1967 (10) TMI 47 - HC - Companies Law

Company when deemed unable to pay its debts, Winding up Application for, General, Advertisement of petition

Issues Involved:
1. Locus standi of the petitioner.
2. Grounds for winding up and adherence to prescribed form.
3. Abuse of process of court and arbitration agreement.
4. Admissibility of supporting affidavits by the Registrar of Companies and the partnership firm.

Issue-wise Detailed Analysis:

1. Locus Standi of the Petitioner:
The petitioner, Kailash Chand Jain, filed the petition under Section 433 of the Companies Act, 1956, claiming to be a creditor of Thakur Paper Mills Ltd. However, the court found that the petitioner was a partner in the partnership firm, Kailash Chand Jain & Co., and not the firm itself or all the partners collectively. The court emphasized that "a debt due to the partnership firm is not due to any individual partner." The petition was dismissed on the ground that the petitioner had no locus standi to file it, as the firm or all partners should have been the petitioners.

2. Grounds for Winding Up and Adherence to Prescribed Form:
The petition lacked specific details such as when the security deposit was made, when the company stopped manufacturing papers, and when the distributorship business was closed. Additionally, none of the letters or notices mentioned in the petition were annexed. The court noted that under Rule 95, the petition must be in Form No. 46, which requires clear particulars showing that the debt claimed is due. The court found the petition deficient in these aspects but indicated that it would not have dismissed the petition solely on these grounds if other issues had not been present.

3. Abuse of Process of Court and Arbitration Agreement:
The company argued that the petition was an abuse of the process of court, intended to bypass the arbitration agreement in the distributorship agreement dated February 22, 1963. The court noted that the company had not raised any dispute regarding the debt during the correspondence prior to the filing of the affidavit-in-opposition. The court concluded that the dispute raised by the company was "clearly belated and does not seem to be bona fide." The arbitration clause would not have barred the winding-up petition if the dispute was not bona fide.

4. Admissibility of Supporting Affidavits by the Registrar of Companies and the Partnership Firm:
The Registrar of Companies and another partnership firm, Sobha Ram Jokhi Ram, filed affidavits supporting the winding-up petition. The court concluded that these affidavits could not be considered to support the petitioner's case, as the company was not called upon to meet the new facts stated in them. The Registrar could not present a petition for winding up without the previous sanction of the Central Government, as required under Section 439(5) of the Act. The court also rejected the request to substitute Sobha Ram Jokhi Ram as the petitioner under Rule 101, suggesting that the firm should file a new application if so advised.

Conclusion:
The court dismissed the winding-up petition on the primary ground that the petitioner had no locus standi. The petition's deficiencies in form and particulars were noted but were not the sole reason for dismissal. The court found the company's dispute over the debt to be belated and not bona fide, and the arbitration clause did not bar the petition. The supporting affidavits from the Registrar and the partnership firm were not considered, and the request for substitution of the petitioner was denied. The petition filed by the company under Section 34 of the Arbitration Act and the application for transfer of title suit No. 64 of 1967 were also rejected.

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