TMI Blog2009 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... e first respondent Yogam is a Charitable Non-trading Company incorporated in 1903 under the Travancore Regulation 1 of 1063 M.E., corresponding to Act 6 of 1882 of the Indian Companies Act (hereinafter referred to as the Act ). The petitioners were elected office bearers of the SNDP Unions/Sakhas under the first respondent. The case of the peti- tioners is that, ever since assuming the office as the General Secretary of the Yogam , the second respondent had been functioning in a quite autocratic manner, suspending the petitioners and others from their office and also bringing the Unions/Sakhas under the management of the Administrators, without any regard to the rules or procedures contemplated under the bye-laws of the Yogam . It is alleged that the affairs of the Yogam are being mismanaged; the funds are being misappropriated and there is complete oppression of minority members, coupled with acts of fraud and such other illegal activities, in total disregard to the statutory prescriptions. The petitioners have approached this Court under section 203( b )( ii ), read with section 433( f ) of the Companies Act with the following prayers : "( a )To appoint a committee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is very much maintainable, simultaneously adding that the doubts, if any, can be entertained only along with the merits of the case, particularly, since the matter has already been admitted by this Court. The learned Sr. Counsel referred to the sequence of events and also the relevant provisions of law, to sustain the said submission. 5. Mr. Nageswara Rao, learned Sr. Counsel appearing on behalf of the first and second respondents submits that the Company Petition is not at all maintainable in view of the other effective, alternate remedy available and also by virtue of the clear mandate under sub-section (2) of section 443 of the Act. It is also stated that admission of the matter does not curtail the rights of the respondents to challenge the very maintainability of the petition, particularly in view of the rider placed by the learned Judge while admitting the matter, holding that admission is subject to maintainability. The learned Sr. Counsel referred to the relevant provisions in the Companies Act, which clearly deal with the rights and liberties of the parties concerned, to have redressal in respect of the prayers made in the instant case at Sl. Nos. ( a ) to ( f ), p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person ( i ) ****** ( ii )has otherwise been guilty, while an officer of the company, of any fraud or misfeasance in relation to the company or of any branch of his duty to the company; the Court or the Tribunal, as the case may be, may make an order that that person shall not, without the leave of the Court or the Tribunal, as the case may be, be a director of or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for such period not exceeding five years as may be specified in the order." 9. Obviously by virtue of the specific stipulation in the statute, the power to restrain fraudulent persons from managing the companies as provided in the said provision can be exercised only in the course of winding up of a company. As such, the basic question to be considered is whether the prayer for winding up, inserted at Sl. No. ( g ) of the Writ Petition, is liable to be entertained. As stated hereinbefore, the prayer for winding up at Sl. No. ( g ) has been raised by the petitioner only as an alternative prayer . The description of the sequence of events and the facts and figures more relate to the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lternate remedy for the minority members, except to invoke the jurisdiction of this Court for appropriate reliefs as the last resort, however, conceding in Ground "D" as noted above that, it was to be granted only if circumstances warranted the same. 11. Considering the moot question put forth by the petitioners, as to whether the circumstances warrant winding up , as projected in Ground D of the Company Petition, nothing else is seen pleaded specifically, so as to grant the remedy of winding up on just and equitable ground as the last resort . In other words, is there any other alternate remedy for redressal of the grievance with regard to the reliefs at Sl. Nos. ( a ) to ( f ) and if any such remedy is available, whether the same is efficacious enough or has any of the minority petitioners been prevented from availing the benefit thereunder, is not discernible from the pleadings on record. As such, it has become necessary to ascertain whether the contention of the petitioners in Ground D , that there is no other alternate remedy for them is correct or sustainable. 12. Section 235(1) of the Companies Act, 1956 deals with the power of the Central Government to invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter before the Tribunal , if an application is preferred by 1/5th of the total number of members of the first respondent Yogam . That apart, sub-section (4) of section 399 provides that the Central Government may, if in its opinion circumstances exist, which make it just and equitable to do so, authorise any member or members of the Company to apply to the Tribunal under section 397 or 398, notwithstanding that the requirements of clause ( a ) or clause ( b ), (as the case may be) of sub-section (1) are not fulfilled. Why the petitioners have not resorted to such an exercise and why they have shut their eyes against the alternate remedy provided under the statute, rather remain to be obscure. 16. The case of the petitioners, as asserted by the learned Sr. Counsel Mrs. Nalini Chidambaram, is that the respondents cannot dictate terms to the petitioners and it is for the petitioners to choose the appropriate remedy and forum, when different remedies are available to the petitioners. When the petitioners assert that, it is by virtue of their discretion that they have chosen to approach this Court/by filing the Company Petition, seeking to wind up the first respondent on just a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to encourage hasty petitions of this nature without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association. There must be materials to show when just and equitable clause is invoked, that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders. The Company Court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between two groups." (p. 575) 19. In Malabar Industrial Co. Ltd. v. A. John Anthrapper [1985] 57 Comp. Cas. 717 (Ker.), a Division Bench of this Court, following the dictum in Hind Overseas (P.) Ltd. s case ( supra ) observed that under sections 397 and 398 of the Act, there are preventive provisions as a safeguard against oppression in management. These provisions also indicate that the relief under section 433( f ) based on the just and equitable clauses is in the nature of last resort , when other remedies are not efficacious enough to protect the general interest of the Company. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 443(2) of the Companies Act." (p. 976) 21. A Division Bench of the High Court of Andhra Pradesh has also taken a similar view in M. Mohan Babu v. Heritage Foods India Ltd. (No. 1) [2002] 37 SCL 490, whereby the Company Petition seeking to wind up the Company on just and equitable grounds under section 433( f ) was dismissed, referring to the alternate remedy available under sections 397 and 398, read with the power under section 443(2). Exactly similar view has been taken by the Division Bench of the High Court of Rajasthan as well, in Takshila Hospital Ltd./Kishan Singh Deora v. Dr. Jagmohan Mathur [2003] 115 Comp. Cas. 343 1 . 22. With regard to the submission made by the learned Sr. Counsel Mrs. Nalini Chidambaram, that the question of maintainability is no more liable to be considered in isolation, (without considering the merits), the petition having been admitted on 1-1-2009, it is to be noted that the order passed by this Court at the time of admission was rather qualified, insofar as the matter was admitted without prejudice to contentions including on the question of jurisdiction . Learned Sr. Counsel submitted that the jurisdiction/maintainabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but for deciding whether the advertisement should be made at all and the petition proceeded with. ( See in this connection Cercle Restaurant Castiglione Co. v. Lavery [1881] 18 Ch. D 555, A Co. In re [1894] 2 Ch. 349, in the matter of Pioneer Bank Ltd. ILR 39 Bom. 16: (AIR 1914 Bom. 190), W.I. Theatres v. Associated Bombay Cinemas Ltd. AIR 1959 Bom. 170, Lord Krishna Sugar Mills Ltd. v. Smt. Abnash Kaur [1961] 31 Comp. Cas. 587; (AIR 1961 Punj. 505) and Charles Forte Investments Ltd. v. Amanda [1963] 3 WLR 662. In fact the maintainability of the application made by the company is not questioned; nor is it suggested that I would be wrong in hearing the company before deciding whether the winding up petition should be admitted or not." (p. 213) 24. From the above decision, it is very much clear that the admission of a Company Petition is not a bar for hearing the jurisdiction/maintainabi-lity . More so, when the very order dated 1-1-2009 passed by the learned Judge of this Court, at the time of admitting the matter, was specific and qualified as dealt with hereinbefore. 25. Mr. N.N. Sugunapalan, learned Sr. Counsel appearing for the third respondent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any of the categories ( a ) to ( g ) of sub-section (1) of section 439. It is also asserted that the petitioners do not constitute contributories as envisaged under section 439(1)( c ), in view of the specific definition of the term "contributory" as given under section 428, pointing out that, in the instant case, the first respondent is not limited by shares but by guarantee . Interference is sought to be declined, also referring to the decision rendered by this Court in SNDP Yogam, In re [1970] KLT 365. 27. Mrs. Nalini Chidambaram, learned Sr. Counsel for the petitioners, in response to the above submissions, referred to sections 3 and 7 of the Kerala Non-Trading Companies Act, 1961, which are stated as very much applicable to the first respondent Yogam and asserted that, by virtue of the specific stipulation that the provisions of the Companies Act are to be taken with modifications as specified, the members of the first respondent are very much entitled to prefer the Company Petition and whether the petitioners are contributories or not is not relevant. Mr. Rajan Babu, the learned Counsel appearing for some of the respondents submits that applicability of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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