The Company Law Board, by its order dated April 16,2009, inter alia, admitted a composite petition filed by the respondents under sections 111A, 235(2), 250(3), 397 and 398 read with sections 402, 403 and 408 of the Companies Act, 1956, in part. The petition had been admitted despite the various objections
Companies Act,1956- Sections 111, 111A, 397 and 398 - Oppression and mismanagement.
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[ 151 Comp Cas 181 (BOM)], Khanwilkar A. M. J
Facts: The Company Law Board, by its order dated April 16,
2009, inter alia, admitted a composite petition filed by the respondents
under sections 111A, 235(2), 250(3), 397 and 398 read with sections
402, 403 and 408 of the Companies Act, 1956, in part. The petition
had been admitted despite the various objections raised by the
appellant. In an appeal against the order, it was, inter alia, contended
that when a party consciously and under legal advice had invoked the
remedy of winding up of the company under section 433 on the
assertion that he was a creditor of the company on account of a certain
transaction, it was not open to that party to later on institute another
substantive proceeding under section 397/398 or under section 111A
of the 1956 Act relying on the same transaction to assert that he was
a member/shareholder of the company. It was also contended by the
appellants that the scope of authority of the Board to grant interim
relief was restricted by section 111A(4) of the Act and the ad interim
reliefs granted were in excess of jurisdiction of the Board. The
respondents submitted that the petition filed against the appellant under
section 433 of the Act be treated as one filed under section 433(f) of
the Act or in the alternative it be allowed to be withdrawn.
Decision: Appeal allowed.
Held: The Company Law Board may be generally right in
observing that the person could avail of more than one remedy in a
given situation and would not, therefore, be deprived from resorting to
another substantive remedy at a later point of time. A member/
shareholder could not be a creditor of the company at the same time
in relation to the same transaction. It was the efficacy of this dichotomy
that was required to be addressed by the Board. These aspects could
not be examined for the first time in the appeal especially when the
order in appeal was one admitting the petition filed by the respondent
in part under section 111A. The order was to be set aside and the
parties were to be relegated before the Board for reconsideration of
the matter afresh as the issue raised by the appellant went to the root
of the matter and the Board had failed to address it. The issue involving
grant of ad interim reliefs was also to be relegated before the Board,
which was to consider the question on the merits.