# NATIONAL CONDUri'S (P) LTD v. S. S.ARORA

- **Citation:** [1968] 1 S.C.R. 430
- **Court:** Supreme Court of India
- **Decided:** 1967-03-07
- **Case number:** Civil Appeal No. 1082 of 1967
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-conduri-s-p-ltd-v-s-s-arora-4112
- **Pages:** 4

## Headnote

NATIONAL CONDUri'S (P) LTD.
v.
S. S.ARORA
September l, 1967
[J. C. SHAH, S. M. Sum and J. M. SHELAT, 11.)
Companies Act, (1 of 1956) Ss. 433 and 439-Compu!sol"I/ wiT&ding up-Petition admitted-Advertisement-If Coo.rt bound.
Companies (Court) Rules, 1959, f"I". 9, 24(2) and 96.
In an appeal to this Court, the High Court's view that on the
admission o! a petition under ss. 433 and 439 of tit! Companies Act,
1956 for compulsory winding up of a company, the Court' is bound
forthwith to advertise the petition, was challenged,
Held: A petition for winding up cannot be placed for hearing
before the Court, unless the petition is advertised: that is claar from
terms of r. 24(2) of the Companies (Court) Rules, 1959. But that is not
to say that as soon as the petition is admitted, it must be advertised.
If the petition is admitted, it is still open to the company to move
the Court that in the interest of justice or to prevent abuse of the
process of Court, the petition be not advertised. Such an application may be made where the Court has issued notice under the last
clause of r. 96, and even when there is an unconditional admission
of the petition for winding up. The
pow~r to entertain such an
application of the company is inherent in the Court and r. 9 Iterates
that power. [432C-F]
fa re. A. Compan11 (1894) 2 Ch. D. 349 applied.
Imd Krishna Sugar MiUs Ltd., v. Smt. A!mash Kaur A.J.R..
(1961) Punj. 505 approved

## Text

NATIONAL CONDUri'S (P) LTD.
v.
S. S.ARORA
September l, 1967
[J. C. SHAH, S. M. Sum and J. M. SHELAT, 11.)
Companies Act, (1 of 1956) Ss. 433 and 439-Compu!sol"I/ wiT&ding up-Petition admitted-Advertisement-If Coo.rt bound.
Companies (Court) Rules, 1959, f"I". 9, 24(2) and 96.
In an appeal to this Court, the High Court's view that on the
admission o! a petition under ss. 433 and 439 of tit! Companies Act,
1956 for compulsory winding up of a company, the Court' is bound
forthwith to advertise the petition, was challenged,
Held: A petition for winding up cannot be placed for hearing
before the Court, unless the petition is advertised: that is claar from
terms of r. 24(2) of the Companies (Court) Rules, 1959. But that is not
to say that as soon as the petition is admitted, it must be advertised.
If the petition is admitted, it is still open to the company to move
the Court that in the interest of justice or to prevent abuse of the
process of Court, the petition be not advertised. Such an application may be made where the Court has issued notice under the last
clause of r. 96, and even when there is an unconditional admission
of the petition for winding up. The
pow~r to entertain such an
application of the company is inherent in the Court and r. 9 Iterates
that power. [432C-F]
fa re. A. Compan11 (1894) 2 Ch. D. 349 applied.
Imd Krishna Sugar MiUs Ltd., v. Smt. A!mash Kaur A.J.R..
(1961) Punj. 505 approved
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1082 of
1967.
Appeal from the judgment and order dated March 7, 1967
of the Delhi Hig~ Court in Company Appeal No. 3 of 1967.
A. N. Khanna and Harbans Singh, for the appellant.
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P. C. Khanna and Maharaj Krishan Chawla. for the respon·
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dent
The Judgment of the Court was delivered by
Shah, J. The appellant-a private limited Company-is
engaged in the manufacture of electric conduit pipes. The respondent .who is a director of the Company presented a petition in·
the High Court of Delhi under ss. 433 and 439 of the Companies
Act. 1956, for an order for compulsory winding up of the ComG
pany. The respondent claimed that it was "just and equitable"
within the meaning of s. 443(f) of the Companies Act, 1956, to
make an order for compulsory winding up,, because one of the
three factories of the Company had been closed, that the accounts
of the Company were not being shown to the respondent, that
no meeting of the Company had been held, no balance.sheet had
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been prepared and a letter of resignation purported to be signed
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NATIONAL CONDUITS (P} LTD. V. ARORA (Shah, J.)
431
A
by the respondent had been forged. On July 18, 1966, Capoor, J ••
directed that notice of the petition be issued to the appellant
Company. The order has not been formally drawn up, and it is
not clear whether by that order it was intended to call upon the
Company to show cause why the petition should not be admitted,
or that by the order the petition was admitted and notice under
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r. 96 of the Companies (Court) Rules, 1959 was issued.
The appellant Company filed its reply controverting the allegations made by the respondent. The Company also filed an application that the winding up petition filed by the respondent be
taken olf the file and be dismissed and that the petition in the
meantime be not advertised. H. R. Khanna, J., held that the appropriate remedy of the respondent on the allegations of misc
management of the affairs of the Company and oppression of the
minority shareholders by the group of Anandi Lal was to file a
petition under ss. 397 and 398 of the Companies Act The learned
Judge further held that the petition for winding up was instituted
with a view "to unfairly prejudice the interests of the shareholders
of the Company", respondent having set up a rival factory in the
name of his son for manufacturing electric conduit pipes.
The
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learned Judge directed that the petition be not advertised and be
dismissed.
In appeal against the order passed by H. R. Khanna, J., the
High Court of Delhi held that under the ·Companies (Court>
Rules, 1959, once a petition is admitted to the file, the Court is
bound forthwith to advertise the petition. The Company challenges that order in this appeal.
Rule 96 of "The Companies (Court) Rules, 1959" framed by
this Court provides :
"Upon the filing of the petition, it shall be posted
before the Judge in Chambers for admission of the petition and fixing a date for the hearing thereof and for
directions as . to the advertisement to be published an<f
the persons, 1f any, upon whom copies of the petition
are to be served. The Judge may, if he thinks fit direct
~otice to be given to the company before giving directions as to the advertisement of the petition."
Rule 24 which relates to advertisement of petitions provides:
.
"(I) Where any petition is required to be advertised,
1t shall, unl~ss the Judge otherwise orders, or these
Rules otherwise provide, be advertised not less than
fourteen days before the date fixed for hearing in one
issue of the Official Gazette of the Staie or th~ Union
Territory concerned, and in one issue each of a daily
newspaper . in the J?nglish language. and a daily
newspaper m the regional language circulating in the
State or the Union Territory concerned, as may be fixed
by the Judge.
432
SUPREME COURT REPORTS
[1968] l B.C.R.
(2) Except in the case of a petition to wind up a
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company, the Judge may, if he thinks fit, dispense with
any advertisement required by these Rules."
When a petition is filed before the High Court for winding up of
a company under the order of the Court, the High Court (i) may
issue notice to the Company to show cause why the petition
should not be admitted; (ii) may admit the petition and fix a date
for hearing, and issue a notice to the Company before giving
directions about advertisement of the petition; or (iii) may admit
the petition, fix the date of hearing of the petition, and order
that the petition be advertised and direct that the petition be
se.rved upon persons specified in the order. A petition for winding
up cannot be placed for hearing before the Court, unless the
petition is advertised: that is clear from the terms of r. 24(2).
But that is not to say that as soon as the petition is admitted,
it must be advertised. In answer to a notice to show cause why
a- petition for winding up be not admitted, the Company may
show cause and contend that the filing of the petition amounts
to an abuse of the process of the Court. If the petition is admitted,
it is still open to the Company to move the Court that in the
interest of justice or to prevent abuse of the process of Court,
the petition be not advertised. Such an application may be made
where the Court has issued notice under the last clause of r. 96,
and even when there is an unconditional admission of the petition
for winding up. The power to entertain such an application of the
Company is inherent in the Court, and r. 9 of the Companies
(Court) Rules, 1959, which reads :
"Nothing in these Rules shall be deemed to limit or
otherwise affect the inherent powers of the Court to give
such directions or pass such orders as may be necessary
for the ends of justice to prevent abuse of the process of
the Court",
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iterates that power. In in re. A. Company(') it was held that if the
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petition is not presented in good faith and for the legitimate
purpose of obtaining a winding-up order, but for other purpose,
such as putting pressure on the Company, the Court will restrain
the advertisement of the petition and stay all further proceedings
upon it. We may state that the High Court of Punjab in Lord
Krishna Sugar Mills Ltd. v. Smt. Abnash Kaur(') was right in
observing tha.t the Court in an appropriate case has the power to
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suspend advertisement of a petition for winding up, pending disposal of an application for revoking the order of admission of ~e
petition, though vie may hasten to state that we cannot agree with
all the observations made in that judgment.
H. R. Khanna. J., was apparently satisfied that the petition
was not a bona fide petition and the respondent in presenting
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(1) (1894) 2 Ch. D. 349.
(2) A.I.R 1961 Punjab 505.
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YATIONAL CONDUITS (P) L'fD. v. ARORA (Shn.Jt, J.)
433
the petition was acting with ulterior motive and his attempt to
obtain an order for winding up was "unreasonable". Before the
High Court directed that the petition for winding up be advertised,
the High Court was bound to consider whether the view expressed by H. R. Khanna, J., was right.
For reasons already set out, in our judgment, the High Court
erred in holding that a petition for winding up must be advertised
even before the app'ication filed by the Company for staying the
proceeding for the ends of justice, or to
prevent abuse of the
process of the Court. The view taken by the High Court that the
Court must, as soon as the petition is admitted, advertise the
petition is contrary to the plain terms of r. 96. Such a view, if
accepted, would make the Court an instrument, in possible cases,
of harassment and even of blackmail, for once a petition is advertised, the business of the Company is bound to suffer serious
loss and injury.
The appeal is allowed. The High Court has disposed of the
appeal on a ground of procedure and has not considered whether
the view of H. R. Khanna, J., that in the exercise of the inherent
power for the ends of justice and for prevention of the abuse of
the process of Court, the petition should not be advertised, is
correct. The case is therefore remanded with the direction that
the High Court do deal with and dispose of the appeal according
to !aw. There will be no order as to its costs in this Court. The
costs in the High Court will be costs in this appeal.
E
Y.P.
Appeal allowed.
I.
L/S5SCI-2,500-26·8·68-GIPS