2009 (5) TMI 543 - HC - Companies Law

Whether this court has the power to stay a voluntary winding up? - permanently staying the voluntary liquidation of the company and thereupon seeking discharge of the liquidators seeked - Held that - Considering the powers of this court, this court is of the opinion that it will not be detrimental to anyone if the company is restarted. In the circumstances and particularly in view of the fact that the share-holders/contributories want to revive the company and there being no impediment whatsoever in doing so, the application is allowed. Consequently, there shall be a permanent stay of voluntary liquidation of the company which was being carried on in terms of the special resolution dated 20-1-1970. The operations of the company shall stand revived and restarted and the shareholders of the company are permitted to elect the members of its board of directors.

Issues Involved
1. Application for permanently staying the voluntary liquidation of the company.
2. Discharge of the liquidators.
3. Revival and restarting of the company.
4. Election of the board of directors.
5. Court's power to stay voluntary winding up under sections 466 and 518 of the Companies Act, 1956.
6. Compliance with statutory requirements during voluntary liquidation.

Detailed Analysis

1. Application for Permanently Staying the Voluntary Liquidation of the Company
The company, incorporated under the Indian Companies Act, 1913, was in voluntary liquidation since 1970. The present application, filed after a special resolution passed on 11-2-2009, seeks to permanently stay the voluntary liquidation. The company had purchased an immovable property in 1947, which led to disputes and subsequent litigation with Malabar Hill Co-operative Housing Society Ltd. Despite a settlement in 1968, further disputes and financial liabilities led to the decision to voluntarily wind up the company in 1970. By 2009, significant changes, including the payment of consideration by the society and the absence of liabilities, justified the stay of liquidation.

2. Discharge of the Liquidators
The liquidators, appointed in 1970, were to be discharged as part of the application. The company had no outstanding liabilities, and the liquidators had complied with statutory requirements. The official liquidator confirmed that the stage for final dissolution had not yet come, indicating no impediment to discharging the liquidators.

3. Revival and Restarting of the Company
The company had acquired valuable rights in the form of FSI in Darshan Apartment, which could be leveraged for commercial usage. The contributories expressed willingness to subscribe to the equity share capital, indicating a viable path for reviving and restarting the company. The court found that reviving the company would not be detrimental to anyone.

4. Election of the Board of Directors
The shareholders were permitted to elect the members of the board of directors, ensuring that the company could operate effectively post-revival. This step was crucial for restarting the company's operations in line with its memorandum of association.

5. Court's Power to Stay Voluntary Winding Up under Sections 466 and 518 of the Companies Act, 1956
The court examined its power to stay voluntary winding up under sections 466 and 518 of the Companies Act, 1956. It concluded that it had the authority to stay the winding up if justified by the circumstances. The court referred to precedents from the Delhi High Court and Karnataka High Court, which affirmed the court's power to stay voluntary winding up and revive the company if the management intended to do so.

6. Compliance with Statutory Requirements During Voluntary Liquidation
The liquidator confirmed compliance with all statutory requirements, including no outstanding amounts or undisputed demands from the Income-tax Department. The company had also filed necessary returns with the Registrar of Companies and the Income-tax Department, ensuring that all legal obligations were met during the voluntary liquidation.

Conclusion
The court allowed the application, permanently staying the voluntary liquidation of the company. The operations of the company were revived, and the shareholders were permitted to elect the board of directors. The court directed the company to forward a copy of the order to the Registrar of Companies, Gujarat, to make a minute of the order in his books. There was no order as to costs.

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