9911796707
TMI Blog1957 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ; the petitioner and respondents 2 and 3 owning ten shares each and respondents 4 and 5 owning 5 shares each. The main activity of the company consists in conducting the business of clearing and forwarding agents for loading goods in the Masulipatnam Port into ships which anchor at a distance from the shore through country craft owned and possessed by it. Among the properties acquired by the company on its formation are the rights, interests and the benefits of all existing contracts then possessed by P. V. Rangayya of Masulipatnam and his family. Contemporaneously with its formation, the company entered into an agreement with the said Rangayya as a consequence of which his business of stevedoring was taken over by the company as a going concern. The third respondent was the former managing director of the company and the petitioner is its present managing director, he having been appointed at a meeting of its directors to serve for the period from 15th July, 1955, till 31st March, 1957. The grounds on which the relief is claimed are set out in paragraph 18 of the petition and they are: "In view of the serious misunderstandings and loss of confidence among the two rival parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be wound up. None of the grounds mentioned in clauses ( a ) to ( d ) form the basis of the petition. Clause ( e ) also is not applicable because it is common ground that the company has no debts to pay. The only ground on which the petitioner, therefore, claims relief is under clause ( f ), that is, that it is "just and equitable" that the company should be wound up. Here it is necessary to mention that the fourth and fifth respondents have filed an application No. 95 of 1956 under sections 397 and 398 of the Companies Act for the appointment of an administrator to administer the affairs of the company and for associating both of them with the said administrator in the management of the company. The averments contained in the affidavit filed in support of this application are that the petitioner and the second respondent are anxious to liquidate the company so that they might purchase the assets of the company at a low price, that the third respondent is also actively associating himself with the business started by his brothers and, therefore, he is not put to loss if the company is wound up. Therefore, while according to them it is neither "just and equitable" that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with regard to the allegations contained in the petition sent to him by the fourth respondent. On the 26th of August, 1956, the petitioner and respondents 2 to 5, i.e. , all the shareholders of the company, met at the registered office of the company and passed the following resolutions: "(1)It has been agreed to sell by auction profitably to the company before 15th October, 1956, the following properties, viz., the assets of the company, i.e. , godowns, building sites, boats, launch, stocks and goodwill and all other properties as also the interests in other companies, that is Maiden Co., and all other companies. The shareholders of the company are requested to bring bidders by making the necessary efforts and carrying on negotiations with others. It has been resolved to appoint the necessary approving officer for carrying out this work. (2)It has been resolved to proportionately divide the balance of the amounts as per accounts after auditing the accounts subsequent to the completion of the audit till 31st March, 1956, and after holding a general body meeting. The time limit for this has been fixed as 15th December, 1956. It has been resolved that from this day till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit that finding vast scope for expansion of the shipping contract business at the port and finding that the company was not in favour of expanding its business by constructing more 'lighters,' his brothers thought it wise to start shipping business in order to attract at least a portion of the trade that was going to Kakinada Port from Krishna district and other areas nearer to Masulipatnam. He, however, denied that he and respondents 4 and 5 had any concern with that business. He also denied that the firm of P. V. Rangaiah Sons Co. ever competed with the business of the company. That firm consists of five partners of whom three are the brothers of the third respondent and what is more important, the wife of the third respondent is also a partner of P. V. Rangaiah Sons Co. Therefore, though the third respondent is not eo nomine a partner of that firm, as is but natural, he is interested in promoting the shipping business of the firm. This was in fact one of the complaints by the fourth respondent in his petition to the Registrar of Companies, Andhra, referred to supra. The third ground of complaint made by the petitioner is that the company and respondents 3 to 5 own e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the shareholders, and as has been already noted, respondents 4 and 5 themselves have filed applications for an enquiry into the affairs of the company by an inspector appointed by the Central Government and also for the appointment of an administrator to administer the affairs of the company. From the above consideration of the respective averments made by the parties, it is safe to conclude (1) that there are serious misunderstandings among the shareholders of the company ; (2) that the third respondent is actively engaged in promoting the interests of a firm which is conducting the same business ; and (3) that there has been no satisfactory accounting with regard to the sum of Rs. 50,000 by respondents 3 and 4. On the above conclusions, the question for determination is whether it is just and convenient to make an order for the company being wound up. It is contended for respondents 4 and 5 by Mr. Seshachalapathi that the above circumstances, even if found to exist, would not justify the passing of an order while it is argued by the petitioner's counsel, Mr. Somasundaram, that in the case of a small private company facts which would justify the dissolution of a partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es had thereby arisen in carrying on the business of the company and things had reached a position of complete deadlock. Under the circumstances, Neville J. held that, having regard to the position into which the affairs of the company had drifted, it was just and equitable to make an order for the winding up of the company. Palmer's Company Law (Nineteenth Edition), contains the following statement of the law at page 378 : "In the case of a small private company facts which would justify the dissolution of a partnership may be a ground for a winding up order." A similar statement of the law is contained in Lindley on Partnership, Eleventh Edition, at page 693. The above discussion of the law establishes that facts justifying an order for dissolution of a partnership would equally justify the making of a winding up order in the case of a small private company. At present the position of the company is this: The company consists of five shareholders. The petitioner and the second respondent, holding among themselves shares of the value of one lakh of rupees out of the subscribed capital of two lakhs, pray that the company should be wound up. The third respondent does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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