IN THE HIGH COURT OF KERALA AT ERNAKULAM
Co.Pet.No. 40 of 2008()
1. SRI.VAMADEVAN.N. AND OTHERS
... Petitioner
Vs
1. SREE NARAYANA DHARMA PARIPALANA YOGAM &
... Respondent
For Petitioner :SRI.S.RAJEEV
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice P.R.RAMACHANDRA MENON
Dated :14/09/2009
O R D E R
(C.R.)
P.R. RAMACHANDRA MENON, J.
........................................................................
C.P. No. 40 OF 2008
.........................................................................
Dated this the 14th September, 2009
O R D E R
‘Sree Narayana Dharma Paripalana Yogam’ (‘Yogam’ in
short) is sought to be wound up in this Company Petition.
2. The first respondent ‘Yogam’ is a Charitable Non-trading
Company’ incorporated in 1903 under the Travancore Regulation
I of 1063 M.E., corresponding to Act 6 of 1882 of the Indian
Companies Act (herein after referred to as the ‘Act’). The
petitioners were elected office bearers of the SNDP
Unions/Sakhas under the first respondent. The case of the
petitioners is that, ever since assuming the office as the
General Secretary of the ‘Yogam’, the second respondent had
been functioning in a quite autocratic manner, suspending the
petitioners and others from their 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
C.P. No. 40 OF 2008
2
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 433(f) of the Companies Act with the following
prayers:
“a) To appoint a committee of not less than
five members to take over 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
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3
details of persons to whom such amounts
were distributed from November 1996
onwards;
d) To direct the respondents to take
immediate steps for ordering elections in all
Unions and branches under Administrator
Control to have elected representatives and
to hand over the assets and management to
such elected bodies within a time
frame;
e) To render to this Hon’ble Court the
correct and complete records and documents
which are maintained in connection with
micro-finance operations and to direct
payments to the needy members in
accordance with the stipulations of NABARD;
f) To direct the 2nd respondent not to
alienate or dispose of any movable or
immovable properties of SNDP Yogam
without prior permission from this Hon'ble
Court.
C.P. No. 40 OF 2008
4
g) In the alternative, the 1st respondent
Sree Narayana Dharma Paripalana Yogam
be wound up by this Hon’ble Court under the
provisions of the Companies Act, 1956;
h) To appoint provisional liquidator to
preserve the assets of the respondent
company; and
i) To pass such other order or orders as
this Hon’ble Court may deem fit, appropriate
and just.”
3. When the above matter came up for admission before
this court on 01.01.2009, another learned Single Judge of this
Court ordered as follows:
“Admitted without prejudice to
contentions including on the question of
jurisdiction. Notice by Special Messenger. List
on 13.01.09 for consideration of the application
for interim reliefs. No immovable property of
the SNDP Yogam shall be alienated or
encumbered until the next date of hearing.”
C.P. No. 40 OF 2008
5
Pursuant to service of notice, the respondents entered
appearance and the matter has been brought up for further
consideration, challenging the very question of maintainability,
at the instance of the respondents 1 and 2.
4. Mrs. Nalini Chidambaram, learned Sr. Counsel appearing
on behalf of the petitioners submits that the Company Petition
is very much maintainable, simultaneously adding that the
doubts, if any, can be entertained only along with the merits of
the case, particularly, since the matter has already been
admitted by this Court. The learned Sr. Counsel referred to the
sequence of events and also the relevant provisions of law, to
sustain the said submission.
5. Mr. Nageswara Rao, learned Sr. Counsel appearing on
behalf of the first and second respondents submits that the
Company Petition is not at all maintainable in view of the other
effective, alternate remedy available and also by virtue of the
clear mandate under 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
C.P. No. 40 OF 2008
6
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 also for the fact that it is only sought for as ‘an
alternative’ prayer. It is the specific case of the respondents 1
and 2, as put forth by the learned Sr. Counsel, that ‘winding
C.P. No. 40 OF 2008
7
up’ has been sought for, as an alternative prayer, only to
sustain the prayer for interference under Section 203(b)(ii),
which, otherwise is not permissible, unless ‘in the course of
winding up’ of a Company.
6. The first respondent ‘Yogam’ is a ‘Non-trading Public
Limited Company’ deemed to be incorporated under the
provisions of the Kerala Non-trading Companies Act,. 1961.
The affairs of the first respondent are governed by the
Companies Act, by incorporation. After considering the rival
submissions, this Court decided to hear the legal aspects as to
the scope of the order passed at the time of ‘admission'(the
question of maintainability) before proceeding with the merits of
the case and accordingly, heard all the learned Counsel in
detail.
7. Mr. Nageswara Rao, learned Sr. Counsel appearing for
the respondents 1 and 2 , explained the scheme of the Statute,
particularly with reference to the nature and extent of the reliefs
sought for.
8. Obviously, the prayers at Sl.Nos. (a) to (f) are with
C.P. No. 40 OF 2008
8
regard to the mismanagement, fraud, oppression of minority,
misappropriation and in turn to take over the administration and
management of the ‘Yogam’, after declaring the respondents 1
to 4, as disqualified from continuing in office. The above prayers
are very much inter-connected and of course, based on the
provisions under Section 203 (b)(ii), which is extracted below for
the purpose of convenience of reference.
“203. Power to restrain fraudulent persons
from managing companies:-(1) Where-
(a) xx xx xx
(b) in the course of winding up a company it
appears that a person–
(i) xx xx xx xx
(ii) has otherwise been guilty, while an officer
of the company of any fraud or misfeasance in
relation to the company or of any branch of his
duty to the company; the Court or the
Tribunal, as the case may be, may make an
order that that person shall not, without the
leave of the Court or the Tribunal, as the case
may be, be a director of , or in any way,
whether directly or indirectly, be concerned or
take part in the promotion, formation or
C.P. No. 40 OF 2008
9
management of a company, for such period not
exceeding five years as may be specified in the
order. “
9. Obviously by virtue of the specific stipulation in the
Statute, the 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 herein before, 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
C.P. No. 40 OF 2008
10
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 Company Petition, as to the
foundation laid for pressing the relief of winding up, as contained
in paragraph 12 and also in Ground “D” under the head
‘Disappearance of Substratum’, which are extracted below:
Paragraph 12:
"This petition is necessitated on
account of gross mismanagement,
misappropriation of money, acts of fraud,
misconduct, diversion of funds, illegal and
ultra vires acts, oppression of minority
members of the Company by the 2nd
respondent in collusion with the Board of
Directors, office bearers and some of the
council members of the Company and their
henchmen who are indulging in acts of
mismanagement, misfeasance and
oppression. The affairs of the Company are
conducted in such a way to promote and
assist their kith and kin, in total exclusion of
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11
90% of the members of the Company, by
resorting to acts prejudicial to and destructive
of the very object of the Yogam. The
following are the acts of fraud, misconduct,
oppression, mis-management and ultra vires
acts committed by the Board of Directors
and Council members and office bearers of
the Yogam. ”
Ground ‘D’:
“The minority of members of the Company
has completely lost confidence in the
majority of the Board of Directors of the 1st
respondent and there is no alternative for the
minority members to seek relief in the matter
except to invoke jurisdiction of this Hon’ble
Court for appropriate relief as a last resort, if
only circumstances warrant, order winding up
of the 1st respondent company.”
10. From the above, it is very much clear that the basic
grievance of th petitioners in respect of the reliefs sought for at
Sl.Nos. (a) to (f) and the prayer for ‘winding up’ has been raised
C.P. No. 40 OF 2008
12
stating that there is no other alternate remedy for the minority
members, except to invoke the jurisdiction of this Court for
appropriate reliefs as the last resort, however, conceding in
Ground “D” as noted above that, it was to be granted only if
circumstances warranted the same.
11. Considering the moot question put forth by the
petitioners, as to whether the circumstances warrant ‘winding
up’, as projected in Ground “D’ of the Company Petition, nothing
else is seen pleaded specifically, so as to grant the remedy of
‘winding up’ on just and equitable ground as the ‘last resort’.
In other words, is there any other alternate remedy for redressal
of the grievance with regard to the reliefs at Sl.No. (a) 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.
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13
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. Without prejudice to the powers of the Central
Government under Section 235, it has been specifically
stipulated under Section 237 that the Central Government can
exercise the powers of investigation into the Company’s affairs in
other circumstances as well, as stipulated therein.
14. Admittedly, there is no case for the petitioners that
C.P. No. 40 OF 2008
14
they have resorted to any such steps to persuade the Central
Government to pursue such appropriate steps for redressal of
their grievances and that the same did not yield any positive
result.
15. In the case of oppression of the minority, the power is
vested with the ‘Tribunal’ under Section 397 of the Act for
granting necessary reliefs. Similar power is vested with the
Tribunal to deal with the situation of mismanagement as well,
as provided under Section 398. By virtue of the power
specifically conferred under Section 397 and 398, if necessary
application is preferred in the manner as specified therein, after
considering the facts and circumstances, the Tribunal, if satisfied
as to the ‘just and equitable’ reason to have the Company
wound up, it can pass appropriate orders to meet the situation.
The circumstances under which a petition can be moved before
the Tribunal under Section 397 or 398 are stipulated under
Section 399. Sub section (1)(b) of Section 399 clearly stipulates
that in the case of a Company not having a share capital (as in
the instant case ), the right to apply under section 397 or 398
C.P. No. 40 OF 2008
15
will be available, if the application is preferred by not less than
1/5th of the total number of its members. To put it more clear,
the petitioner, by virtue of the above statutory prescription is
very much entitled to agitate the matter before the ‘Tribunal’ , if
an application is preferred by 1/5th of the total number of
members of the first respondent ‘Yogam’. That apart, sub
section (4) of Section 399 provides that the Central Government
may, if in its opinion circumstances exist, which make it just
and equitable to do so, authorise any member or members of
the Company to apply to the Tribunal under Section 397 or 398,
notwithstanding that the requirements of clause (a) or clause
(b), (as the case may be) of sub section (1) are not fulfilled.
Why the petitioners have not resorted to such an exercise and
why they have shut their eyes against the alternate remedy
provided under the statute, rather remain to be obscure.
16. 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,
C.P. No. 40 OF 2008
16
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) xx xx cc
(b) xx xx xx
) xx xx xx
(d) xx xx xx xx
(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
C.P. No. 40 OF 2008
17
pursuing that other remedy.”
17. This shows that unlike other grounds for sustaining the
petition to wind up the Company as provided under Section
433, if it is sought for on ‘just and equitable’ grounds under
clause (f) of Section 433, the relief can be declined, if there is
other alternate remedy and in the opinion of the Court, if the
petitioners are acting unreasonably seeking for ‘winding up’,
instead of pursuing the alternative remedy.
18. The above issue had come up for consideration before
the Apex Court, which has been considered and explained as per
the decision in Hind Overseas Private Limited vs.
Raghunath Prasad Jhunjhunwalla and another [1976 (3)
SCC 259]. The observations of the Apex Court in this regard
are very much contained in paragraph 37, 38 and 44, which are
extracted below.
“37. Section 433(f) under which this
application has been made has to be read
with Section 443(2) of the Act. Under the
latter provision where the petition is
C.P. No. 40 OF 2008
18
presented on the ground that it is just and
equitable that the company should be wound
up, the court may refuse to make an order of
winding up if it is of 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.”
“38. Again under Sections 397 and 398 of
the Act there are preventive provisions in the
Act as a safeguard against oppression in
management. These provisions also indicate
that relief under Section 433(f) based on the
just and equitable clause is in the nature of a
last resort when other remedies are not
efficacious enough to protect the general
interests of the company.”
“44. It is not a proper principle to encourage
hasty petitions of this nature without first
attempting to sort out the dispute and
controversy between the members in the
domestic forum in conformity with the
articles of association. There must be
C.P. No. 40 OF 2008
19
materials to show when ‘just and equitable’
clause is invoked, that it is just and equitable
not only to the persons applying for winding
up but also to the company and to all its
shareholders. The company court will have
to keep in mind the position of the company
as a whole and the interests of the
shareholders and see that they do not suffer
in a fight for power that ensues between two
groups. ”
19. In Malabar Industrial Comp. Ltd. vs. John
Anthrapper [1985] 57 Comp. Cases 717 (Ker.), a Division
Bench of this Court , following the dictum in Hind Overseas
Private Limited vs Raghunath Prasad Jhunjhunwalla and
another [1976 (3) SCC 259] = [AIR 1976 SC 565] observed
that under Section 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
C.P. No. 40 OF 2008
20
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
and K.T. Mathew vs. Malabar Industrial Co. Ltd. [(1986) 59
Comp. Case 969 (Ker.)]. Following the dictum laid down by
the Apex Court in Hind Overseas Private Limited vs
Raghunath Prasad Jhunjhunwalla and another [1976 (3)
SCC 259] and also the observation made by the Division
Bench in [(1985) 57 Comp. Case 717 (Ker.)], interference
was declined in the Company Petition seeking to wind up the
C.P. No. 40 OF 2008
21
Company on ‘just and equitable’ ground under Section 433(f),
placing reliance on Section 443(2). The observations made by
the learned Judge in paragraph 18 are very much relevant and
hence it is extracted below:
“18. I am in respectful agreement with the
dictum laid down in A.P. Pothen’s case
[(1967) 37 Comp. Case 266; AIR 1968 Ker.
148 and George’s case (1965) 35. Comp.
Case 17; AIR 1964 Ker. 212, referred to
above. The observations of the learned
Judge in these cases is a complete answer to
the contentions of the petitioners that they
do not have any effective remedy under
Sections 397 and 398 in view of the
limitations placed under Section 399 of the
Act and that this Court having admitted these
petitions, it is to be presumed that this Court
was satisfied that there was a prima facie
case and, therefore, this court is bound to
allow the petitioners to adduce evidence and
that an order under Sections 443(2) can be
passed only after taking evidence or at the
conclusion of the enquiry. The petitioners
have effective alternative remedy under
C.P. No. 40 OF 2008
22
Sections 397 and 398 and the materials on
record clearly indicate that they are acting
unreasonably in seeking to have the
company wound up instead of pursing that
other remedy. The petitioners can also file a
suit in this respect against the company.
These petitions are, therefore, liable to be
dismissed under Section 443 (2) of the
Companies Act.”
21. A Division Bench of the High Court of Andhra Pradesh
has also taken a similar view in K. Mohan Babu vs. Heritage
Foods India Ltd and others [(2001) 5 ALD 800], whereby
the Company Petition seeking to wind up the Company on ‘just
and equitable’ grounds under Section 433(f) was dismissed,
referring to the alternate remedy available under Sections 397
and 398, read with the power under Section 443(2) . Exactly
similar view has been taken by the Division Bench of the High
Court of Rajasthan as well, in Takshila Hospital Ltd. and
Kishan Singh Deora vs. Dr. Jagmohan Mathur ([2003]
115 Comp. Case 343 (Raj.)
C.P. No. 40 OF 2008
23
22. With regard to the submission made by the learned Sr.
Counsel Mrs. Nalini Chidambaram, that the question of
maintainability is no more liable to be considered in isolation,
(without considering the merits), the petition having been
admitted on 01.01.2009, it is to be noted that the order passed
by this Court at the time of admission was rather qualified, in
so far 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
C.P. No. 40 OF 2008
24
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 irreparable hardship,
if the claims were not genuine. The learned Counsel also
submitted that ‘jurisdiction/maintainability’ is not confined to the
availability of ‘arbitration clause’ alone and that, it is equally
applicable on the basis of other alternate remedy, as provided
under the very same statute. Reliance is also placed on the
decision rendered by this Court in Geroge vs. The
Athiamattam Rubber Co. Ltd. Thodupuzha [AIR 1964 KER.
212]. The observations made by Shri P.T. Raman Nair. J., in
paragraph No. 2 of the above decision are very much relevant
and hence extracted below.
“The very institution of a winding up
petition against a company more so its
advertisement, adversely affects the reputation
of the company, and, if done without
reasonable and probable cause, is a wrong
which can be restrained by suit. It is also the
duty of the Court before admitting a winding
up petition, especially one brought by a
C.P. No. 40 OF 2008
25
contributory, to satisfy itself that there are
prima facie grounds, and it is well-settled that
even after the Court has admitted a petition,
it can, on being moved for the purpose by the
company or some other interested person, stay
proceedings and revoke the admission.
Rule 96 of the Companies (Court)Rules,
which deals with the admission of winding up
petitions and directions as to advertisement,
recognises this, for, it says that the judge may,
if he thinks fit, direct notice to be given to the
company before giving directions as to the
advertisement of the petition-the hearing to be
given to the company is not for the purpose of
deciding the manner of the advertisement but
for deciding whether the advertisement should
be made at all and the petition proceeded with.
(See in this connection Cercle Restaurant
Castiglione Co. v. Lavery (1881)18 Ch D 555 ,
In re A Co. (1894)2 Ch. 349, in the matter of
Pioneer Bank Ltd. ILR 39 Bom. 16: AIR 1914
Bom. 190) W.I. Theatres v. Associated
Bombay Cinemas Ltd. AIR 1959 Bom. 170,
Lord Krishna Sugar Mills Ltd. v. Smt. Abnash
Kaur, (1961) 31 Com. Cas. 587; (AIR 1961
C.P. No. 40 OF 2008
26
Punj 505) and Charles Forte Investments Ltd.
v. Amanda, (1963) 3 WLR 662).
In fact the maintainability of the application
made by the Company is not questioned, nor is
it suggested that I would be wrong in hearing
the company before deciding whether the
winding up petition should be admitted or not.”
24. From the above decision, it is very much clear that
the admission of a Company Petition is not a bar for hearing the
‘jurisdiction/maintainability’. More so, when the very order dated
01.01.2009 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 Pvt. Ltd. vs. T.V. Chandran (Ker. ) [(1994) 79
Comp. Case 213] where it was held:
(i) that even a company which was not doing
business could form the subject matter of action
under section 397 and 398 of the Act;
C.P. No. 40 OF 2008
27
(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 share holders 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 397 of the Act is geared to help the members
who were oppressed. Relief under Section 398 of the
Act is geared to save the company and it is in the
interest of the Company alone and not of any
particular member/members. Oppression is the core
element to be proved and the nature of the
oppression to be tested in the context of the “cause
for winding up”. Courts have to decide on the facts
of each case as to whether there is a real cause of
action under Sections 397 and 398 of the Act.
The learned Sr. Counsel also placed reliance on the decision
rendered by a Division Bench of the Bombay High Court [Panaji
Bench (Goa)] in Daulat Makanmal Luthria v. Solitaire
Hotels [(1993) 76 Company Cases 215]. In the judgment
rendered by Mr. K. Sukumaran (J), on behalf of the Bench , it has
been specifically noted that a winding up has to be resorted to,
only when the other means of healing an ailing Company are of
absolutely no avail. When remedies are provided by the
Statute for matters concerning the management and running of
C.P. No. 40 OF 2008
28
a Company, the extreme and irretrievable step of ‘winding up’
must be resorted to, only in very compelling circumstances.
26. Mr. Mohan Pulikkal, the learned Counsel appearing for
the 5th respondent submits that the petitioners are totally
incompetent to prefer the Petition, in view of the mandate
under section 439 of the Act. A person intending to prefer an
application to wind up, has to be a person coming under
Section 439. It is submitted by the learned Counsel that the
petitioners do not come in any of the categories (a) to (g) of
sub section (1) of Section 439. It is also asserted that the
petitioners do not constitute ‘contributories’ as envisaged under
Section 439(1)(c) , in view of the specific definition of the term
“contributory” as given under Section 428, pointing out that, in
the instant case, the first respondent is ‘not limited by shares’
but by ‘guarantee’. Interference is sought to be declined, also
referring to the decision rendered by this Court In re SNDP
Yogam, Quilon (1970 KLT 365).
27. Mrs. Nalini Chidambaram, learned Sr. Counsel for the
petitioners, in response to the above submissions, referred to
C.P. No. 40 OF 2008
29
Sections 3 and 7 of the Kerala Non Trading Companies Act 1961,
which are stated as very much applicable to the first respondent
‘Yogam’ and asserted that, by virtue of the specific stipulation
that the provisions of the Companies 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 Bau, 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 12.02.2009 passed by this
Court, stating that three members of the first respondent
‘Yogam” had moved a petition under Section 399(4) of the Act
C.P. No. 40 OF 2008
30
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 and that, after considering the
same, the Central Government observed that the first
respondent ‘Yogam’ was deemed to be incorporated under the
provisions of the Kerala Non Trading Companies Act, 1961 and
therefore the petition filed before the Central Government was
dismissed being non-admissible under the provisions of the
Companies Act 1956, but with liberty to approach the
Government of Kerala for remedy under the relevant provisions
of the Kerala Non Trading Companies Act 1961, vide Annexure
R7(1) order dated 23.08.2005. It is also pointed out in the
said report that the 7th respondent had received an application
from the first respondent to transfer the records of the
Company, kept in the office, to the office of the Inspector
General of Registration, Thiruvananthapuram as per Section 6
of the Kerala Non Trading Companies Act, 1961, vide Annexure
C.P. No. 40 OF 2008
31
R7(2) application dated 02.10.2005. The matter was taken up
with the Ministry of Corporate Affairs, New Delhi and on
obtaining Sanction, vide letter dated 23.11.2007 [Annexure R7
(3)], all the records of the Company(1st respondent Yogam) were
transferred to the Inspector General of Registration, Government
of Kerala, Vanchiyoor, Thiruvananthapuram on 16.01.2009, vide
Annexure R7(4). It has been further pointed out in paragraph
No.5 of the said Report dated 27.02.2009 that no return has
been filed by the subject Company subsequent to the transfer of
the entire records to the Inspector General of Registration on
16.01.2009 and that the Balance Sheet filed by the Company
was made upto 31.03.1999, which was filed in the office on
02.07.2001.
29. In the above facts and circumstances, particularly in
view of availability of other efficacious alternate remedy for the
petitioners and in view of the clear mandate under sub section
(2) of Section 443 and further in view of the law declared by the
Apex Court in Hind Overseas Private Limited vs Raghunath
Prasad Jhunjhunwalla and another (1976 (3) SCC 259)
C.P. No. 40 OF 2008
32
as well as by the Division Bench of this Court and other High
Courts (cited supra), interference in the Company Petition is
declined and it is held that the Company Petition is not
maintainable.
30. It is made clear that this Court has not gone into the
merits or as to the sustainability of the factual contentions
raised from the part of the petitioners in any manner and the
dismissal of the Company Petition will not bar the way of the
petitioners in resorting to other appropriate alternative remedy
for redressal of their grievances.
The Company Petition is dismissed accordingly.
P.R. RAMACHANDRA MENON,
JUDGE.
lk