Page 335 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes (vii) Where a private company is in essence or substance a partnership: It may be ordered to be
wound up if such circumstances exist under which it would be just and equitable for
the Court to order for the dissolution of the partnership firm. In Re Davis & Coltett
Ltd. [(1935) Ch. 693] one member improperly excluded the other, who held half the
shares, from taking part in the company’s business. Held, the company be wound
up.
In this context, some guiding principles for the application of just and equitable
ground for winding up were laid down in Ebrahimi v. Westbourne Galleries Ltd.
[1972] 2 All ER 492. These are:

(a) The company was formed based on personal relationship and mutual
confidence;
(b) An agreement or understanding that all or some of the shareholders will
participate in the conduct of the business as in the case of a partnership concern;
and

(c) Restrictions on the transfer of a members’ interest in the private company.
However, the fact that an existing partnership firm was converted into a private
company does not necessarily imply that the company retains the features of a
partnership firm [Official Liquidator v. Ram Swarup (1997) Cas 569.]
(viii) Requirements for Investigation: Where Directors were making allegations of dishonesty
against each other in respect of defalcations of the funds of the company, the company
was ordered to be wound up on the ground that, it was a case in which the conduct
of some of the officers of the company required an investigation which could only
be obtained in a winding up by the Court [Re Varieties Ltd. (1893) 2 Ch. 235].

Who may Petition (s.439)

A petition for the compulsory winding up of a company may be presented by: (1) the company
itself by the passing of a special resolution; or (2) any creditor or creditors, including any
contingent or prospective creditor or creditors; or (3) a contributory or contributories; or (4) any
combination of creditors, company or contributories acting jointly or separately; or (5) the
Registrar; or (6) any person authorized by the Central Government, as per s.243. (7) the official
liquidator (s.440).
1. The company [s.439(1) (a)]: A company may make a petition for its winding up, when the
members of the company have so resolved by passing a special resolution. However, it is
not very common for companies to apply for winding up orders since, if desired, they
have only to pass a special resolution for voluntary winding up under s.484 of the Act. But,
where the Directors find the company to be insolvent due to circumstances which ought to
be investigated by the Tribunal, they may file a petition for winding up order on behalf of
the company.
2. Creditor’s petition [s.439 (1) (b)]: A creditor has a right to a winding up if he can prove that,
he claims an undisputed debt and that the company has failed to discharge it. The word
‘creditor’ includes secured creditor, debenture holder and a trustee for debenture holders.
It is not even necessary that, the secured creditor should give up his security [In Re-India
Electric Works (1969) 2 Comp. L.T. 169]. A contingent or prospective creditor (such as the
holder of a bill of exchange not yet matured or of debentures not yet payable) is also
entitled to petition for winding up the company. But, he must give a reasonable security
for costs and establish a prima facie case for winding up [s.439 (8)].

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