OFFICIAL LIQUIDATOR versus DHARTI DHAN (P) LTD.

OFFICIAL LIQUIDATOR versus DHARTI DHAN (P) LTD.

The power to grant a stay under section 442 of the Companies Act is discretionary, not mandatory. The word 'may' confers a power that must be exercised judiciously upon an examination of the totality of facts, and not automatically upon the fulfillment of certain conditions. The application for stay in this case was not bona fide, aiming to delay adjudication, and thus rightly rejected by the Company Judge; the Division Bench's interference was unwarranted.

Parties
Appellant: Official Liquidator; Respondent: Dharti Dhan (P) Ltd.
Jurisdiction
India
Judgment Date
10 February 1977
Procedural Posture
Civil Appeal / Supreme Court Civil Appellate Jurisdiction, Appeal by Special Leave From Judgment and Order of Rajasthan High Court
Outcome
Appeal allowed; Division Bench judgment and order set aside; Company Judge's order restored.
Legal Topics
Winding Up of Companies, Stay of Proceedings, Discretionary Powers of Court, Interference Under Article 136
Company Law Constitutional Law Winding Up of Companies Stay of Proceedings Discretionary Powers of Court Interference Under Article 136

Case Brief

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Parties

Official Liquidator

Appellant

Dharti Dhan (P) Ltd.

Respondent

Procedural Posture

Civil Appeal / Supreme Court Civil Appellate Jurisdiction, Appeal by Special Leave From Judgment and Order of Rajasthan High Court

Legal Issues

  1. 1 Whether the power to stay proceedings under section 442 of the Companies Act is discretionary or mandatory
  2. 2 Interpretation of 'may' in section 442 of the Companies Act
  3. 3 Scope of Supreme Court's interference under Article 136

Ratio Decidendi

The power to grant a stay under section 442 of the Companies Act is discretionary, not mandatory. The word 'may' confers a power that must be exercised judiciously upon an examination of the totality of facts, and not automatically upon the fulfillment of certain conditions. The application for stay in this case was not bona fide, aiming to delay adjudication, and thus rightly rejected by the Company Judge; the Division Bench's interference was unwarranted.

Court Disposition

Appeal allowed; Division Bench judgment and order set aside; Company Judge's order restored.

Orders

  • Parties to bear their own costs.