1983 (1) TMI 286 - HC - Companies Law

Summary

Issues Involved:
1. Preliminary objection to the appeal.
2. Speed and timing of the interim order.
3. Grounds for the appointment of Commissioners.
4. Jurisdiction to pass interim orders at the stage of admission of the winding-up petition.
5. Request to expunge the Commissioners' reports and inventories.

Issue-wise Detailed Analysis:

1. Preliminary Objection to the Appeal:
The appeal is filed under Section 483 of the Companies Act, 1956, which provides for an appeal against any order passed by a Court of first instance in a winding-up matter. The respondents raised a preliminary objection, arguing that the appeal should not be entertained. They cited the Supreme Court's ruling in Shankarlal Aggarwal's case, which requires the appellant to show that some right has been affected by the order in question. The Court found the respondents' contentions naive, noting that the order for inventory affects the company's operations and reputation. The Court held that the preliminary objection failed, allowing the appeal to proceed.

2. Speed and Timing of the Interim Order:
The company argued that the interim order was passed hastily, without giving them adequate time to respond. The winding-up petition was admitted on 13th June 1981, and the application for the appointment of Commissioners was moved urgently. The company's lawyer requested time until the next morning to file an affidavit in opposition, but the Judge refused and passed the order around 4 p.m. The Court found this criticism legitimate, noting that the adjournment requested was only for a few hours, and there was no prima facie risk of the company altering its assets. The Court concluded that the Judge's sense of urgency was misplaced.

3. Grounds for the Appointment of Commissioners:
The Judge gave three reasons for the order: (i) Article 38 of the Company's Articles indicating an inventory in winding-up proceedings, (ii) serious charges against the company, and (iii) the company facing multiple legal proceedings. The Court found none of these grounds justified the order. Article 38 was deemed insufficient to prove the urgency for an inventory. The allegations in the winding-up petition did not reasonably justify an immediate inventory. The fact that the company was involved in multiple legal proceedings was not a valid reason for the order.

4. Jurisdiction to Pass Interim Orders at the Stage of Admission of the Winding-Up Petition:
The company argued that the Judge lacked jurisdiction to pass the interim order at the admission stage, citing Section 443(1)(c) of the Companies Act. The Court rejected this interpretation, stating that the section enumerates the Court's powers during the hearing of a winding-up petition but does not exclude the Court's inherent power to pass interim orders at any time. The Court emphasized that the Companies Act should be construed sensibly, and the presence of Section 443(1)(c) does not imply a restriction on the Court's powers.

5. Request to Expunge the Commissioners' Reports and Inventories:
The company requested that the reports and inventories filed by the Commissioners be expunged from the record. The Court declined to accede to this request, stating that its role as an appellate Court is to pass an appellate order and not to explain the consequences of its judgment on follow-up proceedings. The Court set aside the order of the Judge but did not address the status of the Commissioners' reports and inventories.

Conclusion:
The Court concluded that the order of Shanmukham, J. could not be sustained due to the untenable grounds on which it was founded and the lack of adequate hearing afforded to the company. The order was set aside, but there was no order as to costs.