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TMI Blog1967 (8) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. There is thus a totality shareholding of 67 paid up shares. The latter 42 shares held by Subbiah Asari and his group are characterised by the petitioner as the other group of shareholders. The petitioner's case is that he was induced to join the company by Subbiah Asari, who was unable to find the working capital necessary for the running of the firm. At the instance of Subbiah Asari, the petitioner is reported to have joined the company. His complaint is that, though he was on the board till March 31, 1965, he was not served with any notice of the annual general meeting held in June, 1965, and his further case is that himself and his brothers were eliminated from the directorate at the said annual general meeting. He also alleges that Subbiah Asari is bent upon completely and totally ignoring the interest of the petitioner's group and is conducting the affairs of the company in a manner totally incompatible with the normal functioning of the company. The petitioner has alleged that the directors were taking salaries contrary to the practice and law, Subbiah Asari's group are unable to do real business and that the company is working at a loss. He would also state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he was able to secure certain important contracts after the petitioner and his group of shareholders left the board of management and that he has substantially brought down the mortgage debt of the company and that at no time there was any effort on his part to deliberately keep out the petitioner and his group of shareholders from acquainting themselves with the affairs of the company. In fact, his complaint is that the petitioner and his group of shareholders did not attend the annual general meeting held in June, 1965, and in their absence nothing more could be done than what actually happened on that date in that meeting. He alleged that he at no time entertained any malice against them and that at no time did he do any act so as to prevent them from knowing the affairs of the company. Subbiah Asari contends that he was in management of the company under article 12, as he, as the managing director, was the only person who was to be in control and charge of the affairs of the company. He has also filed a supplemental affidavit and a supporting affidavit from a third party, who is the mortgagee over the fixed assets of the company. In his supplemental affidavit, he reiterates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des the company court in the matter of accepting oral evidence as is available in the common law courts of our country, yet it is desirable in a given case to permit such oral evidence if the circumstances and propriety of the case require. Such a procedure is adopted only to foster justice and right a wrong. As pointed out by a Division Bench of this court, in Veeramackineni Seethiah v. Venkatasubbiah [1949] 19 Comp. Cas. 107 ; AIR 1949 Mad. 675 . " There is no inflexible rule or practice prohibiting the adducing of oral evidence, or the cross-examination of the deponents of affidavits in winding up applications. Where necessity suggests or expediency requires it is open to the judge trying winding-up proceedings to allow oral evidence." P. W. 1 the petitioner examined himself. It is the accepted case of the petitioner that he and his two brothers served on the board till March 31, 1965. In fact, it has been brought out in his examination that notices of meetings were received either by one of the brothers who was a shareholder or even by one of their employees. The petitioner's case is that, contrary to the promise made by the managing director, he was designedly exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate limited company, as in this case, creates certain rights and obligations between its members and the company. The right of management having been exclusively vested in the managing director, it does not lie in the mouth of the petitioner to contend that there was an independent contract, de hors the articles in question, which contemplated joint management. This would be re-writing the articles and importing into it something which it does not mean. If the petitioner wanted an amendment of the article in question, he could have sought the relief through an appropriate process. He cannot press into service a contract which cannot fit in with the. accepted and accredited contract as disclosed in the articles. The petitioner therefore cannot avail himself of the alleged understanding between him and the managing director, and complain that he has been ousted from management. Even if the petitioner could avail himself of such a gentleman's understanding, has it been proved in this case ? The sheet anchor of the argument of the learned counsel for the petitioner is that there is no evidence contra to that spoken to by the petitioner and therefore the arrangement is proved. Let u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and appears to be an afterthought as if they were excluded from the board at a meeting held on June 3, 1965, which they never cared to attend. What would have happened, if they had attended, nobody can conjecture; From the prevaricating answers P.W. 1 gave in the matter of attending board meetings, service of notices of such and other meetings and on other relevant facts, I do not believe that P.W. 1 and his brothers did not receive the notice of the annual general meeting held in June, 1965, when directors were re-elected. As a matter of fact, P.W. 1 and his brothers were participating in the affairs of the company, receiving the agreed remuneration for having discharged their duties as directors, and in fact the petitioner's brothers had to file a suit for the recovery of such money due to them. They having received what according to them was "salary" it would be a paradox if the petitioner's contention that they were excluded, is accepted. It is only after they were not re-elected to the board, the petitioner and his brothers, in a fit of frustration, have set up a case of partnership in the management and a breach of an undertaking on the part of the managing director to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses ( a ) to ( e ) of the said section. Clause ( f ) or the "just and equitable" clause as it is commonly referred to, operates independently and has a precise import and content of its own. Justice, equity and good conscience is a salutary rule in jurisprudence which prompts company courts to act in real and compelling circumstances particularly because it relates to the winding up of a company. Existence of factions amongst shareholders, bickerings at between one group and another group of members, vague allegations against the quality of management by the person in charge of the company, and mere exclusion from management, as in the instant case, cannot by themselves be a ground for winding up of a company. Proved malversation and conversion of funds, deliberate and wanton oppression by the management in power, of the minority shareholders with a view to make personal illegal gains, indulging in subversive activities so as to jeopardise the substratum of the company, a justifiable lack of confidence in the conduct and management of the company's affairs due to lack of probity on the part of those in management, where there is open mismanagement and there is no panacea to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by Mr. Ganapathi reported in In re Lundie Brothers Ltd. [1965] 2 All ER 692; [1965] 35 Comp. Cas. 827 cannot take his case farther. That was a case where though no element of probity or fair dealing to the petitioner in his capacity as shareholder in the company had been established, yet it was found as a fact that blows were exchanged between the two groups of parties, there was incompatibility of temperament between them and the employment of one of the petitioners therein as working director was unlawfully terminated, which almost was equated to deliberate ouster from management. No such telling circumstance appears in the instant case. There is no proof either that this company was formed on the basis of a quasi partnership. Lord Clyde, Lord President of the Court of Session, in Baird v. Lees [1924] SC 83 at: 92 says: "I have no intention of attempting a definition of the circumstances which amount to a 'just and equitable' cause. But I think I may say this. A shareholder puts his money into a company on certain conditions. The first of them is that the business in which he invests shall be limited to certain definite objects. The second is that it shall be carri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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