Court sets aside impugned order, directs winding up petition, awards costs.

The appeal was accepted, and the impugned order was set aside. The court directed the learned company judge to treat the petition as a petition for winding up only and dispose of it accordingly. The appellants were awarded costs, including counsel's fee of Rs. 1,000.

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Issues Involved:
1. Maintainability of the petition under sections 397 and 398 of the Companies Act, 1956.
2. Validity of consent letters annexed to the petition.
3. Compliance with Rule 88 of the Companies (Court) Rules, 1959.
4. Waiver and estoppel in the context of participation in the proceedings.
5. Alternative relief of winding up the company.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Sections 397 and 398 of the Companies Act, 1956:
The appellants contended that the petition filed by the respondents under sections 397 and 398 was not maintainable as it did not satisfy the requirements of section 399 of the Act and Rule 88 of the Companies (Court) Rules, 1959. Section 399(1)(a) specifies that for a company with share capital, a petition can be filed by not less than 100 members, or not less than 1/10th of the total number of members, or any member or members holding not less than 1/10th of the issued share capital, provided they have paid all calls and other sums due on their shares. The respondents did not hold one-tenth of the issued share capital but annexed consent letters from 129 members.

2. Validity of Consent Letters Annexed to the Petition:
The appellants argued that the consent letters did not show that the signatories had applied their minds to the allegations or reliefs sought in the petition. The court examined the meaning of "consent in writing" and concluded that it implies conscious approval of the action proposed, indicating that the members had applied their minds to the allegations and reliefs. The court referenced decisions from the Allahabad, Madras, and Madhya Pradesh High Courts, which supported the view that consent letters must indicate the application of mind. The consent letters in the present case were deemed insufficient as they did not meet this requirement.

3. Compliance with Rule 88 of the Companies (Court) Rules, 1959:
Rule 88 requires that letters of consent signed by the members authorizing the petitioner to present the petition on their behalf be annexed to the petition, and the names and addresses of all members on whose behalf the petition is presented be set out in a schedule. Additionally, the petition must state whether the petitioners have paid all calls and other sums due on their respective shares. The schedule annexed to the petition did not fulfill these requirements, as it did not state whether all calls and sums due on shares had been paid. Therefore, the petition failed to comply with Rule 88.

4. Waiver and Estoppel in the Context of Participation in the Proceedings:
The respondents argued that the appellants had waived their right to file the appeal by participating in the proceedings held by Justice P.N. Khanna, who had been appointed as the chairman of the board under the impugned order. The court rejected this contention, stating that the appellants were bound to obey the impugned order so long as it was in force and that there was no indication that the appellants had taken any benefit from the order. Therefore, there was no question of waiver or estoppel.

5. Alternative Relief of Winding Up the Company:
The respondents had also prayed for winding up the company as an alternative relief. The court observed that a joint application under sections 397 and 398 and for winding up could be filed. However, since the plea for winding up was an alternative plea, and there was no indication whether the impugned order appointing Justice P.N. Khanna as the chairman of the board was based on the averments relating to sections 397 and 398 or otherwise, the impugned order was liable to be quashed. The court directed that the petition be treated as a petition for winding up only and disposed of according to law.

Conclusion:
The appeal was accepted, and the impugned order was set aside. The learned company judge was directed to treat the petition as a petition for winding up only and dispose of it according to law. The appellants were entitled to costs, with counsel's fee set at Rs. 1,000.

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