TMI Blog1992 (7) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... gations contained in the petition are not true, but nevertheless the fact that the company is not doing any business and that there are heavy bank liabilities, and the company suffered heavy loss have been admitted. Apart from that respondent No. 2 also filed a company petition for the winding up of the company. This court, after hearing the parties, prima facie found that, as there was no business transacted over the years and the company has already suffered heavy loss and its liability far exceeds its assets and the petitioner and respondent No. 2 do not see eye to eye and there is deadlock, and the respondent has not seriously objected to the winding up of the company, has, by its order dated July 3, 1992, admitted the petition which reads as follows : "I find that a prima facie case has been made out by the petitioner for winding up under section 433( e ) of the Companies Act. The respondent has not seriously objected. However, he has filed his objections." but, postponed the consideration to take out publication and posted the hearing of Company Application No. 644 of 1992 filed by the petitioner-applicant. The petitioner who is an applicant in the company application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. The petitioner cannot take advantage of her own wrong and illegal action, but admitted that the company has borrowed from the State Bank of India and that these have been guaranteed by the first petitioner as well as the second respondent. The losses suffered by the company are not a new feature, as the company has been suffering losses right from its inception, even from the period when the first petitioner's husband was alive and actively managing the company. It is further stated that the respondent is aware that discussions took place with one Mr. Jamal for the purchase of the factory. The prospective purchaser wanted the concurrence of respondent No. 2 also, while it was the intention of the first petitioner to exclude him altogether and negotiate a private deal from which she would personally benefit. In view of this disagreement between the parties the first petitioner launched upon a series of actions attempting to oust the second respondent from his position as director which made it necessary for him to file a suit for injunction in the City Civil Court, Bangalore. It is averred that the second respondent was willing to negotiate a sale on clear and open terms to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the winding up of the respondent-company. But the second respondent has seriously contended that no relief by way of sale of the assets of the company before the order of advertisement and winding up could be granted, having regard to the jurisdiction of this court under the Companies Act and the consequences of a winding up order, if eventually made. Mr. Udaya Holla, learned counsel for the petitioners-applicants, has submitted that this court has power under section 443(1)( c ) of the Companies Act to pass such interim order to secure the ends of justice, even before the winding up order much less, advertisement is ordered by the court. If the winding up petition is admitted before the order for the insertion of advertisement, the petitioner can move an application in the company petition for an interim order. The power to entertain such application is inherent in the court and rule 9 of the Companies (Court) Rules, 1959, reads as follows : "Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the courts to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent to the company petition. Hearing of the petitioner for the purpose of admitting the petition and issuing notice is also part of the hearing of the winding up petition." Relying on the ratio of the decision rendered in Hind Overseas ( P. ) Ltd, v. Raghunath Prasad Jhunjhunwalla [1976] 46 Comp. Cas. 91 (SC), it is further observed (at page 433 of 64 Comp Cas) : "Thus, it is settled law that even at the stage of admitting the winding up petition, or entertaining the winding up petition, the court has also an inherent power to do that which is necessary to prevent the abuse of the process of the court or to advance the cause of justice or make such orders which are necessary to meet the ends of justice, that inherent power of the court is not taken away or in any way restricted by section 443(1) of the Companies Act." (emphasis supplied) The decision referred to above is apposite to the facts of the case. In the instant case, the winding up petition was admitted and the matter was posted by the order of this court, for further hearing regarding advertisement and for winding up of the company. The company application is one for selling the assets of the company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany when the Winding up petition is pending. There is no inherent indication in the section so as to warrant the conclusion that this power can be exercised only after the winding up order is made. It is difficult to spell out the limits on the jurisdiction of the courts from the opening words in the section, viz., "in the case of winding up" so as to mean "only if the company is ordered to be wound up." It would be reading more than what the Legislature intended in the said wording. I am of the view that the court can exercise jurisdiction under section 536(2) of the Act even before the winding up order is made. The fact that the order becomes otiose, if the application for winding up is ultimately rejected, does not take away the jurisdiction. Therefore, even before the winding up order is made, the jurisdiction of the court can be invoked under section 536(2) of the Act for permission for the disposal of the assets of the company. The contention of Mr. Jayaram, learned counsel appearing for the second respondent, in view of the decision of the Supreme Court as well as the decision of the High Court referred to above, is unsustainable. I am also of the view that, at the stag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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