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TMI Blog1961 (8) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... sister's husband. Thakur Dass and respondent No. 2, Shiv Saran Singh, are owners in equal shares of the property known as Bellevue South at Simla. In April, 1950, Thakur Dass executed a deed of gift transferring his half share in the house to the two petitioners and respondents Nos. 3 and 4 in equal shares. Thakur Dass ran a hotel business in this building under the name and style of "Royal Hotel and Restaurant, Simla" as its sole proprietor. He executed a deed of gift transferring the ownership of the hotel business to his four sons, the two petitioners and respondents Nos. 3 and 4, giving them each 12 per cent. The remaining 52 per cent, share was gifted by him in favour of respondent No. 2, Shiv Saran Singh. The result was that the two petitioners had become owners to the extent of 24/rooths share in the hotel business and respondents Nos. 3 and 4 had similar interests The share of respondent No. 2 in the business is 52/rooths. The donees decided to run the hotel business as a private limited company styled as "Thakur Hotel (Simla) Company Private Ltd." The company was incorporated in September, 1950, but the business had been running since 19th April, 1950, the date of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be pocketed by respondents Nos. 3 and 4 and they ran the affairs of the company to their personal advantage and committed a number of irregularities including misappropriation of the funds. The affairs of the company were being mismanaged. It was also stated that no meeting of the members of the company took place until 7th June, 1952. Ram Sarup, respondent No. 4, had been convicted by the Magistrate in 1951 for forging the Matriculation certificate of the Punjab University and he, therefore, had to leave service of the Government. The company appointed him manager in November, 1951. It was alleged that in May, 1951, the books of the company were not written up and large amounts were misappropriated and respondent No. 3, Manohar Singh, admitted that a sum of Rs. 3,000 was due from him though he had retained much larger amount. Respondent No. 3 was consequently removed and in his stead respondent No. 4 was appointed as the manager and the affairs of the company thus remained entirely in the hands of respondent No. 4. Despite the petitioners having pressed for their inclusion on the board or in the management, their request was turned down. It is then stated that no balance-shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d funds of the company and had been running its affairs to their maximum personal advantage had been repudiated. In May, 1951, Manohar Singh, respondent No. 3, was removed and Pritam Singh, petitioner, was appointed in his place. At that time a sum of Rs. 5,337-12-9 was debited to his accounts. The reason why the accounts could not be written up for this period was that the petitioners had never submitted the it accounts. After respondent No. 4 had become the manager on 21st November, 1951, he got the accounts properly written up for the period up to 30th April, 1951, from what ever records were available in the office and that the accounts for the period commencing 1st May, 1951, up to date have been regularly maintained. It was dented that the share of the rent of the house due to the petitioners is not being given to them. They have been paid this rent after amounts due to the company from them on account of their board and lodging on the premises of the company had been deducted. Regarding the petitioners' complaint as to inspection of the books of the company it was stated that the petitioner, Prem Singh, by his letter dated 28th/3oth March, 1955, had asked for inspection of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Pritam Singh had become manager from 1st May, 1951, to 20th November, 1951. He also admitted that he was allowed inspection of the books and similarly facility was also given to his brother when it was asked. He admitted his signatures and those of his brother on the memorandum and articles of association of the company. He also admitted that according to the terms of agreement, exhibit P-75, there were to be two directors of the company, one being Shiv Saran Singh, respondent No. 2, and the other one out of the four brothers, and that Manohar Singh, respondent No. 3, was the second director representing these four brothers. On behalf of the company, two witnesses were produced. R. W. 1 is K.N. Chandla, chartered accountant. He was appointed by the company as auditor in 1954 to audit the accounts for the year 1953-54. He was also asked to audit the accounts for the previous years 1950-51, 1951-52 and 1952-53 which was done in 1955. Since 1953-54, he has been auditing the accounts of the company every year. According to him, the company was maintaining accounts and account books in a regular manner. In his cross-examination, he mentioned that the reason for reauditing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners has to make out that the affairs of the company were being conducted in a manner oppressive to them and, further, that the facts, justify the making of a winding-up order on the ground that it was just and equitable that it should be wound up though in the circumstances it would unfairly prejudice them if the company were ordered to be wound up. I am not satisfied as to the petitioners having satisfied these two conditions which are precedent before the relief as prayed or any other relief could be given to them. They are admittedly in minority having a holding of 24 per cent, only in the share capital of the company. One of the acts of oppression, according to them, is that they have not been taken on the board of the company as directors. According to the agreement, exhibit P-75, and also according to file articles of association of the company to which they are also signatories as promoters, they had agreed that the company should have two directors. They cannot, therefore, have a legitimate grievance that there are not five directors. The articles of association mention that the two directors are going to be respondents Nos. 2 and 3, The petitioners made certain vague all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner has been concentrated on raking up the past without any reference to the conduct of the affairs of the company in the subsequent years from 1954 up date. My attention was also drawn to Loch v. John Blackwood Ltd, [1924] AC. 783 Lord Shaw said at page 788: It is undoubtedly true that at the foundation of applications for up, on the 'just and equitable' rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore, the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up." A conduct is oppressive if it is "burdensome, harsh and wrongful" (vide Scottish Co-operative Wholesale Society Ltd. v. Meyer [1958] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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