1955 (8) TMI 19 - HC - Companies Law

Foreign company's winding-up petition upheld without shareholder resolution. Appeal dismissed.

The court upheld the maintainability of the winding-up petition filed by the foreign company and confirmed the authority of the directors to file the ... Directors - Power of and Winding up – Application for Issues Involved:1. Maintainability of the winding-up petition by a foreign company.2. Authority of directors to file the winding-up petition without a shareholders' resolution.Issue-Wise Detailed Analysis:1. Maintainability of the Winding-Up Petition by a Foreign Company:The primary contention was whether a foreign company doing business in India can file an application for winding up. The learned Advocate-General for the State of Madras argued that a foreign company could be wound up as an unregistered company only at the instance of a creditor or contributory, not by the company itself. The petitioner, a limited liability company incorporated under the English Companies Act, had its principal place of business in Madras and had ceased operations. The petition was filed under section 271 of the Indian Companies Act, which allows for the winding up of unregistered companies. The court noted that section 271(1) does not explicitly prohibit a foreign company from presenting a winding-up petition. The Advocate-General's argument that the Indian Companies Act's provisions were intended to protect Indian creditors and not to allow foreign companies to escape liability was not upheld by the court. The court emphasized that section 166, which permits an application for winding up by the company, creditor, or contributory, applies to unregistered companies as well. The court dismissed the contention that a foreign company could not file the petition, stating that there was no express prohibition in the Act.2. Authority of Directors to File the Winding-Up Petition Without a Shareholders' Resolution:The second issue was whether the directors of the company could file a winding-up petition without a resolution from the shareholders. The learned Advocate-General contended that under section 162 of the Indian Companies Act, a company could be wound up by the court only if it had resolved by a special resolution to do so. The court examined the provisions of section 162 and found no requirement that a winding-up petition must be preceded by a shareholders' resolution. The court referred to the case In re Galway and Salthill Tramways Co., where it was held that directors could not present a petition without shareholder authorization. However, the court noted that this decision was not followed in English courts and was not supported by the wording of the Act. The court also cited Palmer's Company Law, which states that directors in England can present a winding-up petition without a general meeting's sanction. The court concluded that the directors of the petitioner company had the authority to file the petition under Article 99 of the company's Articles of Association, which allows directors to exercise all powers not expressly required to be done by the company in a general meeting. The court held that the petition was validly presented and dismissed the appeal with costs.Conclusion:The court upheld the maintainability of the winding-up petition filed by the foreign company and confirmed the authority of the directors to file the petition without a shareholders' resolution. The appeal by the State of Madras was dismissed, and the order of winding up by Balakrishna Ayyar J. was affirmed.