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TMI Blog2009 (4) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... Nooty Ramamohana Rao, J . This petition has been moved by three shareholders of the respondent-company seeking winding up of the respondent-company, namely, M/s. Pressteels and Fabrications (P.) Ltd. 2. The case of the petitioners is that the respondent-company was incorporated on December 4, 1971, duly taking over the business carried on by a partnership firm under the name and style of "Pressteels and Fabrications". The partners of the said partnership firm have become directors of the company, at one time or the other. In that process the first petitioner, who was earlier a partner in the firm, also became a director of the respondent-company with effect from October 27, 1980 and he ceased to be a director with effect from June 20, 1984. The nominal capital of the company is standing at Rs. 1,00,00,000 consisting of 1,00,000 equity shares of Rs. 100 each. The issued, subscribed and paid-up capital was initially standing at Rs. 33,00,000 comprising of 33,000 equity shares, which are fully paid-up. The first petitioner was holding 1,819 shares, while the second and third petitioners hold 851 and 825 shares, respectively. Thus, the three petitioners together hold a littl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities. Consistently, for the past several years, the respondent-company is not able to execute any contracts and the standard reply that is furnished by it, is that, there is heavy competition in the market and consequently, it is not able to execute any contracts. But, nonetheless the precious funds of the company are being abused and misused by the directors for defraying their travelling expenses running into lakhs of rupees. It is further pointed out that while reflecting on one hand that no business is being carried on, in its books of account, the respondent-company is consistently booking huge sums as expenditure towards payment of professional charges, on the other hand. Thus, clearly indicating the design of misappropriation of the funds of the company. It was also pointed out that the costs on the staff have been regularly booked in the books of account. There is no consistency from year to year maintained on this account. Thus, indicating the hollowness of the claim that the said money is used for meeting the expenditure of the staff. It is nothing but a devise worked out for misappropriation. Be that as it may, the company has been consistently making loss, as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-company to allot proportionate shares to the petitioners herein, if they exercise an option for acquiring them. Company Appeal No. 13 of 2003, filed, before this court against the orders of the Company Law Board has also been dismissed and the Supreme Court, when approached, had declined to intervene in the matter. The petitioners, therefore, point out that the respondent-company has not made any alteration, whatsoever, in its methods of conduct of business and it was carrying on the same old illegal activities, which have all resulted in the substratum of the company being completely lost out. It has, therefore, become just and equitable to wind up the company. 8. The respondent-company has contested the petition. It has pointed out that M/s. Pressteels and Fabrications, was a registered partnership firm and that in the year 1963, it acquired acre 4.30 guntas of land at Fathenagar in Ranga Reddy District, for starting a fabrication unit for the purpose of manufacturing special tools, dies, jigs and special machine tools, etcetera. It was also carrying on-civil, mechanical and electrical contracts and it was registered as a small-scale industrial unit. The said firm execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... away the highly skilled engineers, technicians and workmen of the respondent-company, but however, failed to execute the project promptly and to the satisfaction of the HPCL, resulting in enormous loss of reputation of the respondent-company. The disputes that arose in executing this contract with HPCL have resulted in not so productive a litigation. The first petitioner instituted a civil suit in O.S. No. 174 of 1986, on the file of the City Civil Court, Hyderabad on February 19, 1986,.seeking a decree in a sum of Rs ; 18,45,280. The arbitration proceedings initiated by the respondent-company with the HPCL resulted in an award being passed for Rs. 16,78,763. Therefore, a compromise decree has been passed for the said sum in the aforesaid civil suit. The respondent-company liaisoned with the HPCL to ensure that this money of Rs. 16,78,763 is directly paid to the first petitioner herein. Having, thus, received the decreetal amount in the year 1992 itself, the first petitioner moved an execution petition bearing No. 11 of 1994, on the file of the Additional Senior Civil Judge, Gudiwada, claiming that a further amount of Rs. 1,66,512 is due and payable by the respondent-company on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored. Since the property is owned by the company and not by the first petitioner herein, the company had to file W. P. No. 8780 of 2004 in this court for quashing the order passed on May 3, 2004, by the Joint Collector, Krishna District to protect its possession, the company had to file a criminal revision petition before the District Court, Machilipatnam. By its order dated January 27, 2004, the said court has set aside the order passed by the Mandal Revenue Officer to the extent, he recognised the possession of the first petitioner. The company had also filed a civil suit in O. S. No. 67 of 2001 and obtained an order of permanent injunction restraining the first petitioner from interfering, in any manner, with the land owned by the company at Chinaautapalli Village, near Gannavaram in Krishna District. The said civil suit is decreed on March 3, 2008. The first petitioner filed an appeal before the District Court, Machilipatnam. In the mean time, the first petitioner has approached the National Highways Authority and drawn an amount of Rs. 85,609 towards compensation for a part of the land acquired at Gannavaram for road widening purpose. As is already noticed supra, the land does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se are necessarily equitable considerations and may, in a given case, be superimposed on law. Whether it would be so done in a particular case cannot be ■ put in the strait-jacket of an inflexible formula. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matte r. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition . It is now well-established that the sixth clause, namely, 'just and equitable', is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by it from M/s. K. C. P. Projects Ltd., during the financial year 2007-08. It is, therefore, difficult to assume that the total substratum of the company has been lost out or eroded. Further, the respondent-company was shown paying income-tax for the past few years, thus, indicating that the expenditure booked by it in its books of account towards staff salaries and the fee paid to the professional services secured by it, is not an act of auditing gimmick or artificial booking of an expenditure, but, a real and genuine one', the respondent-company has offered its explanation as to why its plant and machinery was sold for purposes of liquidating its liabilities and as to how the increase in the capital has come in handy for clearing its debts and liabilities to the bank. Further, if an unproductive asset of the company is sought to be developed, in which process the company can gain substantially, does not amount to any unauthorised activity. No other shareholder of the company raised any demand for winding up of the company and hence, it can be assumed that it is not in the interests of the entire class of the members of the company to wind up the company. As was rightly pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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