Locus standi in share-validation proceedings denied where former director was neither necessary nor proper party to the scheme.

In proceedings concerning validation of purchase of shares in a company under liquidation, the Court held that a shareholder and former director had no locus standi to be impleaded or to participate merely because winding-up proceedings were pending. While creditors and contributories may be heard in winding-up matters, that entitlement did not extend to separate revival or validation proceedings under Section 536(2) of the Companies Act, 1956. The applicant had not participated at earlier stages, had stated that he had resigned as director, and was not shown to be a necessary or proper party to the scheme application. Reliance on Sections 391 and 394 was rejected as inapplicable. The application for impleadment and audience was therefore refused.

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Issues: Whether the applicant, claiming to be a shareholder and former director, had locus standi to be impleaded or participate in the proceedings seeking validation of purchase of shares in the company in liquidation.

Analysis: The application was examined against the background of pending winding-up proceedings and a separate application under Section 536(2) of the Companies Act, 1956 filed for validation of purchase of shares as part of a revival proposal. The right of creditors and contributories to appear and be heard in winding-up matters was acknowledged, but the Court distinguished that right from participation in the independent revival/validation proceedings. It was found that the applicant had not taken part in the winding-up proceedings at earlier stages, had communicated that he had resigned from directorship, and was not shown to be a necessary or proper party to the application filed by the propounder of the scheme. The reliance placed on Sections 391 and 394 of the Companies Act, 1956 was rejected as inapplicable to the proceedings under Section 536(2).

Conclusion: The applicant had no locus standi to participate in the proceedings and was not entitled to impleadment or audience.

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