1932 (2) TMI 21 - HC - Companies Law

Winding up Application for and Right to present winding-up petition where company is being wound-up voluntarily or subject to courts supervision

Summary

Issues:
1. Locus standi of the petitioners to present the winding-up petition.
2. Whether a case has been made out under section 162 of the Indian Companies Act for the company to be wound up by the Court.

Analysis:
1. Locus Standi of Petitioners:
- The respondent alleged that the petitioners' shares were forfeited in March, April, and May 1931, thus challenging their locus standi. However, even if the forfeitures were valid, petitioners were contributors as original shareholders, meeting the requirements under section 166 of the Indian Companies Act.
- The term "contributory" includes those liable to contribute to company assets in case of winding up, establishing petitioners' locus standi despite alleged forfeitures.

2. Winding-up Case:
- The company, incorporated in August 1926, had a nominal capital of one crore rupees but only sold 2,525 shares with discrepancies in the capital amount.
- No balance sheet was issued, a statutory obligation, and the respondent's improvised "balance sheet" lacked proper audit and legal director appointments.
- The company faced a deadlock with improper conduct, unsatisfactory business operations, and financial mismanagement, leading to a standstill in business activities.
- The Court found a complete deadlock in the company's operations, with violations of statutes and Articles of Association, inability to pay debts, imperiled property, and dwindling cash balances, justifying the winding-up order.
- Citing the interests of shareholders and creditors, the Court ordered the company's official winding-up under section 162 of the Indian Companies Act, appointing joint official liquidators and transferring proceedings to the District Judge, Lahore.

In conclusion, the Court granted the winding-up application due to the company's dire financial and operational situation, appointing official liquidators and transferring proceedings to the District Judge, Lahore, while leaving the parties to bear their own costs.