(1) This is an appeal against the order of the learned single judge by which be directed the deletion of .the name of respondents 2-to 5 in a petition for winding up filed under Section 433 of the Companies Act against Respondent No. I a Private Limited Company. Respondents are one family; namely respondent No. 3 is the father of, respondent No. 2. Respondent No. 4 is the wife of respondent No. 2 and respondent No. 5 is the mother of respondent No. 2.
(2) It is pleaded in the petition that the company was floated and incorporated by the appellants along with Ramesh Kumar Bhandari, respondent No. 2 who was a' fast friend of the appellants. The petition is filed by one set of husband and wife as petitioners Nos. I and 2 and petitioners Nos. 3 and 4 as another set husband and wife. It is claimed that the company was floated to give equal preference to the three groups as all three' of them were good friends. Respondent No. 3 was said to be ] conversant with business and that is why it was decided to entrust the work of the incorporation to him.
(3) RESPONDENT: No. 4 is said to have started drawing a salary of Rs. 1500 per month. Respondent Nos 2. 3 and 4 are directors of the company. Allegations are made that respondent No. 2 Ramesh Kumar Bhandari allotted 670 shares to his own family rather than amongst the three groups, 0ns of the persons to whom 310 shares are said to have been allotted is his own wife, respondent No. 4. It is further alleged that respondent No. 2 is trying to sell to respondent No. 5 his mother a flat which was said to have been acquired at Bombay by the society for a sum of Rs. 1,55,000 whereas the appellant/petitioners are even willing to make an offer of Rs. 3 lakhs for the same. On this as well as other various allegations the petition was filed seeking the winding up of the company on just and equitable ground and also on account of the inability of the company to pay its debts, and also praying for any other order that may be made on the premises that shall be just.
(4) In the reply apart from the other objections It was admitted that the flat at Bombay which had been acquired by the Company for Rs. one lakh and on which it was stated that Rs. 20,000 had been spent by company had been sold to respondent No. 5, the wife of respondent No. 3 and the mother of respondent No. 2. The justification given for this transaction is that it was necessary to sell it as that funds were required by the-company. Grievance was made that the appellants have stood in the way of registration by obtaining an ex-parte order and that the company, thereforee is not able to avail of the sum of Rs. 87,594 which is outstanding from this sale amount. The sale in favor of respondent No. 5 is stated to be an act of good management.
(5) We are not concerned in the present proceedings with the merits or otherwise of the present petition which is. still to be disposed of. The only short question concerning us in this appeal is to see the correctness 'of order of upholding the objection that respondent Nos. 2 to 5 were not necessary parties and ordering their names to be deleted from the array of respondents in winding up petition. The reason why the learned single judge has directed the deletion of names of respondents 2 to 5 is 'because 'he has held that in the winding up petition under section 433 of the Act the only order that can be passed is either to wind up the company or not and that no other order in terms of relief against the Directors or anybody else can be passed. Hence apart from the company no body else is a necessary or a proper party. The appellant seriously challenges the basis of the order for deleting of respondents 2 to 5. According to them respondents 2 to 5 are certainly proper if not necessary parties to the petition filed under Section 433 of the Act, It is also disputed that apart from either granting or dismissing a winding up petition no order giving any other relief is permissible on winding up petition. It is maintained that the foundation of the order of the learned single judge being itself erroneous in law the order deleting respondent No. 2 to 5 is vitiated. ',
(6) Section 433 lays down the circumstances in which a company may be wound up the court. Clause (f) provides 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 433 lays down 'that on hearing a winding up petition of the company the court may amongst others (a) dismiss it with or without costs adjourn the hearing conditionally or unconditionally, (c) make any interim- order that it thinks fit (d) make an order for win ding up of the company with or without costs or any .other order that it 'thinks fit.
(7) 'RULE 6 of the company Court Rules 1959 framed by the Supreme Court provides that save as provided by the Act or the Rules the practice and procedure of the court and the provisions of the Code so far as applicable shall apply to all proceedings under the Act and these Rules. The Code is defined. to mean the Civil Procedure Code. Rule 45 provides for a petition for winding up of a company being in form 45, 46 and 47 as the case may be. A reference to the forms does not show that only the company is to be the respondent. Of course .nor does it indicate as to who else is to be the respondent as indeed the form is not expected to do so. The form also does not show, as has been stated, by the learned single judge, that no other relief is possible in winding up excepting the dismissal or the grant .of the petition. Rather a reference to form 45 itself will show. that in the prayer clause while prayer (1) seeks the :winding up of the company, prayer (2) is to the effect that such other order that may be made in the premises as shall bejust.
(8) Before dealing with the aspect of the question as 'to whether orders under the winding up are restricted only to-these two kinds i.e. the grant , refusal as has been held by the learned single judge, we must deal with the preliminary objection that this appeal is not maintainable.
(9) We may in fairness to Mr. Khanna the learned counsel for .the respondents, note that though he did object to the im'leading of respondents 2 to 5 he did not seriously object to responded 2 to 4' who are Directors of the company to bo allowed to remain imp leaded provided the name of respondent No. 5 was deleted. This the appellants were not willing to do because according to them one of their major grounds for moving the petition for winding up is the alleged transfer of company's flat in her name which they say is against the interest o the company. Mr. Khanna had also indicated that if the present petition was got converted into one under Section 397) 398 o the Act be would even then have not objected to respondents: to 5 as being respondents and that he objects only because respondent No. 5 is continued to be imp leaded in this present petition for winding up.
(10) Now Order I Rule 10(2) Civil Procedure Code provides that the court may at any .stage of the proceedings order that the name of any person who ought to have been joined as a, plaintiff or defendant or whose presence before the court away be necessary in order to enable the court effectually and .completely to adjudicate upon and settle, all the questions in dispute involved in the suit. to be added.
(11) Section 483 of the Companies Act provides for appeals from any order made or decisions given in the matter of winding up of a company by the court which shall lie to the same court to which in the same manner in which and subject to the same conditions under which appeals lie from any order or decision of the. court in cases within its ordinary jurisdiction.
(12) .MR. .Khanna does not dispute that the impugned order ofth6 1ea^'fil4: palge'bas been passed in a matter of 'winding up of a company. He however says that the order deleting the name of the parties is neither a decree nor is -it an order appealable under Order 43 Role I Civil Procedure Code nor is it a judgment within the meaning of Letters Patent and, thereforee no appeal would lie against the impugned order which is only 'of procedural nature. It cannot be disputed that the impugned order, is not a decree, nor it is appealable under Order 43 Rule I Civil Procedure Code Mr. Khanna says that it is not even a judgment within the meaning to be given under the Letters Patent as settled in Shah Babulal Khimiji v. Jayaben :, : 1SCR187 and referred us to para 120 where some illustrations of interlocutory orders which may be treated as judgments within the meaning of Letters Patent are mentioned. Mr. Khanna says that an order deleting the names of the parties is not covered. Mr. Mehra the learned counsel for the appellant however referred to this. very para (Ministration 7) which accepts that an order refusing to add necessary parties in a suit under Section 92 of the Code of Civil procedure is a judgment and thus appealable. If that be so, Mr. Mehra contends that in the matter of winding up where the Directors have fiduciary relationship with the com pany and where the allegations is that they have acted in breach of their fiduciary duty allegations are analogous to those for breach of trust under Section 92 of the Code. It is also settled that Directors' position is. similar to those of trustees and same principles will apply see: M/s. Globe Motors v. Mehta Teja Singh (FAO(OS) 5311982 decided on 5-7-1983) (2). The further argument is that for the same reason as in a suit under Section 92 Civil Procedure Code the impugned order deleting the name of respondents 2 to , would be a judgment and thus an appeal would lie against such an order. We find force in the argument that in such a case appeal would be maintainable even under Letters Patent.
(13) We however must repel the contention of Mr. Khanna that an appeal untie Section 483 of the Act would not be maintainable outside the Code or the Letters Patent. This contention is no longer argoble. tri Shankar Lal v. Shankar Lal it was held that orders passed in title matter of winding up petition are appealable under Section 202 independently of the provisions of Section 96 and 104 Civil Procedure Code and Letters Patent clause 15. In that case it was also held that order or decision to be appealable need not be restricted to 'those orders which would be judgment within the meaning of Letters Patent. However Chagla C. J. clarified that by the. use of the Word 'order or decision' used by the Legislature it clearly intended that that order or decision should be subject ^ to appeal which was not purely procedural in character but which affected the rights or liabilities of the affected parties. In that case the learned single judge had after considering the various aspects of the matter come to the conclusion that the petitioners were not entitled to an order of winding up. But instead of dismissing the petition he adjourned the petition for three months. Objection that such an order was not appealable because all that was done by the single judge was to adjourn the matter was negatived because the Bench held that as the petitioner had come to a court asking for relief of winding up and if the learned judge had come to the conclusion that the petitioners were not entitled to the -relief of winding up he should pass proper order and not merely adjourn the matter and .the petitioners were thereforee deprived of a substantive right which they sought. Such an order ^as thereforee held to be appealable. Even under the Code the position is not simple. It is true that a mere order striking off a party under Order I Rule 10(2) Civil Procedure Code is not appealable see Allahabad Bank v. Raja Ram A.I.R.1937 Lah 67 (5). But even there is a difference made by the courts between these cases where an order of deletion of a party is made on the ground that there is no cause of action against the added party.. Thus it has been held that where the name of defendant is struck out under Order I Rule 10(2) on the ground that the plaint does not disclose any cause of action against him the order is appealable as such Lalsa Motisa Shop v. Bhagwant Ramji A.I.R. 1941 Nag 166 (6). An appeal has been held to lie if an order was passed under Order I Rule 10 which in fact amounted to an order on merits (see : AIR1931All333 ).
(14) Whether an order striking down the name of a party would confer a right of appeal or not, one has to see not the form of order but the substance. That is why in Babu Ram v.Shafi-ul-Zaman A.I.R. 1944 Lah 273 (7), it was held that the order of the Court removing the name of the .defendant from the array, of parties was in effect an order of dismissal of suit against him and he would still, be regarded in execution proceedings as a party to the suit for the purpose of Order 47 Civil Procedure Code . notwithstanding that his name was struck down. In title present case the effect of deleting the names of respondents .2 to 5 in substance is to 'deny the right of the appellants to obtain any relief in. these proceedings against them which naturally vitally affects the appellants rights and not a mere matter of procedure.
(15) In Karam Singh v. State of J&K; A.I.R. 1977 J&K; 29 (8) it was held that the order allowing aft application of a party to be imp leaded as aparty to the writ petition was not appealable because even afte,r the judgment was given the imp leaded party would have a right to challenge the judgment in the writ petition. But the bench pointed out the distinction by saying that the position could not be the same if the application of the party had been rejected, because in that case the- appeal could be competent at his instance because once his application was rejected he could not reagitate the matter and press his claim at any subsequent stage of the writ petition. Similar is the position here where because of the order deleting the name of respondents 2 to 5 no findings can be obtained with regard to the alleged illegal or improper transfer of the flat in favor of respondent No. 5 or with regard to the alleged lack of probity qua respondents No. 2 to 4 because no finding would be binding on them because they will not be parties to the present, proceedings. Evidently this order affects the right of the appellant to obtain relief which -they feel they are entitled to in these proceedings. '
(16) The narrow view put forth by Mr. Khanna that the on I' persons entitled to be heard in a petition ror winding up are the petitioners or the company is not even supported by the express provision m the statute. Thus Section 577 of the Act clearly provides that in all matters relating to the winding up of a company the .court may have regard to the wishes of the creditors or contributories of the company. This evidently does postulate that in suitable cases some large creditors or. a contributory could successfully plead not only to be heard but also to be imp leaded to the petition for winding up so that he could put forth his point of view at the proper time in a proper manner. Even the position of contributory has been expanded to include a filly paid lip share holder who has been held to have a right to appear and to be heard upon the application to wind up the company. In the development of corporate ethics,' we have reached a stage where the question 'of social responsibility of business to the community can longer be scoffed at or taken lightly, ...the companies can no longer be accepted as a private domain, the working of which would be of no concern to the society. On the contrary, the very impact of the corporate sector in terms of finance and employment shows that the well-being of the corporate sector is of considerable significance to the society. This is because the well-being of corporate sector has vital effect on. the employment, and economy of the community and health of the society. In the environment of modern economic development, corporate sector no longer functions in rsloation.' (Chapter 12 if Report of the High Powered Expert Committee on. Companies and MRTP Acts). Reference by Mr. Khanna to various sections like sections 464, 543 and- 557 to indicate that it is the contributors and the creditors who alone are affected by the action taken in the course of winding up and who could alone thereforee have the right to be heard of if necessary to be. imp leaded has been answered in the negative by the Supreme Court wherein it is stated. 'These provisions apply at a stage when winding up order is made by the court or the voluntary winding up has commenced or an order is-made for continuance of winding up subject to the supervision of the court, when winding up having been 'ordered or resolved what remains to be done is only to wind up the company, pay the creditors and if there is any surplus, distribute the same among the shareholders. These pro- visions do not deal with a situation prior 'to the making of the winding up order when the question is whether the company should be ordered to be wound up or not : (1983)ILLJ45SC .
(17) Rule 34 of the Company Court Rules also postulates that apart from creditors and contributories there may be other persons who are entitled to be beard at the hearing of the winding up petition.
(18) The sweep of coverage of person having a right to be heard and oppose not only the winding up petition but even to file an appeal if a winding up order is passed has been very much liberalised in this latest Supreme Court judgment wherein it has been held that the workers and the Union have a locus standi to appear and be heard in the winding up petition, both before the. winding up petition is admitted and that if a winding up order is made and workers are aggrieved they would also be entitled to prefer an appeal arid contend that no Winding up order should have been made by the 'company Judge. Thus the argument based on the erroneous assumption that no other party but the creditor and the contributories have a right to be heard in winding up petition states the preposition too narrowly and cannot be accepted.
(19) In the present case what is alleged is that the company was more in the nature of a partnership and that it was incorporated because of mutual friendship of the Directors but that respondents 2 and 3 have 'violated their undertaking and have committed breach of agreement 'and are acting in such a manner as to take away the rights of the petitioners to function in the company. History of the proceedings of the petition also shows that the present attempt to have the respondents 2 to 5 deleted from the array of the respondents is not bona fide and is meant either tc delay the proceedings or to start a new round, of litigation even if the findings are given against respondents 2 to 5 which would in these proceedings be of no value at all if they are not parties to the petition. It will be seen that notice to show cause on this winding up petition was issued on 31-3-1981 'Though reply was filed in April, 1981 on behalf of company and Ramesh Bhandari ope of the Directors and though a preliminary objection was taken that respondents 2 to 5 were not necessary or proper parties to the winding up petition no effective steps were taken to have this point adjudicated. Ultimately on 20-7-81 the petition was admitted by the company Judge for the reasons mentioned therein. Amongst the reasons mentioned was that there are several averments in the pleadings that the Company is in the nature of partnership and that the petitioner has been ousted from the management of the company. It was also noticed that lack of probity on the part of respondents is alleged ;.and' one of the allegation is that the flat belonging to the company' in Bombay which was purchased for Rs. one lakh and on which further Rs. 20,000 (even according to the respondent was spent) was sold to respondent''No. 5,the,mother of respondent No, 3 for one lakh 55 thausand. This was said to have been sold on 26-5-1980 after the suit had been field by one R.K. Bhandari on 19-5-1980. It will thus bee seen that amongst other a strong reason which persuaded the company judge to admit the petition related specifically to the alleged transfer infamous of respondent No. 5 by respondents 2 to 4. Appeal against that order was-taken but was dismissed by the Division Bench of this court by its judgment given on 18-12-1981 (which is reported in 1982 Dlt 150 Moti Films v. Harish Bansal) (10) Special Leave Petition filed in the Supreme Court also failed. Here is thereforee a petition which makes serious allegation against the conduct of respondents 2 to 4. One of the main allegation is that the plot belonging to the company had been deliberately transferred to respondent No. 5 the mother of respondent No. 2 and wife of respondent No. 3, resulting in loss to the company. It is.self-evident that no firm finding can be given on these allegations in the absence of respondents 2 to 5. Even if the court was to come to the conclusion that the transaction of transfer was vitiated .it would be unable to give any immediate relief in the absence of respondent No. 5. The only alternative would be to start fresh proceedings for recovery after impleading respondent NO. 5. Mr. Khanna does not dispute that no order or direction can be given against respondent No. 5, unless she was a party to .the petition. That in reality is the reason why such strong opposition is being placed by respondent No. 2 to 5 to being imp leaded. Mr. Khanna,of course gives it a respectable colour by pleading that in law only two courses are open to the .court i.e. either to allow the petition or to dismiss the petition. Mr. Khanna says that in case a winding up order is passed, it will then be for the Official Liquidator to take necessary 'steps to recover the property or to proceed against the Directors. Wfe do not think that these powers which necessarily vest in the Official 'Liquidator after the company is wound up are any answer to impleading the respondents 2 to 5 (of course if any relief can be given to the appellants in these., company. We are not saying that it is open to the petitioner in a whiting up petition to implead all and sundry as respondents. It win depend on the facts of each case. But in the present case where respondents 2 to 5 are so closely related and amongst others alleged sale made by respondents 2 to 4 in favor of resident No. 5 is challenged, it is notocly..permissible but properly expeditious that respondent No. 5 should be before the Court before it reaches a conclusion -whether the transaction was or was not an act of good management, and whether it is just and equitable to pass an order of winding uIt must be remembered that 'the requirement of 3aw is not to rush into liquidation of the companies. Efforts, no doubt based on sound data must always be made to keep a company. growing, because liquidation must bring in its train unsavoury result for economy and Corporate Sector. As far as possible if should be the effort to save the companies from going into liquidation subject of course to-the interest of seeing that the innocent parties do not suffer in the process. (Vide Pioneer Consolidated Co. Of India and another V.India Turpentine and Rosin Co. Ltd. 23 (1983) DLT 30 (11): Here a plea has specifically been taken by the company that the transfer was an act of good management. How can the court be expected to-give final finding satisfactorily without giving an opportunity to respondent No. 5 who is vitally interested to' upholding this transaction. Proceedings in the winding up would be within very narrow limits if respondents 2 to 5 are not imp leaded to the petition for winding up. The result would be that even if the court Was to come to a conclusion that the' transaction in favor of respondent No. 5 was illegal or against the interest of the company it will not be open to the Company Judge to give any other relief to the appellant other than that of a winding up or any other variation of the relief as was granted by this court ill Abnash Kaur's case (supra.) )simply because the concerned and affected persons are not imploded to the petition for winding up. This would be hardly in the interest of justice. But Mr. Khanna says that this result must follow because the only alternative course is either to allow or dismiss the winding up petition. If this view is correct, then obviously , are not to be imp leaded. But if this ' extreme contention of Mr.Mr. Knanna is fallacious then the present is a case where respondent No. 2 to 5 have .been imp leaded properly so much so that if the petitioner had not itself imp leaded them the court on its own would have been justified in' directing them to be made parties, so that it .could effectively determine the matter in controversy. What Is The Scope And Power Of The Court In Winding Up PETITION'
(20) The plea of Mr. Khanna which was accepted by the' learned single Judge that the. only power and jurisdiction which Judge hearing the winding up petition has is either to make 'an order for winding up the company or dismiss it, is not supported by any principle of law or precedent. As a matter of fact a reference to Section 443 of the Act itself shows that on hearing a winding up petition the court may adjourn the hearing conditionally or unconditionally. It may also pass any other order that it thinks fit (clause d). Not only that sub-s,ection(2) of section 443 puts it beyond the pale of controversy that orders other than mere grant or dismissal of the winding up petition are not only permissible but are considered to be proper in case some other remedy is available to the petitioners. Section 443(2) clearly spells that out. This argument of 'Mr.Khanna suffers from the fallacy of assuming as if a winding Up- petition is like an ordinary Civil Suit in which only some personal rights are to be adjudicated.. This contention which severely seeks to limit the scope of proceedings in winding up is impermissible. One primary consideration which has always to be kept in view is that the 'general interests of the shareholders may not be readily sacrificed at the alter of squabbles of directors of powerful group. for power to manage the company' ::....... . .. . In the. winding. vp petituMI''tfillotei-est of the applicant alone is not of predominant consideration. The interest of the shareholders of the company as Whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application Should be admitted on the allegations mentioned in the petition', .Before a winding up petition is granted '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 , The company court will have 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.' 'Section 433(f) under which this application has been made has to be read with Section 443(2) of the Act. Under the latter provision 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 the opinion that some other remedy is available to the petitioners and that they are acting unreasonably , seeking to have the company wound up instead of pursuing that other remedy'. (Vide Hind Overseas P. Ltd. V. R. P. Jhunjhunwala (1976) 46 Comp. Case (91) (12). '
(21) 'MR. Khanna was not able to cite any precedent in support of his extreme contention that court is not competent to pass any order in winding up petition excepting that of either gran ting the petition or dismissing the petition. On the other band there is a, precedent of a Division Bench of this Court to the contrary. In Abnash Kaur V. Lord Krishna Sugar Mills & others' the learned single Judge had ^ found that it 'was a fit case for winding up. But. having found that this order could not be passed as it was a flourishing company and' a. considerable delay had occurred in the disposal of the flotation he was not inclined to allow the .winding up petition. Instead he ordered that the interest of the. appellants group should be bought over by the respondent group after the price of the shares had been determind by Chartered Accountant. He also in the interim period till the valuation was done constituted a Board of Directors and even put the appellant and her nominee on the Board. The respondents filed an appeal against the said order. The appeal court (Division Bench) concluded . that 'the powers of the court under the 'just and equitable' clause are not limited; and the court will be guided by the rules of equity and will do what justice demands, keeping in view the facts and circumstances of each case.' The' appeal court however, differed with the finding of the learned single Judge and held that the petitioner had failed to establish any deadlock or any justification for her lack of confidence in the conduct of management of the company's affairs, grounded on the conduct of directors in regard to company's business and she has failed to prove lack 'of probity on the part of the directors. It concluded with a finding that her prayer for winding up the company is wholly unjustified and cannot be accepted. On that finding if Mr. Khanna is right then the only order that could have been passed by the Division Bench would have been to dismiss the winding up petition. But the court did not feel that its hands were so circumscribed. That is why the bench not- withstanding its finding against winding up the company, went on to observe as follows :
'HAVING come to: the above conclusion, the question arises, whether the petition should be dismissed or some other order should be passed, section 443 of the Act deals with the powers of the Court on .hearing the winding tip petition.. The Court may dismiss it or under sub-section (d) make an order for winding up or any other order that it thinks fit. In this case, although the appellant is not entitled to a compulsory-order, yet in the interest of the company and of all Shareholders including the appellant arid the respondents, it would be appropriate if the appellant and her .son are allowed to withdraw and separate their interest front the company'.
Vide Abna'sh Kaur's case (supra).' page 458). The Bench then addressed itself to the alternative relief that could begiven. In that context it found the suggestion of the opposite group to be worthwhile that the company would be prepared to accept the surrender of the shares of the petitioner in the Winding up at a fair price to be fixed by the court. The' court, thereforee, directed that in order to bring to 'an end to the unfortunate and prolonged litigation the petitioner be given'. an option to surrender her interest in the capital of the company, for being taken over by the company, thereby resulting in consequent reduction of its share capital for which purpose suitable applications shall be made by the company. The purchase price was to be determined by the court after taking into account the report of the valuer and the value so determined Was to be paid by the company in the time laid down. The court then finally concluded the appeal with the following direction : ' .
'IF the option is exercised, the order in this appeal would be a direction to the company to takeover and to the appellant to surrender to the company'' her shares, as well as that of her son,if . surrendered on the above terms, stand disposed of accordingly. If the option is not exercised by the appellant within six months from the date of this judgment, her appeal, C.A. Ii of 1971, shall stand dismissed.'
(22) This case is rf clear authority for the proposition that event when the court comes to a conclusion that the petition for winding up is, .unjustified still .it can award alternative relief if it is in the interest of the company and of the parties concerned. The Division Bench did not think that its hands were tied to any two kinds of order or the relief that could be awarded by it in the winding up petition. Mr. 'Khanna frankly conceded that this case lays down against the 'contention urged by him and had as a last desperate measure to fall back upon the contention that this case was wrongly decided. Be however could not point out a-single precedent which had laid down that the powers of the court when hearing a winding up petition are so severe, limited .as to passing of only one of the two orders, either of granting or dismissing the winding up petition. On our part we find ourselves in respectful concurrence with the course adopted in Abnash Kaur's case (supra.) and the law laid down by it. In England also the law regarding the lower of the court in hearing the winding up petition has never been accepted to be so-severely curtailed as is urged by Mr. Khanna. In Re. L.H.F. Wools Ltd. (1969) 3 All . E.R. 882 (14), the Court of appeal came to the conclusion in an application filed by the creditor bank that it was entitled ex debito justitiae to a winding up order. Nevertheless it was pleaded by the coinp'any that there was acclaim in Belgium which if it was able to pursue would be more than enough to meet the amount of debt standing against it and, thereforee, an order of winding up need not be passed. This plea was accepted by the Court of Appeal and: the Court directed that the petition should stand over with liberty to either side to restore it until it..could be, seen what progress has been , made in-claim at Belgium. This was done because as the Court posed the question--'What in the end, are the consideration which ought to weigh with the court First, that there is no object in this winding up and no purpose to be served by going on with it.
(23) Similarly in 10 Equity page 337(15) though the court came to the conclusion that winding up was justified it held it over so as to permit the conflict 40 be resolved. Again it will be seen that a course was adopted which goes contrary to Mr. Khanna's contention. The fact of the courts having consistently adopted alternatives other than the two urged by Mr. Khanna shows the hollowness of this argument If a member of a company can show that he is entitled to a winding up order made under the just and equitable paragraph he may in. certain cases be entitled to alternative relief provided for by Section 210 (which is equivalent to Section 397 of our Companies Act). See Gore Brown 42nd Edition page 909 (99)
(24) 'IT was urged by Mr. Khanna that no harm would .be done if respondents 2 to 5 are not imp leaded because any rights of the company could be enforced by the official liquidator after a winding .up -order has been passed. But this aspect deliberately ignores the fact that in the absence of respondents 2 to 5 no firm finding could be given with regard to the alleged fraudulent transfer in favor of respondent No. 5. Thus any. findings given regarding the conduct of respondent No. 2 to 5 would be in vacuum tod of no practical effect. This is because a winding up order is not a judgment in rem, and is not binding on the strangers. 'It is binding on the association and on ever}'- body claiming under it or taking a title under it, but I cannot agree that it is binding or incapable of being challenged by persons who have rights outside, it and thereforee I think it cannot be considered a judgment, in rem for ail time and as against all persons'. Vide (1895) I Chancery Division, page 663 at 668(16). Now if in the present case had respondents 2 to 5 applied to be imp leaded in these proceedings on the ground that as many allegations are made against them they would not like ex parte orders to be passed against them it would be impossible to imagine, that any court would refuse respondents 2 to 5 to join the proceeding because depriving them from joining the winding up petition would prejudice their interest^. No one can deny 'that respondent No. 5, in whose favor the alleged transfer has been made and which is challenged by the appellant has a very - serious and real stake in the proceedings. If she had applied and been refused to be imp leaded as a party she would undoubtedly have had a right to. file,appeal because her interests were very vitally affected. Evidently the reverse situation (as in the present case) must equally 'entitle the_ petitioner .to file an appeal against the order of learned single Judge deleting the parties as' it affects the appellant in obtaining proper and-full relief. '
(25) 'THE foundation of the learned single Judge, thereforee, that as only either of the two orders namely allowing or dismissing winding up petition could .be passed being misplaced in law his consequential order of deleting the names of respondents 2 to 5 automatically falls and cannot be upheld. The position here is that respondents 2 to 4 are directors. As mentioned .before Mr. Khanna himself did not seriously dispute that they could be properly imp leaded as parties. The whole effort of the respondents to have respondents 2 to 5. deleted is to prevent the matters being finally decided, If respondent No. 5 is not before the court it cannot obviously pass an 'order giving a determination about the alleged transfer by respondent No. ^;in favor of his mother, respondent No. 5. Wh'at the respondents really are aiming at is that though there may be a doubt cast on the probity and the conduct of the Directors about this particular transaction and others, the court would not be able to pass any final order if respondents No. 2 to 5 are not parties to the winding up petition, resulting in a fresh round. of litigation and time. consuming process. This mischief can only be prevented by respondents 2 to 5 being allowed to remain parties to this winding up' petition, so that the court can pass a just and proper order in the interest of the company as it deems fit. We have no doubt that the learned Judge would himself have so directed if he had not with respect, incorrectly held that only the order of allowing or refusal of winding up petition is permissible to be passed. Once it is held as we do, that there is no such restriction on the company judge to pass any order which he deems fit in the circumstances, the question of -deleting the names of respondents 2 to 5 could not arise. On the allegations made in the petition there is no doubt that respondents 2 to 5 are necessary parties and were rightly imp leaded to the petition because in their absence no real finding could have been given by the Company Judge. Their presence, was thus absolutely necessary so that the matters could be effectually and properly decided. In that view.-of he matter we would allow the appeal 'and set aside the order of the learned single Judge deleting the names of respondent 2 to 5 from tile petition. The , result will be that respondents 2 to 5 'will continue to remain as parties to .the winding up petition. ' The appeal is allowed as above. No. costs.