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TMI Blog1998 (7) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... dition and in the Official Gazette. The draft publication was produced on June 2, 1998, and was approved by this court and publication was directed to be effected with hearing date July 3, 1998. This petition is filed by the respondent-company in the C.P. on June 18, 1998, seeking revocation of admission of the winding up petition and to stay all further proceedings till the disposal of the application. The respondents have filed a detailed counter-affidavit opposing this application. Both sides were heard in detail. The petitioner-company was incorporated under the provisions of the Companies Act to carry on the business of sale of silk sarees and other dress materials under the name "Remanika" and it is carrying on business in a rented building at M.G. Road, Ernakulam. The company was incorporated on May 4, 1993, with an authorised share capital of Rs. 1 crore divided into 10 lakhs equity shares of Rs. 10 each which is fully paid up. It is alleged by the respondents in the company petition filed by them that difference of opinion arose between the directors of the company and though the first respondent had properly conducted the affairs of the company as its managing direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness as the first respondent was removed from his managing directorship, due to vengeance. Therefore the admission of the company petition has to be revoked since there are absolutely no bona fides in filing the same. The respondents who constitute minority shareholders are not entitled to seek winding up of the company on the ground of either mismanagement or loss to the company. The first respondent has already filed a company petition before the Company Law Board, Delhi, for reliefs against oppression and mismanagement. The order passed by this court giving direction for advertisement even at the admission stage is against law and has caused great hardship to the company which is a going concern. Therefore, the order is liable to be revoked. In view of the fact that the winding up petition has been filed mala fide and with ulterior motives and the company has serious objections to the company petition, an opportunity should be given to the company to file its objections and the matter has to be heard in detail. Therefore, this court should have declined to order advertisement before notice to the company. The order of admission should be revoked and the petition should be dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wind up a company the judge may, if he thinks fit, dispense with any advertisement required by these rules." Therefore, from the above rules it is clear that when a petition is filed before the High Court for winding up of a company, the High Court may (1) issue notice to the company to show cause why the petition should not be admitted, (2) admit the petition and fix a date for hearing and issue notice to the company before giving directions about the advertisement of the petition, and (3) admit the petition, fix a date for hearing of the petition and order that the petition be advertised and direct that the copies of the petition may be served upon the persons specified in the order. Even though in accordance with rule 24 a petition for winding up cannot be put for hearing before the court unless the petition is advertised, it does not stipulate that as soon as the petition is admitted it must be advertised. In case of service of notice to the company to show cause why the petition for winding up should not be admitted, the company can contend that it should not be admitted and the petition amounts to abuse of process of the court. Even if the petition is admitted it is open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and business of the company. In support of his arguments counsel for the petitioner relies upon the decision in Malabar Industrial Co. Ltd. v. A. John Anthrapper [1983] KLT 958 ; [1985] 57 Comp Cas 717 (Ker). In that case the shareholder of the company filed the petition to wind up the company under sections 433( f ) and 439( c ) of the Companies Act on various grounds. The company raised a preliminary objection regarding maintainability of the petition. The company court overruled the objections and after finding that a bona fide case was made out since by the sale of the only estate belonging to the company the substratum of the company will disappear, ordered advertisement of the petition. The Division Bench of this court in the appeal preferred by the company against that order found that the disappearance of substratum has not been established even prima facie and the order directing advertisement of the liquidation petition was not at all justified. In that judgment the Division Bench held that the objects of the company mentioned in the memorandum of association of the company are wide enough to permit the company to engage itself in various activities and the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficient opportunity should be given to the company to set right the irregularities and to revitalise the company. He also argued that the respondents who are the contributories must establish prima facie grounds to admit the petition. In the decision in George v. Athimattam Rubber Co. Ltd. [1964] KLT 1043; [1965] 35 Comp Cas 17 (Ker) a single judge of this court has held that misconduct and mismanagement are not by themselves sufficient for a winding up order and in that case almost all the acts of misconduct and mismanagement alleged by the petitioner related to periods before the new board took charge. Therefore, even if they are well-founded, in the absence of anything to show that the members of the new board were privy to the mismanagement and misconduct is a matter of no consequence. The new board should be given sufficient time to manage the affairs of the company properly and free it from the results of the past mismanagement. But, in this case, all the allegations are made by the respondents regarding the mismanagement of the present managing director though they are denied by him. Therefore, even if mismanagement was committed prior to the constitution of the new board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the company and the petition has to be dismissed ultimately, admission itself can be revoked and the petition can be dismissed. In this case the respondents apart from alleging that there is oppression and mismanagement, also alleged that the petitioner-company is not in a position to discharge its debts and while the debt exceeds six crores of rupees, the assets of the company are only 1.5 crores of rupees. It is also further alleged that various suits and criminal proceedings instituted by the creditors are pending against the company and details of several suits and criminal cases are given in the company petition. Though it is alleged by the respondent-company in the company petition that all those debts are incurred during the period while the first petitioner therein was in the helm of affairs of the company as the managing director and contended that the present management making earnest attempts to pay off those debts, the fact that huge debts are due from the company much in excess of its assets is not denied by the company. It is also contended that this court has already ordered advertisement of the petition by the order dated May 21, 1998, in Company Petition No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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