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TMI Blog1970 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner has taken out Company Petition No. 57 of 1969 under sections 433(b) and 439(c) of the Companies Act for winding up the transport company on the grounds, (1) that the petitioner being a minority shareholder, the other shareholders have joined together and are continuously mismanaging the affairs of the company resulting in loss ; (2) that there is a complete deadlock in the management, and the petitioner is not allowed to enter into the place of business; (3) that the company has committed default in its statutory obligations; and (4) that the substratum of the company has gone by reason of the reduction in routes and dwindling in business and it is impossible to carry on the business except at a loss. The petitioner has taken out Company Petition No. 58 of 1969 in respect of the engineering company under sections 397 and 398 of the Companies Act alleging, inter alia, that respondents Nos. 2 and 3 are virtually in charge of the affairs of the company, that the affairs of the company are being conducted in a manner oppressive to him, that though he is the managing director of the company, he is not able to function as such on account of such oppressive conduct, that the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. (1) The following members of a company shall have the right to apply under section 397 or 398 :- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares". The case of the petitioner, as put forward in paragraph 8 of his petition, is that he has paid all calls made on him and other sums due on his shares. The contention of respondents Nos. 2 and 3 is that the petitioner has not paid all calls and other sums due on his shares. In his reply to this allegation, the petitioner has filed an affidavit denying that any other call was made on him and that any amount is due from him. Initially, the burden lies upon the petitioner to prove that he has paid all calls made on him and other sums due on his shares. He has made out that case in his petition so far as calls made on him are concerned. But the contention of the respondents is that all the calls have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit". In order to entitle the petitioner to succeed in his petition under sections 397 and 398, if he has right to apply by virtue of section 399, he should satisfy, (1) that the affairs of the company are being conducted in a manner oppressive to any member or members; and (2) 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 is just and equitable that the company should be wound up. The question whether the affairs of the company are being conducted in a manner oppressive to any member or members is a question of fact depending upon the facts of each case: "Oppression" means burdensome, harsh and wrongful. A conduct to be oppressive should indicate lack of probity and fair dealing towards one or more members of the company. Oppression may take various forms. But an isolated act of oppression will not normally be sufficient to justify the relief under this section. The words used are "the affairs of the company are being conducted in a manner oppressive to any member or members" and they suggest that the oppressive conduct must be a continuing process. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or persons alleged to have been oppressed in his or their character as a member or members of the company. Harsh or unfair treatment of the petitioner in some other capacity, as, for instance, a director or a creditor of the company, or as a person doing business or having dealings with the company, or in relation to his personal affairs apart from the company, cannot entitle him to any relief under section 210. Secondly, the matters complained of must relate to the conduct of the affairs of the company. Thirdly, they must be such as not only to make the winding up of the company just and equitable, but also to lead to the conclusion that the affairs of the company are being conducted in a manner which can properly be described as 'oppressive' of the petitioner, and, it may be, other members. The mere fact that a member of a company has lost confidence in the manner in which the company's affairs are conducted does not lead to the conclusion that he is oppressed; nor can resentment at being out-voted; nor mere dissatisfaction with or disapproval of the conduct of the company's affairs, whether on grounds relating to policy or to efficiency, however well founded. Those who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting upon these two decisions it is observed in Palmer's Company Law, 21st edition, at page 514, that in the light of the dicta in the earlier cases any such doubt should be resolved in favour of the petitioner and that these two decisions of Plowman J. should not be regarded as laying down any general principles. As against the foregoing decisions, Mr. Raghavachari, appearing for the petitioner, cited the decision in Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] AC 324; [1958] 3 WLR 404; [1958] 3 All ER 56 ; [1959] 29 Comp. Cas. 1 (HL) . In that case the company was a subsidiary company. The controlling powers vested in the majority shareholders and they were found to have been exercised for the purpose of destroying the company's business. The facts established that the majority shareholders acted in such a way as to cause oppression on the minority shareholders. In view of these facts, it was held that relief under section 210 was necessary. Mr. Raghavachari also referred to the decision in In re H.R. Harmer Ltd. [1959] 1 WLR 62 ; [1958] 3 All ER 689; [1959] 29 Comp. Cas. 305 (CA) , already referred to, as supporting the petitioner's case that the conduct of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been reduced in that year. Exhibit P-26 is the balance-sheet for the year ending with March 31, 1968. There, we find a sum of Rs. 13,925.70 as being the debt payable by the transport company to the engineering company. But it is, however, the common case of both the parties that the engineering company is financially sound. Differences appear to have arisen between the petitioner on the one hand and his father, the second respondent, on the other, in about May, 1969, and, as a result of that misunderstanding, one was attempting to find fault with the other. Complaining that the petitioner, as the managing director of the engineering company, had defaulted in convening the meetings of the board, the second respondent wrote on May 27, 1969, exhibit R-1, calling upon the petitioner to convene a meeting as early as possible. The petitioner appears to have declined to acknowledge receipt of the notice and therefore the second respondent was obliged to send the notice by certificate of posting. To the same effect, the third respondent also sent a notice to the petitioner under exhibit R-2 on May 27, 1969. On May 29, 1969, the second respondent informed the petitioner by his letter, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he did not receive any notice of any of the meetings referred to by the petitioner in his letter, exhibit R-5. Respondents Nos. 2 and 3 together wrote exhibit R-10, to the petitioner on June 11, 1969, stating that though they wanted inspection, the books were not made available. On June 11, 1969, the third respondent sent the registered communication, exhibit R-11, to the petitioner making serious allegations against him in regard to his management of the affairs of the company and calling upon the petitioner to furnish some details. On June 26, 1969, respondents Nos, 2 and 3 together sent the communication, exhibit R-12, to the petitioner stating that in spite of their efforts the petitioner had not convened a meeting and that they gave him a last chance to convene a meeting of the board. They also informed him that if the petitioner failed to take necessary steps, they would be taking necessary action open to them for convening a meeting as expeditiously as possible. On 1st July, 1969, the petitioner replied under exhibit R-13 to exhibit R-10 making counter-allegations to the effect that the minutes books were with the second respondent. He also called upon the second responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locutory Application No. 425 of 1969, on July 11, 1969, praying for the appointment of a receiver for the family properties. The subordinate judge passed an order on December 12, 1969, directing the second respondent herein to deposit into court a sum of Rs. 500 on or before 15th of every month commencing from January, 1970, and further holding that in case of default, a receiver would be appointed. Against that order, the second respondent has filed an appeal to this court and the order of the lower court has been stayed. It would be seen from the foregoing facts that all is not well between the petitioner and the other members of his family. But the question is whether the petitioner has made out a case that the affairs of the company are being managed in a manner oppressive to him. The materials on record do not justify an inference in favour of the petitioner. The correspondence reveals that the petitioner was consistently evading the request of the second respondent for convening a meeting. He did not face the board of directors to answer the several charges made against him in his capacity as the managing director. It was open to the other directors to take such action as wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up". Applying this test, I do not find any circumstance whatsoever to hold that it is just and equitable to wind up the company. It is next contended on behalf of the petitioner that on account of the difference of opinion between the petitioner and the other shareholders, a complete deadlock has been created and that on account of such deadlock, it is just and equitable to wind up the company. It is true that if there is complete deadlock in the management of the company, it would be just and equitable to wind up the company, for, with such deadlock, the affairs of the company cannot be carried on to its advantage. The question in this case is whether there is such deadlock. In my view, there is not. The petitioner is only a minority shareholder. Even, according to him, all the other shareholders are all one side, of course as against him. In those circumstances, it can hardly be said that such a deadlock has come into exist ence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... havachari, appearing for the petitioner, lastly, contended that if I should hold that there is no ground to appoint an administrator as prayed for by the petitioner, necessary direction may be given to the second respondent to purchase the shares of the petitioner, as the petitioner does not want to continue to be a shareholder any longer. He submitted that a commissioner may be appointed for the purpose of valuing the shares of the petitioner. I do not think that the circumstances of the case call for such an action, though it is undoubtedly open to the court in suitable cases to pass such an order. The petitioner is solely responsible for the present state of affairs and he cannot take advantage of his own fault and get out by getting an order compelling the other shareholders to purchase his share. We may next take up the case of the petitioner as regards the transport company. In this case, the petitioner has prayed for an order of winding up the company on the following grounds: (1) that the affairs of the company are continuously mismanaged by respondents Nos. 2 and 3 resulting in financial loss; (2) that there is complete deadlock in the management; that the company has com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed up the letter by the next letter, exhibit P-14, on July 5, 1969, stating that it was rather amusing that his resignation sent on October 16, 1968, was accepted only on June 11, 1969. He also stated that he was not responsible for any of the functions as a director after October 16, 1968. This is the state of relationship between the petitioner and the other directors as regards the affairs of the transport company. In view of the foregoing situation, it is contended on behalf of the petitioner by Mr. Raghavachari that there is a complete deadlock in the management of the business and that, therefore, it is necessary to direct the winding up of the company. I have already dealt with the contention of the petitioner in regard to the management of the engineering company with regard to which also it was contended that there was similar deadlock. For the reasons, which need not be repeated here, I am of the view that there is no deadlock as regards the management of the affairs of the transport company. In spite of the petitioner having a hostile attitude against the other shareholders, the affairs of the company can be carried on by the other shareholders who do not want th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expect profitable working so as to wipe off the liabilities and that if the company is not wound up, there is the likelihood of further loss which would have to be shared by the petitioner also. This argument assumes as if the company was started on a clean slate with regard to its financial position. It is admitted that the buses were acquired from another operator and that for such acquisition, loans had to be raised on security of property. It is not the case of the petitioner that the quantum of loan has since increased. It is not disputed that the loan originally borrowed has been reduced, though it is not completely' wiped out. Therefore, there is no substance in the argument that on account of the debts, the company should be wound up. To support the contention that creditors have taken action against the company for realising their dues, reliance is placed upon some notices issued by some creditors and those notices are exhibits P-1G to P-21. All these notices were issued during the period from June to September, 1969, that is, after the petitioner and the father and other members of his family fell out. It is contended on behalf of the respondents that these notices were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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