1964 (6) TMI 37 - HC - Companies Law

Summary

Issues:
- Competency of the appeal filed by a shareholder on behalf of the company without the company filing an appeal.
- Whether a shareholder can maintain an action when a liquidator is functioning.
- Requirement of leave from the winding-up court for a shareholder to file an appeal on behalf of the company.

Analysis:
The judgment revolves around the competency of an appeal filed by a shareholder on behalf of a company without the company itself filing an appeal. The suit in question sought various reliefs related to decrees and execution proceedings obtained fraudulently, with the company as the first plaintiff. The appeal was filed by a shareholder, the third plaintiff, after the company ceased to be the official liquidator. The primary issue raised was the shareholder's entitlement to file an appeal on behalf of the company. The respondent argued that since the company did not appeal, the shareholder's appeal was incompetent. The court delved into the legal standing of a shareholder in relation to the assets of a company, citing Supreme Court precedents emphasizing that a shareholder does not possess an interest in the company's property. It was established that a shareholder cannot maintain an action when a liquidator is in place, as the liquidator has the authority to sue on behalf of the company.

The judgment further explored the provisions of the Indian Companies Act, 1913, which empower the official liquidator to take control of the company's property and institute legal proceedings on behalf of the company. It was clarified that once a liquidator is appointed, even the directors lose the power to sue on behalf of the company. The court highlighted that a shareholder's role in such circumstances is limited to seeking court directions for the liquidator to take legal action. Additionally, the court referenced previous decisions to support the requirement of leave from the winding-up court for a shareholder to file an appeal on behalf of the company. The judgment emphasized that the reliefs sought in the appeal were within the company's prerogative, and since there was no appeal by or on behalf of the company, the shareholder's appeal was deemed incompetent.

In conclusion, the court upheld the preliminary objection regarding the appeal's competency, ruling that the appeal filed by the shareholder on behalf of the company was not valid. The judgment dismissed the appeal and directed the appellant to bear the costs. It was clarified that without the company filing an appeal or granting leave from the winding-up court, a shareholder cannot independently file an appeal on behalf of the company.