P.C.JAIN, J. - (1.) IN this petition, under Section 439(5) read with Section 433(c) and (f) of the Companies Act, 1956, the Registrar of Companies as a petitioner has prayed that the respondent, M/s. Jaipur Stock Exchange Ltd., Jaipur, a company incorporated under the Companies Act, 1956, be ordered to be wound up by this court.
(2.) THE facts of the case lie in a narrow compass and may be stated thus : The respondent company was incorporated on December 28, 1983, as a company limited by guarantee having no share capital. It is alleged that since the date of incorporation, the respondent company had not commenced its main business of stock exchange within a year from the date of its incorporation for which the company was formed. It is also alleged that the company has failed to obtain permission from the Stock Exchange Division, Department of Economic Affairs, Ministry of Finance, as required by the provisions of the Securities Contracts (Regulation) Act. The petitioner alleged that he had received complaints from the Federation of Employees of Delhi, Gujarat, Haryana and Rajasthan against the affairsof the company, wherein allegations were made that some of the promoters of the company were carrying on the activities with ulterior motive and requested cancellation of their registration. In view of the allegations made in the petition, the petitioner contended that it is clearly established that the respondent company has not commenced its business within a year from the date of its incorporation and it is a fit case that the company may be wound up under the provisions of Clause (c) of Section 433 of the Companies Act, 1956 (hereinafter referred to as 'the Act'). It is also alleged that it is just and equitable that the company should be wound up under the provisions of Clause (f) of Section 433 of the Act. The petitioner, Registrar of Companies, is required to obtain the previous sanction of the Central Government under Section 439(5) of the Act. It is, therefore, stated that the Regional Director has accorded sanction for moving the winding -up petition before this court. The petition has been contested by the respondent company. It is contended by the respondent company that as per the objects contained in the memorandum and articles of association of the company, it is clear that the company was incorporated within the meaning of Sections 12 and 25 of the Act for promoting commerce and other useful objects and it intends to apply the income, if any, in promoting its objects and to prohibit the payment of any dividend to its members as required under Section 25 of the Act. It is also contended that the petitioner has failed to make a distinction between an ordinary company formed solely or mainly for the purpose of business and to share profits amongst its members by payment of dividends, etc. The respondent company has been formed mainly for the purpose of promoting commerce and other useful objects and does not intend to apply its profits, if any, or other income for any purpose except for promoting its objects. It specifically prohibits payment of any dividends to its members. The object of the company is to control, support and protect the brokers, dealers and jobbers in stocks. The respondent company further contends that for achieving the objects of the company, it is required to comply with the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as 'the Regulation Act'). In Section 4 of the Regulation Act it is provided that all the activities for attaining the main objects of the exchange can be started only after the grant of recognition to stock exchange by the Central Government and the competent authorities. It is also pleaded that before such a recognition can be granted by the Central Government, numerous requirements of the Act have to be complied with, for which all necessary steps have been taken by the respondent company from time to time. The respondent company emphatically denied that it has failed to obtain the requisite permission from the Central Government under the provisions of the Regulation Act. In fact, the case of the respondent company is that it has taken all steps within its power to secure and expedite incorporation and, thereafter, its recognition. The respondent also pointed out that it was only at the request of the promotors that the Secretary, Industries Dept., Government of Rajasthan, wrote a letter on June 18, 1983, to the Controller of Capital Issues to approve the draft memorandum and articles of association of the stock exchange and it was thereafter that the memorandum and articles of association of the Jaipur Stock Exchange were approved by the Ministry of Finance and it was directed to take necessary steps for incorporation of the stock exchange under Section 12/25 of the Act. Immediately, after the incorporation of the company, the respondent addressed a letter to the Jaipur Development Authority for allotment of a suitable land to enable the stock exchange to erect its own office. The respondent company further stated that regular meetings of the board of directors were convened and held wherein several decisions were taken to expedite the process of recognition. The respondent company also made it clear that it was on account of certain circumstances beyond its control that the completion of certain formalities and submission of application form for recognition took some time as some civil suits were filed by certain interested parties and an interim order was obtained. The suit was filed on May 2, 1984, and an injunction order was obtained on May 3, 1984. One more suit was filed on or about May 31, 1984, by one Sunderdas for declaration and injunction against the respondent in the Court of Munsiff (West), Jaipur City, Jaipur. Thus, these civil litigations created a great hindrance in the way of taking further steps by the respondent company to obtain recognition from the Government. The nominee of the Industries Department of the Government of Rajasthan, nominated by the Central Government for resolving all such problems and disputes was also changed from time to time. The difficulties could not, therefore, be resolved at an early date. The respondent company also took some time to prepare bye -laws to regulate the exchange activities. Bye -laws were finalised on October 31, 1985, which run into 190 pages. The case of the respondent company is that it is at the behest of certain interested persons, including Mewar Stock Exchange Ltd. and Pink City Stock Exchange Ltd. that the Registrar of Companies has filed this winding -up petition and the Regional Director, Kanpur, has granted the sanction in hot haste. Lastly, it is the case of the respondent company that the provisions of Section 433 of the Act are attracted only when it is proved beyond doubt that the company has no intention to commence its business and no activities have been initiated by the company in this regard, or that the company has become commercially insolvent.
(3.) SECTION 433 of the Act says that a company may be wound up by the court under the circumstances detailed in Clauses (a) to (f) of the said section, and provides that the company may be wound up by the court if the company does not commence its business within a year from its incorporation, or may be wound up if the court is of the opinion that it is just and equitable that the company should be wound up. Thus, the petitioner has taken two grounds for contending that the respondent company may be wound up by the court. These two grounds are as follows : 1. That the respondent company failed to commence its business within one year of its incorporation. 2. That it is just and equitable that the company may be wound up. ;