IN THE DELHI HIGH COURT 

Satish Chandra for the petitioner. 

M. R. Chawla for the respondent. 

JUDGMENT 

VIJENDER JAIN J. - This petition has been filed under Section 433 (a), (e) and (f) read with Section 439 of the a Companies Act, 1956, for the winding up of the petitioner-company. Prior to the filing of this petition, the petitioner has filed petition under Section 397 and Section 398 of the Companies Act before the Company Law Board. Certain ex parte interim orders were passed in that petition by the Company Law Board. In para. 21 of the petition the petitioner has stated that petitioner No. 1 was of the view that winding up would be prejudicial to the company and unfair to the interest of petitioner No. 1 and, therefore, the petition before the Company Law Board, as aforesaid, was filed but the present petition has been filed by the petitioner contending that petitioner No. 1 is holding more than 99 per cent. shares and the petitioner is no longer interested in running of the hotel and, therefore, he has no interest in prosecuting Petition No. 16 of 1995 pending before the Company Law Board, New Delhi. 

The main contention of counsel appearing for the petitioner Mr. Satish Chandra is that the only ground agitated in the petition is that the company should be wound up on the just and equitable ground. The case put up by the petitioner in the petition is that long before the incorporation of Kamini Hotel (P.) Ltd. a sum of Rs. 5,73,000 was given by the petitioner to respondent No. 1 without obtaining a receipt on trust and faith as there was, a deed of partnership entered into between petitioner No. 1 and respondents Nos. 2 and 3 for the construction of the hotel. It is this amount which the petitioner has highlighted, which according to him was converted into allotment of 44,000 shares of Rs. 10 each in favour of petitioner No. 1 on October 3, 1994, and on the basis of this money and allotment of shares the petitioner canvassed before me that they were owners of 99 per cent shares of the company which is vehemently, disputed by the opposite party. 

The sum and substance of what Mr. Chandra has contended is that out of the aforesaid amount a part was towards allotment of shares. Allotment of 44,000 shares of Rs. 10 each was made by the board of directors on October 3, 1994, and Form No. 32 duly signed by Smt. Kamini Mittal, respondent No. 2, was filed with the Registrar of Companies, Delhi and Haryana at New Delhi. It is the admitted case of the parties that the plot in question was purchased on July 9, 1991, in the name of respondent No. 1 only. Mr. Chandra has contended that on March 4, 1992, a partnership deed was entered into between respondents Nos. 1 and 2 with the petitioner and a recital in that partnership deed was incorporated which is at page 85 of the paper book that respondents Nos. 1 and 2 and the petitioner were absolute owners of 1/2 share in the aforesaid land though this fact has not been mentioned in the sale deed due to oversight. The company, Kamini Hotel (P.) Ltd. was incorporated on May 15, 1992. He has also contended that the name of the petitioner was also recorded in the municipal licence dated April 30, 1994. Mr. Chandra has contended that the shares were allotted in terms of provisions made in the articles of association of the company by a meeting of the board of directors. He has also contended that no notice for such allotment was required and copies of the minutes book containing, inter alia, that the meetings were indeed held and on the basis of such meetings the resolution to open, the bank account was also taken, have been filed. 

Learned counsel for the petitioner has also contended that the returns regarding allotment of shares and addition of directors were duly filed with the Registrar of Companies. 

On the other hand, Mr. Chawla, learned counsel appearing for the respondent contended that no shares could be allotted and the allotment of shares per se is inconsistent with the articles of association, particularly, clause 5.45 and clause 6 of the said articles. He has further contended that no notice of the meeting of the board of directors was given as contemplated in the articles of association and, therefore, there is no resolution in the eyes of law. In this regard, he has cited in his support Parmeshwari Prasad Gupta v. Union of India, AIR 1973 SC 2389; [1974] 44 Comp Cas 1. Mr. Chawla has contended that there were no signatures on the minutes book of the meeting held on June 1, 1992, at Delhi. He has contended that at page 60 of the paper book the decision to appoint the petitioner as the life chairman and appointing other persons as directors who were the wife and the son of the petitioner was without notice and consent of the respondents. According to learned counsel for the respondent all these resolutions are fabricated and forged as Davender Kumar Mittal or Kamini Mittal did not sign the same. He further stated that Kamini Mittal is ill for the last more than seven years and she is incapable of moving out and, therefore, all the signatures purported to be the signatures of respondent No. 2 are forged. 

Mr. Chawla has further contended that even otherwise the plan of the plot was sanctioned for residential properties. Mr. Chawla has further contended that any inclusion of an additional director by the petitioner on the board of directors is illegal as the same has not been done in accordance with law. He has further contended that even otherwise when admittedly there was a partnership concern on the own showing of the petitioner dated March 4, 1992, that partnership cannot be converted into a company in the absence of any express consent given by the respondent. He has alternatively argued that in any case admittedly the plot of land was not the property of the partnership as no sale deed was executed in favour of the petitioner and, therefore, to argue that the plot of land on which the hotel has been constructed belongs to the company is untenable in law. The respondent has contended that even signatures on the partnership deed were forged. Counsel for the respondent has contended that on the face of it the petition as maintained is frivolous and vexatious as the petitioner has to come before this court to show as to where was the application for allotment of 44,000 shares in the name of the petitioner, secondly, the petitioner has to show that the money was deposited in the account of the company for these shares. Mr. Chawla has further contended that from the statement of account filed by the respondent, no amount has been shown to be deposited in this regard. He has also contended that under the Companies Act books and records are to be maintained in the registered office of the company and the registered office of the company being at the petitioner's address and it was for the petitioner to show, according to, Section 63 of the Companies Act, the register of members, the register of directors under Section 303, the account books under Section 209. Mr. Chawla has contended that on the basis of the requirement of law aforesaid to substantiate his claim the petitioner ought to have filed a suit for declaration if he had any grievance against the respondent. This petition would not lie on the disputed question of facts and any order granted by this court would amount to declaration determining the right of the petition or which would not be the function of this court while exercising jurisdiction under Section 433 and Section 439 of the Companies Act. Mr. Chawla has further contended that after filing the petition before the Company Law Board, the filing of this petition shows the utter mala fides of the petitioner. He has further contended that even to the letter Written by the petitioner dated March 15, 1995, at page 138 of the paper book addressed to the Executive Officer, City Board, Mussoorie the petitioner has stated that he was a 50 per cent. owner of the property. In that letter the petitioner had not taken the plea that he was holding 99 per cents shares of the company, therefore, the plea is highly belated and an afterthought. According to him, if the case of the petitioner is that the property is being misused in which he has a 50 per cent. share then the proper forum and remedy is not the provisions under Section 433 and Section 439 of the Companies Act but to file a suit for a declaration, injunction or rendition of accounts and the present petition is totally misconceived. 

Controverting the arguments of learned counsel for the petitioner that the documents which have been filed with the Registrar of Companies were filed after April 20, 1995, i.e., after the parties have arrived at the alleged oral settlement. 

Mr. Chawla has further contended that as on March 31, 1994, under the heading "share capital" an amount on share application money is shown as Rs. 5,40,000. Mr. Chawla has contended that if this amount was towards share application money then why this entry is not reflected in the bank account of the company and comparing with the corresponding entry for March 31, 1993, no such amount has been shown. Similarly, under the head "Land and building" nil amount has been shown for the period ending March 31, 1993, whereas on March 31, 1994, Rs. 5,38,500 have been shown. On the basis of these discrepancies Mr. Chawla has contended that there were the books of account signifying these entries on the basis of which these entries have been reflected in the balance-sheet. On the basis of these discrepancies he has argued that the balance-sheet as filed by the petitioner was bogus and the signatures of respondents Nos. 1 and 2 are fabricated. Lengthy arguments were advanced by learned counsel for the respondent to explain why the amount of Rs. 80,000 was given to the company by respondent No. 1 itself on the basis of the documents placed on record. 

Yet another contention raised by Mr. Chawla was that in the memo of parties the company is not a respondent. Therefore, no relief could be granted in the present petition. What Mr. Chawla has contended is that if on his own showing the petitioner was holding 99 per cent. shares then 1 the petition for winding up ought to have been filed by making the company a respondent in the proceedings. He has contended that though the stand of the petitioner is that his wife was taken as a director but even the director has not been joined as petitioner No. 2 or as a respondent. Mr. Chawla has further contended that the sale deed regarding land does not make the company a co-owner and, therefore, the company court is not the proper forum. Mr. Chawla has contended that the loan of about Rs. 5,45,000 less Rs. 80,000 which was received prior to the incorporation of the company has been given back to the petitioner as has been borne out by the documents at pages 134 and 136 placed on record dated March 21, 1995, and March 31, 1995, respectively as the parties settled the accounts. 

Repelling the contention of learned counsel for the respondent Mr. Chandra has contended that the returns were filed on September 30, 1994, as that is the computerised date given on the form and not on April 20, 1995, as has been contended by learned counsel for the respondent. Regarding the contention that the company has not been made a party Mr. Chandra has contended that according to Section 433 and Section 439 of the Companies Act it is not mandatory in dopt law that the company has to be a respondent and in this connection he has cited Dr. Satya Charan Law v. Rameshwar Prosad. Bajoria [1950] 20 Comp Cas 39; AIR 1950 Federal Court 133. He has also contended that no forgery has been committed by the petitioner and the respondent did sign on the relevant resolutions passed by the board of directors. What Mr. Chandra has contended is that the petition is basically for winding up of the company on the ground of the just and equitable clause. It is a special circumstance where it is not possible to carry on the affairs of the company although the petitioner and his wife together are holding 99 per cent of the shares. He has further contended that at the stage of admitting the petition it is not necessary to pass elaborate orders and go deeper into this question and in his support he has cited Bhaskar Stoneware Pipes Pvt. Ltd. v. Rajinder Nath Bhaskar [1988] 63 Comp Cas 184 (Delhi) and National Conduits (P.) Ltd. v. S. S. Arora [1967] 37 Comp Cas 786 (SC). Lastly, Mr. Chandra has contended that in the circumstances an administrator be appointed otherwise it would defeat the very purpose of maintaining the winding up petition and in his support he has cited Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao [1956] 26 Comp Cas 91; AIR 1956 SC 213, which reads as under (at page 98): 

"It is no doubt the law that courts will not, in general, intervene at the instance of shareholders in matters of internal administration, and will not interfere with the management of a company by its directors, so long as they are acting within the power conferred on them under the articles of association. But this rule can by its very nature apply only when the company is a running concern, and it is sought to interfere with its affairs as a running concern. But when an application is presented to wind up a company, its very object is to put an end to its existence, and for that purpose to terminate its management in accordance with the articles of association and to vest it in the court. In that situation, there is no scope for the rule that the court should not interfere in matters of internal management. An where accordingly a case had been made out for an order for winding up under Section 162, the to appointment of administrators under Section 153 cannot be attacked on the ground that it is an interference with the internal management of the affairs of the company. If a liquidator can be appointed to manage the affairs of a company when an order for winding up is made under Section 162, administrators could also be appointed to to manage its affairs, when action is taken under Section 153." 
 
I have given my careful consideration to the arguments advanced by learned counsel for both the parties. 

From the arguments advanced by learned counsel for both the parties as well as the desire of the petitioner to get an administrator/receiver appointed in relation to the hotel at Mussoorie it is borne out that the controversy is on account of the plot of land and the hotel constructed thereon. It is the admitted case of the parties that the plot of land was purchased in the name of respondent No. 2 on July 9, 1991. The plot of land was neither the property of the partnership nor of the company which were incorporated on March 4, 1992, and May 15, 1992, respectively. It will be futile for this court to embark upon an enquiry on the face of allegations of fraud and forgery for determining the title of the property as to whether it vests in the partnership or in the company in view of the sale deed dated July 9, 1991, in favour of respondent No. 2. Time and again this court had asked the petitioner to show some documents on the basis of which it is alleged that a sum of Rs. 5,73,000 was given by the petitioner to the respondent for construction of the hotel as has been contended before me by the petitioner. The whole amount is given, according to the petitioner, on good faith and trust but not a single document was placed on record by the petitioner to substantiate his claim that that amount was borrowed from somebody and was given to respondent No. 2 as alleged. This court had further asked the petitioner that in the absence of any document let an affidavit of the parties concerned who had advanced this loan be filed but nothing was done. Therefore, it cannot be authoritatively stated in the proceedings that any such loan was given or not for the construction of the hotel. The petitioner has contended that the documents and resolutions were executed by respondents Nos. 1 and 2 whereas the respondent has vehemently denied and stated that the documents are sheer forgery and respondent No. 2 was seriously ill and could not have signed. I do not want to express my opinion on this aspect of the controversy. What is important for this court in this case is whether the petitioners are holding 44,000 shares and thereby they constituted 99 per cent. of the shareholding inter se the petitioner and his wife. Secondly, whether the building in question is in the name of the company or not so as to warrant any order for appointment of a receiver on the ground of it being just and equitable. Though Mr.Satish Chandra has contended that at this stage the court has to take a prima facie view and has not to go deeper and the simple course is to admit this petition and then have detailed evidence and, there are no two opinions that this is the principle of law regarding admission of petition, however, whether in this case on the basis of the allegations and counter-allegations of fraud and forgery regarding the plot in question and the hotel constructed thereon no finding can be returned in favour of the petitioner prima facie so as to warrant an order of appointment of a receiver. As a matter of fact, allotment of shares, registration of shares and transfer of shares have to be done in accordance with the various provisions of company law. Nothing has been brought on record as to how the allotment of shares as has been averred by the petitioner has been done in his favour. Nothing has been filed on record from the register of members, the register of directors and extract, from the account books as per the provisions of the Companies Act to substantiate the claim of the petitioner. Admittedly, the account was being operated at Mussoorie and there is no entry of the amount which Mr. Chandra has contended in lieu whereof 44,000 shares were allotted to the petitioner. In the absence of basic premises this court will not exercise its jurisdiction under Section 433,
Section 434 and Section 439 of the Companies Act and would not adopt the course of embarking upon an enquiry and declare that the petitioner is holding 44,000 shares of the company, in the absence of which this petition would not be maintainable. There is substance in the submission of learned counsel for the respondent that as per the return filed under the signature of petitioner No. 1 on behalf of the board of directors of the company in Schedule I which is at page 231 of the paper book under the heading "share capital" as on March 31, 1993, an amount of Rs. 1,15,000 has been shown towards "share application money" whereas on March 31, 1994, an amount of Rs. 5,40,000 has been shown under this head. The statement of the bank account has also been filed on record. In the said statement there is no entry of Rs. 4,25,000 which is the difference between Rs. 5,40,000 and Rs. 1,15,000. Therefore, even prima facie the story put up by the petitioner that he was allotted 44,000 shares cannot be substantiated from the bank account and it is not possible for this court to assume that a sum of Rs. 4,25,000 towards share application money was not routed through the bank, if deposited. Therefore, in such an eventuality when prima facie the assumption of 44,000 shares being allotted to the petitioner and his wife seems to be inconsistent with the material placed on record, to admit the petition and go in for evidence would be an abuse of process of the court. 

Coming to the question of the hotel, in the absence of anything on record to show that any money as alleged by the petitioner was given to the respondent for construction of the hotel and the sale deed not in favour of the company or the partnership, to treat the property of the hotel as the property of the company is neither fair nor just either in law or in equity. From the statement at page 231 of the paper book which I have referred to above the plea of the petitioner that he has given funds for the construction of the hotel again seems not plausible, as, on March 31, 1993, under the heading 'Schedule III fixed assets land and building' the return is nil, whereas on March 31, 1994, an amount under this head has been shown as Rs. 5,38,500. No corresponding entries are in the bank account. The statement of account which has been filed at pages 182 and 183 gives credence to the story put up by the respondent that amounts were taken out from the account of the company and the documents at pages 134 and 136 also give credence to the stand of the respondent. Therefore, the case as put up by the petitioner cannot be believed even prima facie. In the circumstances, I find that even on this ground the petitioner has not been in a position to make out a prima facie case so as to warrant assumption of jurisdiction by this court under the provisions of Section 433, Section 434 and Section 439 of the Companies Act. For the reasons recorded above, this petition is dismissed. Interim orders granted earlier stand vacated. No order as to costs.