1995 (11) TMI 469 - HC - Indian Laws

Summary

Issues:
1. Maintainability of petition under Sections 397-398 of the Companies Act
2. Compliance with Section 399 of the Act for maintaining a petition
3. Jurisdiction of the court to entertain a petition under Sections 397-398
4. Relief sought under Section 397-398 versus winding up of the company
5. Just and equitable grounds for winding up the company

Analysis:

Issue 1: Maintainability of petition under Sections 397-398 of the Companies Act
The petitioners filed a petition under Sections 397-398 of the Companies Act, seeking relief against oppression and prejudicial activities of the respondents. The court found that the petitioners did not comply with Section 399 of the Act, which is a condition precedent for maintaining a petition under Sections 397-398. The court held that the petition under Sections 397-398 was not maintainable due to the lack of compliance with Section 399.

Issue 2: Compliance with Section 399 of the Act for maintaining a petition
The court emphasized that obtaining and filing consent in writing is crucial for maintaining a petition under Sections 397-398. The court noted that the petitioners failed to comply with Section 399, which is a jurisdictional requirement. The court rejected an amendment sought by the petitioner after a lapse of time, as it did not relate to procedural matters, and the petitioners did not show any special considerations in their favor.

Issue 3: Jurisdiction of the court to entertain a petition under Sections 397-398
The court clarified that jurisdiction to entertain a petition under Sections 397-398, post an amendment in 1991, vests with the Company Law Board, not the court. The court rejected the amendment sought by the petitioner, leading to the conclusion that the petition under Sections 397-398 was not maintainable. However, the court allowed the winding-up petition to continue.

Issue 4: Relief sought under Section 397-398 versus winding up of the company
The petition primarily sought relief under Sections 397-398, but also included an alternative prayer for winding up the company. The court observed that the petition was primarily filed under Sections 397-398, and the allegations and averments supported this relief. The court dismissed the winding-up petition as the company was in a sound financial position and continuously provided bonuses to shareholders.

Issue 5: Just and equitable grounds for winding up the company
The court highlighted the principle that winding up based on just and equitable grounds should be a last resort when other remedies are not efficacious. The court emphasized the importance of disclosing alternative remedies available to petitioners when seeking winding up. The court dismissed the winding-up petition as the company's financial position was sound, and the mere allegation of production fall in some years was not sufficient grounds for winding up.

In conclusion, the court dismissed the petition for winding up the company, emphasizing that the petitioner failed to establish grounds for such relief and did not comply with the necessary legal requirements, while also highlighting the importance of considering just and equitable grounds for winding up as a last resort.