TMI Blog2000 (12) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2 and 3 are the husband and wife whereas respondent Madan is the real younger brother of appellant No. 2 Umesh. This is sufficient to suggest that this is a business initiated by the family members. Initially both these brothers for service purposes were abroad for quite sometime. Umesh, appellant No. 2 lost his job there and he returned to India. However, the respondent Madan continued to stay and work abroad. 3. After appellant No. 2 returned to India, both the brothers thought of starting a hotel business or industry in India, and to be precise in Goa. Both the brothers originally belong to this State of the country. In furtherance of the idea which was entertained by the brothers, some land was purchased at Vagator, Bardez, Goa, whereon the necessary construction of the hotel building was started. According to the respondent, this business or industry was started with a clear understanding between the brothers that the shareholding was 50 per cent each and the business would be in the shape of partnership. According to the respondent/ petitioner since he was still continuing his service or job abroad, he was not in a position to take part and participate in the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouses, refreshments and all other like activities and facilities for the customers to which a reference is made in details in paragraph 3 of the petition, and also in the memorandum of association. 5. Appellant Nos. 2 and 3 happened to be the subscribers to the memorandum of association of the company. Appellant No. 2 Umesh V. Prabhu is the managing director right from the beginning. Respondent No. 3 and respondent (original petitioner) Madan V. Prabhu also happened to be the directors of the company and members of the board of directors. 6. Since the petitioner was abroad, according to the petitioner, respondent Nos. 2 and 3, i.e., the wife of respondent No. 2 subscribed to the memorandum of the association of the company with ten shares each of Rs. 100. It is the case of the petitioner, though, for the purpose of business a company was to be formed but factually and in substance it remained a family business with a partnership of the petitioner and respondent No. 2 with equal shares. According to him, the intervention of respondent No. 3 was for the limited purpose of carrying out necessary formalities which the petitioner could not do due to his absence. 7. After t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 20,000 respectively which was shown by way of loan in the book of respondent No. 1 till its settlement. The petitioner further alleged that on April 30, 1987, allotment of equity shares was done, out of which 8,990 were allotted to respondent No. 2 i.e., Umesh and 990 equity shares were allotted to Smt. Pranothi. The necessary return of allotment in Form No. 2 under section 75(1) dated May 5, 1987, was also submitted by respondent No. 2 Umesh. According to the petitioner, the record further indicated a further allotment of 2,250 shares to both respondent Nos. 2 and 3 equally. Since no allotment of shares was shown against the petitioner he was naturally enraged and his suspicion about the behaviour of respondent Nos. 2 and 3 by this act of non-allotment of shares to him was further confirmed. The petitioner initiated a civil suit for necessary allotment of 2,250 shares in his favour. The differences between the brothers took an ugly shape which compelled them to depart from each other. In the civil suit referred to above, it appears that respondent No. 2 did admit that the petitioner had paid Rs. 2,25,000 but according to respondent No. 2, it was on some different count. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, else great prejudice was likely to be caused to the petitioner. 13. No doubt, the learned Single Judge also thought of any other alternative remedy, if it was available to the petitioner; as was contended by the respondents before him. The learned Single Judge reached the conclusion that there was no efficacious and alternative remedy much less under section 234/247 or under sections 397 and 398 of the Act. 14. We have heard Sri Kakodkar, the learned senior advocate for the appellants and Sri M.S. Usgaonkar, the learned senior advocate for the present respondent in this appeal. Shri Kakodkar, the learned advocate vehemently contended that the facts as are disclosed indicate that the company was incorporated with ten shares each subscribed by respondent Nos. 2 and 3. Subsequently 8,990 shares were allotted to the respondent Umesh and 990 to respondent No. 3 Pranothi. These shares were allotted on April 30, 1987. Thereafter an allotment was made on April 3, 1989, showing 125 shares to respondent No. 2 and 1,125 shares in the name of the original petitioner. Sri Kakodkar argued that, in fact, an allotment of the shares in the name of the present respondent Madan w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picture that appellant No. 2 was the original account holder and the name of the respondent Madan was introduced subsequently on January 23, 1994. According to Sri Kakodkar, this important piece of evidence has been very lightly brushed aside by the learned single judge. Sri Kakodkar further argued that the learned Single Judge was wrong in reaching the conclusion that the petitioner was being excluded from the business and the management of the company and further that such exclusion entitled the petitioner to ask for winding up of the company. He further argued that the petitioner was neither a member nor a contributory of the company nor was he a subscriber. On the contrary, according to Sri Kakodkar, at the time of registration of the company, the petitioner was not at all in the country itself. 16. Sri Kakodkar further argued that the resignation tendered by appellant No. 3 in fact was not immediately after the return of the petitioner,but many months thereafter. The communication as regards the resignation of respondent No. 3 was communicated to the Registrar of Companies by the respondent Madan only, in spite of it having not been so accepted by the board of directors. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is not a signatory to the memorandum of association or any other initial documents in the name of the company, that by itself, would not divest him of his rights of being at least a contributory and also a shareholder. Sri Usgaonkar therefore suggested that in any case since his client has interest in the welfare and prospects of the company, the petition at the instance of his client was definitely maintainable. He, therefore, argues that the learned Single Judge did not commit any mistake much less in law. Sri Usgaonkar further argued that the conduct of the present appellants was so irritating that even after having swallowed a huge amount from his client which is invested in the present business, the appellants are bent upon dragging him out gradually and in a most unpleasant manner. Sri Usgaonkar argued that, taking into consideration the attempt on the part of the appellants to exclude his client and an attempt to totally eliminate him from the business activities has virtually resulted in total oppression of the petitioner who is compelled to suffer the loss in spite of the handsome financial help having been extended by him to the appellants. 19 . Sri Usgaonkar furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b ) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder". Relying on the abovesaid provision, Sri Kakodkar argued that in the instant case the petitioner cannot be said to be a contributory at all, and if at all he is so held even then the petition at his instance was not maintainable as he did not fulfil the conditions embodied in clause ( b ) of sub-section (4) of section 439 of the Act. From the record we have noticed that none of the shares held by the petitioner were held by him as an original allottee. It is also clear that the same were not registered in his name, much less at least for a period of six months during the eighteen months immediately preceding the commencement of the winding up proceedings. On the basis of this as argued by Sri Kakodkar we feel that the very petition, at the instance of the petitioner in his capacity as a contributory, was not maintainable. The subsequent part of this clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, in fact, allotted the shares and he was participating in the management effectively. However, according to Sri Kakodkar, since he was involved in some misdeeds, the present appellants were required to remove the respondent/petitioner from the directorship and that cannot be a reason for filing the present petition for winding up the company. Such a petition at the instance of a removed director and on that ground is also not maintainable. 26. Sri Kakodkar argued that the respondent/petitioner also had initiated unnecessarily false suit alleging that the pending bills of Sai Trading and Contracting Engineers were not paid by the company. He argued that merely because the appellants have not cleared up the pending bills of the said construction company, would not straightaway entitle the respondent/petitioner to proceed with the winding up petition. We find no difficulty in accepting this argument of Sri Kakodkar and particularly when it pointed out that the work which was done by Sai Trading and Construction Enterprises since was not up to the mark and sub-standards material was used, the bills were withheld. In our opinion to get recovered that amount winding up of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt/petitioner would definitely have made the petitioner interested in the affairs of the company. In view of this, we find no difficulty in holding that the respondent/petitioner happens to be a contributory. However, that by itself, would not entitle the respondent/petitioner to move the winding up petition as he does not fulfil the conditions as are embodied in section 439(4)( b ) of the Act. 32. Sri Usgaonkar, the learned senior advocate invited our attention to the various documents such as his letter exhibit T at page 269 addressed by him to EDC, requesting to disburse the loan amount and to grant eight months time to raise their own share. He also invited our attention to the documents at pages 239, 243, 231 and 229 which mostly, is the correspondence between the two brothers and the resignation letter of Smt. Pranothi. However, it is pertinent to note that no defaults or any shortcomings in the accounts of the company are demonstrated by Sri Usgaonkar nor has he pointed out any tampering with the accounts or any defaultation on the part of appellant No. 2. If all these documents are viewed with proper prespective, we do not find that any of these can be said to have mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0] 67 Comp. Cas. 607 (SC), Sri Usgaonkar argued that the attempts on the part of the appellants are so eloquent as demonstrated through the record that the same can be considered for winding up of the company. According to him, application to the court for relief in cases of oppression, if it is shown that the conduct or the affairs of the company are in a manner prejudicial to public interest or in a manner oppressive to any member or members including any one or more of themselves, may apply to the court for an order under section 397 and if, on such application, the court forms the same opinion, then the court may pass an order of winding up, it being just and equitable. So far as the proposition is concerned, there cannot be any dispute. However, in our opinion, the evidence which is tried to be brought on record through various documents definitely fall short to draw such an inference in the instant matter. On this point, Sri Usgaonkar also invited our attention to yet another decision in the matter of Anisha K. Shah v. Fostenex (P.) Ltd. [1995] 82 Comp. Cas. 514 . However, after having gone through the facts of that case, we have to observe that the same also is of no hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly relied on the decision in the matter of V.V. Projects Investments (P.) Ltd. v. 21st Century Constructions (P.) Ltd. [1997] 90 Comp. Cas. 346(AP). 39. Relying on the decision in the matter of Malabar Industrial Co. Ltd. v. A. John Anthrapper [1985] 57 Comp. Cas. 717 (Ker.), Sri Kakodkar rightly argued that in the present case the substratum cannot be said to have been disappeared, nor is it even prima facie shown to have been so lost and hence in our opinion also the learned company judge should not have exercised the discretion of giving the relief of winding up under section 433( f ) of the Act, which has to be used very sparingly and that too in exceptional cases. 40. We find, in the present case, very vague allegations are made as regards gross mismanagement, lack of probity and oppression, without there being any cogent prima facie evidence to that effect. Even otherwise, all of these allegations are squarely covered by sections 397 and 398 of the Act. We therefore feel that the learned company Judge should not have made haste in admitting the petition and directing to advertise the same. 41. From the facts of the case and the documents on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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