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Judgment
Capoor, J.
1 The applicant in this petition is Suresh Chand Davessar, who was petitioner, No. 4 in the matter of the New India Embroidery Mills (1946) Private Limited, Chheharta, District Amritsar (C.O. 95 of 1962) (hereinafter to be referred to as the Company). That was a petition under sections 397, 398 and 402 of the Companies Act, 1956, or in the alternative u/s 433 thereof for the winding up of the Company. Respondent No. 1 to the petition was the Company itself and respondents Nos. 2, 3, 6, 7 and 8 are the directors of the Company. The three other petitioners, that is, petitioners Nos. 1 to 3 were Jagdish Chand Mehra, Joginder Lal Mehra and Jaigopal Mehra respectively. The paid-up capital of the Company on the 31st of March, 1962, was Rs. 6,68,812/- and the total number of members in the Company did not exceed 30. It was stated that the petitioners 1 to 3 held shares in the Company of the paid-up value of Rs. 1,21,550/-, and petitioner No. 4, that is, S.C. Davessar, held jointly with four others 600 fully paid shares of the total value of Rs. 15,000/-. As such it was claimed that the petitioners were competent u/s 399 of the Companies Act 1956 (hereafter to be referred to as the Act) to present this petition.
The petition was contested by the Company and other respondents. Issues were framed on the 9th of May, 1963, and one witness on behalf of the petitioners was examined on the 9th of August, 1963, and thereafter the case was posted for evidence to the 11th of November 1963..Prior to this date, on the 4th of November, 1963, an application (L. M. 107 of 1963) was filed on behalf of petitioners 1 to 3 as well as some of the respondents, in which it was stated that petitioners 1 to 3 and respondent No. 9 had settled all their disputes amicably through the intervention of Shri Madan Gopal of Amritsar, the settlement being that petitioners 1 to and respondent No. 9 had agreed to transfer all the shares standing in their names and the shares standing in the name of Shri Jaishi Ram Mehra, deceased, father of petitioners 1 to 3 and respondent No. 9 on their sole risk and responsibility to respondents 2 to 4, who had agreed to purchase the same at a fair valuation. The parties had not, however, been able to settle the fair valuation of the share and hence they had agreed to appoint Shri Madan Gopal as the sole arbitrator to fix that valuation. It was also asserted that according to respondents 1 to 8 the entire working of the Company and its affairs had always been in order, but whatever grievance, if any, petitioners 1 to 3 and respondent No. 9 had, those had been entirely removed, and they acknowledged that the working of the Company was in order. It was prayed that the Court may record the settlement arrived at between the parties and that Shri Madan Gopal be appointed to fix the valuation of the shares standing in the names of petitioners 1 to 3 and respondent No. 9 and late Shri Jaishi Ram Mehra in the Company.
The petition came up on the same day before Grover, J. who directed Shri Madan Gopal to make an assessment of the value of the shares of petitioners 1 to 3 and respondent No. 9 and the mode of payment, and submit a report within six weeks.
It appears that petitioner No. 4, that is, the present applicant, was not agreeable to any such settlement and on the 6th of November, 1963, he filed through his counsel Shri K.L. Sachdev the present application (L. M. 115 of 1963) in which it was alleged that petitioners 1 to 3 had somehow or other been won over to conceal the true state of affairs of the Company and the defalcations and loss of large amounts to the Company had been suppressed from the Court. It was contended that settlement by private arbitration and adjustment was not warranted in proceedings under sections 397 and 398 of the Act, and it was prayed that the proceedings in Civil Original No. 95 of 1982 may continue and that the settlement arrived at between petitioners 1 to 3 and some of the respondents may be set aside, and, in any case, ignored. Grover, J. on the 8th of November, 1963, in this petition, issued a notice to the counsel for the opposite party for the 11th of November, 1963.
Much before the expiry of the period of six weeks, as allowed to Shri Madan Gopal for submitting his report, this gentleman gave an application (L. M. 120 of 1963) dated the 14th of November, 1963, in which he submitted that he had given the award which was Annexure ''A'' to this petition, that it had been consented to by petitioners 1 to 3 and respondent 9 on the one hand and respondents 2 to 4 on the other, and that the award be filed and made a rule of the Court. Notice of this petition was issued by Grover, J. to Shri Kashmiri Lal Sachdev, who has filed a reply opposing the award being made the rule of the Court.
The next event in the sequence was that petitioners 1 to 3 in Civil Original No. 95 of 1962, give an application dated the 6th of December, 1963 (L. M. 7 of 1964) in which they pointed out that in accordance with the valuation by Shri Madan Gopal they as well as respondent No. 9 had transferred all the shares standing in their names as well as in the name of their father late Jaishi Ram Mehra to Dr. Het Ram Aggarwal respondent No. 3, and that since petitioners 1 to 3 were no longer shareholders of the Company, they prayed that they may withdraw from the petition. This petition was allowed by my order dated the 10th of January, 1964, and in consequence their names have been struck off from the list of petitioners in Civil Original No. 95 of 1962.
Mr. S.M. Sikri has taken up a preliminary objection that the main petition, that is, a Civil Original No. 95 of l962, is no longer competent because after the withdrawal of petitioners 1 to 3, the only petitioner left on the record being S.C. Davessar, petitioner No. 4, the qualifications as laid down in section 399 of the Act are no longer fulfilled. To this the reply given by Mr. K.L. Sachdev is that the maintainability of the petition is to be decided on the basis of the facts as they were at the time of its presentation and any events subsequent thereto cannot affect its validity. An authority cited on this proposition is Rajahmundry Electric Supply Corporation Ltd. Vs. A. Nageswara Rao and Others, at page 1070-71. One of the arguments advanced before their Lordships of the Supreme Court by the appellant was that subsequent to the filing of the petition, 13 of the members who had consented to the filing of the application had withdrawn their consent, and the petition, therefore, ceased to satisfy the requirements of the statute, and was no longer maintainable. This contention was summarily rejected and it was laid down that the validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation, and neither the right of the applicant to proceed with the application nor the jurisdiction of the Court to dispose it of on its own merits could be affected. The same reasoning should fully apply to a case where some of the petitioners have been permitted to withdraw from the petition. Accordingly, the preliminary objection put forward by Mr. Sikri cannot be sustained.
Mr. Sikri then contended that the insistence by S.C. Davessar to continue to prosecute Civil Original No. 95 of 1962 despite the fact that the other petitioners had now been satisfied that the affairs of the Company were being properly conducted, was an abuse of the process of the Court. Mr. Sikri on behalf of respondents 2 to 4 offered to purchase S.C. Davessar''s comparatively small holding in the Company on the same price as the shares of petitioners 1 to 3 had been purchased, that is, at five times the paid-up value, and he maintained that if the petitioner, S.C. Davessar, did not accept this offer, it was only because he wanted to blackmail the company. He, therefore, argued that Liquidation Miscellaneous No. 115 of 1963 was really an abuse of the process of this Court which the Court had inherent jurisdiction to prevent by dismissing or staying the proceedings vide paragraph 767 of Volume 30 of Halsbury''s Law of England, Third Edition. Mr. Sikri has, however, been unable to satisfy me on this point. The main petition, as pointed out above, prays for relief not only under sections 397, 398 and 402 of the Act, but also in the alternative for winding up of the Company u/s 433 of the Act. It is not possible on the material on the record to arrive at any firm conclusion on this point; rather the first issue in the main petition is whether it is mala fide and that issue will be decided after recording the evidence.
The result, therefore, is that as prayed for in Liquidation Miscellaneous No. 115 of 1963 the main petition will proceed despite the withdrawal filed by petitioners 1 to 3 and the remaining evidence of the petitioner will be recorded on 5th March, 1964. Orders on Liquidation Miscellaneous Nos. 107 of 1963 and 120 of 1963, need not, as already submitted by Mr. Sikri, be passed at present and these two should also come up on 5th March, 1964 along with the main case. There will be no order as to costs in Liquidation Miscellaneous No. 115 of 1963.