AI Structured Summary
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Judgment
S.No.,Name,Company,Amount,,,
1.,JVG Finance Limited,Petitioner 1,"18,71,03,306.55/-",,,
2.,JVG Foods Limited,Petitioner 2,"4,51,31,000.00/-",,,
3.,JVG Farm Fresh Limited,Petitioner 3,"9,960.00/-",,,
,Total,,"23,22,44,266.55/-",,,
Source of funds,31.3.1997,31.3.1998,31.3.1999,31.3.2000,31.3.2001,
JVG Farm Fresh
Ltd.","9,960/-","9,960/-","9,960/-","9,960/-","9,960/-",
JVG Finance Ltd.,"1,87,103,306.55","1,87,103,306.55","1,87,103,306.55","1,87,103,306.55","1,87,103,306.55",
JVG Foods,"45,131,000.00","45,131,000.00","45,131,000.00","45,131,000.00","45,131,000.00",
Sl.No.,"N a m e of
Company in
whose favour
land purchased",Area of land,,,"Value of Land (
In Rs.)","N a m e of
villages of
Distt. Gurgaon
,,Acare,Kanal,Marla,,
1.,"J V G Finance
Ltd.",29,07,17,"2,29,88,823","Rangala Bohra
Khurd
Sidhrawali,
Hiramanaia,
Rathiwas,
Utone, Peraon
2.,"J V G Leasing
Ltd.",22,01,16,"1,56,25,787",-do-
3.,"JVG Securities
Ltd.",12,06,13,"1,60,27,287",-do-
4.,"JVG
Departmental
Stores Ltd.",10,04,03,"97,39,955",-do-
5.,JVG Foods Ltd.,32,03,09,"2,23,19,848",-do-
6.,"J V G Housing
Finance Ltd.",27,01,12,"1,90,44,730",-do-
7.,"J V G Farm
Fresh Ltd.",18,05,10,"1,42,26,010",-do-
8.,"J V G Hotels
Ltd.",14,02,00,"1,41,09,867",-do-
9.,JVG Steels Ltd.,16,03,15,"2,09,99,790",-do-
10.,"JVG
Petrochemicals
Ltd.",17,07,11,"2,29,05,740",-do-
11.,"JVG Overseas
Ltd.",26,02,10,"2,82,44,937",-do-
12.,"JVG Finance &
Services Ltd.",03,06,13,"46,64,790",-do-
13.,"JVG
Publication Ltd.",00,03,14,"19,42,500",-do-
14.,"JVG Industries
Ltd.",00,03,14,"19,42,500",-do-
15.,"G o g a Foods
Ltd.",06,02,08,"72,45,239",-do-
16.,"I ndia Ceroils
Ltd.",01,00,19,"26,63,402",-do-
17.,"Santosha
Resorts Pvt.
Ltd.",01,00,19,"26,63,402",-do-
It is clear from the SFIO report that the respondent company continues to occupy the said land purchased for Rs.19,42,500/-. The respondent",,,,,,
company continues to be liable to return the said land or the consideration received. This is a continuing cause of action. Hence, the question of",,,,,,
limitation in this regard would not arise.,,,,,,
It is clear from the above acts of the respondent that respondent continues to remain liable to return the land or to pay to the petitioner a sum of,,,,,,
Rs.19,42,500/-. In my opinion, there is no bona fide defence raised by the respondent company.",,,,,,
In this context reference may be had to IBA Health (I) Pvt. Ltd. vs. Info-Drive Systems Sdn.Bhd., (2010) (4) CompLJ 481 (SC). The Supreme",,,,,,
Court held as follows:-,,,,,,
“17. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for",,,,,,
winding-up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine",,,,,,
dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The",,,,,,
Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The",,,,,,
grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be",,,,,,
a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave",,,,,,
the creditor first to establish his claim in an action, lest there is danger of abuse of winding-up procedure. The Company Court always retains the",,,,,,
discretion, but a party to a dispute should not be allowed to use the threat of winding-up petition as a means of forcing the company to pay a bona fide",,,,,,
disputed debt.â€,,,,,,
That apart, I may note that under Section 433(f) of the Companies Act, where a court is of the opinion that it is just and equitable, a company may",,,,,,
also be wound up. In the present case clear allegations have been made by the petitioners that the petitioners own 22,99,400 shares in the respondent",,,,,,
Company. That apart, a total of 59,81,900 shares are owned by the JVG Group of Companies in the respondent company which companies are also in",,,,,,
liquidation. Despite having such a large shareholding, no notices are being sent to the Official Liquidator, who is now the Liquidator of the aforenoted",,,,,,
various companies, about holding any meetings or sending copies of any balance sheets, annual accounts etc. It is clear that the respondent Company",,,,,,
is acting in a manner which is prejudicial to its shareholders and to the affairs of the company.,,,,,,
Further, the respondent company was closely linked to petitioner No.1 and the JVG Group. It has been hived off to escape the necessary",,,,,,
consequences when the OL took over most of the companies forming part of the JVG Group. There are serious disputes in the manner the present,,,,,,
management has taken over the control of the company. In my opinion, it would be just and equitable that the respondent is accordingly wound up.",,,,,,
Further the respondent continues to sit on large funds received from the petitioner companies when it was part of the JVG Group of Companies.,,,,,,
In this context reference may be had to Hind Overseas Pvt. Ltd. vs. Raghunath Prasad Jhunjunwalla & Anr., (1976 )3 SCC 25.9 The Supreme",,,,,,
Court after considering various case laws laid down the scope of “just and equitable†under section 433(f) of the Companies Act. The Supreme,,,,,,
Court held as follows:-,,,,,,
“33. ……..Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the Company on account of lack",,,,,,
of probity in the management of the Company and there is no hope or possibility of smooth and efficient continuance of the Company as a commercial,,,,,,
concern, there may arise a case for winding-up on the just and equitable ground……..",,,,,,
The principle of “just and equitable†clause baffles a precise definition. It must rest with the judicial discretion of the court depending upon the,,,,,,
facts and circumstances of each case. These are necessarily equitable considerations and may, in a given case, be superimposed on law. Whether it",,,,,,
would be so done in a particular case cannot be put in the straitjacket of an inflexible formula.,,,,,,
In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take,,,,,,
any action in the matter. Even admission of a petition which will lead to advertisement of the winding-up proceedings is likely to cause immense injury,,,,,,
to the Company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests,,,,,,
of the shareholders of the Company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether,,,,,,
the application should be admitted on the allegations mentioned in the petition.,,,,,,
The question that is raised in this appeal is as to what is the scope of Section 433(f) of the Act. Section 433 provides for the circumstances in,,,,,,
which a Company may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a Company",,,,,,
may be wound up by the court if the court is of the opinion that it is just and equitable that the Company should be wound up. Section 222(f) of the,,,,,,
English Companies Act, 1948 is in terms identical with the Indian counterpart. Section 433(f). It is now well-established that the sixth clause, namely,",,,,,,
“just and equitable†is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite,,,,,,
conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable clause leaves the entire matter to the wide and",,,,,,
wise judicial discretion of the court. The only limitations are the force and content of the words themselves, “just and equitableâ€â€¦â€¦â€¦.â€",,,,,,
Similarly, reference may be had to the judgment of this court in the case of International Caterers Pvt. Ltd. & Ors. V. Manor Hotel Pvt.Ltd. 122",,,,,,
(2005) DLT 20 where this court held as follows:,,,,,,
“34. No doubt, in the case of Hind Overseas P.Ltd. Vs. Raghunath Prasad Jhunjhunwalla and another reported as (1976) 46 Comp.Cas.91, the",,,,,,
Supreme Court emphasized that relief under Section 433(f), based on 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 and it is not a proper principle to encourage hasty petitions for the winding,,,,,,
up of a company without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the,,,,,,
Articles of Association. However, at the same time the court accepted that in case the company is based on the principle of quasi partnership,",,,,,,
principles of dissolution of partnership shall apply and their application would depend upon facts in a given case recognizing that generally application in,,,,,,
a particular case or in all cases creates problems and difficulties. It noted with approval the principles laid down by an English Court In Re. Yenidje,,,,,,
Tobacco Company Ltd., reported as (1916) 2 Ch. 426 and other cases where aforesaid judgment is followed, laying down the proposition that in",,,,,,
applying the principles of dissolution of partnership to companies, the following factors were important:",,,,,,
(1) equal shareholding.,,,,,,
(2) complete deadlock in the administration of the company.,,,,,,
(3) lack of probity and mismanagement in the conduct of affairs of the company.,,,,,,
The court also agreed with the principles laid down by the House of Lords in the case of Ebrahimi Vs. Westbourne Galleries Ltd. (1973) AC 360,,,,,,
wherein after reviewing all the earlier cases it was held as follows:,,,,,,
The foundation of it all lies in the words `just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that",,,,,,
the courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more,,,,,,
than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it,",,,,,,
there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is",,,,,,
defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts,",,,,,,
this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not, as the",,,,,,
respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as",,,,,,
equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character",,,,,,
arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way....",,,,,,
The Superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following",,,,,,
elements:-,,,,,,
i) an association formed or continued on the basis of a personal relationship, involving mutual confidence- this element will often be found where a pre-",,,,,,
existing partnership has been converted into a limited company;,,,,,,
ii) an agreement, or understanding, that all, or some (for there may be 'sleeping' members), of the shareholders shall participate in the conduct of the",,,,,,
business;,,,,,,
iii) restriction upon the transfer of the members' interest in the company-so that if confidence is lost, or one member is removed from management, he",,,,,,
cannot take out his stake and go elsewhere.â€,,,,,,
The full facts and circumstances of the case would justify the passing of a winding up order.,,,,,,
Accordingly, I admit the petition and the Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take",,,,,,
over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the",,,,,,
newspapers „Statesman‟ (English) and „Veer Arjun‟ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing.",,,,,,
The cost of publication may be borne by the petitioner from the common pool fund subject to adjustment. The Official Liquidator shall also endeavour,,,,,,
to prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which they are kept,,,,,,
shall be sealed by him. At the same time, he may also seek the assistance of a valuer to value all assets to facilitate the process of winding up. It will",,,,,,
also be open to the Official Liquidator to seek police help in the discharge of his duties, if he considers it appropriate to do so. The Official Liquidator",,,,,,
to take all further steps that may be necessary in this regard to protect the premises and assets of the respondent-company.,,,,,,
List on 10.07.2019.,,,,,,