2013 (10) TMI 178 - HC - Companies Law

Maintainability of the Petition - Winding up Petition u/s 433(e)/434(1)/439(1)(b) of the Companies Act - Whether the petition was maintainable against the respondent-company - Held that - Following Ram Sarup Gupta (decd.) by LRs v. Bishun Narain Inter College and others 1987 (4) TMI 476 - SUPREME COURT - The general principle was that in the absence of pleadings, no party shall be permitted to travel beyond the pleadings and raise a new point and that the necessary and material facts should be pleaded specifically, it was necessary to have the object of this principle in mind, which was that the opposite party should not be taken by surprise - having regard to this object and with a view to ensuring a fair trial, however, a pedantic approach should not be adopted to defeat justice or hair-splitting technicalities - It was further held that undue emphasis on the form, sacrificing the substance of the dispute, should be avoided - It was another matter that there was no merit the company petition was dismissed as not maintainable against the respondent. Lifting of Corporate Veil Held that - It would be improper and unsafe to draw the conclusion, merely from the statement of the General Manager (Marketing) of Infrastructure, that both the companies were one and the same - It must be remembered that it was not uncommon or unusual for businessmen to form separate corporate entities to carry out different aspects of the same business - Such a practice, driven by business exigencies must be recognised and given effect to, so long as there is no motive of evasion of lawful liabilities - This does not, per se and without anything more, necessarily mean that both the companies were one and the same.

Summary

Issues:
- Maintainability of the petition against the respondent-company under sections 433(e)/434(1)/439(1)(b) of the Companies Act, 1956.

Analysis:
1. The petitioner, Store-One Retail India Ltd., entered into a term sheet with the respondent-company, Century 21 Infrastructure Limited, for a mall space. The term sheet was signed by Piramyd Retail Ltd. and Town Planners, but not by Infrastructure. The petitioner issued a cheque to Town Planners as a security deposit.

2. The petitioner alleged non-compliance by the respondent in constructing the mall and sought a refund of the security deposit. After sending notices and receiving no response, the petitioner filed a petition under sections 433(e)/434(1)(a) of the Act, seeking the refund with interest.

3. The respondent contended that since the cheque was in favor of Town Planners and not Infrastructure, the petition against Infrastructure was not maintainable. The petitioner argued that both companies were essentially one entity, with Infrastructure being the developer and Town Planners its marketing arm, forming a principal-agent relationship.

4. The petitioner relied on cases like Castrol Ltd. Vs. Admiral Shipping Ltd. and Cravatex Ltd. Vs. Vitta Mazda Ltd., while the respondent cited Punjab State Industrial Development Corporation Ltd. v. PNFC Karamchari Sangh. The petitioner's argument was based on the relationship between Town Planners and Infrastructure.

5. The court noted that the mere acknowledgment of payment to "our director" by Infrastructure did not establish the companies as one entity. It emphasized the common business practice of separate corporate entities for different business functions, unless used for evasion. The absence of evidence showing fund transfers between the companies indicated no principal-agent relationship.

6. Despite the petitioner's argument based on an email and paragraph 9(c) of the petition, the court found no merit in considering both companies as one entity. It referenced the principle that new points should not be raised beyond the pleadings, unless necessary for a fair trial, but dismissed the argument.

7. Ultimately, the court dismissed the company petition against the respondent as not maintainable, along with the connected application, with no order as to costs.

This detailed analysis covers the issues of the petition's maintainability against the respondent under the Companies Act, 1956, addressing the arguments presented by both parties and the court's reasoning leading to the judgment.