TMI Blog1955 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... s "riding roughshod" over the rights of the shareholders. In the alternative, it was prayed that action might be taken under section 153C and appropriate orders passed to protect the rights of the shareholders. The only effective opposition to the application came from the chairman of the company, Appanna Ranga Rao, who contested it on the ground that it was the vice-chairman, Devata Ramamohanrao, who was responsible for the maladministration of the company, that he had been removed from the directorate, and steps were being taken to call him to account, and that there was accordingly no ground either for passing an order under section 162, or for taking action under section 153C. The learned Judge of the Andhra High Court before whom the application came up for hearing held that the charges set out therein had been substantially proved, and that it was a fit case for an order for winding up being made under section 162( vi ). He also held that under the circumstances action could be taken under section 153C, and accordingly appointed two administrators for the management of the company for a period of six months vesting in them all the powers of the directorate and authorising t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a finding recorded thereon. We do not find any substance in this contention. Though the objection was raised in the written statement, the respondents did not press the same at the trial, and the question was never argued before the trial Judge. The learned Judges before whom this contention was raised on appeal declined to entertain it, as it was not pressed in the trial court, and there are no grounds for permitting the appellant to raise it in this appeal. Even otherwise, we are of opinion that this contention must, on the allegations in the statement, assuming them to be true, fail on the merits. Excluding the names of the 13 persons who are stated to be not members and the two who are stated to have signed twice, the number of members who had given consent to the institution of the application was 65. The number of members of the company is stated to be 603. If, therefore, 65 members consented to the application in writing, that would be sufficient to satisfy the conditions laid down in section 153C, sub-clause (3)( a )( i ). But it is argued that as 13 of the members who had consented to the filing of the application had, subsequent to its presentation, withdrawn their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view has been affirmed by the learned Judges on appeal. It was argued for the appellant that the evidence only established that the vice-chairman, Devata Ramamohan Rao, who had been in effective management was guilty of misconduct, and that by itself was not a sufficient ground for making an order for winding up. It was further argued that the words "just and equitable" in clause ( vi ) must be construed ejusdem generis with the matters mentioned in clauses ( i ) to ( v ), that mere misconduct of the directors was not a ground on which a winding up order could be made, and that it was a matter of internal management for which resort must be had to the other remedies provided in the Act. The decisions in In re Anglo-Greek Steam Co. [1886] L.R. 2 Eq. 1 , and In re Diamond Fuel Co. [1879] 13 Ch. D. 400, 408 , were relied on in support of this position. In In re Anglo-Greek Steam Co. s case ( supra ) , it was held that the misconduct of the directors of a company was not a ground on which the court could order winding up under the just and equitable clause, unless it was established that by reason of such mismanagement the company had become insolvent. In In re Diamond Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for a winding up order under section 162( vi ) becomes a question to be decided on the facts of each case. Where nothing more is established than that the directors have misappropriated the funds of the company, an order for winding up would not be just or equitable, because if it is a sound concern, such an order must operate harshly on the rights of the shareholders. But if, in addition to such misconduct, circumstances exist which render it desirable in the interests of the shareholders that the company should be wound up, there is nothing in section 162( vi ) which bars the jurisdiction of the court to make such an order. Loch s case ( supra ) was itself a case in which the order for winding up was asked for on the ground of mismanagement by the directors, and the law was thus stated at page 788: "It is undoubtedly true that at the foundation of applications for winding up, on the 'just and equitable' rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management of a company by its directors, so long as they are acting within the power conferred on them under the articles of association. But this rule can by its very nature apply only when the company is a running concern, and it is sought to interfere with its affairs as a running concern. But when an application is presented to wind up a company, its very object is to put an end to its existence, and for that purpose to terminate its management in accordance with the articles of association and to vest it in the court. In that situation, there is no scope for the rule that the court should not interfere in matters of internal management. And where accordingly a case had been made out for an order for winding up under section 162, the appointment of administrators under section 153C cannot be attacked on the ground that it is an interference with the internal management of the affairs of the company. If a liquidator can be appointed to manage the affairs of a company when an order for winding up is made under section 162, administrators could also be appointed to manage its. affairs, when action is taken under section 153C. This contention must accordingly be rejected. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
