Ashutosh Sharma vs Torque Cables Pvt. Ltd.
2013 Latest Caselaw 3631 Del

* IN THE HIGH COURT OF DELHI AT NEW DELHI

                                       Reserved on: 14th August, 2013
                                    Date of decision: 19th August, 2013

+     CO.PET. 413/2013 WITH CO. APPL. 1379/2013

ASHUTOSH SHARMA                                        ..... Petitioner
                 Through :            Mr. Ashish Middha, Advocate
                         vs
TORQUE CABLES PVT. LTD.                                 .... Respondent
                 Through: None
CORAM:
HON'BLE MR. JUSTICE R.V.EASWAR

                            JUDGMENT

R. V. EASWAR, J.:

1. This is a petition filed by Mr. Ashutosh Sharma under section

433(f) read with Section 439(c) of the Companies Act, 1956, seeking

winding up of M/s. Torque Cables Pvt. Ltd.

2. The petitioner and one Mr. Satish Kumar were the promoters of

the respondent-company and signatories to the memorandum and

articles of association. The company was incorporated on 27.08.2010

for the manufacture of cables. The authorised capital of the company

was `1 crore divided into 10 lakh equity shares of `10 each. The paid-

up capital was `10 lakhs. The petitioner initially appears to have taken

75000 shares, with Satish Kumar taking 25,000 shares; later, the

petitioner sold 30,000 shares to one Mohit Kathuria. The shares were transferred to Mohit Kathuria on 25.11.2011. The petitioner and Satish

Kumar were appointed the first directors. Mohit Kathuria and Arvind

Kumar Sharma were later appointed as directors.

3. The work of the company was divided between the three

directors: the petitioner was to look after the sales, Mohit Kathuria and

Satish Kumar, the manufacturing operations. Arvind Kumar Sharma

was only a "sleeping" director. Initially the company did well, but

later on started facing financial problems for various reasons. Soon the

manufacturing operations stopped and the factory became

dysfunctional; the factory land had been mortgaged to the bank for

loan purposes and interest burden started increasing every day. Losses

started mounting.

4. According to the petitioner, he was requesting the other two

directors to maintain proper statutory records, to hold board meetings,

annual general meetings etc. but to no avail. Disputes arose between

the petitioner on the one hand and the other two directors, Satish

Kumar and Mohit Kathuria, on the other hand. The petitioner was

denied access to the company's records, factory etc. and was made

non-functional. He submitted his resignation, but the other two

directors, according to the petitioner, did not file the same with the Registrar of Companies in the prescribed form. On 23.05.2013 the

petitioner wanted to visit the factory but was refused entry by the

security guards.

5. In the above situation, the petitioner sent a legal notice to the

respondent-company and the other two directors Satish Kumar and

Mohit Kathuria; another resignation was also submitted in the legal

notice. According to the petitioner, the other two directors also shifted

the books and records from the registered office without any intimation

to the ROC. The profit and loss account, balance sheet etc. were not

given to the petitioner. Generally, the petitioner was kept out of the

affairs of the company.

6. It is in the above circumstances that the present petition for

winding up has been filed.

7. The learned counsel for the petitioner submits that in the above

circumstances it is just and equitable that the company is wound up. He

also contends that the company has been continuously incurring losses

and the capital has been eroded. He urges that since the other two

directors Satish Kumar and Mohit Kathuria have made it impossible

for the petitioner to take part in the company's affairs, the company

should be wound up.

8. Clause (f) of section 433 uses the expression "just and

equitable". This expression is not to be construed ejusdem generis with

the other clauses of the section, as held by the Supreme Court in

Rajamundry Electric Supply Corporation Ltd. v. A. Nageswara Rao,

(1955) 2 SCR 1066, reiterated in Hind Overseas Private Limited v.

Raghunath Prasad Jhunjhunwalla and Others, (AIR 1976 SC 565). The

facts alleged in the petition and elaborated before me prima facie show

that this is a case to which the provisions of Sections 397-398 may be

attracted; I am not expressing any final opinion on the point, but it is

only a prima facie view. It is well-settled that winding-up proceedings

have to be used as a last resort. In a case such as the present one, there

are preventive provisions in the Act safeguarding against oppression

and mismanagement. If some other remedy is available to the

petitioner, that should be exhausted first: (see observations of the

Supreme Court in Hind Overseas Private Ltd., supra). These principles

have been applied by a Division Bench of this Court (Ranganathan, J.

and S.B. Wad, J.) in Bhaskar Stoneware Pipe (P) Ltd. v. Rajinder Nath

Bhaskar, (1988) 63 Com.Cases 184. The judgment of a learned single

judge of this court (Indermeet Kaur, J.,) in Laguna Holdings Pvt. Ltd.

& ors. v. Eden Park Hotels Pvt. Ltd. & Ors., (2013) 176 Com. Cas. 118

(Del.) is also to the same effect. This petition is thus premature.

9. Learned counsel for the petitioner draws my attention to the

accounts to show that for three continuous years the company has been

incurring losses which exceed the paid-up capital. In my opinion, this

by itself is not decisive of the question whether it is just and equitable

to wind up the company. Once the differences between the directors

are sorted out - for which no attempt appears to have been made so far

- the possibility of the company reviving its operations and making

profits cannot be ruled out.

10. For the aforesaid reasons, I am of the view that the winding- up

petition is premature and is not maintainable. It is dismissed at the

admission stage itself along with the connected application.

(R.V. EASWAR) JUDGE AUGUST 19, 2013 hs