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Modi Fibres Ltd V. Modi Rubber Ltd (2009)

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Court :

Brief :
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

Citation :
Companies Act,1956- Sections 111, 111A, 397 and 398 - Oppression and mismanagement.

MODI  FIBRES  LTD.

 

v. 

 

MODI  RUBBER  LTD. 

 

[[2009]  151  Comp Cas  181  (BOM)],  Khanwilkar  A.  M.  J 

 

[Decided  on  3-7-2009]

 

 

 

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the  Act  or  in  the  alternative  it  be  allowed  to  be  withdrawn.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.

 

^^^ AJIT ^^^
on 29 December 2009
Published in Corporate Law
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