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S.P. Sood Vs. the Registrar of Companies, Delhi - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCivil Appeal No. 552 of 1976
Judge
Reported inILR1977Delhi474
ActsCompanies Act, 1956 - Sections 466
AppellantS.P. Sood
RespondentThe Registrar of Companies, Delhi
Advocates: Satish Chander,; P.R. Monga and; H.S. Bhatia, Advs
Excerpt:
companies act (1956) - sections 446 read with section 518 -- whether court has power to stay a voluntary winding up altogether ; in the instant case, the question arose as to whether the court has power to stay a voluntary winding up, as it has in relation to the winding up by the court under section 466 of the companies act, 1956. answering the question in the affirmative :; that the wide language of section 518 (1) of the act seems to suggest that the powers of the court in relation to winding up proceedings, which are exerciseable, while a company is being wound up by the court, can also be exercised in the course of voluntary winding up. accordingly, the power to stay the winding up exerciseable under section 466 in relation to companies being wound up by the court can also be..........has also been filed. (3) the main controversy in the case turns on whether the court has power to stay a voluntary winding up. the power of the court in relation to a winding up order passed by itself is contained in section 466 of the companies act, 1956, which gives power to the court on an application either of the official liquidator or a creditor or a contributory to pass an order staying the proceedings either altogether or for a limited time. if the present winding up was the result of a winding up order passed by the court, there would be no doubt that the court would have jurisdiction. for the purposes of submitting that the court has a similar power in relation to a voluntary winding up, the petitioner relies on section 518 of the act. sub-section (1) of that section reads :-.....
Judgment:

D.K. Kapur, J.

(1) This petition under Sections 518 and 466 of the Companies Act, 1956, raises an interesting question as to 'the power of the Court to bring a voluntary winding up to an end. The facts of the case are that there is a company, M/s. Dimples Private Limited which has a paid-up capital of Rs. 34,200 ;it was incorpora- ted on 8th February, 1957, but its business came to an end in 1962-63. On 15th April, 1967, the share-holders held an extraordinary general meeting and adopted a special resolution sending the company into a members voluntary winding up. The applicant, Shri S. P. Sood became the Voluntary Liquidator of the company. The Voluntary Liquidator realised all the amounts due to the company with the result that Rs. 34,032.28 are now with him as per statement of accounts made up to 14th April, 1976, annexure 'C' attached to the petition. There are only two share-holders of the company-Mrs. Leela Puri who has one share and Movies Private Limited which has 341 shares. The share-holders held a meeting on 9th August, 1976. resolving that the voluntary winding up should be stayed and the Court should be moved. A copy of that special resolution is annexure 'D'. Acting on this resolution, the Voluntary Liquidator has prayed that the voluntary winding up may be stayed permanently.

(2) Notices of this petition have been given to the Registrar of Companies and the Central Government and also published in the Hindustan Times and Chitra Weekly. An affidavit has been filed on behalf of the Registrar of Companies stating that there was no opposition to the petition on merits, but pointing out that the special resolution had not been filed. Now a receipt has been filed which shows that the special resolution seeking to get the winding up terminated has also been filed.

(3) The main controversy in the case turns on whether the Court has power to stay a voluntary winding up. The power of the Court in relation to a winding up order passed by itself is contained in Section 466 of the Companies Act, 1956, which gives power to the Court on an application either of the Official Liquidator or a creditor or a contributory to pass an order staying the proceedings either altogether or for a limited time. If the present winding up was the result of a winding up order passed by the Court, there would be no doubt that the Court would have jurisdiction. For the purposes of submitting that the Court has a similar power in relation to a voluntary winding up, the petitioner relies on Section 518 of the Act. Sub-section (1) of that Section reads :-

'518(1). The Liquidator or any contributory or creditor may. apply to the Court- (a) to determine any question arising in the winding up of a company ; or (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.'

The wide language in which this provision is framed, seems to suggest that the powers of the Court in relation to winding up proceedings, which are exercisable while a company is being wound up by the Court, can also be exercised in the course of voluntary winding up. The submission, of the petitioner is emphasised by the terms of Sub-section (5) of this Section, which reads :-

'Acopy of an order staying the proceedings in the winding up made by virtue of this section, shall forth-will be forwarded by the company, 'or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.'

Thus, the question for consideration is whether the power to stay the winding up exercisable under Section 466 in relation to companies being wound up by the Court can also be exercised when a company is in voluntary winding up. I find that the position taken up by the petitioner is consistent with a large number of reported case. In Punjab Co-operative Bank, Ltd. Air 1919 Lah 305 (1), it was held under the old Act that the Court could stay a voluntary winding up. In the matter of East India Cotton Mills Ltd. Air 1949, Calcutta 69 (2), S.R. Dass J. (as he then was) examined the principles on which a stay of 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 winding up was stayed. Examples of those are : In re : South Barrule Slate quarry Co. (1869) 8 EC 688 (3), re : Titian Steamship Co. (1888) W.N. 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 stay is in re : Telescriptor Syndicate, Limited, (1903) 2 Ch. D 174 In that case, the Court detailed various points for and against ordering a stay of the winding 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 creditors and contributories had been settled and the debts had been paid and whether the members were prepared to reduce their share capital by surrendering and cancelling their bonus shares, then the Court would 'as at present advised be prepared a 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. The words used in Section 466 are : 'on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed.' Thus, I have got to find from the facts whether this is a case where the winding up ought to be stayed or whether it is a case where the company should be finally wound up.

(4) On this aspect of the case, the pleadings in para No. 10 of the petition are as follows :-

'THEcompany was put into liquidation largely due to unwillingness on the part of the management to provide funds for running the business. The present management and the shareholders are keen to revive the business of the company and are also willing to provide necessary funds for the business if the voluntary winding up is stayed. The company has no liabilities and no assets to be realised but enjoys lot of goodwill amongst the clients to be able to successfully revive the business. The company has facilities to start business including business premises.'

Turning now to the aims and objects of the company which are set out in para No. 8 of the petition, it appears that the company is a hire-purchase company and also an investment company. The accounts of the company disclose that the Liquidator has realised Rs. 34,032.28 and there is no creditor or debtor of the company. Thus, the amount in hand is equal to the total paid-up capital of the company which is Rs. 34,200. It is just as if the company was starting business with a fresh start. I do not find any reason to hold that it will be detrimental to any one if the company is re-started. There are some funds with the company, and the nominal capital is Rs. 5,00,000, of which only shares worth Rs. 34,200 have been issued. It is quite possible for the company to expand its share capital. In any case, the company is not now any worse off then it was when originally incorporated.

(5) In the circumstances, and particularly, in view of the fact that the management wants to revive the company and there seems to be no impediment whatsoever, I proceed to allow this petition. Consequently, I stay the winding up proceedings altogether. As no one has appeared to oppose the petition, there is no order as to costs.


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