1984 (11) TMI 283 - HC - Companies Law

Petition to wind up company dismissed under Companies Act. Business ongoing, assets exceed liabilities.

Registrar of Companies Versus Jai Agro Industries Ltd.

The court dismissed the petition for winding up under sections 433(c) and (f) of the Companies Act, 1956. The judge found that the company had not ... Winding up - Company when deemed unable to pay its debts Issues:- Petition for winding up under sections 439(5), 433(c) and (f) of the Companies Act, 1956 due to the company not carrying on business for more than a year and losing its substratum.Analysis:The petition for winding up was filed by the Registrar of Companies under sections 439(5), 433(c) and (f) of the Companies Act, 1956 against a company, alleging that the company had not been conducting business for over a year and had lost its substratum. The company, incorporated in Delhi, later shifted its registered office to Rajasthan. The company's main objective was to take over agricultural activities from another entity and engage in farming and horticultural activities. The petitioner contended that the company had not filed returns since June 30, 1979, indicating a lack of business activity. The Regional Director of the Company Law Board sanctioned the petition for winding up after finding the company's explanation unsatisfactory.The company, in response, argued that it had been carrying on business regularly, citing the filing of balance-sheets and profit and loss accounts for multiple years. The company highlighted the nomination of directors by its holding company and the subsequent changes in the board of directors. The new management submitted financial documents for the years ending June 30, 1980, 1981, and 1982, showing business operations.The petitioner's counsel argued that the company had not been conducting substantial business, evidenced by minimal expenditures and increasing losses over the years. The counsel contended that the company's substratum had disappeared due to lack of business activity, justifying winding up under sections 433(c) and (f) of the Act. Conversely, the company's counsel argued that the company had generated income from farm produce sales, and its assets exceeded liabilities, negating the claim of losing substratum.The judge analyzed the case under sections 433(c) and (f) of the Act. Regarding section 433(c), the judge found that the company had not suspended business for over a year based on filed returns and the new management's efforts. Under section 433(f), the judge determined that the company had not substantially failed in its objectives, could operate without incurring losses, and had sufficient assets to cover liabilities. Consequently, the judge dismissed the petition for winding up, ruling that neither ground for winding up was established, and no costs were awarded.