Home       Top Rated       Submit Article     Advanced Search     FAQ       Contact Us       Lawyers in India       Law Forum     RSS Feeds     

Register your Copyright Online

We offer copyright registration right from your desktop click here for details.

Latest Articles | Articles 2014 | Articles 2013 | Articles 2012 | Articles 2011 | Articles 2010 | Articles 2009 | Articles 2008 | Articles 2007 | Articles 2006 | Articles 2000-05

Search On:Laws in IndiaLawyers Search

Mutual Consent Divorce in Delhi
We provide fast, cost effective and Hassle free solution.
Contact us at Ph no: 9650499965 (Divorce Law Firm Delhi)

E-mail login                       Password

Free Email Sign Up

Main Categories
 Accident Law
 Aviation Law
 Banking and Finance laws
 Case Laws
 Civil Laws
 Company Law
 Constitutional Law
 Consumer laws
 Contracts laws
 Criminal law
 Drug laws
 Dubai laws
 Educational laws
 Employment / Labour laws
 Environmental Law
 family law
 Gay laws and Third Gender
 Human Rights laws
 Immigration laws
 Insurance / Accident Claim
 Intellectual Property
 International Law
 Juvenile Laws
 Law - lawyers & legal Profession
 Legal Aid and Lok Adalat
 Legal outsourcing
 Media laws
 Medico legal
 Real estate laws
 Right To Information
 Tax Laws
 Torts Law
 Woman Issues
 Workplace Equality & Non-Discrimination
 Yet Another Category

More Options
 Most read articles
 Most rated articles

Subscribe now and receive free articles and updates instantly.


Copyright Registration

To Copyright Your Books, Videos, Songs, Scripts etc
Call us at: 9891244487 / or email at: admin@legalserviceindia.com
Top Law Colleges

Law Updates:

# Income-Tax
# Family law
# Company Law
# Constitutional Law
# Partnership firms
# Immigration Law
# Cyber Law
# Lok Adalat, legal Aid & PIL
# Forms
# Trademarks
# Woman issues
# Medico Legal
# Consumer laws
# Criminal laws
# Supreme Court Judgments

Published : July 25, 2011 | Author : imehta.777
Category : Company Law | Total Views : 7144 | Unrated

Isha Mehta University Institute of Legal Studies,Panjab University,Chandigarh

So you think 433 (e) of the Companies Act,1956 can be taken for a ride?...well, the court doesn't

If you are one of those corporate individuals who know that court can not be taken for a ride, please don't read this article. For the rest, here is an incredible information that would make you realize that the companies act,1956 dare not be misused, or you have deep waters to be in.

What is The Companies Act,1956?
The companies act,1956 is the most important piece of legislation that empowers the central government to regulate the formation ,financing, functioning and winding up of companies. This Act contains the mechanism regarding organizational, financial, managerial and all the relevant aspects of a company, to direct special audit, to order investigation into the affairs of a company and to launch prosecution for violations of the act. If an inspection discloses a prima facie case of fraud or cheating, action is initiated under the provisions of the Companies Act,1956 or the same is reported to the Central Bureau of Investigation. The companies act is administered by the central government through the ministry of corporate affairs and the offices of registrar of companies and official liquidators, public trustees, Company law board, Director of inspection etc. the registrar of the companies (ROC) controls the task of incorporation of new companies and the administration of the running companies.

What is section 433(e)?
Circumstances under which company may be wound up by the tribunal(1).these are:
a) If the company has by special resolution, resolved that the company be wound up by the tribunal

b) if default is made in delivering the statutory report to the registrar or in holding the statutory meeting

c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year

d) if the number of members is reduced, in the case of a public company, below seven ,and in case of a pvt company below two

e) if the company is unable to pay its debts

f) if the tribunal is of the opinion that it is just and equitable that the company should be wound up

g) If the co. has made a default in filling with the registrar its balance sheet and profit and loss account or annual return for any five consecutive financial year

h) If the co. has acted against the interests of the sovereignty and integrity of India, the security of the state, friendly relations with foreign states, public order, decency or morality.

i) If the tribunal is of the opinion that the company should be wound up under the circumstances specified in 424G:
Provided that the tribunal shall make an order for winding up of a company under clause h) on application made by central govt or a state govt.

It has often been observed by courts that many cases that fall under section 433 (e)(2) of this act are generally driven by the creditor's intention to claim his own debt, which lies pending with the company which is being challenged. Courts consider this unacceptable, "it is not a bonafide winding up petition, it is nothing but an abuse to the process of court. In each every case for the inability of the company to pay its debts, winding u petition cannot be admitted as a rule or right(3).courts are of the view that this section isn't an escape route for the creditors to have back their debts, this provision has be used in public interest(4).mere possibility of fiction being employed to deem that the company is unable to pay its debts can not itself ipso facto lead to the inference that the company can be ordered winding up.it is in the discretion of the court to pass an order to wind up a company in the circumstances mentioned in sec 433 of the Act should necessarily be fulfilled for the court to examine as to whether the situation warrants an order to wind up the affairs of the co,even if the circumstances stipulated in any one of the clauses of sec 433 of the act are present, still its the in the discretion of the court to pass an order to wind up a company. It is for the court to bestow its attention to protect public interest. For the transaction of this nature where payment of the cost of the goods, supplied to the respondent co. hasn't been made, the petitioner has a remedy of filing of the summary suit.from the provisions of order 37 of the cpc.

Then under what conditions does sec 433 (e) of the companies act apply?
it was held by the Patna HC(5) the following points need to be considered in this connection(6)
1)that the mere fact,that business hasn't been commenced within a yr isn't a ground 4 the court to order winding up, although courts have jurisdiction for the same
2)that it has to be found out whether the non commencement of business was for some good reason accounting for it
3)that the fact fact of non commencement is an evidence that indicates that the co. has no intention of carrying on business or its not likely to do so
4)that the decisive question is whether there is a reasonable hope of the co. commencing business and doing it a profit & whether the Substratum of the companies has disappeared

Besides these points put forward by Patna HC, there is another consideration in this matter of winding up order. This includes taking into consideration the wishes of the majority of the share holders(7)
The court may look at the overall circumstances. They also see if the creditor has come in a bonafide faith. So the next time you want your debt back think twice before moving the court under section 433(e).In fact a wiser option would be filling a suit under the provisions of order 37 of the cpc.
End notes

1)Subs for court by the companies (2nd amendment) Act,2002(11 of 2003),S,50
2)s,433(e)-if the company is unable to pay its debt
3)Ajanta enterprises v/s Anita tax print ltd. (2004) 49 SCL section 566(raj)
4)HMT Ltd v/s NT Rahamatulla khan & associates(2010)155 comp cas 169 (car)
5)Registrar of companies v/s Bihar wire and wire products(p)Ltd (1975) 45 comp cas 194(pat)
6)A Ramaiya, Nexis butterworths, Wadha Nagpur,17th edition, part 3 page 4618
7)Middlesborough assembly rooms company (1880)14

Authors contact info - articles The  author can be reached at: imehta.777@legalserviceindia.com

1 2 3 4 5
Rate this article!     Poor

Most viewed articles in Company Law category
Globalization & its impact on Indian Economy: Developments and Challenges
Winding Up of a Company
Retrenchment under Industrial Dispute Act, 1947
Dissolution of partnership firm
Articles of Association & Alteration of Articles
ADR Mechanism in India
Demerger under Company Law
Which employees do not fall under the ambit of Industrial Dispute Act, 1947
Directors & Their Liabilities
Remuneration of Directors
Corporate Personality
Appointment, Disqualification And Liabilities Of Directors of A Company: A Legal Perspective
Prevention of oppression & mismanagement
Minority Rights on Oppression and Mismanagement Under Companies Act, 1956 And Companies Bill, 2011
The Employees Deposit-linked Insurance Fund Scheme
Corporate Social Responsibility
Most recent articles in Company Law category
One Person Company
Corporate Criminal Liability: A Jurisprudential and Comparative Approach
Distribution arrangement, whether it creates a permanent establishment
Doctrine of Alter Ego and Attribution
Fast Track Exit
Voluntary winding-up of the Company by Members
Corporate Renaissance
Trade, Commerce and Intercourse
The Corporate as a Criminal
Need For Corporate Social Responsibility
Role of Securities Exchange Board of India
Establishment of Foreign Entity in India
Obligations under GATT and GATS
The Role of Securities and Exchange Board of India in Regulating the Primary Market for Securities
Corporate Social Responsibility
Business Ethics and Corporate Frauds

Article Comments

there are no comments...

Post Your Comments


Your comments

Note : Your email address is only visible to admin, other members / users cannot see it.

You can use following FXCodes

BOLD : [b]
Italic : [i]

[b] Legal Services India [/b] is a [i]nice website[/i].
[url= http://www.legalservicesindia.com/article/ ]click here to visit.[/url]

Legal Services India is a nice website.
Click here to visit


Note : Currently, user comments are moderated and will be posted only after approval.

Please login or register a new free account.

Random Pick
he introduction of the internet has brought the tremendous changes in our lives. People of all fields are increasingly using the computers to create, transmit and store information in the electronic form instead of the traditional papers, documents...

» Total Articles
» Total Authors
» Total Views
» Total categories

Law Forum

Legal Articles

Lawyers in India- Click on a link below for legal Services

lawyers in Chennai
lawyers in Bangalore
lawyers in Hyderabad
lawyers in Cochin
lawyers in Pondicherry
lawyers in Guwahati
lawyers in Nashik

lawyers in Jaipur
lawyers in New Delhi
lawyers in Dimapur
lawyers in Agra
Noida lawyers
lawyers in Siliguri

For Mutual consent Divorce in Delhi

Ph no: 9650499965
For online Copyright Registration

Ph no: 9891244487
Law Articles

lawyers in Delhi
lawyers in Chandigarh
lawyers in Allahabad
lawyers in Lucknow
lawyers in Jodhpur
Faridabad lawyers

lawyers in Mumbai
lawyers in Pune
lawyers in Nagpur
lawyers in Ahmedabad
lawyers in Surat
Ghaziabad lawyers

lawyers in Kolkata
lawyers in Janjgir
lawyers in Rajkot
lawyers in Indore
lawyers in Ludhiana
Gurgaon lawyers


India's Most Trusted Online law library
Legal Services India is Copyrighted under the Registrar of Copyright Act ( Govt of India) 2000-2016
 ISBN No: 978-81-928510-1-3