Document Fragment View

Matching Fragments

(v) The company application essentially introduced a back-door method for the alienation of the assets of the company instead of taking recourse to revival. The claim of the workers could not be defeated; and

(vi) The company application could not be allowed since it was contrary to commercial morality and public interest.

7 Learned Senior Counsel for the Appellants submits that;

(i) The fundamental requirement of Section 466 is that the Court before it grants a permanent stay must be satisfied that all proceedings in relation to the winding up ought to be stayed. The expression "ought to be stayed" imports a requirement that the court must be convinced that the case is fit for the grant of stay;
(ii) For the purposes of Section 466, it is not sufficient that all the creditors have been satisfied and it is the bounden obligation of the court to have due sat 7/24 app 34-2012 regard to the interests of commercial morality and to the public interest at large.

(v) Revival is not just a revival of the corporate existence because once a permanent stay is granted, there would always be a revival of the corporate existence. Hence, what is required to be considered is, whether there is a genuine and bonafide attempt to bring about the revival of the business of the company;

(vi) The expression "commercial morality" is not, as the Appellants assert something which is used in juxtaposition to the morality of the business but is a term which is used in juxtaposition to indicate that merely paying the dues of the creditors is not sufficient;

"28. Therefore, from the above principles which have been summarised in different authorities and the decision referred to hereinbefore it appears that the discretion for stay under section 466 can only be exercised by the Court (1) if the Court is satisfied on the materials before it that the application is bonafide (2) the Court would be guided by the principles and definitely come to the finding that the principles are applicable to the facts of a particular case, (3) mere consent of all the creditors for stay of winding up is not enough, (4) that offer to pay in full or make satisfactory provisions for the payment of the creditors is not enough, (5) Court will consider the interest of commercial morality and not merely the wishes of the creditors and contributories, (6) Court will refuse an order if there is evidence of misfeasance or of irregularity demanding investigation, (7) a firm and accepted proposal for satisfying all the creditors must be before the Court with material particulars, (8) the jurisdiction for stay can be used only to allow in proper circumstances a resumption of the business of the company, (9) the Court is to consider whether the proposal for revival of the company is for benefit of the creditors but also whether the stay will be conducive or detrimental to commercial morality and to the interest of the public at large, (10) before making any order Court must see whether the Ex-directors have complied with their statutory duties as to giving information to the Official Liquidator by furnishing the statement of affairs, (11) and any other relevant fact which the Court thinks fit to be considered for granting or not granting the stay having regard to the peculiar facts of a particular case." (emphasis supplied) 8 85 C.W.N. 557 sat 13/24 app 34-2012 A judgment of a learned Single Judge of the Delhi High Court in Shaym S. Rastogi vs. Nona Sona Exports P.Ltd. 9, places importance on the role of the company court in relation to the exercise of the discretion while ordering a stay of winding up :