TaxTMI 
TaxTMI 
2009 (9) TMI 589
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....heir office and also bringing the Unions/Sakhas under the management of the Administrators, without any regard to the rules or procedures contemplated under the bye-laws of the 'Yogam'. It is alleged that the affairs of the 'Yogam' are being mismanaged; the funds are being misappropriated and there is complete oppression of minority members, coupled with acts of fraud and such other illegal activities, in total disregard to the statutory prescriptions. The petitioners have approached this Court under section 203(b)( ii), read with section 433(f) of the Companies Act with the following prayers :- "(a)To appoint a committee of not less than five members to takeover the administration and management of SNDP Yogam and institutions functioning under that company; (b)To declare that respondents 1 to 4 are disqualified from continuing as office bearers of SNDP Yogam; (c)To direct respondents 2 to 4 to make available to this Hon'ble Court true and correct details of the income and expenditure of the Yogam including Micro Finance Account and amount received from Kerala State Backward Development Corporation and details of persons to whom such amounts were distributed from November 1996 o....
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....er sub-section (2) of section 443 of the Act. It is also stated that 'admission' of the matter does not curtail the rights of the respondents to challenge the very maintainability of the petition, particularly in view of the rider placed by the learned Judge while admitting the matter, holding that 'admission' is subject to maintainability. The learned Sr. Counsel referred to the relevant provisions in the Companies Act, which clearly deal with the rights and liberties of the parties concerned, to have redressal in respect of the prayers made in the instant case at Sl. Nos. (a) to (f), pointing out that the prayer for 'winding up' has been sought for at Sl. No. (g) only as an 'alternative'. Reliance is also placed on the very admission of the petitioner in Ground (d) under the head - 'Disappearance of Substratum' - given at running page 48 of the Company Petition. The learned Sr. Counsel also referred to the judicial precedents rendered by the Apex Court, a Division Bench of this Court and various other High Courts, to substantiate that the remedy by way of winding up under section 433(f) is not liable to be granted in view of the other effective, alternate remedy available and als....
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....e power to restrain fraudulent persons from managing the companies as provided in the said provision can be exercised only in the course of winding up of a company. As such, the basic question to be considered is whether the prayer for winding up, inserted at Sl. No. (g) of the Writ Petition, is liable to be entertained. As stated hereinbefore, the prayer for winding up at Sl. No. (g) has been raised by the petitioner only as an 'alternative prayer'. The description of the sequence of events and the facts and figures more relate to the alleged misappropriation, mismanagement, fraud and oppression of the minority sector, which need not constitute or warrant a 'winding up' on the ground of 'just and equitable reason', as envisaged under section 433(f ). The terms 'just and equitable' as they appear under section 433(f) are not to be read as 'ejusdem generis' with the preceding words of the enactment (Halsbury's Laws of England, Vol. 7(3) IVth Edition 2004 Re-issue). It is in the nature of 'last resort', when other remedies are not efficacious enough to protect the general interests of the Company. In this context, it is also relevant to note the pleading of the petitioners in the Com....
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....) to (f) and if any such remedy is available, whether the same is efficacious enough or has any of the minority petitioners been prevented from availing the benefit thereunder, is not discernible from the pleadings on record. As such, it has become necessary to ascertain whether the contention of the petitioners in Ground 'D', that there is no other alternate remedy for them is correct or sustainable. 12. Section 235(1) of the Companies Act, 1956 deals with the power of the Central Government to investigate the affairs of the Company on receipt of a report from the Registrar under sub-section (6) or (7) of section 234. Sub-section (2)(b) of the very same provision deals with such power conferred on the Tribunal in the case of a Company having no share capital (as in the instant case) where an application is received from not less than '1/5th' of the persons on the Company's register of members. The petitioner has no case that they moved the Tribunal by filing an application preferred by not less than 1/5th of the persons on the Company's register of members or that such course is not available or has been turned futile due to some or other reason, so as to make it ineffective. 13....
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....6. The case of the petitioners, as asserted by the learned Sr. Counsel Mrs. Nalini Chidambaram, is that the respondents cannot dictate terms to the petitioners and it is for the petitioners to choose the appropriate remedy and forum, when different remedies are available to the petitioners. When the petitioners assert that, it is by virtue of their discretion that they have chosen to approach this Court/by filing the Company Petition, seeking to wind up the first respondent on just and equitable ground, invoking the power under section 433(f) without resorting to the alternate remedy, the mandate under section 443(2) has also necessarily to be looked into, which provision is extracted below :- "443. Powers of Tribunal on hearing petition.-(1) On hearing a winding up petition, the Tribunal may- (a) to (d)****** (2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Tribunal may refuse to make an order of winding up, if it is of the opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." 17. ....
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....urt, following the dictum in Hind Overseas (P.) Ltd.'s case (supra) observed that under sections 397 and 398 of the Act, there are preventive provisions as a safeguard against oppression in management. These provisions also indicate that the relief under section 433(f) based on the 'just and equitable' clauses is in the nature of 'last resort', when other remedies are not efficacious enough to protect the general interest of the Company. It is also observed therein that, it is very much necessary to bear in mind that the relief under section 433(f) is in the nature of 'last resort', thus obliging the Court to give relief to the parties, when moved under the section, only under compelling circumstances. Accordingly, relying on the mandate under section 443(2), the appeal was allowed and the Company Petition was dismissed without prejudice to the rights of the petitioner to take appropriate remedies to safeguard the interest as provided under the relevant provisions of the statute. 20. Later, the issue came up again for consideration before another learned Judge of this Court in Jose J. Kadavil/K.T. Mathew v. Malabar Industrial Co. Ltd. [1986] 59 Comp. Cas. 969 . Following the dictu....
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....e liable to be considered in isolation, (without considering the merits), the petition having been admitted on 1-1-2009, it is to be noted that the order passed by this Court at the time of admission was rather qualified, insofar as the matter was admitted 'without prejudice to contentions including on the question of jurisdiction'. Learned Sr. Counsel submitted that the 'jurisdiction/maintainability' contemplated therein was only with regard to the availability of 'arbitration clause' and not with regard to anything else. 23. The learned Sr. Counsel, Mr. Nageswara Rao appearing on behalf of the respondents 1 and 2, submits that the above proposition is not at all correct or sustainable, particularly in view of the fact that the respondents were not available when the matter had come up for admission before the learned Judge and that such a 'rider' was imposed while admitting the matter, with a specific view to see that the consequential proceedings, particularly as to the publication in the dailies regarding winding up of the proceedings, could be kept in abeyance for the time being; lest any such steps without hearing the other side should lead to unpleasant events and irreparab....
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.... the admission of a Company Petition is not a bar for hearing the 'jurisdiction/maintainabi-lity'. More so, when the very order dated 1-1-2009 passed by the learned Judge of this Court, at the time of admitting the matter, was specific and qualified as dealt with hereinbefore. 25. Mr. N.N. Sugunapalan, learned Sr. Counsel appearing for the third respondent, besides supporting the contentions raised from the part of the first and second respondents, placed reliance on the decision rendered by this Court in Palghat Exports (P.) Ltd. v. T.V. Chandran [1994] 79 Comp. Cas. 213 where it was held :- (i)that even a company which was not doing business could form the subject-matter of action under sections 397 and 398 of the Act; (ii)that merely on conduct of the Directors in misappropriating the funds of the company an order for winding up the company would not be just and equitable. In addition to such misconduct further circumstances must exist which render it desirable in the interest of shareholders that the company should be wound up; and (iii)that section 397 of the Companies Act, 1956 is intended to avoid winding up and to mitigate and alleviate oppression. Relief under section ....
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....ies Act are to be taken with modifications as specified, the members of the first respondent are very much entitled to prefer the Company Petition and whether the petitioners are 'contributories' or not is not relevant. Mr. Rajan Babu, the learned Counsel appearing for some of the respondents submits that applicability of the Companies Act and the extent of the modification are specifically dealt with in section 3 itself and that the modification could only be to the extent as specified in the Schedule and nothing more. In any view of the matter, this does not appear to be an essential issue to decide the fate of the present case, in view of the other more glittering grounds. 28. The 7th respondent, Registrar of Companies has filed a Report, pursuant to the Order dated 12-2-2009 passed by this Court, stating that three members of the first respondent "Yogam" had moved a petition under section 399(4) of the Act before the Central Government (Ministry of Corporate Affairs, New Delhi), seeking permission/sanction from the Central Government for making an application before the Addl. Principal Bench of the Company Law Board at Chennai for the relief under section 397/398 of the Act an....