2001 (12) TMI 815 - HC - Companies Law

Appeals allowed, winding-up petition dismissed. CLB to decide under section 397. Petitioners retain right to file in future.

The appeals were allowed, and the winding-up petition was dismissed. The Company Law Board (CLB) was directed to decide the application under section 397 ... Winding-up - Circumstances in which company may be wound-up Issues Involved:1. Whether the petition for winding-up Takshila Hospital Ltd. under section 433(f) of the Companies Act, 1956 should be admitted.2. Whether the alternative remedy under section 397 of the Companies Act, 1956 should be pursued instead of winding-up.3. The impact of the learned Company Judge's prima facie findings on the proceedings under section 397.4. The propriety of keeping the winding-up petition pending while the section 397 application is considered by the Company Law Board (CLB).Detailed Analysis:1. Whether the petition for winding-up Takshila Hospital Ltd. under section 433(f) of the Companies Act, 1956 should be admitted:The petitioners, shareholders, and contributors of Takshila Hospital Ltd. filed for winding-up the company on grounds of mismanagement and malpractices by the company's management, invoking section 433(f) of the Companies Act, 1956. The learned Company Judge opined that a case for winding-up was made out but suggested that an alternative remedy under section 397 of the Act should be invoked instead.2. Whether the alternative remedy under section 397 of the Companies Act, 1956 should be pursued instead of winding-up:The Company Judge did not admit the winding-up petition and instead provided the petitioners with the option to move an application under section 397 within six weeks before the CLB. The rationale was that efforts should be made to save the company from being wound-up, aligning with the principles ingrained in sections 443(2) and 397, which emphasize avoiding winding-up as far as possible.3. The impact of the learned Company Judge's prima facie findings on the proceedings under section 397:The appellants challenged the findings of the learned Company Judge, arguing that these findings could pre-empt the CLB's decisions and affect its independent judgment. The court clarified that any prima facie conclusions reached by the Company Judge were not binding on the CLB, which must form its own opinion independently and uninfluenced by the Company Judge's observations.4. The propriety of keeping the winding-up petition pending while the section 397 application is considered by the Company Law Board (CLB):The court noted that once the petitioners had opted to pursue the remedy under section 397, the winding-up petition should not be kept pending. The court emphasized that the winding-up petition, which had not even been admitted, should be dismissed to avoid complications and ensure that the CLB could consider the section 397 application independently. The court further highlighted that the right to appeal any order passed by the CLB lies with the High Court, and the CLB's proceedings should not be influenced by the learned Company Judge's prima facie findings.Conclusion:The appeals were allowed, and the winding-up petition was dismissed. The CLB was directed to decide the application under section 397 uninfluenced by the findings of the learned Company Judge. The court noted that this order would not impair the petitioners' rights to file a winding-up petition in the future if necessary. There was no order as to costs.