1854 (2) TMI 8 - HC - Companies Law

Summary

Issues:
1. Whether a petition for winding up of a company can be entertained when the company was formed in contravention of the Indian Companies Act.
2. Whether the provisions of Part IX of the Indian Companies Act allow for the winding up of companies formed in violation of section 4 of the Act.

Analysis:

Issue 1:
The petitioners, three shareholders of a company, sought its winding up on the grounds of being just and equitable. The company, formed in 1946 to trade in gold and silver, was never registered. The main issue was whether the company consisted of more than twenty members, as required for winding up. The company's membership exceeded twenty, which was admitted by both parties. The court examined the provisions of the Indian Companies Act, specifically section 4(2), which prohibits the formation of companies with more than twenty members for the purpose of gain unless registered. The court held that members of such an association formed in contravention of the Act cannot seek redress through the court. Citing the case of In re Padstow Total Loss and Collision Assurance Association, the court concluded that the petition for winding up could not be entertained.

Issue 2:
The petitioners argued that the company fell under the definition of an "unregistered company" as per section 270 of the Act, allowing for winding up under Part IX. However, the court rejected this argument, stating that Part IX was intended for companies that could legitimately remain unregistered. The definition of "company" in the Act refers to a registered company only. The court emphasized that the legislature enacted special provisions in Part IX for the winding up of legitimately formed unregistered companies. Therefore, the contention that companies formed contrary to the Act's provisions could be wound up through court under Part IX was deemed invalid. The court dismissed the petition on the grounds that it cannot entertain a petition for winding up a company formed in contravention of section 4 of the Act, with no costs awarded to either party.

In conclusion, the court held that the petition for winding up of the company formed in violation of the Indian Companies Act could not be entertained, and the provisions of Part IX did not apply to such companies. The petition was dismissed, and each party was ordered to bear their own costs.