9911796707
TMI Blog2013 (10) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable winding up would, even if granted, unfairly prejudice the petitioners - Sometimes, in minority petitions, asking the question whether the company petitioner will be unjustly prejudiced on winding up, becomes an obviously unnecessary and empty exercise. Such is the case where two groups of nearly equal shareholding fight with each other for the control of the company. If one were to wait during a battle of this type, and ask, if the company petitioners have made out the case that winding up of the company will unfairly prejudice them, the simple and straightforward answer would be that nobody wants a winding up, the two sets are fighting for the company not its winding up. The principle of 'just and equitable' clause - Scope of section 433 (f) - Section 433 provides for the circumstances in which a company may be wound up by the court - There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it was just and equitable that the company should be wound up - Section 222 (f) of the English Companies Act, 1948 was in terms identical with the Indian counter-part, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnaswamy Naidus sons viz., G.T.K.Rajasekaran, G.t.K.Sivasubramaniam, G.T.K.Parthasarathy and G.T.K.Shanmugasundaram were allotted to 1,000 shares each. P.Asher, a third party, who was in no way related to G.T.Krishnaswamy and his family, was allotted to 500 shares. Thus, the entire paid up capital of 7,500 shares of Rs.100/- each and 7,000 equity shares of Rs.100/- each were held by the family members of G.T.Krishnaswamy Naidu, except 500 shares which were allotted to P.Asher in whose name the licence was ilnitially granted by the Government of India for the Textile Mill. (b) 1000 shares of the said G.T.K.Rajasekaran son of G.T.Krishnaswamy Naidu, were transferred in the name of his son R.Ranganathan. After the death of G.T.Krishnaswamy Naidu and his wife Vijayammal, their 3000 shares were equally transmitted in the name of his sons viz., G.T.K.Rajasekaran, G.t.K.Sivasubramaniam, .T.K.Parthasarathy and G.T.K.Shanmugasundaram and they got 1,000 shares each. The said three persons were holding 2000 shares each apart from 1000 shares, which were transferred to the said R.Ranganathan and 500 shares, which were allotted to the said P.Asher. Thus, out of the paid up capital of 7500 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Tirupur 641 652. All the three units put together have 59376 spindles. (e) The appellants are holding 27,600 shares which constitute about 31% of the paid up capital of the Company. Even though they hold the said percentage, after the death of their father in the year 2000, they were not associated with the management of the Company. The 2nd respondent, realising that the appellants father had no male issues, after his death, has been avoiding whenever the appellants or their representatives tried to meet him for an amicable settlement of either bringing them on the board or their nominees or making necessary arrangements to spin off one of the undertakings to the appellants for their due entitlement. All that efforts have become futile since the 2nd respondent, who has majority shares, sought to it that his own yes-men were brought on the Board so that he will have absolute control of the affairs and management of the Company. (f) The Company is having several cars (Mercedes Benz, S-Class, etc.) and the 2nd respondent is the only person enjoying them. The Company does not declare more than 15% dividend. The company had reserve as on 31.3.2006 a sum of Rs.9,64,50,354.19. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. and the 6th respondent, who is at the beck and call of the 2nd respondent is also being paid a sum of Rs.8,80,300/- towards salary. The 6th respondent has been re-appointed for a period of 5 years with effect from 1.11.2005 at the Extraordinary General Meeting alleged to have been held on 28.12.2005. Apart from the above, there are several inter-company transactions, which are reflected in the balance sheet of the company for the year ending 31.3.2004, 31.3.2005 and 31.3.2006, which are detrimental to the interests of the company. The provisions of section 297 of the Act are not complied with. They are being benefited by virtue of entering into various transactions with the Company at its expense. (k) The company is not disclosing the actual income in its books. Companies similarly situated in Coimbatore having similar spindles are making enormous profits and they have reserve worth several crores. The Company has nearly 60,000 spindles and all its plant and machineries are modernized. The net profit for the year ending on 31.3.2006 is only a sum of Rs.47,88,000/- which is very meagre and it must earn a net profit of not less than Rs.5 Crores per annum. Therefore, the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders just overruled them. (b) The case of the appellants that their father G.T.K.Shanmugasundaram was a Director on the Board of the Company from the date of incorporation till his death is factually incorrect. At the time of incorporation of the Company, he was a minor, aged about 14 years and he was inducted as Director only on 3.6.1968. The claim of the appellants that after the death of their father, they had been making representation to the second respondent through their relatives and friends and sought association in the management of the Company is totally untrue. Had the appellants approached these respondents with any such proposal most certainly they would have got a suitable response. The case of the appellants that the 2nd respondent using his majority holdings, saw to it that his own yet-men were on the Board to enable him to retain absolute control over the management of the Company is nothing but a ridiculous and self serving statement. Nothing prevented the appellants, who hold 30.66% of the paid up capital of the company to raise grievances before the proper forum like the Annual General Meetings of the Company. (c) The 2nd respondent has been permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents never did anything to dilute the shareholding strength of the appellants, though it was within their power to do so. 4. The case of the third respondent is as follows:- (a) The 3rd respondent is the adopted mother of the 2nd respondent. The Company has been managed by the second respondent in a very successful manner especially during the turbulent times of the textile industry. (b) The appellants deliberately and unnecessarily published the interim orders given the Company Law Board in English and Tamil newspaper. While doing so, they have not published the real operative part of the interim order but their own interpretation so as to gain an undue mileage in the minds of the public. (c) After the death of the 3rd respondent's husband and 2nd respondent's adopted father, the second respondent was unanimously appointed as the Managing Director of the Company to which the appellants' father wholeheartedly consented to and approved the proposal. (d) The appellants' legitimate expectations have been raised for the first time in the company petition as an afterthought to extract money from the respondents. (e) There are adequate number of independent professional Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the then Board of Directors of the Company, of which at that time, none other than the father of the appellants was an active member. (c) The shares of the 9th respondent company were purchased from the first respondent company on 7.9.1977 by the father of the 2nd respondent and his other family members. After the demise of his father, the shares held by him were transmitted to the 2nd respondent on 10.12.1984. The entire shares of the 8th respondent company were purchased from the 1st respondent company by the 9th respondent company on 3.10.1977. Thus, the 8th respondent company became a wholly owned subsidiary of the 9th respondent Company and continues to remain so even today. (d) These respondents are totally independent companies and have a business of their own and the value of the transactions entered into with the 1st respondent Company during the last five years form a very insignificant proportion of their respective turnovers. 7. Based on the above pleadings, I have heard Mr.Aravind P Datter, the learned Senior Counsel appearing for the appellants and MR.P.H.Aravindh Pandian, the learned Senior Counsel appearing for the respondents. 8. The first respondent (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupur Gin and Press Private Limited (2) Vijayeswari Ring Travellers Private Limited (R8) and (3) Sovereign Engineers Private Limited (R9). However, now they are no longer the subsidiaries. 12. After the introduction of Section 43-A of the Act, the Company became a Public Limited Company with effect from 01.04.1976. It is the case of the appellants, after the death of their father G.T.K.Shanmugasundaram on 06.11.2000, they have been making representation to the second respondent through their relatives and friends that the appellants be associated with the management of the Company and they should be made as Directors. All efforts to sort out the issue amicably fell on deaf ears. The appellants, who are holding 27,600 shares, which constitutes about 31% of the paid up capital of the Company, could not be associated with the management of the Company, in view of the adamant attitude of the second respondent. The second respondent has majority shares and he saw to it that his own yes-men were brought on the Board so that he will have absolute control of the affairs and management of the Company. Several allegations against the second respondent persist. It is detrimental to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition have failed to prove the alleged mismanagement and oppression by the majority shareholder viz., the second respondent. Issue No.3:- Whether the second respondent has mismanaged the company ? Finding:- The petitioners in the company petition have failed to prove the alleged mismanagement by the second respondent and others. Issue No.4:- Whether the petitioners in the company petition are entitled to an order from the Company Law Board directing the company and the second respondent to purchase the shares of the petitioners or to spin any one of the three units to them ? Finding:- The Company Law Board declined to pass an order on the prayer of the petitioners for exit from the company. Thus, in view of the findings referred to above, the Company Law Board has dismissed the company petition filed by the appellants. Finally, the Company Law Board has held as follows:- " Before concluding, I will refer to the suggestion made by the second respondent that the petitioners have an alternate remedy to invoke the provisions under the Articles to get their shares transferred if they have a desire to exit from the company. The dispute is between cousins. R.3 had even stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being held by the appellants' group and the second respondent's group. It is not disputed that the second respondent is having the majority shares. 16. The Company Law Board found on perusal of the history of the family, in relation to the functioning of the company that it is difficult to find out that a right was impliedly reserved for family members to be on the Board as of right. There is nothing on record to show that each branch of family would be given directorship permanently, since it is evident that the four sons of G.T.Krishnaswamy Naidu are no longer the members of the Company. It has also been found by the Company Law Board that no material is placed before it even to presume that there is a basic understanding between the parties for equal participation in the management of the Company. Finally, the Company Law Board found that the appointment of Directors is done in accordance with the Articles of Association and therefore, it has taken the view that the principles of dissolution of partnership cannot be invoked in the case on hand. I am in entire agreement with the finding of the Company Law Board. Nothing has been placed before me to come to a different conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made very clear that the first respondent Company does not own any bungalow at Coimbatore and the second respondent resides at his own house and the Company has nothing to do with the accommodation. When such a categorical statement has been made in the Counter Affidavit of the second respondent, the appellants have not established by any worth coming documents to prove that the first respondent Company owns a bungalow at Coimbatore and the second respondent resides in the said bungalow. 21. As regards the third allegation is concerned, it has been clearly spelled out in the Counter Affidavit that the old machinery's have been sold by the Company at the market price. It is further stated that the Company has modernized its plant and machinery over the past 9 years by replacing the old and outmoded machines with modern, sophisticated and high productive machinery. It is also contended on behalf of the second respondent that the accounts of the Company are regularly audited by the Statutory Auditors and that the Audit Reports never contained any adverse remarks on all the aspects referred to by the appellants about the selling of the Old machinery's not at the actual price. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s." 24. The above extracted portion of the Counter Affidavit would prove that the allegations of the appellants are far from truth. That apart, the appellants have not established by any acceptable evidence or documents that the Company is not disclosing its actual income in its books. 25. As regards the sixth allegation viz., several lakhs of rupees had been obtained towards loan under various heads and charges is concerned, it is stated in the Counter Affidavit that the alleged transactions involving the dis-investment of the shares held by the first respondent Company in its erstwhile subsidiaries namely, the 8th and 9th respondents herein, took place 3 decades back during the year 1977. It transpires that the second respondent is only 13 years old at that time. While so, the said allegation, on the face of it, appears to be incorrect. It is further stated that the decision of dis-investing of shares of the Companies was taken by the appellants' father himself with the consultation of his brothers. Hence, this allegation also is without any substance. 26. Thus, the entire allegations set out against the second respondent about the mis-management of the affairs of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement lies always on a person who pleads the same. Some details have to be given on the said allegation. Otherwise, it would not be possible for the Courts to examine those allegations. On the facts and circumstances of the case, I am of the view that there was no basis for the finding that the second respondent or the other Directors had abused their fiduciary power or has abused the affairs of the company in breaching of its articles or the Act. 29. In view of the discussions made above, I am of the considered view that the appellants have not made out a case of mismanagement against the second respondent or his associates. The Company Law Board has dealt with this issue extensively and came to the right conclusion that the appellants herein have not established mismanagement either by the second respondent or by his associates. Therefore, the said finding arrived at by the Company Law Board does not require any interference in this appeal. 30. The next issue which has to be considered in this appeal is about the alleged oppression by the second respondent. It is the case of the appellants that they have made repeated attempts for settlement either by getting a Board seat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders. I am in entire agreement with the said finding of the Company Law Board. 33. To summarize the issue, the following factors would establish that absolutely the appellants have not proved 'oppression' as pleaded by them viz., (A) Admittedly, no right was reserved for the family members to be on the Board as of right. Not even there is no material to show that there was understanding within the parties for equal participation in the affairs of the company. (B) The Articles of Association do not specify that there must be a representation to the Board from each branch of the family. Thus, as per the Articles of Association, absolutely power is vested with the Board of Directors to fill up the office of the Directorship. Hence, it cannot be contended on behalf of the appellants that the appellants have to be taken as Directors and that they are entitled to the legitimate expectation for representation in the Board. (C) The father of the appellants, who was a Director in the company, during his lifetime, has not made any request to make the appellants or his family members as Directors of the company. (D) Absolutely, there is no material placed before the Company Law B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up;the Company Law Board may, with a view to bringing to an end the matters complained of, make such order as it thinks fit" 35. In 2008 142 Company Cases page 235 V.S.Krishnan and others v. Westfort Hi-Tech Hospital Ltd. and others, the Hon'ble Apex Court in paragraph 15 of the said judgment, after considering several judgments of the Hon'ble Apex Court viz., " (a) Needle Industries (India) Ltd., Needle Industries Newey (India) Holding Ltd. (1981) 3 SCC 333. (b) M.S.Madhusoodhanan v. Kerala Kaumudi P. Ltd., (2004) 9 SCC 204. (c) Dale and Carrington Invt. P. Ltd., P.K.Prathapan (2005) 11 SCC 314; (d) Sangramsinh P.Gaekwad v. Shantadevi P. Gaekwad (2005) 11 SCC 314. (e) Kamal Kumar Dutta v. Ruby General Hospital ltd. (2006) 7 SCC 613; has held that oppression would be made out: (a) Where the conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Power Tools and Appliances Co. Ltd. and Ors., reported in (1994) 79 Company Cases 505 (Calcutta). It would be useful to extract the same and the same is extracted hereunder:- "What does the word 'oppressive' mean in this context ? In our judgment, oppression occurs when shareholders, having a dominant power in a company, either (1) exercise that power to procure that something is done or not done in the conduct of the company's affairs or (2) procure by an express or implicit threat of an exercise of that power that something is not done in the conduct of the company's affairs ; and when such conduct is unfair or to use the expression adopted by Viscount Simonds in Scottish Co-operative Wholesale Society Ltd, v. Meyer [1958] 3 All ER 71 [1959] 29 Comp Cas 1 burdensome, harsh and wrongful' to the other members of the company or some of them, and lacks that degree of probity which they are entitled to expect in the conduct of the company's affairs ." It has been further held in the said decision that the act of oppression not only has to be alleged with sufficient particulars but also must be proved to the satisfaction of the Court. It must be a continuing one. 37. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply for such a winding up and were the petitioners to be even successful in such a petition, yet such order of winding up would unfairly prejudice the petitioners under section 3976 themselves. That is why they come under section 397 and they do not apply under section 433(f), which is the section for just and equitable winding up. In short, for the court to grant relief under section 397, the respondents must fail to show that just and equitable winding up would unfairly prejudice them and the petitioners must succeed in showing that just and equitable winding up would, even if granted, unfairly prejudice the petitioners. Sometimes, in minority petitions, asking the question whether the company petitioner will be unjustly prejudiced on winding up, becomes an obviously unnecessary and empty exercise. Such is the case where two groups of nearly equal shareholding fight with each other for the control of the company. If one were to wait during a battle of this type, and ask, if the company petitioners have made out the case that winding up of the company will unfairly prejudice them, the simple and straightforward answer would be that nobody wants a winding up, the two sets are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the articles of association. 41. Yet another decision that was relied on by the learned Senior Counsel appearing for the appellants is reported in (1992) 2 BCLC (1) - O.Neill and another v. Phillips and others, Re a company (No 00709 of 1992). In the said case, the question that was called upon to decide was whether the company's affairs were conducted in a manner unfairly or prejudicial to the minority shareholders. In paragraph 5 of the said judgment, it has been held as follows:- " In s.459 Parliament has chosen fairness as the criterion by which the court must decide whether it has jurisdiction to grant relief. It is clear from the legislative history (which I discussed in Re Saul D Harrison Sons plc (1995) 1 BCLC 14 at 17-20) that it chose this concept to free the court from technical considerations of legal right and to confer a wide power to do what appeared just and equitable. But this does not mean that the court can do whatever the individual judge happens to think fair. The concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles. As Wearner J said in Re J E Cade Son Ltd (1992) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 17 18/2006 55 in negativing a promise or withdrawing of an undertaking. For getting the benefit of legitimate expectation, there should be a clear promise or a clear and unambiguous representation and burden of proof is on the person who claims the benefit on the basis of legitimate expectation. This principle that is applicable in administrative law is unknown on company law. in any event, in this case, it was not proved by the petitioners that there was any promise made by the Chairman that they will continue as directors for ever because of their investment. As observed in Union of India and others v. Hindustan Development Corporation and others ((1993) 3 SCC 499), legitimate expectation is not the same thing as anticipation. It is different from a mere wish or desire or hope and a mere disappointment would not give rise to legal consequences. The court observed as follows: "The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence ....... Such expectation should be justifiably legitimate and protectable." Quoting from Attorney General for New South Wales v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms. The aggrieved member could be said to have had a 'legitimate expectation' that he would be able to participate in the management or withdraw from the company. ..." 46. However, in the same judgment, in paragraph 8, it has been held as follows:- "(8) ... I do not thin that there is any support in the authorities for such a stark right of unilateral withdrawal. There are cases, such as Re a company (No 006834 of 1988), ex p Kremer (1989) BCLC 365, in which it has been said that if a breakdown in relations has caused the majority to remove a shareholder from participation in the management, it is usually a waste of time to try to investigate who caused the breakdown. Such breakdown often occur (as in this case) without either side having done anything seriously wrong or unfair. It is not fair to the excluded member, who will usually have lost his employment, to keep his assets locked in the company. But that does not mean that a member who has not been dismissed or excluded can demand that his shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or their representatives tried to meet him for an amicable settlement of either bringing them on the Board or their nominees or making necessary arrangements to spin off one of the undertakings to the petitioners for their due entitlement". 51. Again, in ground (s) and (t), it is stated as follows:- " (s) The company is being managed by one family to the exclusion of the other family. Therefore, the petitioners have a legitimate grievance of being oppressed by the majority shareholders and the petitioners claim to be on the Board of Company is justified. Therefore, the petitioners have established oppression and the denial of legitimate expectation could be just and equitable ground for dissolution of partnership. Therefore, the company could be wound up on the just and equitable grounds. It is financially sound and it will not be in the interest of the company or the petitioners who are minority shareholders to wind up the company and the prayer of the petitioners for a representation on the Board of the company is deserved to be granted by this Hon'ble Bench. (t) The facts and circumstances narrated above indicate that on piercing the corporate veil, the real structure is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 54. Learned counsel appearing for respondents 1 and 2 contended that when there is no oppression or mismanagement, no relief of sale or otherwise can be granted. To the said proposition, learned counsel appearing for the second respondent relied on the following decisions:- (A) In (1994) 79 Company Cases 505 (Calcutta) Jalandhar Chakraborty and others vs. Power Tools and Appliances Co. Ltd., and others, it has been held as follows:- " 64. The last question to be decided in this matter is whether the court can compel the company or the respondents to purchase the shares of the petitioner, AS noted above the petitioners are willing to sell their shares in the company at market value. The offer is not acceptable to the company or the respondents. In my view having held that there was no ground of oppression or mismanagement, there is no question of the court passing any order for bringing to an end any matter complained of either under Section 397 or 398. The substratum for passing any order under Section 397 or 398 is not available. As observed by Buckley L. J. in Jermyn Street Turkish Baths Ltd., In re [1971] 41 Comp Cas 999 1023 [19711 3 All ER 184 ( : "If this could be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor renounce and which were taken up by the Indian shareholders in the enforced absence of the holding company. The willingness of the Indian shareholders to pay a premium on the excess holding or the rights shares is a factor which, to some extent, has gone in their favour on the question of oppresion. Having had the benefit of that stance, they must now make it good. Besides, it is only meet and just that the Indian shareholders who took the rights shares at par when the value of those shares was much above par, should be asked to pay the difference in order to nullify their unjust and unjustifiable enrichment at the cost of the holding company. We must make it clear that we are not asking the Indian shareholders to pay the premium as a price of oppression. We have rejected the plea of oppression and the course which we are now adopting is intended primarily to set right the course pf justice, in so far as we may." 67. In this case the respondents had never expressed any willingness to purchase the shares of the petitioners. There is also no act of inequity in this case as the illegal meeting in Needle's case [1981] 51 Comp Cas 743 (SC) of which justice demands rectification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of a fair price, the presentation or maintenance of a petition under Section 459 of the 1985 Act will ordinarily be an abuse of the process: See Re a company). (E) In the case of Palghat Exports Pvt. Ltd. v. T.V.Chandran and others reported in (1994) 79 Company Cases 213 (Ker), it has been held that a shareholder cannot get the relief under Section 397 of the Act in order to settle his personal problem. It has been further held that ' it is difficult for us to discern a different object which will satisfy section 397 of the Companies Act other than an outside object of Section 397 of recovering the amount invested for purchasing the shares.' 55. However, the learned Senior Counsel appearing for the appellants relied on the decision reported in (1980) 50 Company Cases 771 (Cal) Debi Jhora Tea Co. Ltd, v. Barendra Krishna Bhowmick and others. Paragraph 26, which was emphasised by the learned Senior Counsel, is usefully extracted hereunder:- " 26. It should be borne in mind that when a court passes an order under Sections 397, 398 and 402 as has been done in the instant case there could be no limitation on the court's power while acting under the sections. Instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on the said decision, it has been contended on behalf of the appellants, by the learned Senior Counsel appearing for the appellants, that this Court has got ample power to appoint a Chartered Accountant to value the assets of the company and allot a share over the property. But, in the said decision, in view of the dispute between the two groups, there was a deadlock in the company and the two groups could not carry out the business of the company. Apart from that, mismanagement and oppression were proved in the said case. Paragraph 17 of the said judgment is thus, extracted hereunder:- "17. Regarding the question of deadlock, it is admitted that the two groups who hold equal shares in the company are not in a position to carry on the business of the respondent-company any longer and there is a complete deadlock and, therefore, there is a just and equitable ground for winding-up the company, which is a pre-requisite for exercising the power under Sections 397-398 of the Companies Act, 1956, and on the material placed before me in the pleadings and the annexures in the main application and the interim application and from the conduct of the parties it is quite clear that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion reported in (2007) 138 Company Cases 897 (Mad) M.S.D.C.Radharamanan v. M.S.D.Chandrasekara Raja and another, and contended that even in a case where technically speaking there may not be any oppression within the meaning of Section 397 of the Act for the purpose of setting right thinks, the Court could pass orders under Section 402 of the Act. He has further contended that if there is inter se factional dispute between two groups in a company, the share of one group could be directed to be purchased by the other company. However, that is the case where father and son were the only two shareholders / Directors. There were serious disagreement between them. Under those circumstances, the Division Bench of this Court directed the son to purchase the share of the father in the company. Thus, considering the facts and circumstances of the case, the Division Bench of this Court has held that there was no difficulty in invoking Section 402 of the Act. But, in the present case on hand, such position does not prevail. Hence, the said judgment will not be applicable to the case on hand. 61. The above referred decision was taken up to the Hon'ble Apex Court and the judgment rendered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween two individuals, who were Directors and serious dispute has arisen between them and hence, it was held that it would be just and reasonable to order winding up of the company. 64. In the case of Brownlow v. G H Marshall ltd and others reported in (2002) 2 BCLC 655 (Ch D), it has been held that the position was that brother and sisters were equal shareholders and were Directors of the company. When the sister was removed from Directorship, she commenced the proceeding under Section 459 of the 1985 Act seeking for a direction to purchase her share at a value to be determined by the Court. In such circumstances, it has been held in the said decision as follows:- " In the circumstances of the instant case, having regard to the fact that the company was one in which considerations of a personal character arose out of the relationships between the family shareholders, equitable considerations might disentitle the majority from removing a minority shareholder from office without making a reasonable offer, if asked, for the purchase of the minority member's shares. The existence of service agreements did not change the position. It had never been suggested between the parties th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nflexible formula. 34. 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 matter. 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. 35. The question that is raised in this appeal is as to what is the scope of section 433 (f) of the Act. Section 433 provides for the circumstances in which a company may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up. Section 222 (f) of the English Companies Act, 1948 is in terms ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent, it has been held that " a shareholder has a right only to the dividend and of participation in the annual general meetings and to vote there. A shareholder has no "say" in the management unless and until he becomes part of the management'. 69. When an appeal can be entertained by the Company Law Board, was considered in the judgment reported in (2004) 122 Company Cases 161 (SC) Dale and Carrington Invt. P. Ltd and another vs. P.K.Prathapan and others. In the said decision, it has been held that it is settled law that if a finding of fact is perverse and is based on no evidence, it can be set aside in appeal even though the appeal is permissible only on the question of law. The perversity of the finding itself becomes a question of law. The decision made thereunder will not attract the case on hand, since in the said judgment, it has been held as follows:- " In the present case we are concerned with the propriety of issue of additional share capital by the managing director in his own favour. The facts of the case do not pose any difficulty particularly for the reason that the managing director has neither placed on record anything to justify issue of further share cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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