1968 (7) TMI 37 - HC - Companies Law

Circumstances in which a company may be wound up, Company when deemed unable to pay its debts, Winding up - Appeals from orders, General

Issues Involved:

1. Whether an appeal lies from the order refusing to stay the winding-up petition.
2. Whether there should be a stay of the winding-up petition.

Issue-wise Detailed Analysis:

1. Whether an appeal lies from the order refusing to stay the winding-up petition:

The respondent contended that an appeal was incompetent for three reasons: (a) the order was made in the exercise of inherent power of the court and, therefore, it is not appealable; (b) the order is not a judgment within the meaning of clause 15 of the Letters Patent; (c) section 483 of the Companies Act cannot be invoked as there is no winding-up order made yet. The respondent relied on the Bench decision in *John Herbert & Company Private Ltd. v. Pranay Kumar Dutta* [1966] 36 Comp. Cas. 485, which held that rejecting an application for stay is not a judgment under clause 15 of the Letters Patent.

The appellant contended that: (a) the order was made in the matter of winding up; (b) the order was a judgment within the meaning of clause 15 of the Letters Patent; (c) it was an order in the matter of winding up under section 483 of the Companies Act and, therefore, an appeal was competent. The appellant relied on the Supreme Court decision in *Shankarlal Agarwala v. Shankarlal Poddar* [1965] 35 Comp. Cas. 1, which held that any order made or decision given in the matter of winding up is appealable.

The court held that the appeal in the present case is competent and the decision of the Supreme Court in *Shankarlal Agarwala* settles that question. The court emphasized that section 483 of the Companies Act refers to any order made or decision given in the matter of winding up, not merely procedural orders, but those affecting the rights and liabilities of the parties.

2. Whether there should be a stay of the winding-up petition:

The company was a family concern with shares initially held by family members. The petition for winding up was presented by Mulchand Gupta, who alleged that the company's properties were sold at a gross under-value and that shares were wrongfully transferred. The learned judge initially considered staying the winding-up application but refused due to the sale of the Guraora property, which was not disclosed by Bidya Bhushan Gupta.

The court considered three broad features: (a) the company being a family concern; (b) the distribution of shares; (c) the sale of properties. The court noted that most properties were sold between 1949 and 1960, and the petition suffered from the vice of delay. The court found that Mulchand Gupta was aware of the affairs of the company and had acquiesced in the management and business of the company.

The court held that the grievances about the shares of Jagannath Gupta and their distribution were not legitimate grounds for winding up but were intended to wreak vengeance on Bidya Bhushan Gupta's group. The court also noted that the petition for winding up was presented on the ground of just and equitable principle, but the grounds of complaint related to internal disputes regarding distribution of shares or properties.

The court found that the sale of Guraora property was a disputed transaction and should not have been a decisive factor in refusing the stay. The court emphasized that the petitioner, Mulchand Gupta, had suppressed material facts, including his reference to the Company Law Board, which should have been disclosed.

The court concluded that the appeal should be accepted and allowed, setting aside the judgment and order of the learned judge. The appellant was entitled to costs, and there would be an order in terms of prayer (a) of the judge's summons.

Separate Judgment by S.K. Mukherjea, J.:

S.K. Mukherjea, J. concurred with the decision, emphasizing that *Shankarlal Agarwala v. Shankarlal Poddar* is a clear authority that any order made in the matter of winding up is appealable under section 483 unless it is merely procedural. The judgment does not need to satisfy the tests of a "judgment" within the meaning of clause 15 of the Letters Patent. He noted that the respondent had acquiesced in the sale of properties and transfer of shares over a long period and could not now rely on those transactions for winding up. The action was motivated by private reasons rather than a desire to do justice to the company or shareholders. He agreed that the winding-up proceedings should be stayed.

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