Skip to content


V.B. Purohit Vs. Gadag, - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKarnataka High Court
Decided On
Case NumberCompany Application No. 1837 of 1981
Judge
Reported in[1984]56CompCas360(Kar)
ActsCompanies Act, 1956 - Sections 466 and 518
AppellantV.B. Purohit
RespondentGadag, ;jambukeshwara and ;official Liquidator, High Court of Karnataka
Appellant AdvocateUdaya Holla, Adv.
Respondent AdvocateA.P. Vaidya and ;S.S. Vijayashankar, Advs.
Excerpt:
.....to get the necessary finances in spite of the best efforts of the directors and, therefore, at the general body meeting held on march 8, 1980, the company moved for voluntary winding-up of the company......co-operative bank ltd., air 1919 lah 305, it was held under the old act that the court could stay voluntary winding up. in the matter of ease india cotton mills ltd. 1949] 19 comp cas 61; air 1949 cal. 69, s. r. das j. (as he then was) examined the principles on which a stay of the winding up could be ordered and found that it was analogous to the jurisdiction exercised while rescinding a receiving order or annulling an adjudication in bankruptcy. there are some english cases also in which a voluntary up was stayed. examples of these are : in re south barrule slate quarry co. [1869] lr 8 eq. cas 688, in re titian steampship co. [1888] wn 17 and many other cases. it has been held in such cases that mere consent of the parties is not enough but the court should consider all the.....
Judgment:

Chandrakantaraj Urs, J.

1. This is an application under s. 466 of the Companies Act, 1956, read with s. 518 thereof. The applicant is a shareholder of M/s. Nagaragali Cement Co. Ltd. The said company was incorporated on April 11, 1963, and it has its registered office at Vidyanagar, Hubli.

2. The authorised share capital of the company is Rs. 1 crore divided into 10 lakhs equity shares of Rs. 10 each. The subscribed capital of the company is Rs. 3,80,280 though only 76,056 equity shares have been issued. But the call made so far is only in the sum of Rs. 5. The sub- scribed capital, which is only half of the value of the issued capital, Rs. 72,292, was treated as allotment money and is stated to be due from the shareholders other than the directors of the company. Thus, the subscribed capital of the company is only Rs. 3,07,988.

3. The company, in 1966, acquired the lease of limestone quarry in an extent of 255 acres of land from the Government. This was with the object of carrying out the main objects of the company and establishing a cement factory. The applicant was not able to get the necessary finances in spite of the best efforts of the directors and, therefore, at the general body meeting held on March 8, 1980, the company moved for voluntary winding-up of the company. A resolution was passed at that meeting. The resolution was to the following effect :

'Resolved that the company be wound up voluntarily.'

4. The same meeting resolved to appoint M/s. Gadag and Jambukeswara, Chartered Accountants, Hubli, as the liquidators. The company had no assets other than the mining lease and the office furniture. The office furniture has since been sold by the liquidator and all the creditors have been paid. It has been asserted by the applicant that the voluntary winding up has reached only this stage and no more.

5. The applicant along with some other shareholders decided to revive the company. Pursuant to that decision, an extraordinary general meeting October 14, 1981, at Hubli. In the said meeting, it was unanimously resolved that the company be revived for establishing a cement plant at Nagaragali area for the manufacture of cement and that this court should be approached with a petition under Ss. 518, 466 and other applicable provisions of the Companies Act, 1956, for obtaining a permanent stay of the voluntary winding-up proceedings. In these circumstances, a prayer is made to pass an order staying all further proceedings in respect of the winding up of the company, M/s. Nagargali Cement Co. Ltd., and further to issue directions for the revival of the company and grant such other further relief as is just.

6. Having regard to the stage to which the winding-up proceedings half reached, in that it had not completed the required formalities including the dissolution of the company, it was suggested that the shareholders themselves could revive the company and prevent further steps in the has drawn my attention to the decision of the Delhi High Court in the case of Voluntary Liquidator, Dimples Pvt. Ltd. v. Registrar of Companies [1978] 48 Comp Cas 98. In that case, in somewhat similar circumstances, the voluntary liquidator of the company involved therein himself filed the application for staying further proceedings having regard to the decision of the shareholders to revive the company before it was actually dissolved. The learned judge, while allowing the petition, has the following to say (p. 100) :

'I find that the position taken up by the petitioner is consistent with large number of reported cases. In In re Punjab Co-operative Bank Ltd., AIR 1919 Lah 305, it was held under the old Act that the court could stay voluntary winding up. In the matter of Ease India Cotton Mills Ltd. 1949] 19 Comp Cas 61; AIR 1949 Cal. 69, S. R. Das J. (as he then was) examined the principles on which a stay of the winding up could be ordered and found that it was analogous to the jurisdiction exercised while rescinding a receiving order or annulling an adjudication in bankruptcy. There are some English cases also in which a voluntary up was stayed. Examples of these are : In re South Barrule Slate Quarry Co. [1869] LR 8 Eq. Cas 688, In re Titian Steampship Co. [1888] WN 17 and many other cases. It has been held in such cases that mere consent of the parties is not enough but the court should consider all the circumstances. A leading judgment on the principle on which the court should act while ordering may is In re Telescriptor Syndicate Ltd. [1903] 2 Ch D 174. In that case, the court detailed various points for and against ordering a stay of the minding up and decided that there was no ground for staying the winding up on the facts as they were. The court, however, observed that, at a later date, the official receiver could report whether all the liabilities and editors and contributories had been settled and the debts had been paid and whether the members were prepared to reduce their share capital by surrounding and cancelling their bonus shares, then the court would 'as at present advised be prepared to stay the proceedings in the winding up'. Thus, there is no doubt that the court 'does possess the power to stay a winding up even when it is a case of voluntary winding up. There must, however, be facts justifying the stay.'

7. Pennington in his Company 'Law, 4th Edn., at page 709, has this to

'Once a resolution for voluntary winding up has been passed, the members of the company cannot rescind it and restore the directors' powers to them so as to enable the company to carry on its business as before. But an application may be made to the court to stay the winding up in the same way, and with the same consequences, as if the company were being wound up compulsorily.'

8. As pointed out by the learned judge of the Delhi High Court, the only impediment that may be in the way of the court to grant the prayer for a permanent stay of a voluntary winding-up proceeding can only be the absence of justifiable reasons. In the instant case, it is pointed out in the pleadings that the company has a lease of limestone quarry with great potential and has estimated that the limestone for quarrying is in the region of 27 million tonnes with an estimated reserves of 50 million tonnes. It is also common knowledge that increased production of cement is in national interest. If the shareholders have resolved to revive the company and make one more effort to start a cement factory, opportunity should not be denied to them.

9. In these circumstances, accepting the assertions made for the applicant who has been duly authorised at the general body meeting held on October 14, 1981, to present this application, the prayers in this application are granted, and the voluntary winding-up proceedings at whatever stage they are, hereby stayed absolutely. Consequently, the shareholders are free to elect a new board of directors and do all that is necessary in order to achieve the object for which the company has been incorporated.

10. Before passing this order, the counsel for the official liquidator has been heard.

11. In the light of the order passed as above, Company Application No. 1838/1911 does not survive for consideration separately.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //