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Vinod Krishan Khanna and others Versus M/s Amritsar Swadeshi Textile Corporation (P) Limited and others

2016 (3) TMI 425 - PUNJAB AND HARYANA HIGH COURT

Winding up petition - Circumstances in which company may be wound up by Court - “Just and equitable” principle - Held that:- No case is made out for winding up the respondent-company. Learned counsel for the petitioners has not been able to prove on the basis of the material and the evidence on record that it is just and equitable to make out an order for winding up the respondent-company. Consequently, finding no merit in the petition, the same is hereby dismissed. - Company Petition No.61 of 2 .....

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. Respondent - M/s Amritsar Swadeshi Textile Corporation (P) Limited having its registered office at Ramtirath Road, Putlighar, Amritsar is a company incorporated as Company Limited by shares and is registered with the Registrar of Companies, Punjab, HP and Chandigarh at Jalandhar vide certificate of incorporation dated 24.1.2005, Annexure P.1. The partnership firm was formed by Hansraj Khanna alongwith his three sons namely Hari Krishan Khanna, Siri Krishan Khanna and Raj Krishan Khanna in the .....

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g, M/s Hansa Fabrics, M/s Amritsar Swadeshi Woollen Mills (Garments Division) and M/s Swadeshi Koreatex. In 1959, Shri Hari Krishan Khanna died and petitioner No.1 being his eldest son who was then a student was included as a partner in the firm. Petitioner No.1 joined the Indian Administrative Service in 1963 and during this service was the Chief Secretary, Government of Punjab. He retired as Chairman, Inland Waterways Authority of India in the year 2001 and then was working as Chairman, Nation .....

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lso signing cheques regarding the bank accounts of these firms. In addition, he was also operating the accounts of other units of the firm. Due to differences amongst the partners of the firm, it was decided to dissolve the firm and divide the assets between the parties/partners. On 2.2.2004, it was suggested by some of the partners Siri Krishan Khanna and Raj Krishan Khanna to convert the partnership firm into a private limited company under the name and style of M/s Amritsar Swadeshi Corporati .....

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changes were made without the consent of the petitioners. On 2.4.2004, the partners of the firm again met where one of the partners Siri Krishan Khanna got a fresh partnership deed, Annexure P.4 prepared which was signed by the petitioners and it was decided to make partnership firm a joint stock company within the meaning of Section 565 of the Act, which was a prerequisite for getting the company registered under Chapter IX of the Act. However, actual conversion of the partnership firm into a .....

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artners and therefore, in order to sort out the problem, there was no need to form a company. They could sign a Memorandum of Understanding (MOU) to divide the assets in partnership concern itself. Thereafter, the idea of formation of a company was given up and steps were initiated to divide the assets within the partnership itself. Accordingly, a draft MOU/Family settlement was signed by heads of all the four branches of the family on 5.8.2004. Several rounds of discussions were held among the .....

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attorney was only for exclusive running of the business and for no other purpose. Thereafter, petitioner No.3 had specifically revoked his power of attorney in the year 1989 which had been given in favour of Siri Krishan Khanna. Further, petitioner No.3 then executed a power of attorney on 22.2.1989 in favour of his elder brother petitioner No.1 and an affidavit to this effect was given to the various authorities in this regard. In pursuance of this decision, without the knowledge and consent of .....

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w of the formation of the company from the firm filed a complaint with the Registrar of Companies on 8.3.2005, Annexure P.11 praying that the company should not be allowed to carry out any activity of any nature as the formation of the company was fraudulent and illegal and that any activity carried out by the company would be detrimental to the interest of the petitioners. The complaint was forwarded to the Union of India through the Regional Director, Department of Company Affairs, Kanpur. Acc .....

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any could not have been formed without the express authorization of the petitioners. The General Power of Attorneys (GPAs) used for registration did not authorize any person to subscribe to Memorandum of Association (MOA) or Articles of Association (AOA). The petitioners had never given any GPA to anyone for this purpose. Some GPAs were given to Siri Krishan Khanna decades back but these were limited to matters pertaining to routine business of the firm. None of them contained even a single word .....

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partnership had been converted into a company and that GPAs of the petitioners had been used to sign on their behalf, petitioner Nos. 1 and 2 Vinod Krishan Khanna and Vimal Krishan Khanna asked Siri Krishan Khanna to return their GPAs immediately because they did not want them to be again misutilised for any other purpose. Hence again fraud was played on the petitioners. Instead of returning the GPAs used for registration, Siri Krishan Khanna returned to petitioner Nos. 1 and 2 the GPAs dated 2 .....

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e Registrar of Companies issued a notice under Section 234(7) of the Act calling upon the respondent company for furnishing of information and documents with regard to the formation of the company. The said notice was sent on 16.3.2005, Annexure P.12. Another notice was sent on 26.5.2005, Annexure P.13 for launch of prosecution under section 234(4) of the Act. The Registrar of Companies after enquiry had written a detailed note to the Union of India through the Regional Director regarding the il .....

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e Registrar of Companies vide communication dated 10.8.2005 to issue notices for action under sections 628, 629 and 433(f) of the Act after obtaining necessary approval from Regional Director, Noida and report the matter to the Ministry. Inspite of that, no action has been taken by the authorities. Hence the instant petition by the petitioners for winding up the respondent company. 3. Reply on behalf of the respondent company has been filed wherein it has been inter alia stated in the preliminar .....

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l partner to file a winding up petition. Only those persons who are specifically named in Section 439 of the Act are entitled to file a winding up petition. The petitioners have also challenged the change made by the land revenue department in the revenue records in favour of the company by representing themselves as partners of the firm. They have also filed their claims for compensation as partners of the firm before the Sub Divisional Magistrate-1, competent authority, National Highways Act, .....

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issued by Registrar of Companies clearly states that the company is registered under Part IX of the Act. The company stands properly incorporated even in view of the provisions contained in Section 565 of the Act because the holding of the petitioners is only 21% as compared to 79% holding of the other members. Section 565 of the Act clearly provides that the assent of the majority of the members is required to get joint stock company registered under Part IX of the Act. The respondent company .....

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ied that Siri Krishan Khanna was authorised to sign on behalf of Mr. V.K.Khanna and his brothers that he registered the company and issued the certificate of incorporation on 24.1.2005. Petitioner No.1 had no interest in the concern and even after retirement from service he never participated in the management of the business. Petitioner No.3, a doctor by profession residing permanently in USA and carrying on his profession in a big way had neither contributed in the management of the concern no .....

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used as an instrument to wind up a company on mere allegations. Winding up cannot be taken up on disputed facts since the company court has summary jurisdiction. Further, the petition does not fulfil the criterion necessary for proceeding under section 433(f) of the Act. The petitioners never objected to the conversion of the firm into company at any time after signing the unanimous resolution dated 2.2.2004 and partnership deed dated 2.4.2004 nor did they revoke the partnership deed dated 2.4. .....

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smissal of the petition has been made. 4. I have heard learned counsel for the parties and perused the record. 5. The petitioners have preferred the company petition seeking winding up of the respondent-company-M/s Amritsar Swadeshi Textile Corporation (P) Limited under Section 433(f) of the Act on the ground of Just and equitable . The core issue arising in this Company Petition is whether it would be appropriate to wind up the respondent-company M/s Amritsar Swadeshi Textile Corporation (P) Li .....

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ion. Sub section (2) thereof which is relevant for the present purposes is in the following terms:- Section 443 - Power of Court on hearing petition (1)xxxxxx (2) 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 pursuin .....

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should be wound up, it has the jurisdiction to do so. Under Section 443 of the Act, powers of the Court have been prescribed on hearing petition for winding up. The court may dismiss it or make an order for winding up if in its opinion, it is just and equitable to do so. In other words, Section 443(2) of the Act empowers the company court to refuse to make an order of winding up if it is of the opinion that some other remedy was available to the petitioners and that they were acting unreasonabl .....

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When a winding up petition is made under section 433(f) of the Act on the cause of just and equitable ground, it is the duty of the petitioner to disclose the material facts in clear and fair manner. While dealing with the issue of winding up of a company on just and equitable ground, the Gujarat High Court in Re: Atul Drug House Limited, (1971) 41 Company Cases 352 (Guj.) elaborately discussing the issue had observed as under:- As regards the last ground, it should be kept in mind that when a w .....

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have the company wound up instead of pursuing that other remedy. In the context of section 443(2) which is applicable when the ground for winding-up is under section 433(f) that it is just and equitable to do so, it would be the bounden duty of the petitioners to disclose the material facts as to the alternative remedies which they have availed of or which are available to them. It is only this disclosure which would enable the court to exercise its discretion under section 443(2) and when such .....

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ic advertisement would have very serious repercussions especially when the concern is a solvent, flourishing, running concern and the harm which would be done to such a concern by issuing the public advertisement would be almost irreparable and irreversible. That is why the petitioners, who seek to get the winding-up petition admitted full well knowing that in such solvent concern the advertisement would have such effect or irreparable damage, must exercise scrupulous care and caution to come wi .....

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pany Law Board would be one of the reasons not to permit this alternative remedy. The importance of such an allegation is that if investigation of the affairs of the company was pending it might be that the court would not admit the petition for winding-up. In such an investigation before the company Law Board rival contentions would be gone into and, therefore, if that remedy had been chosen, it would not be just and proper to allow the winding-up petition to be pursued by the same litigant. It .....

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state of affairs of the company were required to be investigated by the minority group by applying under section 408, this material fact ought to have been disclosed in the petition. The petitioners have never cared to disclose this fact in the petition. Mr. Divan vehemently argued that there was no deliberate suppression and this might have been overlooked and, for such an inadvertent omission, the extreme penalty of rejecting the petition should not be imposed on the petitioners. Mr. Divan in .....

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of two additional Government directors. To what extent this averment would have weighed with the court at the time of admission is wholly immaterial. In fact, the interim orders were sought at the stage of presentation of this petition when the notice was issued to the company. The petitioners were, therefore, under a duty to disclose these material facts. When the petitioners sought interim orders without disclosing these material facts and got a stay from this court on material suppression of .....

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87 Company Cases 223 (Delhi), it was observed by the Delhi High Court:- 2. I have heard learned counsel for the petitioner and perused the record. Admittedly, the grounds taken by the petitioners are not covered under section 433(f) of the Act. The only ground on which winding up has been sought are that the company has reduced the share capital without approval of the shareholders and sanction of the court, and that of the removal of petitioners Nos. 1 and 2 from the management of the company .....

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up. Reference can be had to the decision of the Supreme Court in the case of Seth Mohan Lal v. Grain Chambers Ltd. [1968] 38 Comp Case 543 as well as to the judgment of the Division Bench of this court in Bhaskar Stoneware Pipes Pvt. Ltd. v. Rajinder Nath Bhaskar [1988] 63 Comp Case 184. On the ground of reduction of the share capital, mismanagement and oppression, the petitioners can invoke the jurisdiction of the Company Law Board under section 397 and can file civil suit for seeking relief. .....

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ested with the company court to be exercised with due diligence because the court has summary jurisdiction and it cannot go into complicated questions of fact which are disputed by the respondents. Under just and equitable clause, the interest of the applicant is not of predominant consideration. The interest of the shareholders of the company as a whole, interest of the creditors, lenders, workers and the public at large has to be kept in mind. The relief under Section 433(f) of the Act based o .....

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judication of the controversy involved. It would be advantageous to refer to the relevant provisions which read thus:- 35. Conclusiveness of certificate of incorporation. A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorized to be registered and duly regist .....

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b- section (1), the Company Law Board is of opinion- (a) that the company' s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding- up order on the ground that it was just and equitable that the company should be wound up; the Company Law Board] may with a view to bringing t .....

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whether together or separately; or (e) by the Registrar; or (f) in a case falling under section 243, by any person authoised by the Central Government in that behalf. (2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause (b) of sub- section (1). (3) A contri .....

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the case of a private company, below two; or (b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder. (5) Except in the case where he is authorised in pursuance of clause (f) of sub-section (1), the Registrar shall be ent .....

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e to pay its debts: Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid. (6) The Central Government shall not accord its sanction in pursuance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any. (7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) .....

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ding up the company; and (b) until such security for costs has been given as the Court thinks reasonable. 565. Companies capable of being registered. (1) With the exceptions and subject to the provisions contained in this section- (a) any company consisting of seven or more members, which was in existence on the first day of May, 1882 , including any company registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, correspond .....

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an unlimited company, or as a company limited by shares, or as a company limited by guarantee; and the registration shall not be invalid by reason only that it has taken place with a view to the company's being wound up: Provided that- (i) a company registered under the Indian Companies Act, 1882(6 of 1882), or under the Indian Companies Act, 1913(7 of 1913), shall not register in pursuance of this section; (ii) a company having the liability of its members limited by any Act of Parliament o .....

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United Kingdom or Letters Patent in force in India, shall not register in pursuance of this section as an unlimited company or as a company limited by guarantee; (iv) a company that is not a joint stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares; (v) a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy .....

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proxy, at the meeting; (vii) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases .....

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ny the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan 566. Definition of joint- stock company". (1) For the purposes of this Part, so far as it relates to the registration of companies as companies limited by shares, a joint stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly .....

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f a joint stock company, there shall be delivered to the Registrar the following documents:- (a) a list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than six clear days before the day of registration, were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number; (b) a copy of any Act of Parliament or other Indian law, A .....

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e; (iii) the name of the company, with the addition of the word" Limited" or" Private Limited" as the case may require, as the last word or words thereof; and (iv) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee. 569. Authentication of statements of existing companies. The lists of members and directors and any other particulars relating to the company required to be delivered .....

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substitute memorandum and articles for deed of settlement. (1) Subject to the provisions of this section, a company registered in pursuance of this Part may, by special resolution, alter the form of its constitution by substituting a memorandum and articles for a deed of settlement. (2) The provisions of sections 17 and 19 with respect to an alteration of the objects of a company shall, so far as applicable, apply to any alteration under this section with the following modifications:- (a) there .....

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y. (3) An alteration under this section may be made either with or without any alteration of the objects of the company under this Act. (4) In this section, the expression" deed of settlement" includes any deed of partnership, Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law. 11. Section 35 of the Act deals with conclusiveness of certificate of incorpo .....

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icial to public interest or in any manner oppressive to its members, they may file an application before the Company Law Board for an order under this section as it thinks fit. Section 439 of the Act deals with the provisions with regard to filing applications for winding up of a company by the company or any creditor or creditors, contributory, Registrar or second creditor etc. Section 565 of the Act relates to companies capable of being registered whereas Section 567 of the Act prescribes the .....

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of this part of the Act may by special resolution alter the form of its constitution by substituting memorandum and articles for a deed of settlement. The deed of settlement includes any deed of partnership. 12. In order to establish irregularities and illegality in the formation of the respondent-company, learned counsel for the petitioners pointed out several infirmities which may be narrated thus:- (i) A family owned partnership firm of fifty years was illegally and fraudulently converted int .....

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efore, could not be used for transferring the right, title and interest in the assets of the partnership firm. The GPAs were executed decades earlier by the petitioners only for regulating the day to day functioning of the partnership firm in their absence. (ii) The basis of incorporation of a company is partnership deed dated 2.4.2004 whereas the Articles and the Memorandum differ from the scheme contained in the partnership deed. The partnership deed dated 2.4.2004 is signed by all the three p .....

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rship deed dated 2.4.2004 submitted for incorporation of the company are not in terms of the provisions of the Act. Rajiv Khanna was not the authorized person who had submitted the application for incorporation. (vi) Memorandum of association and articles of association should be only in the hand of the person concerned and not through an attorney. The power had not been given to the attorney to sign the memorandum of association and articles of association. (vii) Sections 13, 15, 26 and 30 of t .....

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were executed in the year 1969, 1978 and 1981, no one had even thought of forming a company. Moreover, these GPAs stood revoked. Although Siri Krishan Khanna had ceased to act as the GPA of Vinod Krishan Khanna and Vimal Krishan Khanna since 1989, Vijay Krishan Khanna had specifically withdrawn his GPA in 1989. The memorandum and articles of association were never shown to the petitioners. No explanation whatsoever in written or oral submissions had been given as to why Mr. S.K.Khanna signed th .....

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ignatures. (xi) The company's name has been changed from Amritsar Swadeshi Corporation to Amritsar Swadeshi Textile Corporation without following the procedure laid down in Section 572 i.e. without any general meeting called for the purpose. Besides, the learned counsel for the petitioners had drawn the attention of the court to various documents/Annexures to substantiate and corroborate the aforesaid contentions. 13. To support these contentions, learned counsel for the petitioners relied u .....

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23; (f) K.M.Mani vs. P.J.Antony and others, AIR 1979 SC 234; (g) Krishan Kumar vs. Nand Lal, 2011(1) RCR 970 (Civil) (P&H); (h) Shiba Shankar Mohapatra and others vs. State of Orissa and others, AIR 2010 SC 706; (i) Firm Mathra Das Jagan Nath vs. Firm Jiwan Mal Gian Chand, AIR 1928 Lahore 196; (j) Timblo Irmaos Limited, Margo vs. Jorge Anibal Matos Sequeira and another, (1977) 3 SCC 474; (k) Naresh Chandra Sanyal vs. Calcutta Stock Exchange Association Limited, 1971(1) SCC 50 (l) Sangramsinh .....

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is no irregularity. There is complete compliance of Part IX of the Act. The company court in summary proceedings cannot determine the disputed questions of fact regarding power of attorney and validity of other documents. Fraud has to be specific and pleaded in eloquent manner. Resolution dated 2.2.2004 cannot be said to have been negated by partnership deed dated 2.4.2004. No document between 2.4.2004 and January 2005 for not getting the company registered was addressed by the petitioners. Onl .....

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everal months. v) There is no evidence that the partnership of 2.4.2004 was not to be acted upon till 24.1.2005. vi) The pleas taken by the petitioners are meaningless in view of Section 35 of the Act. vii) The argument of the petitioners that Memorandum and articles of association was never shown to them is misconceived on facts and in law. The company was formed by conscious and affirmative act of the partners. viii) Jurisdiction of this court being summary, the question of examining complicat .....

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seriously disputed by the respondents. Support was gathered from the following judgments:- (a) Salim Akbarali Nanji and others vs. Union of India and others, 2003 Company Cases 141; (b) Rama Sundari Ray vs. Syamendra Lal Ray, (1947) 2 ILR Calcutta Series 1; (c) Smt. Somawanti and others vs. The State of Punjab and others, AIR 1963 SC 151; (d) In re Barned's Banking Company (Peel's case), 1867 Volume II Chancery Appeals 670; (e) Moosa Goolam Ariff vs. Ebrahim Goolam Ariff, 1912 Volume XL .....

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14 ITR 81; (k) S.B.Adityan and others vs. First Income Tax Officer, Madras, (1964) ITR 453; (l) M/s Anand Construction (P) Limited vs. Ram Niwas, 1994(31) DRJ 205 (Delhi); (m) National Textile Workers' Union vs. P.R.Ramakrishnan and others, (1983) 53 Company Cases 184 (SC); (n) K.S.Mothilal and others vs. K.S.Kasimaris Ceramique (P) Limited and others, (2003) 113 Company Cases 562 (Madras); (o) Suresh Kumar Bansal vs. U.P.Mineral Products Limited, (1996) 87 Company Cases 223 (Delhi); (p) Pun .....

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In view of issuance of certificate of incorporation on 24.1.2005, it would result in conclusive evidence that all the formalities under the Act had been undertaken in respect of registration and all incidental matters have been complied with for the registration of the company. The conclusiveness of the certificate of incorporation was recognized in Re: Barnard's Bank Company's case (supra) (Peel's case), wherein it was observed: Although the conduct of the Registrar in knowingly re .....

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xxxxx In my opinion the certificate of incorporation given to this company under Section 192 of the Act of 1862 is conclusive evidence that the company was authorized to be registered under Part VII, and although it may be that if prior to the substitution of section 1 of the Act of 1900 for sections 18 and 192 of the Act of 1862, now in turn replaced by section 17 of the Act of 1908, it could have been established that at the date of registration, no partnership or association capable of regist .....

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to apply, even as the statute law then stood, to a company then already registered under Part VII and possessed of the evidence declared by statute to be conclusive of the fact that it was a company authorized so to be registered. 18. In Moosa Goolam Ariff's case, it was recorded thus: 8. The provisions of the Indian-Companies Act of 1882 as regards the incorporation of Companies are the same as those contained in the Imperial Act of 1862, except that it is specially provided in Section 40 .....

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e (supra), it was recorded by the Apex Court thus:- Since evidence means and includes all statement which the court permits or requires to be made, when the law says that a particular kind of evidence would be conclusive as to the existence of a particular fact it implies that that fact can be proved either by that evidence or by some other evidence which the Court permits or requires to be advanced. Where such other evidence is adduced it would be open to the Court to consider whether, upon tha .....

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conclusive proof. Statutes may use the expression 'conclusive proof' where the object is to make a fact non- justiciable. But the legislature may use some other expression such as 'conclusive evidence' for achieving the same result. There is thus no difference between the effect of the expression conclusive evidence' from that of 'conclusive proof', the aim of both being to give finality to the establishment of the existence of a fact from the proof of another. 20. T .....

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gistered under the Act is a legal person separate and distinct from its individual members. An incorporated company has separate existence and law recognises it as a juristic person separate and distinct from its members. In K.Mohan Babu vs. Heritage Foods India Limited, 2001(5) ALD 800, it was observed by the Andhra Pradesh High Court as under:- 28. Section 433 of the Act deals with several circumstances in which company may be wound up by the Court and the opening words of the provision " .....

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an be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase 'just and equitable' for purposes of winding-up. In R.E.S. Co., Ltd v. Nageswara Rao, 1956 ALT 279, their Lordships held that the words 'just and equitable' specified in Section 433 of the Act were not to be read as ejusdem generis with the preceding words of the enactment. (J.A. Raghurama v. East Coast T & S Co., AIR 1958 AP 259. In P.K .....

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r which are available to them. In Senthil Kumar v. Sudha Mills (India) Pvt. Ltd. (Madras), (2001) 103 CC 1029, it was held that under Section 443(2) of the Companies Act, the Court shall decline the wind-up the company on just and equitable grounds, if the Court is of the opinion that some other remedy is available to the petitioner and they are acting unreasonably in seeking to have company wound up instead of pursuing other remedy. In this context, the decision in Raghunath Swamp Mathur v. Har .....

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mt. Abnash Kaur v. Lord Krishna Sugar Mills Ltd. (Delhi), (1974) 44 CC 390, it was observed as follows: "The Law required the Court to form an opinion about the equitable nature of the case. Equity jurisdiction, thus, has been vested in the Court by the statute itself; and then it is not imperative on the Court to make a winding-up order even if the Court forms the opinion that it was just and equitable to do so. The use of the word "may" creates a further discretion in the Court .....

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o bring about maximization of social welfare and common good. This necessarily involves reorientation of thinking with regard to the duties and obligations of the company not only vis-a-vis the shareholders but also vis-a-vis the rest of the community affected by its operations such as workers, consumers and the government representing the society. The Apex Court pointed out as far back as in 1950's in Chiranjit Lal Chaudhary vs. Union of India, AIR 1951 SC 41 as under:- We should bear in mi .....

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a legal device adopted by shareholders for carrying on trade or business as proprietors has been discarded and a company is now looked upon as a socioeconomic institution wielding economic power and influencing the life of the people. The view that a company is the property of the shareholders can no longer be regarded as valid. Apart from capital and labour there are other factors which contribute to the production of national wealth; the financial institutions and depositors who provide the ad .....

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obligations of the company not only vis-a-vis the shareholders but also vis-avis the rest of the community affected by its operations such as workers, consumers and the Government representing the society. It is now accepted on all hands, even in predominantly capitalist countries, that a company is not property. The traditional view that the company is the property of the shareholders is now an exploded myth. There was a time when a group controlling the majority of shares in a company used to .....

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affiliations with the rest of the community in which it functions. It would be wrong to look upon it as something belonging to the shareholders. It is true that the shareholders bring capital, but capital is not enough. It is only one of the factors which contributes to the production of national wealth. There is another equally, if not more, important factor of production and that is labour. Then there are the financial institutions and depositors, who provide the additional finance required f .....

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n which it functions.... 23. It is settled principle of law that winding up is a remedy of last resort and is not available to wind up and kill a healthy and economic entity. The company is a separate legal entity and juristic person. It cannot be held responsible or liable for acts antecedent to its formation. 24. The petitioners have sought winding up of the respondentcompany enumerating various circumstances which according to them would declare the registration as illegal and unwarranted by .....

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ate of incorporation had been issued by the Registrar of Companies. The disputed questions of fact fall outside the domain of the Company Court under the Act. 25. With regard to the issue of disputed questions of fact, Company Court is of summary jurisdiction. In exercise of its jurisdiction under Section 433 of the Act, it does not embark upon an enquiry into highly disputed or complicated questions of fact which may be the subject matter of adjudication by a civil court and not by Company cour .....

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Khanna J. (as his Lordship then was) observed that "Although the power conferred by the section on courts is very wide, the law seems to be well settled that the remedy provided by the section is summary. It can be invoked in non-controversial matters requiring quick decision. Section 155 is not meant to be used for deciding disputes requiring investigation. In the case of a dispute of complicated nature involving controversy under several heads, the section ought not to be allowed to be us .....

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Volume 6 of Halsbury's Laws of England Third Edition at page 218 which reads :- "If the Court thinks that the case, by reason of its complexity or on the ground that there are matters requiring investigation or otherwise, could more satisfactorily be dealt with by an action, the court will decline to make an order on a motion, without prejudice to the right of the applicant to institute an action for rectification." 26. In Marina World Shipping Corpn Limited's case (supra), it .....

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winding up proceeding when the matter agitated involves complicated and disputed questions of fact requiring investigation on facts and evidence in depth. The Company Court in such a proceeding has only a restricted jurisdiction which is limited by the provisions of the Act. It cannot act like a civil Court for adjudicating and fixing the liability by scrutinizing and examining in depth the entire evidence placed on record. In this connection reference may be made to a decision of this Court in .....

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Court in the case of R.Prakasham vs. Sree Narayan Dharma Paripalana Yogam in (1980) Vol.50 Company Cases 611 (Kerala). Similar view has also been taken by the Punjab and Haryana High Court in the case of Panipat Woolen and General Mills Company Limited vs. P.L.Kaushik reported in (1969) 39 company Cases 249. 27. To gather support to the contentions raised by him, learned counsel for the petitioners drew support from the contents of the replication filed by them. Learned counsel for the responden .....

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y the petitioners, it may be noticed that the petitioners without the permission of the court filed replication in which the documents which were already rejected by this court vide order dated 17.8.2006 were relied upon. They incorporated all the pleadings which were not allowed to be added by way of amendment to the original petition vide order dated 27.1.2010 by this Court. The position of law in this behalf is well settled. In M/s Anant Construction's case (supra), it was held by the Del .....

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Replication is a pleading by plaintiff in answer to defendant's plea. 'Rejoinder' is a second pleading by defendant in answer to plaintiff's reply i.e. replication. (2) To reach the avowed goal of expeditious disposal, all interlocutory applications are supposed to be disposed of soon on their filing. A delivery of copy or the I.A. to the counsel for opposite party is a notice of application. Reply, if any, may be filed in between, if the time gap was reasonable enough enabling r .....

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pleaded by defendant (iii) when the court directs or permits a replication being filed. (5) Court would direct or permit replication being filed when having scrutinised plaint and written statement the need of plaintiff joining specific pleading to a case specifically and newly raised in written statement is felt. Such a need arises for the plaintiff introducing a plea by way of 'confession and avoidance.' (6) A plaintiff seeking leave of the court has to present before it the proposed .....

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essentially a part of causes of action of plaintiff, in absence whereof the suit will be liable to be dismissed or the plaint liable to be rejected cannot be introduced for the first time by way of replication. Thus, a replication to the written statement is not to be filed or permitted to be filed ordinarily much less in routine. The petitioner has to seek leave of the court before presenting its replication. The court may grant or refuse the leave. In view of the discussion herein before, no r .....

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sons through auxiliary industries and its business activities. Its total turnover for the year ending 31.3.2006 was Rs. 56.53 crores. The exports during the year were Rs. 33.23 crores. It had in hand export orders to the tune of Rs. 10 crores to be executed upto 30.9.2010. Public money to the tune of Rs. 25 crores by way of Bank loans etc. stands invested in the company. The company generates revenue of crores of rupees to the Government by way of foreign exchange, income tax, sales tax, customs .....

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tirement, he was gainfully employed as Chairman of the National Shipping Board, Government of India. He had absolutely no interest in the concern and even after retirement he never participated in the management of the business. Petitioner No.2 Vimal Krishan Khanna is holding 7% equity share capital in the company. It has also been alleged that even prior to incorporation of the company, petitioner No.2 was holding the same amount in the company capital as is clear from the deed of partnership d .....

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With regard to the allegation that the company has not been formed as per the provisions of the Act, Section 35 of the Act debars raising of any such objection relating to the incorporation of the company after the issuance of certificate of incorporation dated 24.1.2005 by the ROC. The certificate of incorporation is conclusive evidence that all the requirements of the Act qua registration and formation of the company have been complied with. Herein the certificate of registration was duly issu .....

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omplied with in the present case. For substituting the deed of partnership with the memorandum/Articles, only 3/4th majority is required. The petitioners hold only 21% shares in the respondent company and the balance 79% are held by the persons who have no grievance against the company. From the perusal of the record of the case, it is discernible that the respondent company had already made an offer to buy back the equity shares of the petitioners but they had not agreed to the said proposal. 3 .....

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red between the parties in the month of August 2004 and the power of attorney dated 22.2.1989 being in dispute had been ordered not to be taken into consideration. It would be apposite to notice the order dated 17.8.2006 passed by this Court which reads thus:- Respondent No.5 has filed the present application for directing the production of original of Annexures P.5, P.6, P.8, P.9, P.10 and P.18. The petitioner was directed by this court on 3.8.2006 to produce originals of the said documents wit .....

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titioner No.1. I have heard learned counsel for the parties at some length. Annexure P.6 is a memorandum of understanding which was alleged to have been entered upon by the parties in the month of August 2004. Reference may be made to para (x) and (xi) of para No.3 of the petition. The said document is titled as Draft Memorandum of Understanding/Family Settlement and does not bear any date and month but years 2004 as the year. Still further Clause (d) of para No.3 relates to the value of assets .....

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t that after obtaining the signatures of Shri R.K.Khanna, the document was faxed to the petitioner. The date of fax mentioned as 8.8.2003 is stated to be incorrect. With respect to Annexure P.9, a General Power of Attorney dated 22.2.1989, it is pointed out by the learned counsel for the respondents that the same is attested at Delhi, although on the same date, a letter is purportedly written by Shri V.K.Khanna, from Michigan (USA) (copy Annexure P.8). Thus,it is contended that the author of Ann .....

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the authenticity of Annexures P.6 and P.9 is in dispute and the originals have not been produced, I order that the said documents shall not be taken into consideration for the purpose of the present petition. The present application stands disposed of accordingly. The serious disputed questions of facts are required to be adjudicated by way of this petition which is not permissible. 32. There is no allegation against the company for which Section 433 of the Act can be invoked. The allegations ar .....

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n such petition. Infact, the petitioners have impleaded respondent Nos. 2 to 4 to furnish evidence to the petitioners in support of their averments. Such procedure is not known to law. Consequently, I deem it appropriate to struck off the names of respondent Nos. 2 to 8 from the memo of parties. Ordered accordingly. 33. Additionally, the winding up of the respondent company inter alia has also been sought on the ground that the Registrar of Companies in its written statement before the civil cou .....

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m. In Oswal Fats and Oils Limited's case (supra), it was observed by the Apex Court thus:- 20. It is settled law that a person who approaches the Court for grant of relief, equitable or otherwise, is under a solemn obligation to candidly disclose all the material/important facts which have bearing on the adjudication of the issues raised in the case. In other words, he owes a duty to the court to bring out all the facts and refrain from concealing/suppressing any material fact within his kno .....

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application has been made to this Court for a rule nisi or other process, if the Court comes to the conclusion that the affidavit in support of the applicant was not candid and did not fairly state the facts, the Court ought, for its own protection and to prevent an abuse of its process, to refuse to proceed any further with the examination of the merits. This is a power inherent in the Court, but one which should only be used in cases which bring conviction to the mind of the Court that it has .....

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has only been set in motion by means of a misleading affidavit." 22. The above extracted observations were approved by the Court of Appeal in the following words: "It is the duty of a party asking for an injunction to bring under the notice of the Court all facts material to the determination of his right to that injunction: and it is no excuse for him to say that he was not aware of the importance of any facts which he has omitted to bring forward. If an applicant does not act with ub .....

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dship observed: "It is perfectly well settled that a person who makes an ex parte application to the Court - that is to say, in absence of the person who will be affected by that which the Court is asked to do - is under an obligation to the Court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may .....

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575, G. Narayanaswamy Reddy (dead) by LRs. and another v. Government of Karnataka and another (1991) 3 SCC 261, S.P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by LRs. and others (1994) 1 SCC 1,Agricultural and Processed Food Products v. Oswal Agro Furane and others (1996) 4 SCC 297, Union of India and others v. Muneesh Suneja(2001) 3 SCC 92, Prestige Lights Ltd. v. State Bank of India (2007) 8 SCC 449, Sunil Poddar and others v. Union Bank of India (2008) 2 SCC 326, K.D. Sharma v. .....

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court without hiding anything from it. The petitioners have not disclosed all the relevant material facts. The entire case of the petitioners is based on the alleged Draft MOU/Family settlement and on the allegation that the memorandum and articles of association were signed by Siri Krishan Khanna on behalf of Vijay Krishan Khanna without having a valid power of attorney because Vijay Krishan Khanna had issued a new power of attorney in favour of his brother petitioner No.1. Although in the aff .....

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petition. Similarly, the GPA executed by Vijay Krishan Khanna in favour of Vinod Krishan Khanna was also not to be taken into consideration being disputed and the originals having not been produced. It was for the first time on 24.2.2005 that Vinod Krishan Khanna and his brothers expressed their desire to revoke the general power of attorneys executed by them and all the original GPAs were returned to them on that day. It is only after Vinod Krishan Khanna had got in his hands the original GPAs .....

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ri Transport (P) Limited's case (supra), the issue was of a new company formed on the basis of subscription to MOA and AOA. In that case, someone was mentioned as Director in the MOA/AOA but he was not holding the qualification shares. So it was held that he was not director of the company. In the present case, the petitioners were already the shareholders/members of the Joint Stock Company. 36. In Hind Overseas Private Limited's case (supra), it was held that just and equitable clause c .....

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a given case be superimposed on law. Whether it would be so done in a particular case cannot be put in the strait-jacket of an inflexible formula. 35. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application h .....

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ny may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up. Section 222(f) of the English Companies Act, 1948 is in terms identical with the Indian counter-part, section 433 (f). It is now well established that the sixth clause namely, 'just and equitable' is not to be read as being ejusdem ge .....

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ed a rule derived from the history and extent of the equity jurisdiction itself and also born out of recognition of equitable considerations generally. This is particularly so as section 35(6) of the English Partnership Act, 1890 also contains, inter alia, an analogous provision for the dissolution of partnership by the court. Section 44(g) of the Indian Partnership Act also contains the words 'just and equitable'. 37. Section 433(f) under which this application has been made has to be r .....

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regard to oppression under Section 397 of the Act. The acts of oppression and mismanagement under Sections 397 and 398 fell under the jurisdiction of the Company Law Board. Such is not the position in the present case. 38. Syed Abdul Khader's case (supra) was dealing with the principles of agency which is not the case here. Bhaskar Stoneware Pipes Pvt. Limited's case deals with the petition under section 397 of the Act i.e. oppression and mismanagement. G.V.Sreerama Reddy and K.M.Mani .....

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