1968 (10) TMI 75 - HC - Companies Law

Applications under sections 391 and 394 - Notice to be given to central government for, Advertisement of petition

Issues Involved:
1. Requirement of notice to the Central Government under Section 394A.
2. Requirement of notice to shareholders before convening a meeting.
3. Interpretation of "application" under Section 394A.
4. Definition and scope of "company" under Section 391.
5. Mode of service of notices to shareholders.

Detailed Analysis:

1. Requirement of Notice to the Central Government under Section 394A:
The court addressed whether notice to the Central Government is required at the initial stage before convening a meeting under Section 391(1). The applicant argued that notice to the Central Government is not necessary at this stage, relying on previous rulings (Bangeswari Cotton Mills Ltd. and W.A. Beardsell & Co. (P.) Ltd.) which stated that the Central Government's role is that of an impartial observer. However, the court disagreed, emphasizing the clear language of Section 394A requiring notice of "every application made to it under section 391 or 394" to the Central Government. The court found no conflict between Section 394A and the Companies (Court) Rules, 1959, and held that notice must be given to the Central Government before any order is passed to convene a meeting.

2. Requirement of Notice to Shareholders Before Convening a Meeting:
The court considered whether shareholders are entitled to notice before directions are given to convene a meeting. The court noted that there is no statutory provision like Section 394A for serving notices to shareholders at this stage. However, the court emphasized that the issues to be decided under Rule 69 of the Companies (Court) Rules, 1959, involve the interests of shareholders. The court concluded that shareholders are necessary parties and must be heard before a decision to hold a meeting is taken, as their interests and convenience are directly impacted.

3. Interpretation of "Application" under Section 394A:
The court examined whether the term "application" under Section 394A includes applications made by summons as well as by petitions. The applicant contended that Section 394A should be read to exclude applications made by summons. The court rejected this contention, stating that the plain and obvious meaning of Section 394A includes both types of applications. The court emphasized that the term "application" must be construed in its ordinary and natural meaning, which includes applications by summons and petitions.

4. Definition and Scope of "Company" under Section 391:
The court addressed the contention that the term "company" in Section 391 refers only to companies liable to be wound up. The shareholders argued that the applicant company does not fall under this category. The court noted that Section 391(2) distinguishes between companies that are being wound up and those that are not. The court held that the term "company" includes any company liable to be wound up under the Act, thus encompassing the applicant company. The court deferred a final decision on this issue until all parties are heard.

5. Mode of Service of Notices to Shareholders:
The court considered the mode of service of notices to shareholders, given their large number. Rule 32 of the Companies (Court) Rules, 1959, provides for personal service, service through an advocate, or by pre-paid registered post. The court decided to dispense with the need to serve copies of the supporting affidavit on shareholders due to its length. Instead, shareholders would be served through summons in Form 33 by ordinary post and publication, evidenced by certificates of posting. The court fixed the next hearing date and allowed shareholders to request copies of the affidavit if desired.

Conclusion:
The court concluded that both the Central Government and shareholders must be given notice before any decision is taken to convene a meeting under Section 391(1). The court emphasized the judicial nature of the function under Section 391(1) and the necessity of hearing all parties concerned. The court provided directions for the mode of service of notices to shareholders to ensure timely proceedings.

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