1951 (9) TMI 25 - HC - Companies Law

Winding up Circumstances in which company may be wound up voluntarily and Power to apply to court to have questions determined or powers exercised

Summary

Issues Involved:
1. Validity of the voluntary winding up of the company.
2. Competency of the liquidators to make the application under section 216 of the Companies Act.
3. Validity of the orders of attachment made before the commencement of the winding up.

Detailed Analysis:

1. Validity of the Voluntary Winding Up of the Company:
The petitioners argued that at an extraordinary general meeting held on 17th March 1950, a special resolution was passed for the voluntary winding up of the company and their appointment as liquidators. They conceded that the notice of the resolution was not published in the official Gazette as required by section 206 and that no declaration of solvency was filed as required by section 207. They contended these omissions were mere irregularities and not illegalities. However, the court held that compliance with sections 206 and 207 is essential. Section 207 divides voluntary winding up into two classes: members' voluntary winding up and creditors' voluntary winding up. A members' winding up requires a declaration of solvency, which was not made in this case. Hence, the voluntary winding up was invalid, and the appointment of the petitioners as liquidators was also invalid.

2. Competency of the Liquidators to Make the Application Under Section 216 of the Companies Act:
The court emphasized that under section 216, the court can exercise its powers only if the application is made by a person entitled to do so, such as a liquidator, contributory, or creditor. The non-applicants argued that the petitioners were not validly appointed liquidators due to the invalid voluntary winding up. The court agreed, stating that the petitioners could not be regarded as persons entitled to apply under section 216 due to the invalidity of their appointment. The court also distinguished between cases where the validity of liquidation proceedings is attacked by the applicant and where it is raised by the opponents. In this case, the opponents' attack was to show that the conditions for exercising powers under section 216 did not exist.

3. Validity of the Orders of Attachment Made Before the Commencement of the Winding Up:
The petitioners contended that section 216(2) does not prohibit the court from setting aside orders of attachment made before the commencement of the winding up. However, the court held that section 216 presupposes that the application would be made after the commencement of the winding up and that the words "after the commencement of the winding up" refer to the time when any attachment, distress, or execution is put into force. Since the orders of attachment were made and put into force before the passing of the special resolution for voluntary winding up, the court found it impossible to set aside these orders. Additionally, the court noted that the exercise of powers under section 216 must be just and beneficial to all parties, which was not the case here due to the irregularities in the winding-up procedure.

Conclusion:
The court rejected the petition, concluding that the voluntary winding up and the appointment of the petitioners as liquidators were invalid due to non-compliance with sections 206 and 207 of the Companies Act. Consequently, the petitioners were not entitled to apply under section 216. Furthermore, the orders of attachment made before the commencement of the winding-up could not be set aside. Both parties were directed to bear their own costs due to the complex nature of the issues involved.