1965 (7) TMI 38 - HC - Companies Law

Summary

Issues Involved:
1. Justifiability of the winding-up order based on affidavits without oral evidence.
2. Sufficiency of the allegations in the petition to warrant a winding-up order.
3. Withdrawal of defense by the contesting respondents and its implications.

Detailed Analysis:

1. Justifiability of the Winding-Up Order Based on Affidavits Without Oral Evidence:

The appellants contended that the winding-up order was unjustified as no witness was called to substantiate the averments in the petition, and the order was based solely on affidavits. The court found this objection untenable, stating that there is no provision in the Companies Act or the Rules requiring that such orders must be based on oral evidence alone. The Act and the Rules allow for affidavits and counter-affidavits to be used as evidence, which is permissible in law and often desirable for the expeditious disposal of such matters. The court emphasized that affidavit evidence is sufficient and that oral evidence is not a sine qua non for the disposal of a winding-up petition. The court referenced English precedents and Indian judicial opinions supporting the use of affidavits in such proceedings, noting that affidavits are the usual and appropriate form of evidence unless challenged, in which case the deponents can be summoned for cross-examination.

2. Sufficiency of the Allegations in the Petition to Warrant a Winding-Up Order:

The appellants argued that the allegations in the petition did not provide justifiable grounds for a winding-up order. The petition claimed that the company was heavily indebted, unable to pay its debts, and suffering from severe internal dissensions affecting its management. The court found these allegations sufficient to warrant a winding-up order, especially given that the statutory affidavit filed by the petitioner was unchallenged and supported by affidavits from other creditors. The court highlighted that Section 443 of the Companies Act grants the court wide powers to make a winding-up order if it deems fit, considering the company's inability to pay creditors, increasing interest burdens, and deteriorating management due to shareholder disputes.

3. Withdrawal of Defense by the Contesting Respondents and Its Implications:

The contesting respondents, including the company and its managing director, eventually withdrew their defense and consented to the winding-up order. This withdrawal meant that the averments in the petition stood unchallenged, and the court found no need for further evidence. The court noted that the respondents' withdrawal and consent to the winding-up order indicated their acceptance of the petition's allegations. Therefore, the court acted rightly in passing the winding-up order based on the unchallenged statutory affidavit and supporting affidavits.

Conclusion:

The court dismissed the appeal, finding no merit in the appellants' contentions. It upheld the winding-up order, emphasizing that affidavit evidence is permissible and often appropriate in winding-up proceedings, and that the allegations in the petition were sufficient to justify the order. The court also noted that the respondents' withdrawal of defense further supported the decision to wind up the company. The appeal was dismissed with costs to the respondents who were impleaded in the related C.M. Ps.