1960 (12) TMI 103 - HC - Companies Law

Summary

Issues Involved:

1. Petition for winding up the Company under Section 439 of the Indian Companies Act, 1956.
2. Allegations of oppression and prejudicial conduct by the majority shareholders.
3. Failure of the main object and substratum of the Company.
4. Introduction of new matters and allegations after the filing of the petition.
5. Alleged deadlock in the management of the Company.

Issue-wise Detailed Analysis:

1. Petition for Winding Up the Company:
The petitioners sought the winding up of the Akola Electric Supply Company (Private) Limited under Section 439 of the Indian Companies Act, 1956. The petition was initially rejected in limine but was later admitted by the Division Bench and sent for final hearing. The petitioners argued that the Company had failed in its primary objective of supplying electric energy due to the expiration of its license and the subsequent takeover by the Bombay State Electricity Board.

2. Allegations of Oppression and Prejudicial Conduct:
The petitioners alleged that the Brijlal group, which managed the Company, conducted themselves in an oppressive manner, particularly by not distributing dividends to the Bilasrai group. They claimed that this conduct was prejudicial to the interests of the Company. The respondents denied these allegations, asserting that the management was being run smoothly and economically, with no misconduct or misapplication of funds.

3. Failure of the Main Object and Substratum of the Company:
The petitioners contended that the main object of the Company, which was to supply electric energy, had failed due to the expiration of the license and the Government's policy of taking over electric undertakings. They argued that the substratum of the Company had gone. The respondents countered that the Company had multiple objects, and the failure of one object did not mean the failure of the substratum. They also argued that the Company could still utilize the compensation money for new ventures within the objects of the Company.

4. Introduction of New Matters and Allegations:
During the hearing, the petitioners introduced new matters, including an affidavit and a letter (Ex. A) indicating that the compensation money might be used to discharge the Income Tax liabilities of the partners of Sarupchand Prithiraj. The respondents opposed this introduction, arguing that the petitioners should confine themselves to the original allegations. The court allowed the new matters, stating that they were relevant to determining whether the Company could start a new venture.

5. Alleged Deadlock in the Management of the Company:
The petitioners claimed that irreconcilable disputes between the Bilasrai and Brijlal groups had created a situation analogous to a deadlock in the management of the Company. The respondents denied this, stating that there was no deadlock and that the management was functioning smoothly. The court found that the disputes did not reflect a deadlock in the management and that the petitioners had other remedies available, such as suits for the recovery of dividends.

Conclusion:
The court concluded that the petitioners had failed to prove that the substratum of the Company had gone or that it was impossible for the Company to start a new venture. The court also found that the disputes between the shareholders did not amount to a deadlock in the management. Therefore, the petition for winding up the Company was dismissed with costs.