TaxTMI 
TaxTMI 
2013 (10) TMI 31
X X X X Extracts X X X X
X X X X Extracts X X X X
....he main object of the company is to carry on spinning of yarn from cotton. After the incorporation, the paid up capital of the Company was initially increased to Rs.7,50,000/- consisting of 7,500 equity shares of Rs.100/- each. G.T.Krishnaswamy Naidu and his wife Vijayammal were holding 2,000 and 1,000 shares respectively. Apart from them, G.T.Krishnaswamy Naidus sons viz., G.T.K.Rajasekaran, G.t.K.Sivasubramaniam, G.T.K.Parthasarathy and G.T.K.Shanmugasundaram were allotted to 1,000 shares each. P.Asher, a third party, who was in no way related to G.T.Krishnaswamy and his family, was allotted to 500 shares. Thus, the entire paid up capital of 7,500 shares of Rs.100/- each and 7,000 equity shares of Rs.100/- each were held by the family members of G.T.Krishnaswamy Naidu, except 500 shares which were allotted to P.Asher in whose name the licence was ilnitially granted by the Government of India for the Textile Mill. (b) 1000 shares of the said G.T.K.Rajasekaran son of G.T.Krishnaswamy Naidu, were transferred in the name of his son R.Ranganathan. After the death of G.T.Krishnaswamy Naidu and his wife Vijayammal, their 3000 shares were equally transmitted in the name of his sons v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncorporation till his death. The 4th respondent became a Director of the Company with effect from 19.12.1969. (d) As on today, the Company has 3 units viz., (i) Spinning Divisions, Unit No.1, Anupparapalayam, Tirupur 641 652. (ii) Unit No.2, 1486, Avanashi Road, Peelamedu, Coimbatore 641 004. (iii) Unit No.3, Jubilee Unit, 15, Velampalayam Village, Tirupur 641 652. All the three units put together have 59376 spindles. (e) The appellants are holding 27,600 shares which constitute about 31% of the paid up capital of the Company. Even though they hold the said percentage, after the death of their father in the year 2000, they were not associated with the management of the Company. The 2nd respondent, realising that the appellants father had no male issues, after his death, has been avoiding whenever the appellants or their representatives tried to meet him for an amicable settlement of either bringing them on the board or their nominees or making necessary arrangements to spin off one of the undertakings to the appellants for their due entitlement. All that efforts have become futile since the 2nd respondent, who has majority shares, sought to it that his own yes-me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....neries are being sold to book valud. The difference in the market value and the book value is being siphoned by the 2nd respondent and his associates which is detrimental to the interests of the Company and the appellants. (j) The 2nd respondent as the Managing Director of the Company is being paid Rs.7,07,793/- which includes the contribution to provident fund, etc. and the 6th respondent, who is at the beck and call of the 2nd respondent is also being paid a sum of Rs.8,80,300/- towards salary. The 6th respondent has been re-appointed for a period of 5 years with effect from 1.11.2005 at the Extraordinary General Meeting alleged to have been held on 28.12.2005. Apart from the above, there are several inter-company transactions, which are reflected in the balance sheet of the company for the year ending 31.3.2004, 31.3.2005 and 31.3.2006, which are detrimental to the interests of the company. The provisions of section 297 of the Act are not complied with. They are being benefited by virtue of entering into various transactions with the Company at its expense. (k) The company is not disclosing the actual income in its books. Companies similarly situated in Coimbatore having s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t out hereunder:- (a) The appellants are just housewives and they did not ever envisage any role in the management of the Company and they did not attend a single Annual General Meeting, though notices were sent to them regularly. As far as the allegation of oppression is concerned, it is not clear as though they opposed any decision of the Company and the majority shareholders just overruled them. (b) The case of the appellants that their father G.T.K.Shanmugasundaram was a Director on the Board of the Company from the date of incorporation till his death is factually incorrect. At the time of incorporation of the Company, he was a minor, aged about 14 years and he was inducted as Director only on 3.6.1968. The claim of the appellants that after the death of their father, they had been making representation to the second respondent through their relatives and friends and sought association in the management of the Company is totally untrue. Had the appellants approached these respondents with any such proposal most certainly they would have got a suitable response. The case of the appellants that the 2nd respondent using his majority holdings, saw to it that his own yet-men ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts. (i) The alleged transactions involving the disinvestment of shares held by the Company in its erstwhile subsidiaries, viz., the 8th and 9th respondents herein took place three decades back. At that time, the second respondent was 13 years old boy and that the said decision to disinvest the shares of these companies was taken by the father of the appellants. (j) The respondents never did anything to dilute the shareholding strength of the appellants, though it was within their power to do so. 4. The case of the third respondent is as follows:- (a) The 3rd respondent is the adopted mother of the 2nd respondent. The Company has been managed by the second respondent in a very successful manner especially during the turbulent times of the textile industry. (b) The appellants deliberately and unnecessarily published the interim orders given the Company Law Board in English and Tamil newspaper. While doing so, they have not published the real operative part of the interim order but their own interpretation so as to gain an undue mileage in the minds of the public. (c) After the death of the 3rd respondent's husband and 2nd respondent's adopted father, the second resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oimbature instead of A.5, Coimbatore. (b) These respondent companies ceased to be the subsidiaries of the first respondent Company during the year 1977, when the Company took a strategic decision to disinvest the shares held by them. The second respondent who was a 13 years old boy at that time, was not in the picture at all when this decision was taken. Significantly, the decision was taken by the then Board of Directors of the Company, of which at that time, none other than the father of the appellants was an active member. (c) The shares of the 9th respondent company were purchased from the first respondent company on 7.9.1977 by the father of the 2nd respondent and his other family members. After the demise of his father, the shares held by him were transmitted to the 2nd respondent on 10.12.1984. The entire shares of the 8th respondent company were purchased from the 1st respondent company by the 9th respondent company on 3.10.1977. Thus, the 8th respondent company became a wholly owned subsidiary of the 9th respondent Company and continues to remain so even today. (d) These respondents are totally independent companies and have a business of their own and the value o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is the textile mill, the second respondent is the son of G.T.K.Sivasubramaniam and his wife Kamala (a) Krishnakumari, the third respondent. During the pendency of the Company Appeal, the fourth respondent died and his legal representatives have been brought on record as R10 and R11. The respondents 5 and 6 are the outsiders. 11. The first respondent Company had 3 subsidiaries as on 24.12.1975 and they are, (1) Tirupur Gin and Press Private Limited (2) Vijayeswari Ring Travellers Private Limited (R8) and (3) Sovereign Engineers Private Limited (R9). However, now they are no longer the subsidiaries. 12. After the introduction of Section 43-A of the Act, the Company became a Public Limited Company with effect from 01.04.1976. It is the case of the appellants, after the death of their father G.T.K.Shanmugasundaram on 06.11.2000, they have been making representation to the second respondent through their relatives and friends that the appellants be associated with the management of the Company and they should be made as Directors. All efforts to sort out the issue amicably fell on deaf ears. The appellants, who are holding 27,600 shares, which constitutes about 31% of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h issues which are set out one by one here under: Issue No.1:- Whether R.1 is a family company to which principles of quasi partnership applies ? Finding:- Principles of partnership cannot be invoked. Issue No.2:- Whether the petitioners in the company petition have established oppression and mismanagement of the affairs of the company by the second respondent and his associates ? Finding:- The petitioners in the company petition have failed to prove the alleged mismanagement and oppression by the majority shareholder viz., the second respondent. Issue No.3:- Whether the second respondent has mismanaged the company ? Finding:- The petitioners in the company petition have failed to prove the alleged mismanagement by the second respondent and others. Issue No.4:- Whether the petitioners in the company petition are entitled to an order from the Company Law Board directing the company and the second respondent to purchase the shares of the petitioners or to spin any one of the three units to them ? Finding:- The Company Law Board declined to pass an order on the prayer of the petitioners for exit from the company. Thus, in view of the findings referred to abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir closeness with G.T.Krishnaswamy Naidu. When the Company was incorporated in the year 1956, G.T.Krishnaswamy Naidu and his two sons namely, G.T.K.Sivasubramaniam, the second respondent's father and T.N.Rajasekaran alone were made subscribers to the Company, apart from a non-family member, the fourth respondent. After transmission of the shares, either due to the death of the share-holders or relinquishment of shares, now the entire shares are being held by the appellants' group and the second respondent's group. It is not disputed that the second respondent is having the majority shares. 16. The Company Law Board found on perusal of the history of the family, in relation to the functioning of the company that it is difficult to find out that a right was impliedly reserved for family members to be on the Board as of right. There is nothing on record to show that each branch of family would be given directorship permanently, since it is evident that the four sons of G.T.Krishnaswamy Naidu are no longer the members of the Company. It has also been found by the Company Law Board that no material is placed before it even to presume that there is a basic understanding between the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly because the Company owns several cars and one is being used by the second respondent, the same cannot be said to be mismanagement of the affairs of the Company by the second respondent. 20. The second allegation namely, that the first respondent has constructed a big bungalow at its cost worth about several crores and the second respondent is living there without paying any rent cannot also be countenanced, since in the Counter Affidavit, it has been made very clear that the first respondent Company does not own any bungalow at Coimbatore and the second respondent resides at his own house and the Company has nothing to do with the accommodation. When such a categorical statement has been made in the Counter Affidavit of the second respondent, the appellants have not established by any worth coming documents to prove that the first respondent Company owns a bungalow at Coimbatore and the second respondent resides in the said bungalow. 21. As regards the third allegation is concerned, it has been clearly spelled out in the Counter Affidavit that the old machinery's have been sold by the Company at the market price. It is further stated that the Company has modernized its pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Balance Sheet and Profit and Loss Account of the Company. They are unable to understand that the Depreciation amount itself, being a cash accumulation, is a huge hidden reserve and it is ploughed back into the business towards the modernisation of the Plant and Machinery, which is necessary for the very survival of the Company. The alleged suppression and diversion of the funds of the Company is thus a myth fabricated by the ignorant minds of the Petitioners." 24. The above extracted portion of the Counter Affidavit would prove that the allegations of the appellants are far from truth. That apart, the appellants have not established by any acceptable evidence or documents that the Company is not disclosing its actual income in its books. 25. As regards the sixth allegation viz., several lakhs of rupees had been obtained towards loan under various heads and charges is concerned, it is stated in the Counter Affidavit that the alleged transactions involving the dis-investment of the shares held by the first respondent Company in its erstwhile subsidiaries namely, the 8th and 9th respondents herein, took place 3 decades back during the year 1977. It transpires that the second r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll likely to affect the affairs of the company. In the given case on hand, as discussed already, the appellants have not established that neither the second respondent nor the other persons managing the company abused their dominant position and conducted affairs of the company in such a way which is prejudicial to the interest of the company. No material has been placed to substantiate the allegation of mismanagement. It is the common law that burden of proof of mismanagement lies always on a person who pleads the same. Some details have to be given on the said allegation. Otherwise, it would not be possible for the Courts to examine those allegations. On the facts and circumstances of the case, I am of the view that there was no basis for the finding that the second respondent or the other Directors had abused their fiduciary power or has abused the affairs of the company in breaching of its articles or the Act. 29. In view of the discussions made above, I am of the considered view that the appellants have not made out a case of mismanagement against the second respondent or his associates. The Company Law Board has dealt with this issue extensively and came to the right co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts were issued with bonus shares, besides dividend on an average of 15% every year even after the death of their father. There is also evidence to show that notice of AGM was served on the appellants and the annual reports were also sent to them periodically. Considering those aspects, the Company Law Board found that the interest of the appellants is well taken care of by the majority group and that the appellants have failed to prove the oppression by majority of the shareholders. I am in entire agreement with the said finding of the Company Law Board. 33. To summarize the issue, the following factors would establish that absolutely the appellants have not proved 'oppression' as pleaded by them viz., (A) Admittedly, no right was reserved for the family members to be on the Board as of right. Not even there is no material to show that there was understanding within the parties for equal participation in the affairs of the company. (B) The Articles of Association do not specify that there must be a representation to the Board from each branch of the family. Thus, as per the Articles of Association, absolutely power is vested with the Board of Directors to fill up the offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 397 of the Act is, thus, extracted hereunder:- " 397. (1) Any members of a company who complain that the affairs of the company are being conducted in a manner oppressive to any member or members including any one or more of themselves may apply to the Company Law Board for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1) the Company Law Board is of the opinion-- (a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up;the Company Law Board may, with a view to bringing to an end the matters complained of, make such order as it thinks fit" 35. In 2008 142 Company Cases page 235 V.S.Krishnan and others v. Westfort Hi-Tech Hospital Ltd. and others, the Hon'ble Apex Court in paragraph 15 of the said judgment, after considering several judgme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tail a court to set aside the issue of shares. In fact, no unfair prejudice has been caused to the petitioners. The Company Law Board failed to take note of all these vital aspects and relied on irrelevant materials. Apart from these, it is pointed out that the company having turned the corner and doing well, it would be fair exercise of discretion by this court not to interfere with the High Court judgment." 36. What is oppression was considered in the decision reported in Jaladhar Chakraborty and Ors. Vs. Power Tools and Appliances Co. Ltd. and Ors., reported in (1994) 79 Company Cases 505 (Calcutta). It would be useful to extract the same and the same is extracted hereunder:- "What does the word 'oppressive' mean in this context ? In our judgment, oppression occurs when shareholders, having a dominant power in a company, either (1) exercise that power to procure that something is done or not done in the conduct of the company's affairs or (2) procure by an express or implicit threat of an exercise of that power that something is not done in the conduct of the company's affairs ; and when such conduct is unfair or to use the expression adopted by Viscount Simonds in Scottis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dversaries fail in showing this, i.e., they fail in showing that a winding up order on the just and equitable ground would unfairly prejudice the adversaries, even then relief, inter alia, under section 402, does not automatically follow as a consequence of success under section 397. The petitioner under section 397 has to satisfy the court on a further point. He just satisfy the court that although the facts are such that a just and equitable winding up of the company is called for, yet were the petitioners to apply for such a winding up and were the petitioners to be even successful in such a petition, yet such order of winding up would unfairly prejudice the petitioners under section 3976 themselves. That is why they come under section 397 and they do not apply under section 433(f), which is the section for just and equitable winding up. In short, for the court to grant relief under section 397, the respondents must fail to show that just and equitable winding up would unfairly prejudice them and the petitioners must succeed in showing that just and equitable winding up would, even if granted, unfairly prejudice the petitioners. Sometimes, in minority petitions, asking the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at their name implies: the contractual terms which govern the relationship of the shareholders with the company and each other. They determine the powers of the board and the company in general meeting and everyone who becomes a member of a company is taken to have agreed to them. Since keeping promise and honouring agreements is probably the most important element of commercial fairness, the starting point in any case under Section 459 will be to ask whether the conduct of which the shareholder complains was in accordance with the articles of association. 41. Yet another decision that was relied on by the learned Senior Counsel appearing for the appellants is reported in (1992) 2 BCLC (1) - O.Neill and another v. Phillips and others, Re a company (No 00709 of 1992). In the said case, the question that was called upon to decide was whether the company's affairs were conducted in a manner unfairly or prejudicial to the minority shareholders. In paragraph 5 of the said judgment, it has been held as follows:- " In s.459 Parliament has chosen fairness as the criterion by which the court must decide whether it has jurisdiction to grant relief. It is clear from the legislative hist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thority to act fairly by taking into consideration all relevant factors relating to such 'legitimate expectation'. Within the conspectus of fair dealing in case of 'legitimate expectation', the reasonable opportunities to make representation by the parties likely to be affected by any change of consistent past policy, come in." But, the above principle cannot be extended in company law. Doctrine of 'legitimate expectation' is mostly confined to the right of a fair hearing before a decision which results Com.Appeal Nos.14, 15, 17 & 18/2006 55 in negativing a promise or withdrawing of an undertaking. For getting the benefit of legitimate expectation, there should be a clear promise or a clear and unambiguous representation and burden of proof is on the person who claims the benefit on the basis of legitimate expectation. This principle that is applicable in administrative law is unknown on company law. in any event, in this case, it was not proved by the petitioners that there was any promise made by the Chairman that they will continue as directors for ever because of their investment. As observed in Union of India and others v. Hindustan Development Corporation and others ((1993....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive right' to which a relationship between company members may given rise in a case when, on equitable principles, it wold be regarded as unfair for a majority to exercise a power conferred upon them by the articles to the prejudice of another member. I gave as an example the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company. In such a case it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms. The aggrieved member could be said to have had a 'legitimate expectation' that he would be able to participate in the management or withdraw from the company. ..." 46. However, in the same judgment, in paragraph 8, it has been held as follows:- "(8) ... I do not thin that there is any support in the authorities for such a stark right of unilateral withdrawal. There are cases, such as Re a company (No 006834 of 1988), ex p Kremer (1989) BCLC 365, in which it has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l appearing for the appellants contended that in ground (h), (s) and (t), the appellants have pleaded an exit from the company. But, I am unable to accept the said contention of the learned Senior Counsel appearing for the appellants. In ground (h), what all that has been stated is that " the petitioners waited long enough for the second respondent to make necessary arrangements for their exit. ... The second respondent realising that the petitioners' father had no male issues and after his death, has been avoiding whenever the petitioners or their representatives tried to meet him for an amicable settlement of either bringing them on the Board or their nominees or making necessary arrangements to spin off one of the undertakings to the petitioners for their due entitlement". 51. Again, in ground (s) and (t), it is stated as follows:- " (s) The company is being managed by one family to the exclusion of the other family. Therefore, the petitioners have a legitimate grievance of being oppressed by the majority shareholders and the petitioners claim to be on the Board of Company is justified. Therefore, the petitioners have established oppression and the denial of legitimate exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respondent that the intention of the appellants is to spin off one of the three units of the company and when it has not been materialised, they have gone to the Company Law Board making an allegation of mismanagement and oppression. 53. Even otherwise, if the appellants need to exit from the company, they are at liberty to invoke clauses 23 to 26 of the Articles of Association and get their shares transferred. However, they have failed to do so. Having failed to do so, they cannot make a complaint against the company or the second respondent. 54. Learned counsel appearing for respondents 1 and 2 contended that when there is no oppression or mismanagement, no relief of sale or otherwise can be granted. To the said proposition, learned counsel appearing for the second respondent relied on the following decisions:- (A) In (1994) 79 Company Cases 505 (Calcutta) Jalandhar Chakraborty and others vs. Power Tools and Appliances Co. Ltd., and others, it has been held as follows:- " 64. The last question to be decided in this matter is whether the court can compel the company or the respondents to purchase the shares of the petitioner, AS noted above the petitioners are willing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appeal succeeds on the finding that the holding company has failed to make out a case of oppression, the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same position in which they would have been, if the meeting of May 2 were held in accordance with law..... There is no reason why we should not call upon the Indian shareholders to do what they were always willing to do, namely, to pay to the holding company a fair premium on the shares which were offered to it, which it could neither take nor renounce and which were taken up by the Indian shareholders in the enforced absence of the holding company. The willingness of the Indian shareholders to pay a premium on the excess holding or the rights shares is a factor which, to some extent, has gone in their favour on the question of oppresion. Having had the benefit of that stance, they must now make it good. Besides, it is only meet and just that the Indian shareholders who took the rights shares at par when the value of those shares was much above par, should be asked to pay the difference in order to nullify their unjust and unjustifiable enrichment at the cost of the h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... complain of unfair conduct if he has made no attempt to use the valuation machinery provided for in the articles. (D) In (1989) BCLC 365 Re a company (No 006834 of 1988), exparte Kremer, it has been held that the principle to be derived from the cases is that when it is plain that the appropriate solution to a breakdown of relations is for the petitioner to be able to sell his shares at a fair price and the articles contain provisions for determining a price which the respondent is willing to pay or the respondent has offered to submit to an independent determination of a fair price, the presentation or maintenance of a petition under Section 459 of the 1985 Act will ordinarily be an abuse of the process: See Re a company). (E) In the case of Palghat Exports Pvt. Ltd. v. T.V.Chandran and others reported in (1994) 79 Company Cases 213 (Ker), it has been held that a shareholder cannot get the relief under Section 397 of the Act in order to settle his personal problem. It has been further held that ' it is difficult for us to discern a different object which will satisfy section 397 of the Companies Act other than an outside object of Section 397 of recovering the amount invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iscretionary relief and apart from that, the appellants have not made out any case either under Section 397 or 398 of the Act. 58. Yet another decision that has been relied on by the learned Senior counsel appearing for the appellants is reported in (1983) 53 Company Cases 883 (Calcutta) Sishu Rangan Dutta and Anr. vs. Bhola Nath Paper House Ltd. The question that has been called upon in the said decision was whether the Courts have power to divide the assets of the company. In the said case, a Special Officer was appointed to divide the assets of the company. Relying on the said decision, it has been contended on behalf of the appellants, by the learned Senior Counsel appearing for the appellants, that this Court has got ample power to appoint a Chartered Accountant to value the assets of the company and allot a share over the property. But, in the said decision, in view of the dispute between the two groups, there was a deadlock in the company and the two groups could not carry out the business of the company. Apart from that, mismanagement and oppression were proved in the said case. Paragraph 17 of the said judgment is thus, extracted hereunder:- "17. Regarding the questi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heir representation to enter on the board deserves to be granted or alternatively, it is contended by the learned Senior Counsel that the appellants should be permitted to sell their shares to the second respondent or other Directors for a fair price. However, as rightly contended by the learned counsel appearing for respondents 1 and 2, that is the case where the petitioner thereon established oppression by the respondents. Hence, the said judgment will not be applicable to the case on hand. 60. Learned Senior Counsel appearing for the appellants relied on the decision reported in (2007) 138 Company Cases 897 (Mad) M.S.D.C.Radharamanan v. M.S.D.Chandrasekara Raja and another, and contended that even in a case where technically speaking there may not be any oppression within the meaning of Section 397 of the Act for the purpose of setting right thinks, the Court could pass orders under Section 402 of the Act. He has further contended that if there is inter se factional dispute between two groups in a company, the share of one group could be directed to be purchased by the other company. However, that is the case where father and son were the only two shareholders / Directors. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould be necessary. But, the Company Law Board is not powerless to pass any other or further order in the interest of the company, if it is of the opinion, that it would protect the interest of the company. 63. Even the judgment reported in (1984) 55 company Cases 462 (Delhi) Eastern Linkers Pvt. Ltd., vs. Dina Nath Sodhi, which was relied on by the learned Senior Counsel appearing for appellants has no application to the present case on hand since on facts in the case cited, though the company in question was a company in reality, it was found that it is a partnership between two individuals, who were Directors and serious dispute has arisen between them and hence, it was held that it would be just and reasonable to order winding up of the company. 64. In the case of Brownlow v. G H Marshall ltd and others reported in (2002) 2 BCLC 655 (Ch D), it has been held that the position was that brother and sisters were equal shareholders and were Directors of the company. When the sister was removed from Directorship, she commenced the proceeding under Section 459 of the 1985 Act seeking for a direction to purchase her share at a value to be determined by the Court. In such circumsta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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. 33. The principle of 'just and equitable' clause baffles a precise definition. It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case. There are necessarily equitable considerations and may, in a given case, be superimposed on law. Whether it would be so done in a particular case cannot be put in the strait-jacket of an inflexible formula. 34. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y vs. Commissioner of Income Tax, Bombay. The relevant portion made in paragraph 7 of the said judgment is usefully extracted hereunder:- " ... That a shareholder acquire a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company ..." 68. In the decision reported in (2009) 151 Company Cases 502 (Delhi) Ravi Raj Gupta and others v. Hans Raj Gupta and Co. P. Ltd., and others, which was relied on by the learned counsel appearing for the second respondent, it has been held that " a shareholder has a right only to the dividend and of participation in the annual general meetings and to vote there. A shareholder has no "say" in the management unless and until he becomes part of the management'. 69. When an appeal can be entertained by the Company Law Board, was considered in the judgment reported in (2004) 122 Company Cases 161 (SC) Dale and Carrington Invt. P. Ltd and another vs. P.K.Prathapan and others. In the said decision, it has been held that it is settled law that if a finding of fact is perverse and is based on no evidence, it can be s....