PRASHANT KHUSALCHAND SHAH Vs. RINKU POLYCHEM LIMITED

JUDGEMENT

(1.) THIS petition has been filed for winding up of the Company on the ground that it is just and equitable to do so under Section 433 (f) of the Companies Act, 1956. It is stated in the petition that the Company was originally incorporated as M/s. Rinku Polychem Pvt. Ltd. on 11th July, 1990 and subsequently converted into Limited Company with effect from 22nd April, 1992. The main objects for which the Company is incorporated, inter alia, consist of :

(2.) IT is submitted by the Counsel for the petitioner that such kind of a Company which is flouting statutory provisions deserves to be wound up. The Company has misrepresented the facts in the prospectus and thus caused unlawful losses to the shareholders. It is, therefore, just and equitable to order the winding up of the Company. In any event it is submitted that the petitioner has set out sufficient particulars to make out a strong prima facie case for the acceptance and admission of the petition. Counsel has relied on a Division Bench judgment of this Court given in the case of Jivabhai Marghabhai Patel v. Extrusion Processes Pvt. Ltd. , (1966-II Comp LJ 74) to canvass the submission that at this stage the petition cannot be dismissed merely because an alternative remedy may be available to the petitioner.

(3.) NO affidavit in reply has been filed by the Company. Counsel appearing for the Company has made a number of submissions. Firstly it is submitted that the petition filed by the petitioner is an abuse of the process of the Court. The petition has not been filed bona fide. The petitioner bought shares of the Company with open eyes. The shares were bought by the Petitioner in April, 1994. Petition has been filed in December, 1996. This fact is highlighted to show that there have been steep fall in the price of the shares. Consequently the petitioner is merely trying to pressurise the Company into refunding the amount which the petitioner has spent on purchasing the shares. It is further submitted that the facts and circumstances as narrated in the petition even if accepted to be correct would not justify an order under Section 433 (f) of the Companies Act, hereinafter referred to as "the Act". In fact, the petitioner is acting wholly unreasonable in bringing the present petition for winding up. Thus it is submitted that there is no just and equitable ground on the basis of which the Company would be ordered to be wound up. Apart from this, it is submitted that number of remedies are open to the petitioner for redressing any grievance that he may have. Reference in this connection has been made to Sections 62 and 63 of the Act. Section 62 provides that if there is any untrue statement included in the prospectus the person who has been induced into purchasing the shares is liable to be compensated in the event it is found that such a person has suffered loss or damage due to such false statements. Apart from this, Section 63 provides that if the prospectus includes any untrue statement, every person who authorised the issue of prospectus shall be punished with imprisonment for a term which may extend to two years or five, unless he proves that the statement was immaterial or that he had reasonable ground to believe that the statement was true. With regard to the other allegations there are adequate remedies in the Act. In the event of any violation of the statutory provisions of the Act, criminal proceedings can be taken against the Directors of the Company. Therefore, it is submitted that the petition is liable to be dismissed in limine on the ground that effective alternate remedies are available. Counsel has relied on single Judge decision of the Gujarat High Court in Re. Atul Drug House Ltd. , (1971) 4 Com Cas 352. In this judgment the petition was dismissed as the petitioner did not disclose in the petition that alternative remedies were available. Referring to a number of judgments of various Courts it has been held :