Page 336 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

Sometimes a creditor’s petition is opposed by other creditors. In such cases the court may Notes
ascertain the wishes of the majority of the creditors. However, the opinion of the majority
of creditors does not bind the court. The question will ultimately depend upon the state of
the company. If the company is commercially insolvent and the object of trading at a
profit cannot be attained, winding up order will follow as a matter of course.
A creditors’ petition is generally based on the ground that, the company is unable to pay
its debts. He will not ordinarily be heard to urge that a winding up order should be made
because the substratum of the company is gone, which is usually the proper concern of the
company’s shareholders [Bukhtiarpur Bihar Light Rly. Co. Ltd. vs. Union of India, AIR
(1954) Cal.499]. However, if the debt of a petitioning creditor is disputed, no order for
winding up can be made [Md. Amin Bros vs. Dominion of India, AIR (1952) Cal. 323].

3. Contributory’s petition [s.439(1) (c)]: A ‘contributory’ means any person liable to contribute
to the assets of a company in the event of its being wound up. But for this purpose the term
‘contributory’ includes a holder of fully paid shares. A ‘contributory’, however, may
petition only: (i) on the ground that, the number of members is reduced below the statutory
minimum of seven members in case of public company and two in case of a private
company; (ii) on any other ground if the shares in respect of which he is a contributory or
some of them were originally allotted to him, or/have been held by him and registered in
his name for at least six out of the eighteen months preceding the commencement of the
winding up, or/have devolved upon him through the death of the former holder.

Example: A transfer though executed and stamped in June, 2006, was registered in October,
2007. The shareholder presented a winding up petition in December, 2007.
Held: The petition was not valid since she had not held shares for 6 months as required by
the Act.
A holder of fully paid shares is a contributory for the purpose of a petition not because he
is liable to contribute but because he may have an interest in the assets in a winding up.
The section provides: “A contributory shall be entitled to present a petition for winding
up a company notwithstanding that, he may be the holder of fully paid-up shares, or that
the company may have no assets at all or may have no surplus assets left for distribution
among the shareholders after the satisfaction of its liabilities.”

The legal representative of a deceased shareholder may petition. Even an insolvent
shareholder, whose name is still there on the register, may, at the instance of the assignee,
petition.

Did u know? What is joint petition?
Joint petition [s.439(1) (d)]: This means that, any combination of the company, the creditors
and the contributories can present a petition for winding up.

4. The registrar [s.439(1) (e)]: The Registrar may file a petition where: (i) a default is made in
delivering the statutory report to him or in holding the statutory meeting; or (ii) the
company has not commenced its business within a year from its incorporation; or (iii) the
number of its members has fallen below the statutory minimum; or (iv) the financial
condition of the company, as disclosed in its balance-sheet or from the report of a special
auditor appointed under s.233A or any inspector appointed under Ss.235 to 237 it appears
that, it is unable to pay its debts; or (v) it is just and equitable that, the company be wound
up.

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