2017 (7) TMI 876 - HC - Companies Law

Voluntary winding up - Held that - The power of Court under the provisions of Section 466 of the Act, to stay the winding up proceedings in relation to Companies being wound up by the Court, can also be exercised when a company is undergoing voluntary winding up, in the event the facts and circumstances of the case warrant stay of the voluntary winding up proceedings. In the present case, the Petitioner Company is stated to have sufficient funds with comparatively negligible liabilities, in order to continue the business operations of the Petitioner Company. Further, it has been stated that the primary shareholder of the Petitioner Company, Btindia Ltd., holding more than 99% of the share-capital of the former, is willing to support the Petitioner Company once the Petitioner Company revives its business operations. The voluntary winding up of the Petitioner Company being in its initial stage; and in view of the satisfaction accorded by the Official Liquidator and the Registrar of Companies, there appears to be no impediment to allow the relief prayed for by way of the present petition. Consequently, the voluntary winding up proceedings of the Petitioner Company are stayed altogether. The Directors of the Petitioner Company shall be restored with the power of managing the affairs of the Petitioner Company, and the Voluntary Liquidator shall handover the charge of the Petitioner Company to its Directors. The Voluntary Liquidator, Ms. Seema Khanna, stands discharged qua the voluntary winding up proceedings of the Petitioner Company.

Issues Involved:
1. Restoration of management powers to the board of directors.
2. Permission for the Liquidator to handover charge and discharge from winding up proceedings.
3. Seeking permanent stay of voluntary winding up.
4. Compliance with statutory requirements and objections raised by the Registrar of Companies.

Issue-wise Detailed Analysis:

1. Restoration of Management Powers to the Board of Directors:
The petition sought to restore the management powers of the Petitioner Company to its board of directors. The court noted that the Petitioner Company was initially incorporated on 24.06.2005 and had passed a special resolution for voluntary winding up on 17.11.2014. However, the Board of Directors reassessed the situation and concluded that continuing the company would be more beneficial due to economic improvements. Consequently, the shareholders rescinded the winding-up resolution on 23.02.2015. The court found no objection from the Official Liquidator or the Registrar of Companies regarding this request and thus decided to restore the management powers to the board of directors.

2. Permission for the Liquidator to Handover Charge and Discharge from Winding Up Proceedings:
The petition requested permission for the Liquidator to handover charge to the directors and discharge her from further proceedings. The court observed that the voluntary winding up was in its initial stage and the Liquidator had not commenced the realization of assets or discharged any liabilities. The Official Liquidator and the Registrar of Companies confirmed that the statutory duties had not yet commenced and raised no objections to the relief sought. Consequently, the court permitted the Liquidator to handover charge to the directors and discharged her from the winding up proceedings.

3. Seeking Permanent Stay of Voluntary Winding Up:
The court referred to Sections 466 and 518 of the Companies Act, 1956, which empower the Tribunal to stay winding up proceedings. The court also cited the case of S.P. Sood vs. The Registrar of Companies, which established that the court has the power to stay voluntary winding up if the circumstances justify it. In this case, the Petitioner Company had sufficient funds and negligible liabilities, and the primary shareholder was willing to support the company. The court found these conditions satisfactory and ordered a permanent stay on the voluntary winding up proceedings.

4. Compliance with Statutory Requirements and Objections Raised by the Registrar of Companies:
The Registrar of Companies raised several objections, including the non-filing of MGT-14, retention of funds in a private bank account beyond the prescribed period, and payment of increased salary to a director without proper authorization. The Petitioner Company addressed these objections in an affidavit, clarifying that the funds were retained due to procedural delays in opening a special bank account and that the increased salary included a one-time ex-gratia payment. The court found these explanations satisfactory and noted that the objections were resolved.

Conclusion:
The court allowed the petition, staying the voluntary winding up proceedings altogether. The directors were restored with the power to manage the company's affairs, and the Liquidator was discharged from her duties. The Petitioner Company was directed to communicate the order to the Registrar of Companies within 30 days. No order as to costs was made, and the petition was disposed of accordingly.

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