TMI Blog1984 (5) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... , was transferred in favour of the partnership. Dhirendra died intestate on May 6, 1963, leaving Tarulata, his widow and petitioner No. 1 in this application, as his sole heiress and legal representative. By a deed executed thereafter on January 15, 1964, petitioner No. 1 and respondent No. 2 constituted a new partnership in the same name " Modern Furnishers", which took over the business of the previous partnership. The two partners had equal shares in the partnership except as to the goodwill of the business in which petitioner No. 1 retained 2/3rds share and respondent No. 2 was given the balance 1/3rd. The said partnership was converted into a limited company named Modern Furnishers (Interior Designers) P. Ltd. (hereinafter referred to as "the company") on or about November 7, 1975. One of the objects of the company was to acquire and take over the business of the said partnership. Respondent No. 2 was appointed the permanent managing director of the company under its articles and he has continued as the managing director ever since. The said partnership was, however, not dissolved. The tenancy in the said premises at Park Street was retained by the said partnership whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anerji, the wife of respondent No. 2, and respondent No. 4 herein, holds 10 shares; and ( d )Petitioner No. 2 holds 10 shares. It is alleged in the petition that at the time of the incorporation of the company it was agreed or understood between petitioner No. 1 and respondent No. 2 that both of them would have the right to participate in the management of the company equally. It was further agreed that as petitioner No. 1 was a pardanashin lady not capable of participating actively in the management of the company, petitioner No. 2 would look after her interests in the company and also take an active part in the management of the company as her representative. It is alleged that taking advantage of the position of petitioner No. 1, respondent No. 2 has been treating the company as his personal property without any reference to petitioner No. 1. The services of the said K. A. Karmally, it is alleged, was terminated wrongfully and illegally without any resolution of the board of directors of the company or the consent of the petitioners. K. A. Karmally, it is alleged, was an old employee in the business from the time of Dhirendra. It is alleged that the motive behind the termi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistrator or receiver over the books of account, statutory books including shareholders' minute books, directors' minute books, other properties and assets of the company situated at No. 1 Gorachand Lane, Calcutta, and at its showroom at 38, Park Mansion, Calcutta; ( b )Appointment of a special officer or administrator or receiver to take charge and to carry on the management and business of the company; ( c )A declaration to the effect that respondent No. 2 be deemed to have vacated and has ceased to be a director of the company; ( d )An injunction restraining respondent No. 2 from acting as the managing director of the company and from exercising any of the powers and authorities of managing directors and an officer of the company usurping the functions of the directors or officers of the company or from drawing any remuneration and from interfering with the affairs of the company; ( e )Supersession of the board of directors of the company and directions for fresh election of the board; ( f )An injunction restraining respondent No. 2 from holding any meeting of the board of directors of the company; ( g )An injunction restraining respondents Nos. 2 and 4 from surrend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said Karmally, who had been acting as the supervisor in the factory of the company, was not discharging his duties faithfully. He misbehaved with other workmen. It was also found that, with the assistance of petitioner No. 2, Karmally had established a rival business, where he was accepting orders from the customers of the company, and was supplying furniture to them direct. In spite of warnings, neither petitioner No. 2 nor the said Karmally took any step to desist from such wrongful activities. The services of Karmally were accordingly terminated. Even after the termination of the services of Karmally, it was found that petitioner No. 2 in spite of verbal warnings continued to have business dealings and transactions through Karmally which directly affected the business of the company. Petitioner No. 2 also started instigating the workmen of the company against the management. He was using the facilities of telephone and transport of the company for carrying on his personal dealings through Karmally as aforesaid. The aforesaid wrongful activities of petitioner No. 2 were brought to the notice of petitioner No. 1, who said that she was helpless in the matter and was una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner No. 1. It is alleged that petitioner No. 1 is an illiterate and not in good health and it is, therefore, necessary that one of her relations should act as her representative in the said business. It is alleged that petitioner No. 2, before he joined the business, was employed as a school teacher and at the request of petitioner No. 1, he left his job and joined the partnership business on February 1,1964. At the hearing, learned counsel for the petitioners reiterated in his submissions the contentions of the petitioners in their pleadings and further submitted that, in the facts and circumstances, a case of oppression and mismanagement has been made out against respondent No. 2. He urged that there has been a total ouster of one group of shareholders by another group of equal strength from the management of the company and its business and the court should exercise its powers under sections 397 and .398 of the Companies Act, 1956, to restore the previous position. He submitted that respondent No. 2, who joined the business as a mere employee, has by manoeuvring taken control of the entire company. Learned counsel for the respondents submitted, on the other hand, that no ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be called upon to act upon the same . ( d ) Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick [1980] 50 Comp. Cas. 771. This decision of a Division of this court was cited by the petitioner for the following observations (at p. 782): "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 the winding-up of a company, the court under the abovementioned sections has been vested with ample power to continue the corporate existence of a company by passing such orders as it thinks fit in order to achieve the objective by removing any member or members of a company or to prevent the company's affairs from being conducted in a manner prejudicial to the public interest. The court under section 398 read with section 402 of the Act has the power to supplant the entire corporate management. Under the aforesaid sections, the court can give appropriate directions which are contrary to the provisions of the articles of the company or the provisions of the Companies Act." ( e ) Scottish Co-operative Wholesale Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that upto now there has been no dispute in the existing partnership where petitioner No. 1 and respondent No. 2 are partners with equal shares. If the parties had strong differences in opinion, disputes would not have remained confined to the affairs of the company only and would have extended to the running of the partnership. I also note that the tenancy in the said premises in Park Street, which appears to be the target of the contesting parties and in respect of which mutual allegations and counter-allegations have been made, belong to the partnership and not to the company which is only a licensee under the partnership. The company may not be able to carry on its business effectively in future if such licence is withdrawn. The contention of the respondents that there has been no allegation of financial irregularity or misappropriation against the management has to be taken note of and it is also to be noted that respondent No. 2 remains the permanent managing director of the company under its articles. The articles constitute an agreement between the shareholders. Petitioner No. 1 must have had full confidence in respondent No. 2 when she subscribed to the said article. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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