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TMI Blog2007 (8) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... is no longer possible as the company's licence to carry on such business has been revoked and, given that the company was an association of two individuals having equal measure of rights therein, there would be no useful purpose in letting the company live. 3. The key facts are not in dispute, though the respondents assert that the petitioners no longer have a representative on the board of the company and that it is the husband and wife team of the second and third respondents which has control of the management. 4. The husband and wife team of the petitioners refers to the lack of probity on the part of the second and third respondents in the conduct of the company's affairs, of the assets of the company having been usurped and of the petitioners being denied any say in the company's affairs and participation in its remaining business. There are charges made in the petition that should ordinarily adorn a petition under sections 397 and 398 of the Companies Act in an action for redressal against oppression and mismanagement. The petitioners cite these as further grounds, in addition to the deadlock, to suggest that in the event mere deadlock is not enough in justice and equity f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each, their wives held 3500 shares each and the two brothers as karta of their individual Hindu undivided families held 100 shares each. The respondents refer to an oral partition following which the family office at room No. 7, 23A, Netaji Subhas Road, Calcutta-700 001, a rented accommodation, was halved, one brother retaining the No. 7 and the other getting the new room shown as room No. 7A. According to the respondents, following the oral partition, the company came to the second respondent and several other businesses and assets of the family were taken over by the first petitioner. The respondents claim that it was only after such partition and while the formalities to effectuate it had not been completed, that the first petitioner attempted to sabotage the business of the company. The respondents suggest that notwithstanding the petitioners continuing to be shareholders in the company, the second and the third respondents are beneficially entitled to the entire paid up capital in the company as the petitioners were required to transfer their shares in the company to the second and the third respondents in terms of the oral partition. Contrary to what the petitioners claim, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and 398 of the Companies Act cannot be resorted to for solving a genuine deadlock in the absence of any established misfeasance or malfeasance by one group to the prejudice of the other. If the parties have lost all confidence amongst them and it is not possible for them to carry on business jointly or provide for an acceptable management, the only way out seems to be to wind up the company and if necessary in the instant case to dissolve the existing partnership. The assets, if any left, will be available to the parties for distribution. On the facts of this case, the dispute in the management of the company cannot be solved in the domestic forum inasmuch as the two opposing groups hold equal shares. The court also cannot through its officers continue to manage the company for all times to come. The petitioners have also not been able to make out a case of substantial injustice which can be set right by the court invoking the principles laid down in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC); AIR 1981 SC 1298. For the reasons stated above, I am not inclined to and do not pass any order on this application except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as. 223 (Delhi); V.V. Projects and Investments (P.) Ltd. v. 21st Century Construc-tions (P.) Ltd. [1997] 90 Comp. Cas. 346 (AP.) and Palaniappan S. v. Tirupur Cotton Spg. & Wvg. Mills Ltd. [2003] 50 SCL 293 (Mad.), in support of the contention that relief under section 433(f) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious to protect the general interest of the company, that such clause can be invoked only in compelling circumstances and the court has to weigh the interests of the shareholders and the creditors of the company before making an order thereunder. 13. Both sides have referred to the Supreme Court's recognition of partnership principles in company law in the judgment reported at Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla [1976] 46 Comp. Cas. 91 (SC) ; AIR 1976 SC 565. The petitioners refer to such judgment for the recognition therein that the sixth clause in section 433 of the Act is not to be read as being ejusdem generis with the preceding five clauses. The respondents cite it in support of their contention that such clause can be used to wind up a company upon the court's satisfaction th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first petitioner having called upon the Reserve Bank not to renew or cancel the company's licence, is enough for the first petitioner to be disqualified from seeking justice and equity in having the company wound up. 16. The petitioners have alleged ouster from the management. A charge of such ouster can be maintained, in appropriate action, both on grounds of illegality and on grounds of inequity. A perfectly legal act may be inequitable and an illegal act may, in the larger interest of the company, be justified. The petitioners here cite the exclusion of their nominee on the board and the induction of the third respondent as an illegal act and hasten to insinuate that such illegal act was per se inequitable. It is not necessary that the one must follow the other and in considering whether it is just and equitable to wind up a company, an act of illegality is tempered by a justification thereof on the ground of necessity. The first petitioner's exclusion and the third respondent's induction on the company's board need to be weighed against the first petitioner's conduct. He may have been justified in alleging that company funds had been defalcated by his brother but in issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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