2009 (9) TMI 589 - HC - Companies Law

Winding up petition - Held that - Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. Thus the Company Petition is not maintainable particularly in view of availability of other efficacious alternate remedy for the petitioners. See Hind Overseas case 1975 (10) TMI 71 - SUPREME COURT OF INDIA

Issues Involved:
1. Mismanagement and fraud by the General Secretary of the 'Yogam'.
2. Misappropriation of funds and oppression of minority members.
3. Maintainability of the Company Petition under section 433(f) of the Companies Act.
4. Availability of alternative remedies under sections 397, 398, and 399 of the Companies Act.
5. Jurisdiction of the Court to entertain the Company Petition for winding up.

Detailed Analysis:

1. Mismanagement and Fraud by the General Secretary of the 'Yogam':
The petitioners alleged that the second respondent, the General Secretary of the 'Yogam', had been functioning in an autocratic manner, suspending the petitioners and others without regard to the rules or procedures under the bye-laws of the 'Yogam'. They claimed that the affairs of the 'Yogam' were being mismanaged, funds misappropriated, and there was complete oppression of minority members, coupled with fraud and other illegal activities.

2. Misappropriation of Funds and Oppression of Minority Members:
The petitioners sought several reliefs, including the appointment of a committee to take over the administration, disqualification of the respondents from continuing as office bearers, and an order for the respondents to provide details of income and expenditure. They also requested elections in all Unions and branches under Administrator Control and an injunction against alienation or disposal of the 'Yogam's' properties without the Court's permission. As an alternative, they sought the winding up of the 'Yogam' under the Companies Act, 1956.

3. Maintainability of the Company Petition under Section 433(f) of the Companies Act:
The respondents challenged the maintainability of the petition, arguing that the petitioners had other effective, alternate remedies available. They contended that the prayer for winding up was only an alternative and could not sustain the primary reliefs sought. The Court noted that the reliefs under section 203(b)(ii) could only be exercised in the course of winding up a company.

4. Availability of Alternative Remedies under Sections 397, 398, and 399 of the Companies Act:
The Court examined whether the petitioners had other remedies available. It was noted that sections 397 and 398 of the Companies Act provided for relief against oppression and mismanagement, and section 399 allowed members to apply to the Tribunal if not less than one-fifth of the members supported the application. The Court found no evidence that the petitioners had attempted to pursue these remedies or that such attempts had been futile.

5. Jurisdiction of the Court to Entertain the Company Petition for Winding Up:
The Court considered the jurisdiction and maintainability of the petition. It was highlighted that under section 443(2) of the Companies Act, the Court could refuse to make an order for winding up if another remedy was available and the petitioners were acting unreasonably in seeking winding up instead of pursuing that remedy. The Court cited various precedents, including decisions of the Supreme Court and High Courts, which emphasized that winding up should be a last resort when no other remedies were efficacious.

Conclusion:
The Court concluded that the Company Petition was not maintainable due to the availability of other efficacious remedies under the Companies Act. It was held that the petitioners had not demonstrated that they had exhausted these remedies or that such remedies were ineffective. The petition for winding up was dismissed without prejudice to the petitioners' right to pursue other appropriate remedies for their grievances. The Court did not delve into the merits of the factual contentions raised by the petitioners.

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