1971 (3) TMI 73 - HC - Companies Law

Summary

Issues Involved:
1. Whether the company is in voluntary liquidation.
2. Validity of the resolution to liquidate the company.
3. The role of laches in disputing the liquidation status.
4. The equitable doctrine of laches and its applicability.
5. The conduct of the fertilizer company and its officers.

Issue-Wise Detailed Analysis:

1. Whether the company is in voluntary liquidation:
The applicant, Mr. Tickler, sought a declaration that payments totaling lb7,000 made to Bailey Fertilizers Ltd. constituted a fraudulent preference. The defense argued that the company was not in liquidation. The court examined the circumstances surrounding the company's liquidation, including the resignation of directors, the convening of an extraordinary general meeting, and the subsequent appointment of Mr. Tickler as liquidator. The court found that the company was indeed in voluntary liquidation based on the actions and inactions of the shareholders and directors, who allowed the resolution to be passed and dealt with the liquidator without objection for an extended period.

2. Validity of the resolution to liquidate the company:
The defense contended that the resolution to liquidate was invalid due to inadequate notice. The meeting was convened with a 14-day notice instead of the required clear 14 days. Despite this, the shareholders, including Mr. Kinslow and Mr. Bailey, did not object to the resolution at the time and allowed the liquidation process to proceed. The court held that the shareholders' conduct, including their attendance and abstention from voting, indicated their acceptance of the resolution. The court applied the principle that a company is bound by the unanimous agreement of its members, as established in cases like In re Express Engineering Works Ltd. and Parker and Cooper Ltd. v. Reading.

3. The role of laches in disputing the liquidation status:
The court considered whether the fertilizer company was barred by laches from disputing the liquidation status. The fertilizer company had delayed raising any objection to the liquidation for over three years. The court found that the company's conduct, including dealing with the liquidator and attending meetings, demonstrated acceptance of the liquidation. The court applied the equitable doctrine of laches, which bars claims where there has been unreasonable delay and where granting relief would be practically unjust.

4. The equitable doctrine of laches and its applicability:
The court cited the case of Erlanger v. New Sombrero Phosphate Co., which outlines the principles of laches. The court emphasized that laches is not an arbitrary doctrine but depends on the length of the delay and the nature of the acts done during the interval. The court found that the fertilizer company's delay in raising the objection and its conduct during the period made it practically unjust to grant the relief sought.

5. The conduct of the fertilizer company and its officers:
The court examined the actions of Mr. Kinslow and Mr. Bailey, who were officers of the fertilizer company. Despite their initial misgivings about the liquidation, they did not openly object to Mr. Tickler's appointment as liquidator. Their conduct, including instructing their solicitor to abstain from voting and reserving the right to challenge the liquidation later, indicated their acceptance of the liquidation. The court found that their actions and the company's delay in raising the objection barred them from disputing the liquidation status.

Conclusion:
The court declared that the company is in voluntary liquidation. The resolution to liquidate was deemed valid based on the shareholders' conduct and the principle of unanimous agreement. The fertilizer company was barred by laches from disputing the liquidation status due to its delay and conduct. The equitable doctrine of laches was applicable, and the court found that granting the relief sought would be practically unjust. The conduct of the fertilizer company and its officers demonstrated acceptance of the liquidation, and the court found no injustice in treating them as having agreed to the liquidation.