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Issues Involved:
1. Complete failure of substratum and no hope of revival. 2. Deadlock in management due to lack of probity. 3. Company in the nature of a partnership, justifying dissolution. 4. No alternative remedy except winding up. 5. Majority of creditors/shareholders support winding up. Detailed Analysis: Ground No. 1: Complete Failure of Substratum and No Hope of Revival The substratum of the company has disappeared because the object for which it was incorporated, i.e., manufacturing of FRP light fittings, has completely failed. The company has not been able to manufacture and sell such products on a commercial basis. The financial position is dire, with significant losses and liabilities far exceeding the annual sales. As per exhibits P-18 and P-19, the company has to repay loans of Rs. 15.5 lakhs and has a carry-forward loss of Rs. 8.8 lakhs, while the gross sales per annum are only Rs. 90,000. The balance sheets indicate that the company is not a viable unit. The activities have virtually come to a standstill, and the machinery is lying unutilized. The principles enunciated in the cases of Seth Mohan Lai v. Grain Chambers Ltd. and Virendra Singh Bhandari v. Nandalal Bhandari and Sons Ltd. were applied, confirming that the substratum has failed, justifying winding up. Ground No. 2: Deadlock in Management Due to Lack of Probity The Supreme Court in Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla established that a deadlock in management due to lack of probity could justify winding up. The petitioner was promised a directorship but was only appointed in May 1988, despite investing funds earlier. His salary was never paid, and he was removed from the board in a humiliating manner. Financial irregularities by PV with banks further exacerbated the situation. The company has not been revived or properly managed post-petitioner's removal. The allegations of subversive activities by the petitioner were unsubstantiated. The financial and management issues indicate a complete deadlock, justifying winding up on just and equitable grounds. Ground No. 3: Company in the Nature of a Partnership, Justifying Dissolution The company was formed on a personal relationship basis, with an understanding that the petitioner would be a director. His expulsion from management justifies winding up, as per the principles laid down in Ebrahimi v. Westbourne Galleries Ltd. The company operates like a partnership, and the exclusion of the petitioner from management violates the mutual confidence essential for such a relationship. The Partnership Act, section 44 clauses (c), (d), (f), and (g) apply, highlighting prejudicial conduct, breach of agreements, and the impossibility of carrying on the business except at a loss. The animosity between PV and the petitioner has resulted in a deadlock, further justifying winding up. Ground No. 4: No Alternative Remedy Except Winding Up The petitioner has no effective remedy other than winding up. The company's financial position is untenable, and the petitioner has been unjustifiably excluded from management. Alternative remedies under sections 397 and 398 or other legal actions are not viable. The company was formed for a specific business objective, which has failed. The decision in Yenidje Tobacco Co. Ltd., In re supports this view, emphasizing the need to terminate the company's affairs promptly. The respondent did not suggest any alternative remedy, reinforcing the necessity of winding up. Ground No. 5: Majority of Creditors/Shareholders Support Winding Up Supporting affidavits from the majority of shareholders and creditors have been filed, indicating broad support for winding up. The financial position is irredeemable, with sales significantly lower than the outstanding loans and accumulated losses. The company's machinery is underutilized, and banks have refused credit facilities due to the current situation. The decision in Ramakrishna Industries (P.) Ltd. v. Ramakrishna allows reliance on subsequent events to support winding up grounds. The petitioner has demonstrated a complete failure of substratum, justifying winding up. Conclusion: The company petition is allowed, and the respondent-company is ordered to be wound up under the provisions of the Companies Act, 1956. The petitioner is to deposit Rs. 2,500 with the official liquidator within four weeks. No order as to costs.
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