ORDER
B.A. Khan, J.
1. Applicants herein are respondents 3 & 4 in winding up Company Petition No. 1/94. They pray for stay of the proceedings in the aforesaid petition on the plea that the Company Law Board (CLB) is seized of their complaint on the subject matter under Sections 397/198 of the Companies Act. The sole question that arises in the circumstances is : whether the winding up proceedings in CP No. 1/94 are liable to be stayed on this ground?
2. It would be useless to go into the genesis of the disputes that have overwhelmed the Company — M/s. Devi Dass Gopal Kishen Ltd. Suffice it to say that the Company’s three branches controlling equal share-holding are engaged in a fight to finish. One group headed by A. K. Puri wants it to be wound up while the other two groups of K. K. Puri and Indu Puri are resisting this and seek ouster of the rival group. All the three groups come from one family but are presently pitted against each other in a tussle for supremacy. They have launched litigation all over and C.P. No. 1/94 filed by A. K. Puri and his group seeking winding up of the company under Section 433(f) of the Act is only one of the off shoots. This petition was filed on 28-3-1994 and a show cause notice was issued to respondents on 30-3-1994. While they filed their counter to it on 2-5-1994, one of the groups headed by Indu Puri (respondents 3 & 4) seems to have approached the Company Law Board under Sections 397/398 of the Act for removal of A. K. Puri group. They have now filed this C.M.P. seeking stay of the winding up proceedings till the CLB passes appropriate orders in the matter.
3. Mr. Kohli, learned counsel for the applicants has urged a variety of grounds in support. According to him, the scope of inquiry under Sections 397 and 433(f) being the same, it would be both worthwhile and expedient to allow the Board to try its band first in tune with the scheme of the Act which entrusted it with the task of settling the disputes inter se shareholders. Otherwise the Board would be disadvantageously placed and handicapped in discharging its statutory duty. This was more so because this Court happened to be the Appellate Forum against the Board which could have its own impact if the winding up proceedings were allowed to continue. It would also lead to an anamolous position as both forums could pass conflicting interim orders.
4. Mr. Kohli further submitted that the position would become worse if the winding up petition was admitted to hearing because the public notice issued pursuant thereto would create third party interests and unnecessarily complicate issues. He finally pleaded that since the Board inquiring under Sections 397/398 provided an alternate remedy to winding up proceedins, it was equally in the interests of non-applicants to avail of this opportunity. His associate counsel Mr. Gupta also intervened to say that admission of the winding up petition would lead to automatic winding up of the company.
5. Resisting the application, Mr. Choudhary, learned counsel for the non-applicants pointed out that the contentions raised proceeded on the wrong premise that the jurisdiction under Sections 397/398 and Section 433(f) was concurrent. He referred to (1984) 55 Comp Cas 462 : (1982 Tax LR 2513) (Delhi) and (1983) 54 Comp Cas 856 : (1982 Tax LR 2505) (Delhi) to show that it was different and separate and so was the relief liable to be granted under the relevant sections and as such there was no occasion for one proceedings being stayed at the cost of other. Nor was there any scope for a clash or conflict between the interim orders to be passed by this Court and the CLB as the orders of this Court would always prevail upon the orders of the Board — an inferior forum. He argued that while the High Court was admittedly an appellate forum, it was of no consequence so long as this court exercised a separate original jurisdiction in a winding up petition under Section 433(f).
6. Mr. Choudhary contended that this application was prematurely being pressed into service before the admission of the winding up petition when the Court had yet to decide whether to proceed with it or not. He repelled the argument that the proceedings in the CP deserved to be stayed as the petitioners had failed to avail of the alternate remedy under Sections 397/398 of the Act and submitted that the factor of alternate remedy was required to be taken in regard only at the time of passing of the winding up order. According to him, there was no question of any third party interests being created pursuant to the admission of the winding up petition because the public notice issued was meant only to enable interested people to assist the Court. He lastly alleged that the conduct of the applicants had been subversive of any mutual settlement and that their application proceeded on mala fide considerations designed to prolong the agony of the petitioners and to bring the company under profitability pressure so that its liabilities overtake the assets.
7. It may be pointed out at the very outset that there is no statutory provision in the Companies Act which provides for stay of the winding up proceedings under Section 433 while the CLB is seized of a petition between the same parties under Sections 397/398. There is also no available precedent on the point. In other words, there is no explicit or implied bar for this Court to carry on the widing up proceedings even when the CLB is seized of a matter. It is a different thing if it decides to keep its hands off in the peculiar circumstances of the case keeping in regard the conduct of the parties and their bona fides to reach a settlement and to save the company from closure.
8. Before adverting to the rival contentions a brief reference to the relevant provisions becomes necessary.
9. Sections 397 and 398 of the Act enable any member/s of the company to lodge a complaint before the CLB on the conditions provided therein and if the Board forms an opinion about the existence of such conditions, it is empowered to pass such orders as it thinks fit. Under first provision i.e., Section 397 the Board is required to form an opinion that to wind up the company would unfairly prejudice such member or members but that otherwise the facts would justify the making of a winding up order, on the just and equitable grounds. On the contrary, Section 433 details out the circumstances in which the Company is liable to be wound up under the orders of the Court and its Sub-clause (f) provides for its winding up on “the just and equitable grounds”.
10. Lastly, Section 443 gives various options to the Court on hearing a winding up petition. It may, dismiss the petition with or without costs, adjourn the hearing conditionally or unconditionally or make any interim order as it thinks fit or make an order for winding up of the Company with or without costs or any other order that it thinks fit. Clause (b) of this section lays down that where the petition is presented on just and equitable grounds, the Court 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 seeking to have the Company wound up instead of pursuing that remedy.
11. A combined reading of Sections 397 and 433(f) shows that “the just and equitable ground “constitutes a common thread passing through the two provisions. It furnishes a ground for winding up of the Company and is also a pre-requisite to sustain a petition under Section 397. The similarity, however, ends there though it creates a confusion and a misleading impression that the jurisdiction and the scope of inquiry under the two provisions is identical and that one is the substitute of the other. No wonder the present controversy emanates from a similar confusion.
12. In my view, the proceedings under Sections 397/398 and the winding up proceedings under Section 433(f) are two different and distinct jurisdictions, poles apart from each other, notwithstanding the commonality of “the just and equitable ground”. While the scope of the former is the resolution of the internal disputes relating to oppression and mismanagement in a Company the latter is directed to achieve the winding up of the company which is the last resort. Their scope of inquiry and procedural modes are different and so are the reliefs capable of being granted. It is true that Section 397, 398 provides an alternate remedy to winding up of a Company but it does not provide a substitute any way. Therefore, it is fallacious to contend that the CLB and the Company Court enjoy concurrent jurisdiction under the respective provisions. It was not so even when the Company Court possessed joint jurisdiction under Sections 397 and 433, not to speak of today when two different forums stand created to exercise separate jurisdiction. It would be advantageous to refer to the observations of the Supreme Court in M/s. Worldwide Agencies’ case, (AIR 1990 SC 737) in this regard though these are referable to a situation when the Company Court enjoyed joint jurisdiction under Sections 397/398 and 433 :
“Averments which a petitioner would have to make to invoke jurisdiction under Section 397/398 are not destructive of the averments which are required to be made in a case for winding up under Section 433(f) on the just and equitable ground, though they may appear to be rather conflicting if not contradictory…”
13. Viewed thus, there is no overlapping of jurisdiction between the CLB and this Court and, therefore, it cannot be urged as a rule that the Company Court must pack up the moment a party approaches the CLB under Section 397 398. Such a view, if accepted, would render the Court’s jurisdiction under S, 433 totally redundant. Looking from the other angle, even if some conflict of jurisdiction was discernible, a party would he still hard put to show special circumstances and special bona fides to succeed in staying the winding up proceedings.
14. The other submissions made by Mr. Kohli, also do not stand scrutiny. It is wholly imaginary and presumptuous to say that the Company Court and the CLB would tend to pass contradictory interim orders if the winding up proceedings continued. The argument proceeds on a stray apprehension because such an eventuality is too remote to arise and even if it docs, there is no room for any conflict because the orders of the inferior forum would automatically give way to those of the superior forum i.e. the Company Court. I also find it difficult to accept the contention that the continuation of the winding up proceedings in this Court, being an appellate forum, would in any way prejudice or influence the course of proceedings of the CLB or render such proceedings meaningless or infructuous. As noticed earlier, the two formus exercise independent and separate jurisdiction under the relevant provisions of the Act with hardly any scope for any clash. It is true that an appeal lies to the High Court against the orders of the CLB under Section 10-E of the Act but that is irrelevant and of no consequence so long as the Company Court is exercising an independent original jurisdiction under Section 433 of the Act. Thus, there is no question of any pending proceedings of the company court casting any shadow on the course of proceedings before the CLB, let alone make it useless or redundant.
15. There is also no merit in the argument that the on-going winding up proceedings deserve to be stayed as the non-applicants had failed to avail of the alternate remedy under Sections 397/398 and because admission of the winding up petition would create third-party interests. The submission is untenable and requires to be rejected on the threshold. The failure to avail of the alternate remedy may disentitle the non-applicants from obtaining a winding up order but it certainly does not constitute a ground for staying the winding up proceedings. Similarly, when a winding up petition is admitted to hearing, a public notice through advertisement enables all interested persons to participate in the proceedings and assist the Company Court to reach a just conclusion over and above the narrow vested interests of the shareholders. It helps in resolving issues in a just and fair manner rather than complicating them and the question of creating any third party-interests does not arise.
16. The position that emerges is that the Company Court is not under any obligation or compulsion to stay the winding up pro-ceedings under Section 433(f) merely because some members of the Company have chosen to invoke the jurisdiction of the CLB under Section 397/398 and the commonness of “the just and equitable ground” in the two proceedings is immaterial for this purpose. In other words, if the CLB is seized of the matter under Sections 397/398, that by itself is not enough to seek stay of pending winding up proceedings before the company court. It is a different matter if there are other compelling circumstances like the parties bona fide approach to try other modes to save the company from an avoidable death which may influence or persuade the company court to stay its hands off to afford them a chance to exhaust other avenues. This squarely falls within the discretion of the Court which indeed has to be exercised on established sound judicial principles.
17. In the present case, the applicants have failed to show any compelling circumstances to warrant stay of the winding up proceedings. Their effort appears both premature and retaliatory and their tactics dilatory. As already recorded elsewhere CP No. 1/94 was filed by the non-applicants on 28-3-1994. The applicants filed their reply to it on 2-5-1994 claiming majority shareholding and subsequently moved the Cl -B for removal of applicants under Sections 397/398. Their action seems to be a clear tactical reaction to the winding up petition. Be that as it may, the winding up petition is still in its infancy, so to say. It has to pass through many stages and hurdles before it can fructify into a winding up order. As on today it is not for certain whether it would merit admission to hearing at all, not to speak of a winding up order which is miles away. Therefore, it is too much to say that pendency of the proceedings at such a stage would hamper or influence the Board in passing the orders under Sections 397/398, which it is required to do within a time frame.
18. All told the applicants have failed to make out a case for stay of winding up proceedings. This Civil Misc. Petition is accordingly rejected. Company Petition No. 1/94 be listed for further proceedings next week.