9911796707
TMI Blog1969 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... , was dismissed by the learned trial judge. These two appeals were by agreement of parties heard together and we are disposing of these two appeals by one judgment. 2. On or about 9th August, 1966, the Hind Overseas Private Ltd. (hereinafter referred to as the company ) was incorporated with a share capital of ₹ 5,00,000 consisting of 5,000 shares of ₹ 100 each. Though there is no dispute as to who were the shareholders at the inception, there is some dispute regarding the basis on which the division of shares had been made. According to the appellants, the company was at its very inception constituted more or less on the lines of a partnership firm. Indeed, it is said that the original idea of the promoters was to have a partnership and not a limited company on the basis of 10 annas and 6 annas shares. The 10 annas shares were to be held by a group led by the respondent, V.D. Jhunjhunwala, and 6 annas shares were to be held by a group led by the appellant, R.P. Jhunjhunwala. Later on, the promoters changed their minds and formed a private limited company instead of a partnership firm. It has been stated by the appellants that, prior to the incorporation of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his family were transferred to and in the name of V.D. Jhunjhunwala's wife. The company started producing railway sleepers from its factory some time about 1959 and by all accounts started making profits. 4. On 2nd September, 1963, a resolution was passed at an extraordinary general meeting of the company to the effect that V.K. Jhunjhunwala, son of B.D. Jhunjhunwala, should be sent to the United States for studies in chemical engineering. P.C. Jhunjhunwala himself seems to have proposed the resolution and as far as one can see the two groups who are now fighting were in agreement at that time about the company bearing all the expenses of V.K. Jhunjhunwala's education in the United States. The appellants now contend that the resolution was not a special resolution. 5. Troubles apparently started brewing some time about 1964. In April that year, R.P. Jhunjhunwala is said to have appointed his brother-in-law, Hariram Modi, to an office or place of profit of the company. It is not known if V.D. Jhunjhunwala knew about this at the material time but now, of course, the respondents are complaining that this appointment was a violation of Section 314 of the Companies Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jhunwala and three others served a requisition on the company for calling an extraordinary general meeting with the purpose of removing P.C. Jhunjhunwala and R.P. Jhunjhunwala from their respective office of a director of the company with immediate effect and for appointment of Prakash Chandra Jhunjhunwala and Biswanath Purohit in their place and stead and also for appointing a committee for investigating into the affairs of the company in connection with certain losses alleged to have been suffered by the company. Added to this requisition notice there is an explanatory note, the first paragraph of which is important for our purpose and is set out verbatim hereunder : The requisitionists feel that the company has been mismanaged by Shri Raghunath Prasad Jhunjhunwala and Sri Phoolchand Jhunjhunwala who were in charge of the day-to-day working bf the company and have lost confidence in them and their any further association with the management of the company is considered very detrimental to the interest of the company. Hence resolutions Nos. 1 and 2 are being proposed to be passed. The third resolution is for the purpose of ascertaining the ways and means adopted by the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to time have been cancelled and for all the acts if done by you henceforth for and on behalf of the company, you shall be personally liable for any loss or damage which may be caused to the company. 10. On 28th May, 1966, a notice was issued for the holding of an extraordinary general meeting on 22nd June, 1966, for removal of the directors belonging to the group of R.P. Jhunjhunwala. Advertisements were also published in Biswamitra by which a general notice was given to the public that powers and authorities given to Raghunath Prasad Jhunjhunwala and Phoolchand Jhunjhunwala including the power to operate banking accounts of the company had been cancelled ; on 30th May, 1956, a notice was issued by V.D. Jhunjhunwala calling a meeting to be held on 4th June, 1966. The petitioners requested V.D. Jhunjhunwala not to hold this meeting as well, but that request was rejected. On 4th June, 1966, a meeting was held and the letter dated 27th May, 1966, of Messrs. Khaitan Co. placed and considered at the meeting. It is stated that there was a resolution that no reply was necessary to that letter as the reply that had already been sent, by which presumably reference was made to V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of a group of partners has unquestionably taken place and the two groups cannot carry on business together again, the company ought to be wound up on the same principle on which partnerships are dissolved when the partners fall out between themselves. Mr. Sen relied no doubt on the celebrated judgment of Lord Cozens-Hardy, Master of the Rolls, in the case of In re Yenidje Tobacco Company Ltd., [1916] 2 Ch. D. 426 where the learned Master of the Rolls had held that the principle which operates in the case of dissolution of a partnership firm can also be invoked in regard to an organisation which, though in the guise of a private company, is, in substance, a partnership. Mr. Sen made this principle the cornerstone of his arguments and, at one stage when he was challenged by Mr. S.D. Mukherjee on this point, he conceded that if he fails on this point his case is bound to fail. Mr. R.C. Nag who gave the reply on behalf of the appellants also relied on this principle, though it must be said his enunciation of the principle was slightly different to that of Mr. Sen. We shall deal with this aspect in its proper time. 13. Mr. Sen, as I understood him, placed his argument on the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khata admittedly means Partnership account . Mr. Sen says that the reference to this partnership was really a reference to the partnership venture between R.P. Jhunjhunwala and V.D. Jhunjhunwala. The account was, according to Mr. Sen, opened specifically for the purpose of a proposed partnership business. Mr. Sen strongly relied on the statement of account, a translation of which has been reproduced as annexure A to the joint affidavit of R.P. Jhunjhunwala and P.C. Jhunjhunwala affirmed on 8th June, 1966. The account shows a sum of ₹ 11,000 on the credit side. This sum, Mr. Sen argued, had been deposited by R.P. Jhunjhunwala on 19th February, 1956, and was credited to the Sir Khata account. Two several sums of ₹ 1,000 and ₹ 10,000 aggregating ₹ 11,000 were paid to R.P. Jhunjhunwala on 20th June, 1956, and 1st August, 1956, respectively. The balance sum of ₹ 8,680 was advanced by V.D. Jhunjhunwala and the Sir Khata account was credited with the said balance sum by debiting ₹ 500 against R.P. Jhunjhunwala's personal account, after the company's incorporation. The remaining balance of ₹ 8,180-2-0 was debited against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , V.D. Jhunjhunwala admitted with reference to the foundry of the company that he was running the foundry in partnership with Raghunath Babu, i.e., R.P. Jhunjhunwala. The letter is to be found at page 8 of a supplementary paper book filed by the appellants. Mr. Sen argued that if the share registers of the company were to be examined it would be found that the entire shareholding of the company was confined to the members of the respective families of R.P. Jhunjhunwala and V.D. Jhunjhunwala. Further, even the original allotment and subsequent issue of the shares were held by the members of these two families in such a manner that the ratio of 6 and 10 annas between the holdings of these two families was always maintained. Moneys were advanced by V.D. Jhunjhunwala to P.C. Jhunjhunwala, son of R.P. Jhunjhunwala, in order to enable him to buy the subsequently issued shares in order that the parity of the holding of 6 annas and 10 annas shares in the capital of the company could be sustained. This has been clearly stated by R.P. Jhunjhunwala in an affidavit affirmed on 24th June, 1966. He says that V.D. Jhunjhunwala advanced certain sums of money to Phool Chand Jhunjhunwala for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 4. L. K. Jhunjhunwala Brother 400 5. N. K. Jhunjhunwala Son 315 6. K. K. Jhunjhunwala Son 500 7. V. K. Jhunjbunwala Son 500 8. Nami Devi Jhunjhunwala Brother's wife 731 9. Arati Devi Jhunjhunwala Do. 21 10. Lalita Rani Kedia Sister 350 Total 3,125 16. The relationship between the parties was sought to be established by reference to various affidavits in the proceedings. As this position was not seriously contested by the other side, I am not referring in detail to the various paragraphs of the affidavit from which the relationship will appear. Mr. S.B. Mukherjee appearing for the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the supplementary paper book. Mr. Mukherjee, however, admitted that the shareholding of R.P. Jhunjhunwala's group was in the ratio of 6 annas to 10 annas. 19. We have very carefully considered the various affidavits in the paper book and we are satisfied that the company at its inception and for a number of years afterwards was really in substance a partnership. This does not, of course, mean that all the legal features of a partnership will be found in the company. In the nature of things that cannot be, for, we are, after all, dealing with a company incorporated under the Companies Act. It is just impossible to expect that if we dissect a company, we will find the anatomy of a partnership. When one says that a company is in substance a partnership, what is really meant is this that a company should be in the image of a partnership. The three most important indicia of partnership, viz., equal status of the partners (though not necessarily equal interest), equal participation in management and mutual confidence, are the basis of association. A private limited company which is an association of persons in a joint-stock company who have agreed to keep the membership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as then closed by transferring the debit balance to the company's account. I find no explanation whatsoever why the debit balance of a firm should be wiped out by debiting a private limited company to the extent of the debit balance unless it was a clear intention of the parties that the company would step into the shoes of the firm. Any way, it is quite clear that there must have been an account of Hind Overseas Private Ltd., in the same Sir Khata Account of Chimanram Motiram. If only V.D. Jhunjhunwala had produced the Sir Khata Account that would have resolved many problems concerning this account. Since he has not done so, I think it is legitimate to presume that the account would go against him and would support the contention of the appellant. (iii) The shareholding shows clearly that the company's shares are divided amongst two groups. It is impossible to resist the impression after reading all the correspondence and affidavits that the share of the company was really divided amongst the members of the families of R.P. Jhunjhunwala, V.D. Jhunjhunwala and M.P. Jhunjhunwala. It is clear also that the petitioner and the members of his family hold 1,875 shares w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a partnership. The learned trial judge has held that, unless there is a deadlock, the application of the partnership principle does not arise Mr. Sen canvassed the extreme view that the principle of dissolution of partnership firm is extended to the case of a private limited company without any modification or abatement and that as soon as the mutual confidence, trust and co-operation between the members forming a private limited company have disappeared the company must be wound up without considering any other fact. As regards the learned judge's decision that the principle of partnership applies only when there is a deadlock, Mr. Sen argued that deadlock is an entirely separate ground and the learned judge was in error in mixing up these two distinct grounds of winding up of a company. Mr. S.B, Mookherjee appearing for the respondents contended, on the other hand, that the principle of partnership applied in two classes of cases, namely, (i) in the case of deadlock and (ii) in those cases where the company concerned is a family or domestic company. In the second class of cases, winding-up is allowed if there is justifiable lack of confidence and lack of probity. Mr. Moo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by Warrington J., who was also one of the judges in the Yenidje Tobacco Company's case. Besides, the case was referred to and cited at the time of arguments in the latter case. Therefore, we may, as well, start with that case. A petition was presented by a shareholder for a winding-up order of Furrier's Alliance Ltd., on the ground that it was just and equitable within the meaning of Section 79, Sub-section (5), of the Companies Act, 1862. Out of 12,005 ordinary shares which where issued and subscribed in that company 6,000 shares were held by the petitioner or by persons who were either his trustees or his agents and 6,000 shares were held by one Mr. Friedeberg. They were the first directors of the company. The remaining 5 shares were held by five persons holding one share each. Two of these five persons supported the petitioner. The articles of association required that every share should form one vote and the number of directors should be not less than two nor more than three. The petitioner and Mr. Friedeberg were to be the first directors and to retain office as long as they held the necessary qualifications. The two directors started disagreeing in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an authority which could be invoked, namely, the authority of the majority of the shareholders of the company. And when one director held substantially one-half and his co-director the other half of the shares (though that was not an exactly accurate statement in the present case, for there was one vote over, which might be a casting vote) there was an authority to which both had agreed by the constitution of the company to submit, namely, the authority of the majority, which might only be one vote. It seemed, therefore, to him that the deadlock to which he had referred was not a deadlock at all, it was only a temporary deadlock. It was possible under the articles to appoint an additional director, and then there might be no deadlock at all and the business of the company could go on. 24. On these grounds his Lordship held that, the case was one which did not come within the limits of the just and equitable clause and dismissed the petition. 25. After this, in point of time, comes the Yenidje Tobacco Company's case, which is always regarded as the locus classicus on the subject. In 1914 one Winderg and one Rothman who used to carry on two separate businesses as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te it, what would have been the position ? 26. His Lordship answers this question in this way : I think it is quite clear under the law of partnership, as has been asserted in this court for many years and is now laid down by the partnership Act, that that state of things might be a ground for dissolution of the partnership for the reasons which are stated by Lord Lindley in his book On Partnership, at page 657 in the passage which I will read, and which, I think, is quite justified by the authorities to which he refers. 27. His Lordship thereafter quotes a passage of Lindley's book which reads : Refusal to meet on matters of business, continued quarrelling, and such a state of animosity as precludes all reasonable hope of reconciliation and friendly co-operation have been held sufficient to justify a dissolution... All that is necessary is to satisfy the court that it is impossible for the partners to place that confidence in each other which each has a right to expect, and that such impossibility has not been caused by the person seeking to take advantage of it. 28. Thereafter, the learned Master of the Rolls again discusses the conduct of the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the parties when the company was formed and which ought to be terminated as soon as possible ... It is contrary to the good faith and essence of the agreement between the parties that the state of things which we find here should be allowed to continue. 31. Warrington L.J., in a supporting judgment, held that in substance W. and R. were really partners though they were carrying on the business by means of a limited company. His Lordship treated the litigation to be in substance a ground for dissolution of the partnership and considered that if the relations between W. and R. were treated as other than that of partners or the litigation as other than that of action brought by one for the dissolution of the partnership against the other it would be giving too much importance to matters of form. His Lordship found that had the company been an ordinary partnership and an action brought for dissolution the petitioner would have had sufficient grounds for a dissolution of partnership according to the ordinary principle by which the court is guided in such matters. 32. All the parties in this case tried to invoke before us the principles enunciated in the Yenidje Tobacco Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is judgment and shall return to this point again later. 35. To the extent I have indicated above there is no doubt that Mr. A.K. Sen is right when he argues that on the authority of the Yenidje Company's case if a private limited company is in substance a partnership then the circumstances which would justify the dissolution of a partnership would also justify a winding-up order in regard to a private limited company. Whether this principle has been watered down or modified or reversed in course of development of the later case law on this subject is a matter to which I shall presently address myself. 36. The case of In re American Pioneer Leather Company Ltd. [1918] 1 Ch. 556 which was cited before us in this connection was decided on a slightly different principle and, in my opinion, is not of much help for deciding the instant case. The case concerned a private company consisting of three shareholders who held all the issued shares in equal proportions. Of them one was a resident of America and the other two, namely, Traeger and Luben, were the directors of the company at the time when the winding-up application was made. The articles of association of the company prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercome only by the intervention of the third shareholder. The articles of association of the company had foreseen a contingency when two shareholders could combine against the third and had provided that the two should, on proper notice being given, take over the interest in the company of the third, or if that was not done, the company should come to an end. This, his Lordship thought, should be taken into consideration in a winding-up petition. His Lordship found that, since it was the intention of the shareholders from the first that, in such circumstances, the shareholder who was left in the cold should be entitled to put an end to the company, it was just and equitable to make an order for the compulsory winding up of this company. It is abundantly clear that his Lordship did not come to the decision either on the ground that there was a deadlock or on the ground that the company was in substance a partnership and the principles of partnership would operate in the matter of its dissolution. Except giving us another example of how the just and equitable clause is extended much beyond the ejusdem generis principle, this case, to my mind, does not furnish any guidance in rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an order for the winding up of the company. This case is clearly a case on the point which we are called upon to decide and Crossman J., who passed the order of winding up, applied without reservation the principles that apply to the dissolution of a partnership. It remains for me only to point out that Crossman J. made it quite clear during the arguments of the counsel that his Lordship was not deciding the case on the question of deadlock (vide his Lordship's observation set out within parentheses at page 41. In re Cuthbert Cooper and Sons Ltd. [l937] Ch. 392 ; (1938) 8 Comp. Cas. 131 (Ch D.) is another case where also the question that came to be decided was whether the principles that would be applied in an action for dissolution of a partnership would also apply in the case of a private company. Simonds J. indicated clearly in his judgment that he proposed faithfully to follow the injunction laid down by the Court of Appeal in In re Yenidje Tobacco Company Ltd. and followed in In re Dams and Collett Ltd. by Crossman J. On the facts, however, his Lordship found that no grounds have been shown in the petition on which it would be just and equitable within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders had entered into on the formation of the company, and which were binding on them. None of that can we tell, and it seems to me, therefore, that in the absence of evidence of that kind, if there are material matters of that sort, they must be found in the petition itself. 44. Since the evidence was not to be found in the petition, his Lordship upheld the decision of the trial judge in dismissing the appeal. Donovan L.J., who agreed with the decision of Danckwerts L.J., went more or less on a technical ground that, since there was no evidence at all about the rights of the petitioner and the respondent and since Plowman J. had in his discretion dismissed the petition on that ground, the appeal should be dismissed, 45. Charles Forte Investments Ltd. v Amanda [1964] Ch. 240 ; 34 Comp. Cas. 233, 236 (C. A.) was cited before us and relied on by the counsel for the respondents. Charles Forte Investments'Limited (hereinafter briefly referred to as C.F.I. Limited) was incorporated as a private limited company in 1962 with an authorised share capital of #750,000 divided into 750,000 shares of 1 pound each. The object of the company was to acquire for payment in shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord Cozens-Hardy M.R. The Court of Appeal allowed the appeal. Willmer L.J. held that this was a proper case for the exercise of the inherent jurisdiction of the court to restrain the assertion of doubtful rights in a manner productive of irreparable damage, provided, of course, the plaintiffs could otherwise make good their claim that the winding up petition was bound to fail and amounted, in the circumstances of the case, to an abuse of the process of the court. After making these observations, his Lordship considered whether the petition was bound to fail. In that connection his Lordship had to discuss not only the scope of the directors' authority to refuse to register a transfer under Regulation 3 of Part 2 of Table A but also whether by applying the principle of the Yenidje Tobacco Company's case a winding-up order could be justified in the present case on the same grounds as would justify a dissolution of a partnership. His Lordship refused to apply the principles of Yenidje Tobacco Company's case or the case of In re Davis and Collett Ltd. by saying [1964] 34 Comp. Cas. 233, 244-45 that those two cases, - are utterly remote from the question that has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a few shareholders. 52. While there is no doubt that this case of Charles Forte Investments Ltd. introduces some modifications in the principles laid down by Yenidje Tobacco Company case it is important to remember that the case itself was peculiar in so far as it concerned a private company which was holding shares in a public company. Any repercussion of the private company was bound to have repercussion on the public company as both companies were being managed by the same directors and there were outsiders who though they were concerned in the dispute of the private company, for example, an advertisement in the newspapers would have affected the public company and would have further affected outsiders who were members of the public company. 53. The next case, namely, the case of In re Lundie Brothers Ltd. [1965J2 All E.R. 692; [1965] 1 W.L R. 1051 ; 35 Comp. Cas. 827 (Ch. D.) seems to take us back to the line laid down by Lord Cozens-Hardy M.R. The petitioner in this case was a director and a contributory of Lundie Brothers Ltd., which was a private company. The petition was for relief under Section 210 of the Companies Act, 1948, alternatively for an order under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company and that he had also been kept out of the business of S. Limited. The petitioner asked for various reliefs under Section 210 of the Companies Act, 1948, and also made an alternative prayer that the company should be wound up by the court. 54. Section 210 of the Companies Act, 1948, which in terms is practically the same as Sections 397 and 398 of the Companies Act, (1956, required consideration of the question whether the facts of any particular case would justify the making up of a winding up order on the ground that it was just and equitable that the company should be wound up. Plowman J., who heard the petition applied himself to this consideration first because that was a matter common both to the claim under Section 210 and to the claim under Section 222. His Lordship says that in his Lordship's judgment the company was in substance a partnership. His Lordship observes that the principles to be applied to a case of this sort are well settled. His Lordship refers to the judgment of Lord Cozens-Hardy M.R. in Yenidje Tobacco Company's case and, after quoting a passage which I have also quoted, comments : As I understand those last words, they mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowman J. was the following facts :--(a) in substance a partnership existed between R. Lundie, C. Lundie and Blackmoor, (b) they were all working directors although Blackmoor was part-time, (c) they all had an equal financial strength in the company and (d) Blackmoor was forced out of his position as a working director, 59. In re Expanded Plugs Ltd. [1966] 1 All E.R. 877; [1966] 1 W.L.R. 514 ; 36 Comp. Cas. 497, 505 (Ch. D.) was another case in which Plowman J. was called upon to deal with the applicability of the principle of Yenidje Tobacco Company. In the petition there were other grounds of winding up, namely, deadlock, oppression of the petitioner as a member of the company and the disappearance of the substratum of the company. On facts, Plowman J. found that there was no deadlock at all because of the existence of the chairman's casting vote. As for oppression of the petitioner, his Lordship found that that was more appropriately an element to be considered in a petition under Section 210 of the Companies Act. The case for substratum was abandoned before his Lordship. Therefore, the only other question that remained for consideration was that of applying the partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of the regulations which governed their relationship. Plowman J. quoted with approval from the judgment of Simonds J. in In re Cuthbert Cooper and Sons Ltd. [1937] Ch. 392 ; [1937] 2 All E.R.. 466, 468; [1938] 8 Comp. Cas. 131, 133 (Ch.D.) the following words : It has been pressed upon me that I am to be guided by the principles laid down by the Court of Appeal in In re Yenidje Tobacco Company Ltd. and followed recently by Crossman J. in In re Davis and Collett Ltd. But whether it be a matter of articles of association or articles of partnership the rights of the parties are determined by those articles, and the question whether it is right for me to apply the principles of partnership to the question of dissolution depends upon what are the contractual rights of the parties as determined by the articles of association in this case. Accordingly, when I come to consider the allegations in the petition, I must have regard to the rights of the parties as determined by the bargain into which they have entered. 61. From this point of view, Plowman J. considered the framework of the articles of the company and found that the petitioner had failed to establish that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of a family for the purpose of paying off the family debts. His Lordship dealt with the Yenidje Tobacco Company case but did not follow the doctrine on the ground that the Yenidje Tobacco Company was a trading company of two members and the company before his Lordship was a non-trading company of several members. His Lordship ignored the partnership doctrine. 67. Veeramachineni Seethiah v. Venkatasubbiah [1949] 19 Comp. Cas. 107 ; A.I.R. 1949 Mad. 675 was a case decided by a Division Bench of the Madras High Court. The Yenidje Tobacco Company case was relied upon by the petitioner for showing that where there is an irreconcilable faction among the directors of a company it is always just and equitable that the company should be wound up. Their Lordships of the Madras High Court refused to follow this principle on the ground that in the case before their Lordships 9 or 10 directors were solidly taking one view as against 3 directors only of the other group and that, in their Lordships' opinion, the majority view should prevail ordinarily. It does not appear from the judgment that the extreme doctrine of the Yenidje case was pressed before their Lordships. Their Lordships o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ustifiable 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 remedy the evil, such are instances, though not exhaustive, when the courts exercise their jurisdiction under the just and equitable ' rule to wind up companies. 70. It is interesting to note that Rao J. considers the doctrine of the Yenidje Tobacco Company case as having been considerably whittled down in later years. In support of this observation his Lordship relies on the observations of Plowman J. in Expanded Plugs Ltd. case [1966] I All E.R. 877 ; 36 Comp. Cas. 497 (Ch.D.). 71. I shall now briefly refer to two other Division Bench decisions of this High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of association while there was yet another application for rectification of the register. Banerjee J. by a judgment ordered rectification and refused to pass any order in the other applications. An appeal was made from that judgment by these persons who were pressing for the winding-up of the company. In the appeal before the court of appeal of this High Court one of the contentions was that the company in question being a private limited company the principles of partnership which applied in the matter of dissolution of a partnership should be applied also in this case. At the same time, the respondents argued that, so long as there was the possibility of removing the deadlock and so long as it was possible to manage the affairs of the company according to the wishes of the majority of the shareholders, the court could not direct a winding up of the company. Chief Justice Chakravarti relied upon certain observations made by Lord Clyde in the case of Baird v. Lees, [1924] S.C. 83 and quoted by Lord Shaw in the well-known case of Lock v. John Black-wood Ltd., in which a statement has been made regarding the various circumstances which would bring a case within the scope of the just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trine in In re Dams and Collett Ltd. [1935].Ch. 693 ; 5 Comp. Cas. 467 and followed the principle of Yenidje Tobacco Company case without any reservation. Crossraan J. expressly stated that he was not deciding the case on the question of deadlock. In the case of Cuthbert Cooper and Sons Ltd. the partnership principle was affirmed. On facts, however, the principle could not be applied. The case of Davits Investments (East Ham) Ltd., though decided on a demurrer, throws some light on the manner in which the partnership principle is to be applied according to the Court of Appeal. This does not really appear on the surface. But a little analysis brings out the point. Before the Court of Appeal it was contended on behalf of the appellants that mere disagreement among the partners could be sufficient to justify a winding-up order. Therefore, the absence of the articles of association of the company on the records should not matter and the ground of demurrer on which Plowman J. had dismissed the petition did not arise at all. Danckwerts L.J. rejected this contention. By implication, therefore, Danckwerts L.J. thought that the application of the partnership principle was not automatic in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid down in the Yenidje Tobacco Company case. Indeed, his Lordship went back a little further and has very closely followed the judgment of Warrington J. in the case of Furriers' Alliance Ltd. [1906] 51 Sol. J. 172. 78. In the light of the foregoing analysis I ask myself the following questions : (1) What exactly was the ratio of Yenidje's case ? (2) Has the Yenidje doctrine been always followed ? 79. Before giving my own answers to these questions I would like, however, to examine the answers which the counsel appearing on both sides gave to us in court. I have already made a brief reference to their arguments. They were all without exception relying on the Yenidje Tobacco Company case. They were all trying to use the doctrine of Yenidje Tobacco Company in support of their respective cases and each formulated certain principles which, they suggested, emerged from the subsequent decisions following that case. 80. Mr. A.K. Sen, who opened the appeal for the appellant, argued that Yenidje's case left no room for qualification of the partnership principle and as soon as a private limited company was found to be in substance a partnership firm there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of three exceptions, namely, (i) if the private limited company is of such a nature that there are outsiders who, though members, are in no way concerned with the dispute between the persons who are associated with the management of the company, (ii) when public interest is involved and (iii) if the private company happens to be an investment company holding shares in a public limited company. Strictly speaking, exception (iii) is really included within exception (ii). 83. It is clear that Mr. Nag has modified Mr. A.K. Sen's enunciation of the principle considerably. For Mr. A.K. Sen, the first rule of Mr. Nag would have been enough. In fact, that seems to me to be the undiluted doctrine of Yenidje case, though in the judgments in Yenidje's case there was no clear and direct reference to amity as the basis of the original association as soon as Mr. Nag found it necessary to provide for a second rule, it became clear that he recognised that the Yenidje doctrine has been slightly modified or qualified by later decisions. It appears to me that Mr. Nag formulated the second rule in order to make room for certain observations of Crossman J. in Davis and Collett Ltd. as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But even taking the classification at its face value I do not think that all the cases which he sought to bring under the first head are really deadlock cases. It is not permissible to bring a case under this first group merely because of the fact that there was actually a deadlock in that case. The real point is: was the partnership principle applied in the context of a deadlock ? Applying this test, it is difficult to justify Mr. Mookerjee's classification. The case of Furrier's Alliance Ltd. has been correctly described as a deadlock case. The Yenidje Tobacco Company case, however, was definitely not a case where the partnership principle was applied on the ground of deadlock. The case of American Pioneer Leather Company Ltd. was a case in which the decision was neither on the basis of a deadlock nor on the ground that the company was in substance a partnership. The case of Cuthbert Cooper Sons Ltd. was not decided on the ground that there was a deadlock. The Anglo-Continental Produce Company Ltd. is not a case where the question of applying the partnership principle arose at all. Therefore, there is no point in bringing this case under either class. The case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as applying the Yenidje doctrine at all. 88. We have now, in my opinion, sufficiently cleared the grounds for consideration of the present case in the light of what have been our findings so far. Since we have already found on facts that the company with which we are dealing can be described as a partnership in the guise of a private company, I see no escape from the proposition that the Yenidje doctrine ought to be followed. As I have said already this case was argued at length and with vigour by eminent counsel appearing for both parties to the dispute. None of them even suggested that the principles laid down in the Yenidje case are not sound. I have also further said that I have not come across a single English case where there has been a clear disavowal of the Yenidje doctrine. Therefore, since we are satisfied that this company is in the nature of a partnership, though its outward trappings may be those of a private company, we must work out the logical consequence by applying the partnership principle in accordance with the Yenidje doctrine. But what is the partnership principle ? That also should be stated clearly in order that no room is left for doubt or confusion. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to take advantage of it. 89. I have already referred in brief to this quotation from Lindley's treatise by Lord Cozens-Hardy M.R. It appears to me that in the case of a partnership firm, the following circumstances will, according to Lindley, justify the dissolution of the partnership : (1) If the partnership agreement is wilfully or persistently violated. (2) If one partner so behaves in matters relating to the partnership business that the other partners find it impossible to carry on business in partnership with him. (3) If some partners are in effect excluded from the concern. (4) If the misconduct of one or more partners is such that the mutual confidence which must subsist in a partnership is destroyed. (5) If there is a state of animosity which precludes all reasonable hope of reconciliation and friendly co-operation. (6) If it is impossible for the partners to place that confidence in each other which each has a right to expect, provided that the impossibility has not been caused by the persons seeking to take advantage of it. 90. If the judgment of Lord Cozens-Hardy in the Yenidje Tobacco Company's case is carefully read along with this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal. As the judgment and order under appeal disposed of several applications it is necessary that we have to give appropriate directions in all these matters. We, therefore, pass the following order : Both the appeals are allowed. The judgment and order, dated 6th July, 1967, passed by Ray J. are set aside. The application for stay of winding up proceedings is dismissed. Since the final hearing of the winding up application did not at all take place we remand the application for winding up (viz., Company Petition No. 123 of 1966) as well as the application for appointment of provisional liquidator and injunction (i.e., Application No. 136 of 1966) for re-hearing according to the usual procedure. The costs of these two appeals as well as the costs of the hearing before Ray. J. will be costs in the winding up proceedings. Certified for two counsel. 94. Before parting with this case I should make one observation. It is necessary that the applications should be dealt with by the appropriate court with some amount of expedition. Due to unavoidable reasons, disposal of the applications at the trial stage as well as at the appeal stage has been delayed. The judgment under a ..... 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