1979 (1) TMI 240 - SC - Indian Laws

Summary

Issues:
1. Validity of the alleged transfer of shares by Jagannath Gupta.
2. Allegations of wrongful possession and distribution of shares by Bidya Bhushan Gupta and Padam Chand Gupta.
3. Allegations of mismanagement, oppression, and continuous losses in the company.
4. Stay order on winding up proceedings based on pending investigation under Sections 235/237 of the Companies Act.

Detailed Analysis:
Issue 1: The validity of the alleged transfer of shares by Jagannath Gupta is in question. The respondent alleges that Jagannath Gupta nominated successors for his shares in a resolution passed during his lifetime. However, the petitioner contests the authenticity of the meeting minutes and claims that the transfer was wrongful and illegal.

Issue 2: Bidya Bhushan Gupta and Padam Chand Gupta are accused of wrongfully taking possession of shares after the deaths of Jagannath Gupta and Bhuran Devi. The distribution of shares among family members is alleged to be in contravention of the law and the company's Articles of Association. The petitioner claims deprivation of legal rights to the shares and non-delivery of share certificates.

Issue 3: The company is accused of mismanagement, oppression, and continuous losses. Bidya Bhushan Gupta and Padam Chand Gupta are said to have controlled the company's affairs, leading to the sale of properties at undervalued prices and continuous losses without any dividend declaration. The petitioner alleges that the company's substratum has disappeared.

Issue 4: The High Court issued a stay order on winding up proceedings based on a pending investigation under Sections 235/237 of the Companies Act. However, it was found that no inspectors had been appointed, and no parallel investigation by the Central Government was ongoing. The High Court's decision to stay the proceedings was deemed erroneous, and the case was sent back for disposal on its merits. The discretionary nature of the Central Government's power to direct investigations under the Act was highlighted, emphasizing that such investigations may not be a substitute for winding up proceedings in court.