Interim injunctions in winding up may reach non-parties, but a subsidiary remains a separate legal entity.

In winding up proceedings, the court's interim powers may extend to restraining a non-party subsidiary where necessary to preserve assets and protect the subject matter of the proceedings, provided affected persons are heard. However, a subsidiary cannot be treated as a mere asset of its holding company simply because the holding company holds a majority stake. The Companies Act recognises the holding-subsidiary relationship for limited purposes, but separate corporate personality remains the general rule and the corporate veil is lifted only where statute or clear facts justify it. On the facts, a bare majority shareholding and possible loss of control did not justify treating the subsidiary as part of the holding company's property.

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Issues: (i) Whether, in winding up proceedings, the court had jurisdiction under the Companies Act to grant an interim injunction restraining a subsidiary company, not a party to the winding up petition, from acting on a resolution for issue of further share capital; (ii) whether the subsidiary company could be treated as an asset or property of the holding company so as to justify restraint on its corporate acts.

Issue (i): Whether, in winding up proceedings, the court had jurisdiction under the Companies Act to grant an interim injunction restraining a subsidiary company, not a party to the winding up petition, from acting on a resolution for issue of further share capital.

Analysis: The power to make interim orders in winding up proceedings is wide and is directed to preservation of the company's assets and protection of creditors and shareholders. The statutory scheme, including the powers relating to stay of proceedings, commencement of winding up, avoidance of prejudicial transactions, and protection of property after commencement of winding up, shows that the court may pass such interim directions as are necessary to preserve assets and maintain the subject matter of the proceedings. That power is not confined only to persons who are formal parties, although principles of natural justice require that any affected person be heard.

Conclusion: The court had jurisdiction to make an interim order against a non-party where necessary for preservation of assets.

Issue (ii): Whether the subsidiary company could be treated as an asset or property of the holding company so as to justify restraint on its corporate acts.

Analysis: Although the Companies Act contains provisions which recognise the relationship between holding and subsidiary companies and qualify the strict rule of separate corporate personality for limited purposes, those provisions do not abolish the fundamental doctrine that each company is a distinct legal entity. The corporate veil may be lifted only for specific statutory purposes or where the facts clearly justify it. On the facts, a bare majority holding did not justify treating the subsidiary as having lost its separate identity or as being merely an asset of the holding company. The mere possibility that the holding company would lose control, or that its block of shares might fetch less value, was not enough to stop the subsidiary's independent functioning.

Conclusion: The subsidiary company could not be treated as a mere asset of the holding company on the facts found.

Final Conclusion: The injunction order was set aside and the appeal succeeded, but the question whether the proposed issue of share capital was mala fide was left for fresh decision by the court below.

Ratio Decidendi: In winding up proceedings, the court may make wide interim orders to preserve assets even against non-parties, but a subsidiary remains a separate legal entity unless the facts and the statutory purpose clearly justify piercing the corporate veil.

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