TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>High Court Allows Meeting for Company Reconstruction Scheme Despite Member Objections</h1> <h3>Manakkil Paily Versus Kaimathuruthil Sebastian Joseph</h3> Manakkil Paily Versus Kaimathuruthil Sebastian Joseph - [1953] 23 COMP. CAS. 549 (TRAV - COCHIN) Issues:Permission to convene a meeting of the members of a company in liquidation to consider a proposal for reconstructing the company.Analysis:The judgment revolves around the official liquidator's appeal seeking permission to convene a meeting of the members of a company in liquidation to discuss a scheme for reconstructing the company. The company in question, Gothuruthi Educational & Industrial Co. Ltd., was incorporated under the Cochin Companies Act with the primary objective of promoting charity through education, industry, commerce, and charity. The company had no share capital, and each member had a limited liability of Rs. 500 for 24 years. Due to economic challenges, the company faced difficulties in meeting its obligations, leading to its winding up. At the time of the petition, there were surplus assets of around Rs. 22,000 in court, with minimal outstanding liabilities. The official liquidator proposed a scheme for reconstruction as there were no provisions in the memorandum of association regarding the utilization of surplus assets in the absence of debts.The main contention arose from objections by some members opposing the reconstruction, fearing it may revive their personal liabilities extinguished after 24 years. The lower court rejected the petition, citing concerns about potential loss of assets and suggested starting a new institution instead of reconstructing the existing one. However, the High Court disagreed with this reasoning, emphasizing the provisions of Section 153 of the Indian Companies Act, which allow for meetings to consider compromises or arrangements between a company and its members. The court highlighted that objections to the proposed scheme could be discussed during the meeting, and members opposing the reconstruction might reconsider their stance after a detailed discussion.The judgment clarified that the purpose of the petition was not for sanctioning the scheme but merely to convene a meeting for considering the proposal. It emphasized that if the scheme were to be approved by a majority representing three-fourths of the members, it would still require court sanction, where objections, including those related to increased liabilities, could be addressed. The court ruled in favor of granting permission to convene the meeting, noting the substantial funds held by the company and the absence of outstanding liabilities. The official liquidator was directed to organize the meeting, with expenses to be covered from the company's assets. The appeal was allowed, with no costs imposed on either party.In conclusion, the judgment underscores the procedural aspects of seeking member approval for reconstructing a company in liquidation, highlighting the importance of holding a meeting to discuss and decide on such proposals in accordance with the relevant legal provisions.
TaxTMI 