TMI Blog1961 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ring immediate execution. That petition was allowed on May 20, 1960, and an advocate-receiver was put in charge of the affairs of the company pending disposal of this petition. The receiver assumed charge on May 1, 1960, and is carrying on business to the satisfaction of all concerned. The company is seen to make appreciable profits under his management. Encouraged apparently by the signs of prosperity to the company, the petitioner submitted before this court on December 12, 1960, that he was not pressing this motion for a winding up. Thereupon, Shri Pullat Sankaranarayana Menon, apparently supported by 37 other shareholders, intervened to prosecute the petition for winding up. He was substituted in the place of the original petitioner and was allowed to amend the petition under rule 102 of the Companies (Court) Rules, 1959. It is the petition as amended by him that now comes up for disposal before me in this proceeding. The company has a nominal share capital of Rs. 10 lakhs divided into 6,000 cumulative preference shares of Rs. 50 each and 70,000 ordinary shares of Rs. 10 each, of which 3,200 preference shares and 34,000 ordinary shares have been subscribed making up a paid up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the meeting of shareholders to be held on March 18, 1960, averting thereby all possibilities of an auction that day as advertised by the board of directors. Having thus gained a breathing space, he instituted this petition for compulsory winding up of the company on March 25, 1960. It was soon followed by another similar petition which was registered as C. P. No. 16/1960, by Shri K. T. Kunjunni, another shareholder of the company. When these two petitions came up for final hearing on December 12, 1960, the petitioners in both the petitions submitted in court that they were not pressing the motion for a compulsory winding up. As there was nobody to intervene in C. P. No. 16/1960 to prosecute the same further, that petition was dismissed on December 12, 1960; and Shri Pullat Sankaranarayana Menon having intervened in C.'P. No. 7/1960, as already mentioned above, this petition remains to be disposed of now. It must be stated at the outset that this company is not the least insolvent. The petitioner himself stated in his affidavit filed in support of the petition that "the fixed assets of the company exclusive of the investments and current assets shown separately in the balance- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to make out a circumstance for a compulsory winding up are: (1)That the company itself has resolved unanimously to terminate its existence; but the board of directors cannot be entrusted with any job of confidence so that the only way to carry out the resolve of the company is to have a winding up by court; (2)The prospects of the company to earn profits sufficient to clear off the arrears of dividend on the cumulative preference shares and to declare a dividend on the ordinary shares are too far ; (3)A large majority of shares are held by one or two individuals so that the other shareholders cannot have any effective control of the affairs of the company ; and (4)The managing agents who held control of the company from 1946 to 1960 are guilty of many acts of malfeasance, misfeasance and nonfeasance which can be exposed and remedied only in a proceeding in winding up by the court. With reference to the company's resolve to terminate itself and wind up its affairs, the petitioner urges that a special resolution to that effect has been passed unanimously at the extraordinary general meeting of the shareholders held on January 19, 1960, and the same has been ubsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two months to enable the petitioner to decide whether this petition is to be pressed or withdrawn. It is ordered accordingly.................." It may be noted that at that time the company had been under the management of the receiver only for a very short period, for less than three months. Subsequently, the hearing of this petition came to be adjourned several times to enable a meeting of the board of directors to review the present position of the company; and finally when the petition was taken up for hearing on December 12, 1960, the petitioner in C. P. No. 16/60 and the original petitioner in this petition candidly submitted that they did not desire to press the motion for a compulsory winding up, and many other shareholders appeared in court to oppose the petitions. The circumstances disclosed in this case are on a par with those in Oriental Navigation Co. Ltd. v . Bhanaram Agarwalla, A.I.R. 1922 Cal. 365 where Sanderson C.J. observed: "The mere fact that a majority of the shareholders, who voted at the meeting, were in favour of winding up the company, either under supervision of the court, or by the court compulsorily, was not sufficient to justify the court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resence of the shareholders at a meeting convened. That cannot materially prejudice the shareholders. Even apart from that, it has been held by the Judicial Committee of the Privy Council in Ripon Press and Sugar Mill Co. Ltd., Bellary v. Gopal Chetty [1932] 2 Comp. Cas. 70(PC). : " It is well-settled that an ultra vires transaction on the part of the directors is of itself no ground for a winding up order." Considering the trivial nature of the ultra vires act alleged in this case, I hold that it cannot be made the basis for a motion for compulsory winding up of the company. Nor does the fact that any prospect of the company's declaring a dividend to its ordinary shareholders is not seen in the , near future induce me to order this petition. When the petition is based upon the ground that it is just and equitable that the company should be wound up it is not sufficient to show that the company has not been earning profit is for a longtime see In re Anglo-Continental Produce Co. Ltd. [1939] 1 All E.R. 99 The old managing agents, in whose long term of office the company was not recording any appreciable profit, have gone out of office. Under its management e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject for which it was incorporated has substantially failed, or ( c ) it is impossible to carry on the business of the company except at a loss which means that there is no reasonable hope that the object of trading at a profit can be attained, or ( d ) the existing and probable assets are insufficient to meet the existing liabilities. When none of the four tests can be applied to the facts of the particular case the company cannot be wound up." In In re Anglo-Continental Produce Co. Ltd. [1939] 1 All. E. R. 99 , it was held: " The court ought not to exercise its jurisdiction under the Companies Act, 1929, section 186(6) (corresponding to our section 433 ( f )), unless some wrong has been done to the company and the company is deprived of its remedies in respect of it by the improper use of voting power of the shareholders, or that the substratum of the company has gone, or that it is impossible, owing to the way in which the voting power is held and to the feelings of the directors towards one another, for the business of the company to be carried on. The petitioner had failed to establish that any of these conditions existed, and the petition ought to be dismissed. " Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
