2019 (5) TMI 1106 - HC - Companies Law

Winding Up - Oppression and mismanagement - Company Judge has rejected the Company Petition at the threshold itself relying on Section 443(2) that relief's of oppression and mismanagement u/s 397 and 398 as well as winding up u/s 433(f) are sought which in the jurisdiction of Company Law Board - scope of Contributory - It was contended that the petitioner in the Company Petition is not a contributory as defined u/s 428 who alone can maintain a company petition u/s 439(1)(c) of the Companies Act, 1956 - HELD THAT - The petitioner in the Company Petition asserts that he is a contributory of S.N.D.P.Yogam which is a non-trading company to which the Companies Act, 1956 does apply. Clause (4) of the Memorandum of Association of the S.N.D.P.Yogam speaks both of 'liability' as well as 'shares' making it ambiguous warranting an adjudication as to its constitution. The Memorandum of Association does not give any indication of S.N.D.P.Yogam being a company limited by guarantee. A composite company petition of the nature filed is perfectly maintainable and this Court had the jurisdiction to grant the relief of winding up at the time of its preferment. We shall not be misunderstood as holding that a case for winding up the company has been made out though the impugned judgment to the extent it holds that this Court lacks jurisdiction is unsustainable. The Company Petition remitted to the Company Judge for disposal - impugned judgement set aside - Company appeal allowed.

Summary

Issues:
1. Jurisdiction of the Court to grant reliefs under Sections 397 and 398 of the Companies Act, 1956.
2. Definition of a contributory under Section 428 of the Companies Act, 1956.
3. Ambiguity in the Memorandum of Association of the company.
4. Maintainability of a composite company petition for winding up.

Analysis:

1. The judgment addresses the issue of the Court's jurisdiction to grant reliefs under Sections 397 and 398 of the Companies Act, 1956. The Company Petition sought reliefs of oppression, mismanagement, and winding up. The Court clarified that while the Company Law Board had jurisdiction over Sections 397 and 398, the Court retained jurisdiction for winding up. The Company Judge had rejected the petition based on Section 443(2) of the Companies Act, which states that winding up should be the last resort. The Court emphasized that the provision does not affect the Court's jurisdiction to entertain a company petition for winding up, which requires a hearing to decide.

2. The judgment delves into the definition of a contributory under Section 428 of the Companies Act, 1956. The petitioner claimed to be a contributory of a non-trading company, S.N.D.P.Yogam. The Memorandum of Association was deemed ambiguous regarding liability and shares, necessitating a deeper probe post-evidence submission. Reference to relevant case laws and the company's bye-laws was deemed essential for adjudication.

3. Addressing the ambiguity in the Memorandum of Association, the judgment highlighted the need for a detailed examination of the company's constitution. The lack of clarity on whether S.N.D.P.Yogam was a company limited by guarantee required further investigation based on relevant clauses in the Memorandum and Bye-laws.

4. The judgment concluded on the maintainability of a composite company petition for winding up. It cited a Supreme Court observation that a company petition must proceed to a certain stage common to both winding up and other reliefs. The Court asserted its jurisdiction to grant the relief of winding up at the time of filing the petition, emphasizing that the lack of jurisdiction claim was unsustainable. The impugned judgment was set aside, and the Company Petition was remitted for further disposal based on the observations provided.

This detailed analysis of the judgment from the Kerala High Court provides insights into the legal intricacies surrounding jurisdiction, contributory definitions, company constitution ambiguity, and the maintainability of composite company petitions for winding up.