2015 (2) TMI 1316 - HC - Companies Law

Recall of Winding up order - appellant was not even a shareholder of the Company in liquidation - time limitation - procedure for revival of the Company - HELD THAT - It is absolutely clear that the only interest of the appellant is to the extent that he is a guarantor of the loan taken by the Company from the State Bank of India. He has no share holding in the Company and had voluntarily exited from the Company in the year 2006 when he transferred his share holdings in favour of Sri S.N. Ladhani and his family members. The assets of the Company have to be distributed as per the terms of the Companies Act. A guarantor, even though may be the initial promoter of the Company, cannot be said to be a party interested in the revival of the Company as none of the provisions of the Companies Act give any right to such a person to revive a Company, who is not even a shareholder. The Company consists of shareholders and not outsiders. In the absence of the appellant having been able to place before us any provision under which a guarantor can be handed over the assets of the Company for its revival, (for which there is no proposal even filed by the appellant before the learned Company Judge or in appeal), the prayer for recalling the order of winding up at the instance of such guarantor (appellant) has been rightly rejected by the learned Company Judge. Appeal dismissed.

Summary

Issues:
1. Appellant's application for recalling the winding-up order and delay condonation.
2. Appellant's claim as a guarantor and interest in the company's revival.
3. Official Liquidator's stance on appellant's rights and revival proposal.
4. Shareholders' argument against company revival and support for winding-up order.
5. Lack of legal provision for guarantor's involvement in company revival.
6. Justification for rejecting appellant's application and delay in filing.

Analysis:
1. The appellant, a former shareholder, sought to recall a winding-up order issued five years prior. The application was dismissed due to lack of merit as the appellant no longer held shares in the company. The delay in filing the application was also a key factor in the rejection.

2. The appellant argued his status as a guarantor of a loan taken by the company gave him a vested interest in its revival. He proposed negotiating with creditors to revive the company for the benefit of all stakeholders. However, the respondent contended that the appellant had cleared debts, and the Official Liquidator emphasized the appellant's lack of legal standing as a shareholder or secured creditor.

3. The Official Liquidator maintained that the appellant, as a guarantor without shares or creditor status, had no right to participate in the company's revival. The absence of a legal provision allowing guarantors to revive companies was highlighted, leading to the rejection of the appellant's application.

4. Shareholders supporting the winding-up order argued against company revival, citing the absence of assets and the court's justified decision to wind up the company. They aligned with the Official Liquidator's position on dismissing the appellant's appeal.

5. The court emphasized that the Companies Act does not grant guarantors the authority to revive companies, especially in the absence of shareholding. The example of a guarantor attempting to claim company assets over other creditors' interests illustrated the legal principles guiding such matters.

6. The court upheld the rejection of the appellant's application, noting the lack of legal basis for his claims and the significant delay in filing the application. The dismissal of the appeals was justified, although the appellant was permitted to file a suitable application if entitled under the Companies Act.