TaxTMI 
TaxTMI 
1996 (10) TMI 347
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....y) promoted Kilpest (P.) Ltd. (the company) and were its first Directors. Dubey was the managing director and Mehra was the joint managing director. The two fell out and Mehra did not attend Board or other meetings of the company after 1-9-1981. In December 1981 Mehra, his relations and friends (the Mehra group) held 1,500 shares of the company of Rs. 100 each and Dubey, his relations and friends (the Dubey group) held 1,625 shares. Thereafter the Dubey group increased its shareholding so that when the present petition was filed they held 4,500 shares. At a Board meeting of the company held on 2-1-1982, K.P. Mishra, the third appellant in Civil Appeal No. 1974 of 1986, was appointed to the Board as an Additional Director. In the Extraordina....
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....o trial on the basis of affidavits. The single Judge dismissed the petition, whereupon Mehra filed the appeal upon which the order under challenge was passed. The Division Bench came to the conclusion that there was no merit in Mehra's case that he had not been given notice of the meetings. It found that the company could not be treated as a partnership concern and there was no ground for winding it up under the just and equitable clause. Dubey was found to have committed an act of breach of faith by appropriating to himself the sum of Rs. 52,875 belonging to the company. Having regard to its powers under section 402 of the Act, the Division Bench directed that Mehra be appoint-ed a Director of the company enjoying all the powers and pr....
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....e House of Lords in Ebrahimiv. Westbourne Galleries Ltd [1972] 2 All. ER 492. It was submitted that inasmuch as there were only two promoter Directors, who held, along with their friends and relations, 1,50C and 1,650 shares respectively, and since they were to remain Joint Managing Directors for life, the principles applicable to a partnership were relevant. There having been an exclusion of Mehra from the business of the company, Mehra was entitled to an order winding up the company. Ebrahimi's case (supra ) was considered by this Court in Hind Overseas ( P., Ltd. v. Raghunath Prasad Jhunjhunwalla [1976] 3 SCC 259. The facts of Ibrahimi's case ( supra) were set out therein thus: "In Ebrahimi's case (supra) the company wh....
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....ion of Ebrahimi's status as well as of the relationship. (6)Ebrahimi through ceasing to be a director lost his right to share in the profits through directors' remuneration retaining only the chance of receiving dividends as a minority shareholder. Bearing in mind the above features in the case, the House of Lords allowed the petition for winding-up by reversing the judgment of the court of appeal and restoring the order of Plowman, J." This Court observed that although the Act was modelled on the English statute, the Indian law was developing on its own lines and making significant progress. Where the words used in both the Indian and English statutes were identical, English decisions might throw light and their reasons mi....
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....ructure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company." 8. We respectfully agree with the observations in the case of Hind Overseas (P.) Ltd. (supra) and would add this. Sections 397 and 398 provide relief to shareholders against oppression and mismanagement. The powers exer-cisable in such petitions, at the relevant time, by the Courts and now by the Company Law Board, have been set out in section 402. Section 402 reads thus: "Powers of Company Law Board on application under section 397 or 398.- Without prejudice to the generality of the powe....
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....ion 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference, (g)any other matter for which in the opinion of the Company Law Board it is just and equitable that provision should be made. The promoters of a company, whether or not they were hitherto partners, elect to avail of the advantages of forming a limited company. They voluntarily and knowingly bind themselves by the provisions of the Act. The submission that a limited company should be treated as a quasi-partnership should, therefore, not be easily accepted. Having regard to the wide powers under section 402, very rarely would it be necessary to wind up any company in a petition filed under sections 397 and....