9911796707
TMI Blog1997 (4) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... chemicals, chemical products, alkalis, acids, tannings, essence, emulsions, solvents, chemical auxiliaries, pesticides, weedicides, insecticides, caustic soda, soda ash, carbon, hydro-carbons, petroleum, synthetic products, polymers, elastomers and resins of all types and grades and co-polymers, formulations and in all forms, dyes and intermediates, paints, varnish, rubber chemicals, agro chemicals, textile auxiliaries, marine chemicals, photo-chemicals, industrial chemicals, fertilizers, gas and gases, materials of all kinds, salts, marine minerals their derivatives by-products and compounds of all kinds and descriptions, etc." The authorised capital of the company is Rs. 10 crores comprising one crore equity shares of Rs. 10 each. The issued, subscribed capital of the company is Rs. 9,05,45,000 and the paid-up capital is Rs. 9,03,15,500. The petitioner is holding 30,000 fully paid equity shares of Rs. 10 each in the company. In January, 1994, the company entered the capital market through prospectus by making public issue of 60,00,000 equity shares of Rs. 10 each. The petitioner on the basis of believing the contents of the prospectus has subscribed for equity shares of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory provisions deserves to be wound up. The company has misrepresented the facts in the prospectus and thus caused unlawful losses to the shareholders. It is, therefore, just and equitable to order the winding up of the company. In any event it is submitted that the petitioner has set out sufficient particulars to make out a strong prima facie case for the acceptance and admission of the petition. Counsel has relied on a Division Bench judgment of this court given in the case of Jivabhai Marghabhai Patel v. Extrusion Processes Pvt. Ltd. [1966] 2 Comp LJ 74 to canvass the submission that at this stage the petition cannot be dismissed merely because an alternative remedy may be available to the petitioner. No affidavit-in-reply has been filed by the company. Counsel appearing for the company has made a number of submissions. Firstly it is submitted that the petition filed by the petitioner is an abuse of the process of the court. The petition has not been filed bona fide . The petitioner bought shares of the company with open eyes. The shares were bought by the petitioner in April, 1994. The petition has been filed in December, 1996. This fact is highlighted to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have made and they are acting unreasonably in seeking to pursue this remedy by way of winding up petition without resorting to the alternative remedy at least under sections 397 and 398. The remedy under section 408 they have availed of and they have failed..... In any event the petitioners not having availed of the remedies under sections 397 and 398, there is no justification whatever for this petition at this stage. Therefore, on all these grounds this petition must fail and it cannot be admitted as on doubtful assertions the petitioners are presenting the petition in a manner productive of such irreparable damage to the solvent company without availing of the ample alternative remedies. Therefore, the company petition is dismissed at the admission stage and the notice is discharged." It is further observed in the said judgment (page 367) : "Therefore, unless the constitution is such which results in complete, irresoluble deadlock and where there is no adequate remedy, the partnership principle must be invoked ; while, in other cases, the ground of lack of probity in the conduct of the company's affairs must be established. The question of alternative remedy even when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a has pointed out the provisions of sub-section (2) of section 443 of the Act which reads as under : "Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." A perusal of the said section clearly shows that the existence of an alternative remedy can be argued as a ground for dismissal of the petition. It is further argued by Mehta that the petitioner being a shareholder is a contributory as defined under section 428 of the Act. Section 439 gives various classes of persons who can present a petition for winding up. Sub-section (1)( c ) provides that a contributory may present a petition for winding up. However, sub-section (4) of section 439 gives the instances in which the contributory can present a petition for winding up. Sub-section (4)( a ) provides that a contributory shall not be entitled to present a petition for winding up unless the number of members in a public company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make an order for winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. The question that the court will have to answer will be whether other remedy is available which, in our view, must be an effective remedy and not merely a doubtful remedy, and whether the petitioners or petitioner is acting in an unreasonable manner in asking the company to be wound up." The Division Bench has also held that each case must be considered on its facts and all circumstances bearing on the question have to be taken into account. I have considered the rival contentions of the parties and I am entirely in agreement with the submissions made by Mehta. I find prima facie the petition has been filed merely as a pressure tactic. It is an abuse of the process of the court. Effective remedies are available to the petitioner under the Companies Act. Furthermore, I am of the opinion that the widespread publication of the acceptance or admission of this petition would cause irreparable loss to the company. This may result in a further fall in the price o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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