1948 (2) TMI 12 - HC - Companies Law

Dismissal of Winding-Up Order Set-Aside Application due to Lack of Jurisdiction and Locus Standi

The application to set aside the winding-up order was dismissed as the High Court lacked jurisdiction to entertain it as a re-hearing or appeal. The ... Winding up – Power of tribunal to stay winding up and Appeals from orders Issues Involved1. Jurisdiction of the Court to entertain the application.2. Locus standi of the petitioners to maintain the application.3. Validity of the winding-up order.4. Allegations of collusion and suppression of service.5. Application for stay of winding-up proceedings.Detailed Analysis1. Jurisdiction of the Court to Entertain the ApplicationThe primary issue is whether the High Court has jurisdiction to entertain the application to set aside the winding-up order. According to section 202 of the Companies Act, re-hearings and appeals from orders made in the winding-up of a company must be conducted in the same manner and subject to the same conditions as appeals from orders made in cases within the Court's ordinary jurisdiction. The Court concluded that re-hearing under section 202 is akin to an appeal and must be initiated through a memorandum of appeal and brought before the appropriate appellate Court. Therefore, the High Court, as the company Court, lacks jurisdiction to entertain the application as a re-hearing or appeal.2. Locus Standi of the Petitioners to Maintain the ApplicationThe petitioners did not give notice of intention to appear at the hearing of the winding-up petition under rule 58 or file any affidavit under rule 59, nor did they seek leave of the Court at the time of the hearing. As a result, they did not become parties to the proceedings. The right to appeal or seek re-hearing is generally available only to parties to the proceedings. The Court referred to several judicial decisions, including *Security Insurance Company's Case* and *Rustomji v. Official Liquidator of the Peoples and Amritsar Banks Ltd.*, to support the conclusion that non-parties to the proceedings cannot maintain an appeal or re-hearing without leave of the Court.3. Validity of the Winding-Up OrderThe petitioners argued that the winding-up order was obtained through collusion and suppression of service. The Court examined the sequence of events leading to the winding-up order, including the statutory notices, the presentation of the petition, and the service of the petition on the company. The Court found no evidence of collusion between the petitioning creditor and Manabendra. The statutory notices were duly sent, and the petition was served on the company's registered office. The advertisements were also published as directed by the Court. The Court concluded that the winding-up order was validly obtained.4. Allegations of Collusion and Suppression of ServiceThe petitioners alleged collusion between Manabendra and the petitioning creditor, Shiva Prosad, and suppression of service of the petition on the company. The Court found no evidence to support these allegations. The statutory notices were sent to the company's registered office, and the petition was served on an employee of the company. The Court noted that the petitioners had not provided sufficient evidence to prove that the company had no employee named Ram, who allegedly received the petition. The Court concluded that the allegations of collusion and suppression of service were unfounded.5. Application for Stay of Winding-Up ProceedingsThe petitioners also sought a stay of the winding-up proceedings under section 173 of the Companies Act. The Court noted that this section presupposes a valid winding-up order and requires proof that all proceedings in relation to the winding-up ought to be stayed. The Court considered various factors, including the absence of a balance sheet since 1944, the lack of ordinary general meetings, the conviction of a partner of the managing agents for bribery and black-marketeering, and ongoing disputes between factions. The Court concluded that the petitioners had not provided sufficient information or material to justify staying the winding-up proceedings.ConclusionThe application to set aside the winding-up order was dismissed on the grounds that the High Court lacked jurisdiction to entertain the application as a re-hearing or appeal, and the petitioners did not have the locus standi to maintain the application. The allegations of collusion and suppression of service were found to be unsubstantiated. The application for stay of the winding-up proceedings was also dismissed as the petitioners failed to provide sufficient justification for the stay. The petitioners were ordered to pay the costs of the liquidator, Manabendra, and the petitioning creditor.