TMI Blog1983 (7) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... are the following: (1)Articles of association of the company were amended in order to oppress minority shareholders. (2)The affairs of the company are being grossly mismanaged. The company is being managed as if it was a family concern of the board of directors. (3)Substratum of the company would disappear as a result of the decision taken to sell the Skinnapuram estate, the only estate owned by the company. This company was incorporated in the year 1918 under the Travancore Companies Regulation (1 of 1092 M.E.) as a public company limited by shares. The paid up capital of the company is Rs. 4,50,000 divided into 45,000 shares of Rs. 10 each. Some of the objects for which the company has been established have been extracted in paragraph 5 of these petitions as clauses ( a ) to ( c ). This company owns a rubber estate known as Skinnapuram estate having an extent of 698.92 acres in Enathi Mangalam village, Kunnathur Taluk. Of the abovesaid extent, 377.51 acres are said to be having mature rubber trees and 311.58 acres having immature rubber trees and the remaining 9.83 acres haying other plantations. In the counter-affidavit, the company has denied the material allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making out of a prima facie case much less an order of winding-up, it was not proper and justifiable to press the third ground, namely, that the decision to sell the estate of the company would cause disappearance of the substratum. This ground was accordingly not pressed before this court. But pressing the other two grounds, the counsel raised a contention that sub-section (2) of section 443 can be invoked only at the conclusion of an enquiry and not at any time earlier. It was contended that the test to decide the maintainability of the petitions is whether the allegations made in the petitions, if proved, made out a prima facie case; and, therefore, without taking evidence, these petitions cannot be dismissed under section 443(2) of the Act. Still another contention raised was that in order to dismiss a petition under section 443(2), there must be a finding that the petitioners have some other remedy available and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy and that such a finding can be given only after taking evidence. It was also argued by the counsel for the petitioners that for invoking sections 397 and 398 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up the company with or without costs, or any other order that it thinks fit. There is also a proviso to this sub-section which states: "The court shall not refuse to make a winding-up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets." Sub-section (2) of section 443 reads: "Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." There is nothing in sub-section (2) of section 443 to show or indicate that the court cannot make an order under sub-section (2) of section 443 at any stage before the conclusion of the enquiry of the winding-up petition or before taking evidence in the petition. Under sub-section (1), as pointed out earlier, on hearing a winding-up petition, a court can dismiss it, with or without costs; and under sub-section (2), the court can refuse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s grounds taken in the petitions, the petitioners have no case that they have no alternative effective remedy. In Hind Overseas Pvt. Ltd. v. R. P. Jhunjhunwalla [1976] 46 Comp. Cas. 91 (SC); AIR 1976 SC 565, it was observed by the Supreme Court that section 433( f ) has to be read with section 433(2) of the Act and that. (p. 106 of 46 Comp. Cas.): " where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding-up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." It is further observed in that case that there are preventive provisions in the Act under sections 397 and 398 as a safeguard against oppression in management and that these provisions indicate that relief under section 433( f ) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interest of the company. Therefore, the remedy to wind up the company is the last resort a contributory sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the allegations made, the petitioner's proper remedy would be an application under section 398 of the Companies Act and that he is acting unreasonably in seeking to have the company wound up instead of pursuing that remedy. To say that that remedy is not available to the petitioner, since he cannot muster the support required by section 399 of the Companies Act, seems to me no answer and only serves to show that other members are not prepared to subscribe to the allegations made by the petitioner." I am in respectful agreement with the dictum laid down in A. P. Pothen's case [1967] 37 Comp. Cas. 266 ; AIR 1968 Ker. 148 and George's case [1965] 35 Comp. Cas. 17; AIR 1964 Ker. 212, referred to above. The observations of the learned judge in these cases is a complete answer to the contentions of the petitioners that they do not have any effective remedy under sections 397 and 398 in view of the limitations placed under section 399 of the Act and that this court having admitted these petitions, it is to be presumed that this court was satisfied that there was a prima facie case and, therefore, this court is bound to allow the petitioners to adduce evidence and that an order un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d set aside the order of a single judge and dismissed C. P. No. 33 of 1982. The Division Bench found that in the absence of any allegation either that the company is insolvent or that the company has debts or that the company is not run profitably, a mere sale of an estate will not by itself render its substratum to disappear; that the apprehension of the contributory that the sale proceeds would disappear is a mere apprehension voiced in support of the petition, for the shareholders have very effective remedies both under the general law and under the provisions of the Companies Act to safeguard their interest after the sale proceeds come into the hands of the company. It was also held that the court will be justified in concluding that the substratum of the company has disappeared and in finding justification for an order of winding-up, only when the activities of the company become impossible by the operation of law or by unforeseen circumstances. The Division Bench also observed as follows; "All that the shareholder can establish by oral evidence may be to show either that the shares of the company are cornered by the relatives of the managing director, etc ., or that the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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