2010 (2) TMI 587 - HC - Companies Law

Winding up petition dismissed - Held that - No case has been made out by the petitioners to warrant any exercise for winding up of the company. Further, it is not in the interest of the entire class of the members of the company to wind up, and it cannot be opted merely at the instance of the petitioners, who have been pursuing one or the other proceedings at different stages, without any success. It only shows that the attempt on the part of the petitioners is to see that the company is put to losses at the cost of major shareholders, which is neither permissible nor sustainable under the law. Therefore, we are in entire agreement with the reasoning given by the learned Single Judge and hold that there is absolutely no justifiable or equitable grounds for the purpose of arriving at a conclusion that the respondent-company deserves to be wound up. Appeal dismissed.

Issues Involved:
1. Winding up of the company under Section 433(c), (f), and (g) of the Companies Act, 1956.
2. Allegations of mismanagement and suppression of facts.
3. Previous litigations and their impact on the current proceedings.
4. Just and equitable grounds for winding up the company.

Detailed Analysis:

1. Winding up of the Company under Section 433(c), (f), and (g) of the Companies Act, 1956:
The appellants sought the winding up of the company under Section 433(c), (f), and (g) of the Companies Act, 1956, alleging unsatisfactory affairs and internal disputes among directors. The petitioners claimed that the company was not conducting business properly, annual meetings were not held, and accounts were not presented to the general body. The company had incurred significant losses and debts, and there were allegations of assets being sold under dubious circumstances.

2. Allegations of Mismanagement and Suppression of Facts:
The appellants alleged that the company had not been carrying out any business since 1994 and had delayed filing reports to create false records. They claimed that the company's directors were involved in real estate transactions without proper authorization from shareholders. The respondents countered these allegations by stating that the petitioners had suppressed many facts and previous proceedings. They highlighted that the petitioners' shareholding was only 4% and that there were several litigations initiated by the petitioners themselves, which had no findings against the company regarding its affairs or financial management.

3. Previous Litigations and Their Impact on the Current Proceedings:
The court noted the history of litigation between the parties, including suits filed by the first petitioner and the company. The petitioners had previously approached the Company Law Board under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement, but their claims were not upheld. The Supreme Court had also dismissed their appeal. The court observed that the petitioners had consistently engaged in litigation without any substantial findings against the company, indicating a lack of bona fides.

4. Just and Equitable Grounds for Winding up the Company:
The court emphasized that winding up a company is a serious remedy and should not be granted on flimsy grounds. It referred to the principles laid down by the Supreme Court in Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla, which stated that a prima facie case must be made out, and the interests of the shareholders and the company as a whole must be considered. The court found that the petitioners had not provided specific details or evidence of mismanagement that would warrant winding up the company. The company's financial activities and efforts to protect its interests in various litigations demonstrated its sincerity and proper management.

Conclusion:
The court concluded that the appellants had not made out a prima facie case for winding up the company on just and equitable grounds. The learned Single Judge had rightly dismissed the petition, and the appeal lacked merit. The court held that the interests of the petitioners, who held only 4% of the shares, could not outweigh the interests of the majority shareholders and the company. The appeal was dismissed with no costs.

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