- Petitioner, a shareholder of third respondent-company, being aggrieved by non-receipt of annual report and notice of extraordinary annual general meeting of company and not getting any return on his investment, filed writ petition seeking direction to first respondent to appoint a competent person as investigator for investigating affairs of company - Whether since power has been conferred on CLB to order investigation, if there are circumstances necessitating same, it was incumbent on petitioner to approach CLB and there arose no reason for exercising discretionary power vested in Company Court to order such investigation - Held, yes - Whether, therefore, writ petition was not maintainable - Held, yes - S. Ravi Kiran v. Secretary, Ministry of Company Affairs (AP)

Winding up

APPEALS FROM ORDERS

- Whether High Court is bound to entertain appeal against order of Single Judge who has disposed of it on merit and not summarily or in limine - Held, yes - Company, having become a sick company, was ordered to be wound up and High Court started process of disposal of its assets - Appellant filed an application before High Court submitting a proposal for revival of company, but same was rejected - Division Bench dismissed appeal of appellant summarily without giving any reason or even without considering desirability of revival - Whether impugned order was to be set aside and matter was to be remitted to High Court for fresh disposal in accordance with law - Held, yes - Vijay Kumar Karwa v. Official Liquidator, Rohtas Inds. Ltd. (SC) (FB)

APPLICATION FOR

- Whether if a person intends to present a petition for winding up of a company as a contributory, he/it has to satisfy Company Court that his/its case is covered by one of eventualities contemplated by clause (b) of section 439(4) - Held, yes - Whether phrase ‘or have devolved on him through death of former holder’ would apply to natural persons, who are holding shares in their individual capacity and not to juristic entities - Held, yes - Respondent-company controlled by one ‘K’ and a foreign company ‘C’ set up a joint venture company - Subsequently, company ‘C’ amalgamated with petitioner and went out of existence - Due to alleged breaches committed by respondent and ‘K’, petitioner terminated joint venture agreement and filed petition for winding up of said company - Whether since, admittedly, petitioner was neither original shareholder of company, nor had its name been registered in register of members of company, it could not present petition for winding up of company in capacity of a contributory - Held, yes - Severn Trent Water Purification, Inc. v. Chloro Controls (India) (P.) Ltd. (SC)

CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP

- Petitioner filed winding up petition against respondent-company for recovery of a sum of Rs. 6,04,565 together with interest - In counter affidavit, company asserted that out of amount due to petitioner, a sum of Rs. 2,18,372 was adjusted by it against its claim in respect of its dealings with an associate concern of petitioner and balance claim had been given up by petitioner on account of material being rejected by company - Certain letters allegedly issued by petitioner were relied upon by company to support its claim- Petitioner, however, contended that such letters had been brought into existence in support of company’s false assertions - Whether manufactured documents, unless demonstrably false, afford, a party relying upon them, to have adjudication of same in proceedings other than where summary procedure applies - Held, yes - Whether since genuineness of letters relied upon by company as regards adjustment claimed on account of inferior quality of goods supplied required to be tested and it could not be concluded that defence taken by company on such accounts was moonshine, petitioner was to be relegated to a suit in respect of said amount - Held, yes - Whether, however, petitioner’s account could not be debited for claim that company might have against associate of petitioner and, therefore, petition was to be admitted for Rs. 2,18,372 - Held, yes - Bliss Graphics (P.) Ltd. v. Multi Layers Plastics (Cal.)

CUSTODY OF COMPANY’S PROPERTY

- Respondents were debtors of company-in-liquidation in respect of two loans for which they had executed mortgage and promissory note - Official Liquidator issued notice to respondents to repay loan amount with stipulated interest - As respondents did not repay amount, Official Liquidator filed application seeking direction to respondents to pay specified amount or permit him to sell mortgaged property - Whether since mortgage deed, promissory notes, receipts issued by respondents for payment of loan, letter of respondents confirming deposit of title deeds, etc., along with oral evidence cumulatively established liability of first respondent as debtor and second respondents as surety to company-in-liquidation, they were to be directed to pay amount due or to deliver possession of mortgaged property to Official Liquidator - Held, yes - Official Liquidator, R.P.S. Benefit Fund Ltd. v. Mrs. K. Tamilselvi (Mad.)

Companies Act, 1956

- Section 237

- Section 433

- Section 439

- Section 456

- Section 483

Foreign Exchange Regulation Act, 1973

Offences and prosecutions

- Enforcement Directorate filed a complaint against petitioner alleging that in course of investigations in connection with an agreement entered into by petitioner with a foreign company, he issued four summonses on several dates to petitioner for his appearance together with certain documents, but petitioner did not appear on different pretexts despite service of summonses - Trial court, while holding that one of summonses was received by petitioner later and, therefore, could not be complied with, held that prima facie evidence existed for framing charges against petitioner for committing offence under section 56 - In revision petition, petitioner contended that (i) trial court had overlooked explanations furnished by him for his non-appearance and; (ii) there had been violation of provisions of section 219 of Code inasmuch as provisions permitted clubbing of three incidents whereas in instant case four incidents were clubbed together and accusation regarding each incident had been framed composite instead of separately framing each charge - Whether questions as to whether petitioner’s explanation regarding his non-appearance was justified and was correctly ignored, were issues which were matter of defence and no interference could be made with impugned order for that reason - Held, yes - Whether as regards second contention, suitable course would be to delete incident of non-compliance of summons, which was received by petitioner later, from charges as framed - Held, yes - Whether as regards framing of composite charge, since no failure of justice had been occasioned on that account, there was no merit in petitioner’s contention - Held, yes - Dr. Vijay Mallya v. Enforcement Directorate (Delhi)

Foreign Exchange Regulation Act, 1973

- Section 56

Securities Exchange Board of India Act, 1992

Offences

- Whether amendment in section 24 brought into force with effect from 29-10-2002 is a substantial amendment and amendment in section 26 is only consequential in view of enlargement of sentence period under section 24 - Held, yes - Whether when forum of trial has been changed in consequence of substantial amendment, it has to be read with main section providing for sentence and it cannot be read in isolation - Held, yes - Whether consequently, amendments to section 24, read with section 26, shall have prospective effect and not retrospective - Held, yes - Whether, therefore, complaints under section 24 filed before or after 29-10-2002 but in respect of alleged offences, that have taken place prior to said date, are required to be tried by Court to which they were presented and they are not required to be committed to Court of Session - Held, yes - Videocon International v. SEBI (Bom.)

Securities Exchange Board of India Act, 1992

- Section 24

SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003

Prohibition of manipulative, fraudulent and unfair trade practices

- On receiving complaint against appellant-company, SEBI ordered investigations during pendency of which, it prima facie appeared that some irregularities had been committed by appellant by issuing duplicate shares to some of its original allottees knowing well that same had been pledged by said allottees with complainant by way of additional security - Considering serious nature of allegations, SEBI passed an ex parte order directing appellant not to issue any further shares or alter its share capital in any manner till further directions - Appellant objected that Board had no power to issue such directions; and that 2003 Regulations did not apply to facts of case - Whether it was too premature to record any findings on issues raised by appellant because investigations were still pending and, accordingly, Board was to be directed to conclude investigations expeditiously and decide objections of appellant - Held, yes - Bellary Steels & Alloys Ltd. v. SEBI (SAT - Mum.)

SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003

- Regulation 4

SEBI (Stock Brokers and Sub-brokers) Regulations, 1992

Procedure for action in case of default

LIABILITY FOR MONETARY PENALTY

- Adjudicating Officer imposed penalty on appellant on ground that it, as a stock broker, had failed to deliver securities to its clients within 48 hours of settlement of trade and, thus, there was violation of regulation 26 - Whether since all clients, whose securities had been lying with appellant, had authorised appellant in writing to retain those securities with it beyond 48 hours, there was no violation of regulation 26(vi) and, therefore, impugned order passed by Adjudicating Officer was to be set aside - Held, yes - Mehta Equities Ltd. v. SEBI (SAT - Mum.)

SEBI (Stock Brokers and Sub-brokers) Regulations, 1992

- Regulation 26

Words & Phrases

- ‘contributory’ as occurring in section 428 of the Companies Act, 1956

- ‘or have devolved on him through death of former holder’ as occurring in section 439(4)(b) of the Companies Act, 1956

MAGAZINE

features

Company Law

Ashhok Saxena (Company Secretary)

- One-person company (OPC) - An Innovative concept

N. Vijia Kumar (Advocate)

- Sick company rehabilitation pending before BIFR under SICA - High Court not to interfere under Companies Act, 1956

L.V.V. Iyer

- Corporate Law Referencer