1994 (2) TMI 244 - HC - Companies Law

Summary

Issues Involved:
1. Winding up of three private limited companies.
2. Appointment of a provisional liquidator.
3. Transfer of shares and management rights.
4. Allegations of oppression and denial of benefits.
5. Just and equitable grounds for winding up.
6. Non-declaration of dividends and financial mismanagement.
7. Quasi-partnership and equitable considerations.

Detailed Analysis:

1. Winding Up of Three Private Limited Companies:
The appellant filed petitions under sections 433(e) and (f), 434(1)(a), and 439(1)(b) of the Companies Act, 1956, for the winding up of Fostenex Private Limited, Toolex Private Limited, and Brightenex Private Limited. The appellant argued that she had received no assets as a share in the companies and sought the appointment of a provisional liquidator to take charge of the companies' affairs.

2. Appointment of a Provisional Liquidator:
The trial court dismissed the petition for the appointment of a provisional liquidator. The appellant moved an interim petition for such an appointment during the appeal. The respondents opposed this, asserting that the companies had done nothing to deny the appellant her legal dues, which were limited to holding shares.

3. Transfer of Shares and Management Rights:
The respondents admitted that the shares held by the appellant's deceased husband were transferred to her. However, they denied her the right to be a director or managing director, asserting she was only entitled to the shares and associated benefits, not a management role.

4. Allegations of Oppression and Denial of Benefits:
The appellant claimed that her father-in-law and brother-in-law denied her legitimate shares, a management position, and the benefits of her husband's shares. She alleged that the companies had not declared any dividends and had not paid her any money, while the respondents drew substantial salaries and perquisites.

5. Just and Equitable Grounds for Winding Up:
The appellant argued that the respondents' actions justified a winding up order under the "just and equitable" clause of section 433(f) of the Companies Act. The court noted that this clause is a remedy of last resort, invoked when other remedies are not sufficient to protect the general interests of the companies.

6. Non-Declaration of Dividends and Financial Mismanagement:
The court expressed concern over the non-declaration of dividends despite the companies being profitable. This adversely affected the appellant while benefiting the respondents, who drew substantial emoluments. The court referenced case law indicating that failure to declare dividends and oppression of minority shareholders could justify a winding up order.

7. Quasi-Partnership and Equitable Considerations:
The court considered whether the companies were essentially partnerships in the guise of private limited companies. It noted that in cases of quasi-partnerships, equitable considerations could justify a winding up order. The court found sufficient evidence of a personal relationship involving mutual confidence between the parties and a breach of that confidence by the respondents.

Conclusion:
The court directed that the companies continue functioning with the appellant being appointed as a director in all three companies, receiving the same emoluments her husband would have received. Specific orders included:
1. Respondents to furnish details of the board of directors and withdrawals made by them.
2. Deposit amounts equivalent to what the appellant's husband would have drawn.
3. The appellant to withdraw half of the deposited amount each month without security.
4. The order to prevail over any subordinate court orders.

The appeals were allowed to the extent indicated, with no order as to costs.