1986 (5) TMI 214 - HC - Companies Law

Key Ruling on Joint Petition by Creditor & Shareholders/Directors

BP. Gupta Versus Standard Enamel Works (P.) Ltd.

The court addressed the maintainability of a joint petition by a creditor and shareholders/directors under sections 433 and 434 of the Companies Act. ... Company when deemed unable to pay its debts Issues:1. Maintainability of the joint petition by a creditor and shareholders/directors.2. Interpretation of Order 1, rule 1 and Order 2, rule 3 in relation to the Companies Act.3. Compliance with procedural requirements under the Companies Act and Civil Procedure Code.4. Affidavit requirements and verification in support of the petition.5. Legal infirmities in the present petition based on past judgments.Analysis:The judgment pertains to a petition filed under section 433 of the Companies Act, 1956, involving a creditor and shareholders/directors of a company. The petitioner, a creditor, claimed non-repayment of a loan and salary dues, while the shareholders/directors alleged mismanagement and exclusion from company affairs. The respondents raised a preliminary objection on the maintainability of a joint petition by a creditor and shareholders/directors, citing misjoinder of parties under Order 1, rule 1 and Order 2, rule 3. The respondents argued that such misjoinder is not permissible, supported by a precedent (AIR 1973 HP 23).In response, the petitioners contended that a joint petition is allowable under sections 433 and 434 of the Companies Act, despite differing causes of action. The petitioners argued that the requirements of Order 1, rule 1, regarding a common question of law and fact, are not applicable in this scenario. However, the court noted that the petition lacked proper verification and support from all petitioners, as required by the Civil Procedure Code.Furthermore, the court highlighted legal infirmities in the current petition, referencing a previous dismissed petition from 1980 due to technical objections. The court emphasized the need for compliance with procedural rules and directed the petition to be amended to focus solely on the creditor's claims. The judgment suggested amending the petition to rectify deficiencies and listed it for admission on merits at a later date.In conclusion, the court addressed the maintainability of a joint petition by a creditor and shareholders/directors, emphasizing the need for compliance with procedural requirements under the Companies Act and the Civil Procedure Code. The judgment underscored the importance of proper verification and support for allegations in a petition, highlighting past legal precedents to guide the decision-making process.