Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
It is known that resolving the disputes between or among the shareholders
in a closely held company is very difficult in the absence of any settlement
between or among the parties. Now a day, based on the practice of entertaining
petitions under section 397/398 of the Companies Act, 1956 without looking into
sheer technicalities, a shareholder/s who is qualified to approach Company Law
Board under section 399 of the Companies Act, 1956 and who has a grievance with
the other shareholders prefers to file a Petition under section 397/398 of the
Companies Act, 1956. It is known that as adjudicating a company dispute
requires specialization and also a traditional Civil Court may not speedily
dispose a Company dispute and may not go beyond the brief. In view of the
difficulties in approaching the traditional Civil Court though a Civil Court
can be approached at times in respect of the grievances in the Company, many
prefer to approach the Company Law Board.
Normally, in most of the Petitions under section 397/398 of the Companies
Act, 1956, the parties talk about their interests and rights in the Company and
it is really rare to talk about public interest in the Company. But, in view of
the clear reference to public interest under section 397/398 of the Companies Act,
1956, it is the responsibility of the Company Law Board to look into many other
considerations pertaining to the Company and also the public interest. This is
the complication with a petition under section 397/398 of the Companies Act,
1956. The parties before the Board may effective conceal certain things and
disclose the things based on their convenience. However, in view of the law and
the responsibility conferred on the Company Law Board as conferred on the
Company Court while dealing with a winding-up petition, the Company Law Board
do every effort to ascertain all issues pertaining to the Company; not only the
creditors, assets and liabilities of the Company.
Dealing with the issue of public interest under section 397/398 of the
Companies Act, 1956 and the requirement on the part of the Company Law Board to
look into many issues while entertaining a petition under section 397/398 of
the Companies Act, 1956, the Hon’ble High Court of Bombay in Bhalchandra
Dharmajee Vs. Alcock, Ashdown and Co.Ltd reported in 1972 (42) CC 190 was
pleased to observe as follows:
“(6) After the amendment of sections 397 and 398 of the Companies Act by
sections 10 and 11 of the Companies (Amendment) Act (LIII of 1963), it would
appear that the affairs of the company have to be conducted not only in the
best interest of its members for their profit but also in a manner which is not
prejudicial to public interest. The element of public interest enters into the
management of the companies after 1963. The modern corporation has become the
accepted instrument of social policy, because it affects a large part of the
economic life of the community. It has become an instrument for the improvement
of the economic standards of the people and for economic growth of the nation.
Society depends for some of its needs on corporate enterprise. It has therefore
an interest in its stability and efficiency as an economic institution. The
element of public interest also arises from the responsibility for ensuring a
minimum wage to the numerous employees in the corporate sector. It is necessary
to see that people who put their labour and lives into a concern get fair
wages, continuity of employment and a recognition of their right to their jobs
where they have trained themselves to highly skilled and specialised work. In
deciding whether the court should wind up a company or change its management
the court must take into consideration not only the interest of the
shareholders and creditors but also public interest in the shape of the need of
the community and the interest of the employees. This, in my opinion, is the
requirement of section 397 and 398 of the Companies Act. This country has been
spending vast sums of money in promoting new industries in public and private
sectors in the interest of the economic progress of the country and improvement
of living standards. In face of this, it would appear to be improper to destroy
a company which has worked for nearly 87 years and has acquired experience and
expertise in manufacture and supply of structurals and in boat building and
ship repairing. At the same time the company cannot be kept alive so as to
incur further liabilities and to diminish the dividend payable in case of
winding up to the existing creditors or the shareholders. Their interests also
have not to be sacrificed. It is therefore necessary that pending the hearing
and final disposal of these petitions, an arrangement ought to be made for the
collection, realisation, preservation and maintenance of those assets of the
company which are in the possession of the company. It is also necessary that
an investigation ought to be made into the affairs of the company to find out
if it is possible to resuscitate the company. It is only after such
investigation that one can come to a conclusion as to whether the company ought
to be wound up or whether it ought to be kept alive. In view of this position,
I think the best order to make is to appoint a special officer to collect,
realise, preserve and maintain the assets of the company and also to make the
necessary investigation referred to hereinabove.”
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
