1975 (2) TMI 66 - HC - Companies Law

Court Overturns Impermissible Amendment, Grants Appeal, and Awards Costs

The court found the amendment allowing new grounds under Section 433(f) in a petition originally filed under Section 433(e) to be impermissible as it ... Company when deemed unable to pay its debts, Winding up - Appeals from orders Issues Involved:1. Maintainability of the appeal.2. Justification of the order directing the amendment.3. Whether the original company petition was admitted.4. Nature of the original petition and the proposed amendments.5. Appealability of the order allowing the amendment.Detailed Analysis:1. Maintainability of the Appeal:The appeal's maintainability was questioned on two grounds. The respondent's counsel argued that the original company petition was still at the preliminary stage and not admitted. He contended that the amendment did not change the nature of the petition but only expanded on existing grounds. The appellant's counsel argued that the original petition should be deemed admitted based on the order sheet and that the principles of amendments apply at any stage of proceedings.2. Justification of the Order Directing the Amendment:The amendment was opposed by the company on the grounds that it changed the nature of the original petition from one under Section 433(e) to one under Section 433(f) of the Companies Act. The company argued that such an amendment, allowed after two years, would prejudice its rights. The court observed that the original petition was based on the company's inability to pay debts, while the amendment introduced grounds of mismanagement and misappropriation, which fall under Section 433(f).3. Whether the Original Company Petition was Admitted:The court examined the record to determine if the original petition was admitted. Although no specific order of admission was found, the procedural steps and orders passed indicated that the petition was treated as admitted. The court concluded that the original petition was indeed admitted and fixed for final hearing.4. Nature of the Original Petition and the Proposed Amendments:The original petition was filed under Section 433(e) for the company's inability to pay debts. The proposed amendment sought to introduce new grounds under Section 433(f) based on subsequent developments, including mismanagement and misappropriation of funds. The court found that the original petition did not invoke the just and equitable grounds under Section 433(f) and that the proposed amendments constituted an entirely new cause of action.5. Appealability of the Order Allowing the Amendment:The court considered whether the order allowing the amendment was appealable under Section 483 of the Companies Act, which provides for appeals from any order made in the matter of winding up. The court held that the order was appealable as it affected the company's right to oppose the admission of a petition under Section 433(f). The court referred to the Supreme Court's judgment in Shankarlal Aggarwala v. Shankarlal Poddar, which distinguished between administrative and judicial orders, emphasizing that the nature of the order determines its appealability.Conclusion:The court concluded that the amendment could not have been allowed as it introduced a new cause of action under Section 433(f) in a petition originally filed under Section 433(e). The amendment prejudicially affected the company's right to oppose the admission of the petition. The court allowed the appeal, set aside the order allowing the amendment, and directed that the original petition be heard on its merits. The appellant-company was awarded costs in the appeal, while costs before the company judge were left to his discretion.