1970 (8) TMI 97 - HC - Companies Law

Summary

Issues:
1. Whether the company has ceased doing business after the government takeover in 1951?
2. Whether it is just and equitable to wind up the company?

Analysis:

Issue 1:
The petition under Section 433 of the Companies Act, 1956 sought the winding up of the Narasaraopet Electric Corporation Ltd. The petitioners, preference shareholders, argued that the company ceased business after the government acquisition in 1951. The respondents, however, contested this claim, stating that the company had other objects besides electricity supply. The court examined the memorandum and articles of association, concluding that the main object of the company was indeed to supply electrical energy in and around Narasaraopet. The court found that since the government takeover in 1951, the company had not engaged in any other business, supporting the petitioners' claim that the company had ceased operations.

Issue 2:
The court considered whether it was just and equitable to wind up the company due to the disappearance of its substratum. Citing legal precedents, the court highlighted that when a company's main purpose becomes impossible to achieve, it is just and equitable to order winding up. The court emphasized that the shareholders' interests and the company's inability to carry on business profitably are crucial factors in such decisions. In this case, the court found that the company's substratum had disappeared after the government takeover in 1951, making it just and equitable to wind up the company. The court referred to a similar judgment involving the winding up of another company in comparable circumstances. Consequently, the court ordered the winding up of the Narasaraopet Electric Corporation Ltd., directing the official liquidator to take charge of the company's assets and papers, and the petitioners to file a certified copy of the order with the Registrar within 30 days. The costs of the petition were to be covered by the company's estate, with specific instructions for further legal proceedings and advertisement of the winding-up order.