2017 (7) TMI 876 - HC - Companies Law

Court allows petition, stays winding up. Directors restored. Liquidator discharged. Order communication to Registrar. No costs.

In Re : Brand Trading (India) Private Limited

In Re : Brand Trading (India) Private Limited - Tmi Issues Involved:1. Restoration of management powers to the board of directors.2. Permission for the Liquidator to handover charge and discharge from winding up proceedings.3. Seeking permanent stay of voluntary winding up.4. Compliance with statutory requirements and objections raised by the Registrar of Companies.Issue-wise Detailed Analysis:1. Restoration of Management Powers to the Board of Directors:The petition sought to restore the management powers of the Petitioner Company to its board of directors. The court noted that the Petitioner Company was initially incorporated on 24.06.2005 and had passed a special resolution for voluntary winding up on 17.11.2014. However, the Board of Directors reassessed the situation and concluded that continuing the company would be more beneficial due to economic improvements. Consequently, the shareholders rescinded the winding-up resolution on 23.02.2015. The court found no objection from the Official Liquidator or the Registrar of Companies regarding this request and thus decided to restore the management powers to the board of directors.2. Permission for the Liquidator to Handover Charge and Discharge from Winding Up Proceedings:The petition requested permission for the Liquidator to handover charge to the directors and discharge her from further proceedings. The court observed that the voluntary winding up was in its initial stage and the Liquidator had not commenced the realization of assets or discharged any liabilities. The Official Liquidator and the Registrar of Companies confirmed that the statutory duties had not yet commenced and raised no objections to the relief sought. Consequently, the court permitted the Liquidator to handover charge to the directors and discharged her from the winding up proceedings.3. Seeking Permanent Stay of Voluntary Winding Up:The court referred to Sections 466 and 518 of the Companies Act, 1956, which empower the Tribunal to stay winding up proceedings. The court also cited the case of S.P. Sood vs. The Registrar of Companies, which established that the court has the power to stay voluntary winding up if the circumstances justify it. In this case, the Petitioner Company had sufficient funds and negligible liabilities, and the primary shareholder was willing to support the company. The court found these conditions satisfactory and ordered a permanent stay on the voluntary winding up proceedings.4. Compliance with Statutory Requirements and Objections Raised by the Registrar of Companies:The Registrar of Companies raised several objections, including the non-filing of MGT-14, retention of funds in a private bank account beyond the prescribed period, and payment of increased salary to a director without proper authorization. The Petitioner Company addressed these objections in an affidavit, clarifying that the funds were retained due to procedural delays in opening a special bank account and that the increased salary included a one-time ex-gratia payment. The court found these explanations satisfactory and noted that the objections were resolved.Conclusion:The court allowed the petition, staying the voluntary winding up proceedings altogether. The directors were restored with the power to manage the company's affairs, and the Liquidator was discharged from her duties. The Petitioner Company was directed to communicate the order to the Registrar of Companies within 30 days. No order as to costs was made, and the petition was disposed of accordingly.