9911796707
TMI Blog1968 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... Gupta, who preferred the Company Petition No. 158 of 1967, filed an affidavit in opposition affirmed on 13th November, 1967. Bidya Bhusan Gupta filed an affidavit in reply affirmed on 20th November, 1967. There are further affidavits of Mulchand Gupta affirmed on 27th March, 1968, and of Bidya Bhusan Gupta affirmed on 20th April, 1968. Bidya Bhusan Gupta stated in his affidavit in support of the summons that the company from its inception carried on business in manganese and ironore, and brokerage in jute, gunny and hessian, and that the company still continues to carry on the business. The further allegations in the said affidavit are that the total bank balance to the credit of the company's account as on 16th August, 1967, is about Rs. 1,30,000. The company has been suffering some loss in the business of manganese ore on account of restriction by the Government on the export of ore and general trade depression. The capital of the company has not been exhausted. The assets of the company and the investments are worth Rs. 8,76,432 and are shown separately in annexure "C" to the said affidavit. In the said affidavit the other allegations made by Bidya Bhusan Gupta are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of court. It is also alleged that except the respondent's group (Mulchand Gupta) all other shareholders are satisfied that the winding up of the company will be injurious to the interest of the company. It is also alleged that the winding up of the company will gravely embarrass the directors in resisting proceedings before the Company Law Board and that charges before the Board are identical. Mulchand Gupta in his affidavit in opposition alleged that the company's immovable properties except premise No. 8, Murlidhar Sen Lane, Calcutta-7, had been sold and/or transferred. One of the major disputes centres on the allegation in the affidavit of Bidya Bhusan Gupta that Jagannath Gupta, who held 495 shares, bequeathed 125 shares to Padam Chand Gupta, 250 shares to Bidya Bhusan Gupta, 65 shares to Gopal Krishna Gupta and 55 shares to Debi Prosad Gupta. Mulchand Gupta in his affidavit alleged that, though the shares were alleged to have been transferred by Jagannath Gupta in 1949, the same was not recorded till 1952. Mulchand Gupta alleged that the proceedings were false and colourable transactions and intended to deprive Mulchand Gupta of his right, title and interest in the said sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Government of Punjab and that the company was still the owner of the other properties. Mulchand Gupta in the said affidavit affirmed on 27th March, 1968, alleged that item No. 16 in Schedule A, namely, the Ranchi property, was conveyed in the name of the wife of Bidya Bhushan Gupta and that item No. 17 in the said Schedule A being the Bhaironpur property had been appropriated to have been transferred to Mulchand Gupta's son, Gopal Krishna Gupta, although no such transfer had taken place and item No. 18, namely, Guraora property, had also been shown to have been transferred to Mulchand Gupta's son, Gopal Krishna Gupta, although no such transfer had taken place. In the affidavit in reply affirmed by Bidya Bhusan Gupta, affirmed on 25th November, 1967, on the judge's summons dated 4th September, 1967, Bidya Bhusan Gupta alleged that Bhaironpur and Guraora properties could not be delivered to the purchasers and the conveyances in respect thereof were treated as cancelled and further that Bhaironpur property was eventually acquired by the Government of Punjab. Mulchand Gupta in paragraph 7 of his affidavit affirmed on 27th March, 1968, said that he made enquiries during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... John Herbert Company Private Ltd. v. Pranay Kumar Dutta [1966] 36 Comp. Cas. 485 ; 70 C.W.N. 516. That was a decision on an appeal from an order refusing to stay proceedings on a Company Petition No. 22 of 1965. It was held that in rejecting such an application the court merely decided that there was a prima facie case for enquiry and it could not then and did not in fact adjudicate upon the rights of the parties and, therefore, it was not a judgment under clause 15 of the Letters Patent. Counsel for the appellant, on the other hand, contended, first, that the order was not in exercise of inherent power but that the order was made in the matter of winding up. Secondly, it was said that the order was a judgment within the meaning of the word in clause 15 of the Letters Patent. Thirdly, it was said that it was an order in the matter of winding up under section 483 of the Companies Act and, therefore, an appeal was competent. Counsel for the appellant relied on the decision of the Supreme Court in Shankarlal Agarwala v. Shankarlal Poddar [1965] 35 Comp. Cas. 1 ; [1964] 1 SCR 717 ; AIR 1965 SC 507. It must be stated at the outset that in the Bench decision in John Her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision given in winding up will be appealable is to restrict the language of the section. The Supreme Court in Shankarlal Agarwala s case ( supra ) referred to the views of this court as also the views of the Bombay High Court on orders or decisions under section 202 of the 1913 Companies Act. Section 202 was in the same language as section 283 of the Companies Act, 1956. With regard to the meaning of the expression "order or decision" used in section 202 of the 1913 Companies Act, the Supreme Court accepted the Bombay view to be correct, namely, that an order or decision in the matter of winding up would not be merely procedural in character but that it would be an order or decision to affect the rights and liabilities of the parties. The Supreme Court further observed that the right of appeal was conferred by the first limb of section 202. The first limb of section 483 of the 1956 Companies Act is the same as the first limb of section 202 of the 1913 Companies Act. The first limb of the section states that appeals from order made or decision given in the matter of the winding up of a company by the court shall lie to the same court. Therefore, the Supreme Court decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally held as follows : ( a ) Jagannath Gupta ... 495 shares ( b ) Srimati Bhuran Devi ... 5 shares ( c ) Bidya Bhushan Gupta ... 125 shares ( d ) Padam Chand Gupta ... 125 shares ( e ) Mool Chand Gupta ... 125 shares ( f ) Bhim Sen Gupta ... 120 shares ( g ) Krishna Devi ... 5 shares The first directors of the company were Jagannath Gupta, Padam Chand Gupta, Bidya Bhushan Gupta. Jagannath Gupta while alive, at a meeting of the board of directors held on 6th September, 1949, passed a resolution whereby he nominated his successors to his 495 shares or bequeathed or transferred his 495 shares in the event of his death and 125 shares were given to Padam Chand Gupta, 250 shares to Bidya Bhusan Gupta, 65 to Gopal Krishna Gupta, son of Mulchand, and 55 shares to Debi Prasad Gupta, son of Bhim Sen Gupta. The third distinctive feature in the present case is that the company was formed with 19 properties specified in schedule A to the memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In the exercise of jurisdiction for staying the winding up petition counsel for the respondent contended that the winding up petition was not controverted by affidavits and, therefore, the allegations had not been gone into and, therefore, the court should not stay if the facts reveal the necessity of enquiry. Broadly stated, the proposition would be correct that the court would not stay the winding up if the facts disclosed grounds for winding up. In the present case, one of the most important elements is that Mulchand Gupta was in the employment of the company up to the year 1966 and he did not take any step to object about these affairs as long as he was in employment. In the second place, the allegations are that most of the properties were sold between 1949 and 1960. When a petitioner waits for seven years to come to a court of law on a charge of winding up, the court will decide as to whether the petition is presented for legitimate grievances or is presented in aid of collateral reasons. In the present case, the facts leave no doubt whatsoever that the sale of properties for over two decades ended in the year 1960. When Mulchand Gupta was in the active knowledge of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s right, title and interest. Bhim Sen Gupta in his affidavit affirmed on 13th November, 1967, alleged in paragraph 3 thereof that he pointed out to his brother, Mulchand Gupta, that he had never sold or transferred his 120 shares to Bhuran Devi or any other person and that it was false and incorrect to say that the shares had been sold as alleged or at all. These allegations about the shares, particularly the distribution of the shares belonging to Jagannath Gupta or transfer of shares by Bhim Sen Gupta, are also invoked in aid of the application for winding up on the ground that the group of Bidya Bhushan Gupta is in majority with the aid of these shares. It cannot be disputed that the distribution of Jagannath Gupta's shares took place 15 years prior to the presentation of the winding up petition. It cannot also be disputed that Mulchand Gupta was aware of everything that happened in relation to the transfer of those shares. The letter dated 9th August, 1966, written by Mulchand to the Regional Director, Company Affairs, appearing at page 187 of the paper-book, indicates that Mulchand Gupta knew that transfers were not supported by properly executed transfer deeds and that no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced that an application for winding up would require greater candour than an application for stay. In regard to statement of facts in petition neither on principle nor on precedent any such distinction can be made. But in the present case an important consideration is whether the petitioner who impeaches sale of certain properties can travel beyond the petition for winding up by additional allegations and thereby prevent a stay of the winding up. Counsel for the appellant relied on the statement of law in Buckley on the Companies Acts (12th edition) at page 473 that a winding-up order could be made only on secundum allegata et probata. In my opinion, the petition for winding up is to be confined to the grounds set out in the petition and the petitioner, except with the leave of the court, should not be allowed to travel outside the petition. In the present case the sale of Guraora property appears to be very much in dispute as to whether it is a complete sale or an inchoate sale. In winding up disputed questions of fact are taken into consideration to decide as to whether there should be a winding up or not. Similarly, in an application for stay of winding up the court will l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Copies of correspondence are said to be collectively marked with the letter "B". It is true that one or two of the letters written by Mulchand Co. found place in the annexure but, unless and until it appears in the petition as to why the correspondence is relied on, the annexures will not be meaningful in regard to the petition. In the present case, Mulchand Gupta alleged that the correspondence would show that the company and its directors were written to for explanation of illegal acts. There is no averment by the petitioner that the petitioner preferred complaint before the Company Board. Counsel on behalf of the respondent contended that annexures would eventually indicate that there was reference before the Company Board. The suppression in the present case is that the petitioner asked for investigation of affairs of the company by the Company Law Board. The importance of such an allegation is that if investigation of the affairs of the company is pending, it may be that the court will not admit the petition for winding up. It was said by the Supreme Court in R ajahmundry Electric Supply Corpn. case ( supra ) that there must be a justifiable lack of confidence and business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even between corporate rights and individual rights of shareholders. But Mulchand Gupta's claim to properties is on the basis of heirship and not as a shareholder of the company. It is noticeable that in the present case, though the petition for winding up is presented on the ground of just and equitable principle, the grounds of complaint relate to disputes between the parties of internal character regarding distribution of shares or distribution of properties. That is another reason why the winding up petition should not be allowed to be pursued. Counsel for the respondent contended that the appellant in the present case asked for injunction and removal of the petition from file and these prayers were not. proper It will appear that the reliefs asked for on the judge's summons are modelled on Palmer's Company Precedents, volume II, Forms No. 17 and 18, at page 46. The decision in In re Bharat Vegetable Products Ltd. [1952] 22 Comp. Cas. 62 ; 52 C.W.N. 29 also indicates that the reliefs asked for are in proper form. Counsel for the appellant relied on the decision of the Supreme Court in Seth Mohanlal v. Grain Chambers Ltd. [1968] 38 Comp. Cas. 543 (SC) in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be looked into. The Guraora property has been alleged to be sold and it is also claimed on the principle of inheritance. In my opinion, it would not have weighed with the learned judge in refusing stay on the ground of suppression of fact for the reason that it was beyond the sccpe of the petition and the sale was a disputed transaction. The learned judge was correct in coming to the conclusion, on the facts and circumstances of the case, that there should be a stay. The consideration of the sale of Guraora property by the learned judge disentitled the appellant to a stay of winding up of the petition. In my opinion, the learned judge should not have placed reliance on the alleged sale of Guraora property in arriving at that conclusion. The facts in the present case indicate that the last transaction took place seven years before the presentation of the petition. Secondly, the petitioner was in the employment of the company and was a party to the sales and had knowledge of the sale. Thirdly, the impeachment of distribution of shares is made by Mulchand Gupta after fifteen years. He was fully aware of all that happened and he did not take any step. Fifthly, the petitioner, Mulchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of a learned single judge by which he confirmed the sale of the assets of a company by joint liquidators. The Division Bench held that the order was appealable as, in its opinion, the order satisfied the tests of a "judgment". The Supreme Court thought it unnecessary to pronounce on the question whether the order was a judgment or not, because in the opinion of the court the order was appealable under section 202 of the Indian Companies Act, 1913, which corresponds to section 483 of the Companies Act of 1956. The court also expressly approved the decision of the Bombay High Court in Bachharaj Factories Ltd. v. Hirjee Mills Ltd. [1955] 25 Comp. Cas. 227 ; AIR 1955 Bom. 355, where it was held that an order adjourning the hearing of a petition for winding up in order to enable certain shareholders to file a suit for the purpose of a declaration that the debentures issued in favour of the petitioners were not valid in law, was an order from which an appeal lies under section 202 of the Act of 1913. The Supreme Court also approved the judgment of Chagla C.J. in Western India Theatres Ltd. v. Ishwarbhai Somabhai Patel , [1959] 29 Comp. Cas. 133 where the learned Chief Justice he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order cannot be said to affect the rights or liabilities of the parties. The proceeding is still continuing against others and, if, in the course of that proceeding, some other facts come to light which have a bearing on the conduct of Lakshmipat Singhania and Birdhi Chand Bhalotia the company judge will undoubtedly have jurisdiction to reconsider his order. Hence, his order under appeal cannot be said to have attained that finality to make it appealable". It appears that the learned judge proceeded on the basis that an order to be appealable under section 202 must attain the character of finality. That this was the principle which lies at the basis of the decision will appear from the following lines in the concluding portion of the judgment: "An order passed either rejecting the application of the liquidator finally or allowing it and directing the directors concerned to recoup the loss to the company would undoubtedly be a final order affecting the rights and liabilities of the parties and, as such, appealable. But, where, in the initial stage of a proceeding under section 235, the company judge merely says that, at that stage, there is no prima facie case against two of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal was a "judgment" or not, and, as he came to the conclusion that it was not a "judgment", it was not necessary for him to allude to section 483 of the Companies Act. It is unfortunate that the decision of the Supreme Court in Shankarlal's case ( supra ) was not brought to the notice of the learned judge because, if it were, the decision in that case might have been different. John Herbert Co. s case ( supra ) is still an authority for the proposition that an order rejecting an application for stay of winding up is not a "judgment", although it must be acknowledged that the validity of the classical view of "judgment", as expressed by Sir Richard Couch C.J. in the case of Justices of the Peace for Calcutta v. Oriental Gas Co. 8 Bang. LR 433 , on which the judgment of G. K. Mitter J. is founded, has been widely and persistently questioned. Be that as it may, in so far as the case decides that an order refusing stay of winding up is not appealable because it does not satisfy the tests of a "judgment", the decision must be held to be contrary to the principles laid down in Shankarlal's case ( supra ) by the Supreme Court and cannot, therefore, be regarded as good law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. The balance-sheets and profit and loss accounts were accessible to him and, if they were not accessible, he should have certainly taken steps in that behalf. It will be too much to believe that he was not aware that the properties were being sold one after another and that the shares belonging to his father were distributed and allotted in the manner complained of. As an heir of his father it will be natural to expect that he will not lose sight of his father's properties including the shares in the company which were part of the assets left by his father on his death. Not only he never raised any objection to the sale of the properties but he actively acquiesced in the sale of the Chittaranjan Avenue property by executing a letter of indemnity in support of the sale. He never questioned the propriety of any of the sales until his service was terminated. He never objected to the transfer of shares. He knew that he never executed any transfer deed and yet he accepted and acquiesced in the transfer of shares. Assuming that the properties were sold at a gross under-value to the prejudice of the company and that his father's shares were transferred and allotted wrongfully, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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