was solvent and paying its debts, and no other creditors had raised demands for repayment.

Conclusion:
The court concluded that it was not just and equitable to wind up the respondent-company. The petitioners had alternative remedies under Sections 397 and 398 of the Companies Act, which they had not pursued. The petitioners' conduct and motives were questionable, and the company was financially and operationally viable. Therefore, the petition was dismissed, and the notice was discharged without any order as to costs.