2006 (2) TMI 294 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the petition for winding up on the grounds of the petitioner not being a registered shareholder.
2. Whether the petitioner qualifies as a contributory under Section 439(4)(b) of the Companies Act, 1956.
3. The applicability of the devolution of shares through the death of a former holder to a corporate entity.
4. The petitioner's standing to maintain the petition as a creditor.
5. Allegations of abuse of process due to premature advertisement.
6. The existence of an alternate remedy under Sections 397 and 398 of the Companies Act.
7. The authority of the power of attorney to file the winding-up petition.
8. Allegations of mala fide intentions to conduct competing business.

Detailed Analysis:

1. Maintainability of the Petition for Winding Up:
The company and Chloro Controls (India) Pvt. Ltd. opposed the petition on the ground that the petitioner was not a registered shareholder and thus had no standing to maintain the petition. The petitioner argued that it had stepped into the shoes of Capital Controls (Delaware) Company Inc. due to a merger and was entitled to maintain the petition. However, the court emphasized that foreign law is a question of fact and must be pleaded by the party relying on it. The petitioner failed to plead the relevant laws of merger from Delaware or Pennsylvania, making it difficult to ascertain the legal effect of the merger.

2. Qualification as a Contributory under Section 439(4)(b):
The court examined whether the petitioner, as a contributory, met the conditions under Section 439(4)(b). The petitioner was neither the original allottee of the shares nor had the shares been registered in its name for at least six months during the eighteen months before the commencement of winding up. The court found that the analogy drawn by the learned company Judge, equating the merger to the death of a former holder, was fallacious. The expression "or have devolved on him through the death of a former holder" applies only to personal representatives of a deceased natural person and not to corporate entities.

3. Devolution of Shares through Death of a Former Holder:
The court disagreed with the view that the merger of Capital Controls (Delaware) Company Inc. with the petitioner could be equated to the death of a former holder. The expression "or have devolved on him through the death of a former holder" is applicable only to natural persons and not to corporate entities. The court emphasized that statutory provisions cannot be modified to fit such an analogy.

4. Standing as a Creditor:
The petitioner also claimed to be a creditor of the company, asserting that it was owed a substantial amount. The court noted that this aspect was not canvassed before the learned company Judge and remitted the matter back for consideration of whether the petition could be maintained on just and equitable grounds as a creditor.

5. Allegations of Abuse of Process:
The petitioner issued a public notice before the admission of the company petition, which was argued to be an abuse of process. The court noted that this issue could be raised by the appellants upon remand.

6. Alternate Remedy under Sections 397 and 398:
The appellants argued that the appropriate remedy for the grievances raised in the petition lay under Sections 397 and 398 of the Companies Act. The court did not delve deeply into this issue but left it open for consideration upon remand.

7. Authority of the Power of Attorney:
The appellants contended that the power of attorney did not grant specific authority to file a winding-up petition. The court did not make a definitive ruling on this issue but noted it could be raised upon remand.

8. Allegations of Mala Fide Intentions:
The appellants alleged that the winding-up petition was filed with mala fide intentions to conduct competing business. The court did not address this issue in detail but left it open for consideration upon remand.

Conclusion:
The court set aside the impugned order dated 21-4-2005, holding that the petitioner did not have standing to maintain the petition for winding up as a contributory unless registered on the company's register of members. The matter was remitted back to the learned company Judge to consider whether the petition could be maintained on just and equitable grounds as a creditor. The appellants were allowed to oppose the admission of the company petition on all available grounds, including the issue of premature advertisement.