TMI Blog1992 (12) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... expulsion of a partner; that the petitioner who had been to Vijayawada in September, 1980, was confined to bed and that taking advantage of his absence and his inability to take part in the affairs of the firm, the other partners of PEC claimed to have called for a meeting on 1.6.81 and claimed to have resolved to form a company by transferring all the assets and liabilities of the partnership business as a going concern to the new company; that in accordance with that decision, it would appear that the respondent company (PCPL) was constituted and was registered with the Registrar of Firms, Hyderabad, on 23.12.81; that at a meeting said to have been held on 26.12.81 a resolution is claimed to have been passed authorising the transfer of the partnership firm - as a going concern to the respondent-company; that notices for the meeting said to have been held on 1.6.81 and 26.12.81 have not been given to the petitioner and that the alleged transfer of the partnership firm in favour of the respondent-company is illegal, fraudulent, inoperative in law and hence is null and void. 3. The petitioner further contended in the petition that PEC was constituted under a partnership deed, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm to the respondent-company was done in accordance with law; that the petitioner is neither a contributory nor a creditor and that it is neither just nor equitable to grant the relief sought for. 6. On the above pleadings, the following issues have been settled for determination : (1) Whether the petitioner is a creditor of the company within the meaning of section 439(b) of the Indian Companies Act ? (2) Whether the petitioner is a debtor of the company ? (3) Whether it is just and equitable to order winding up of the company ? (4) Whether the company petition is maintainable in view of the various suits pending in the civil courts wherein the parties were agitating their respective rights ? (5) Whether the company petition is maintainable in view of O.S. No. 616/83 on the file of the Court of the I Addl. Judge, City Civil Court, Hyderabad, a suit for dissolution and rendition of accounts of the firm, Progressive Engineering Company ? (6) Whether on the facts and circumstances of the case the company petition is liable to be dismissed without enquiry ? (7) Whether the petitioner has any locus standi to file the company petition and the same is bona fid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the meaning of section 439(b) ? (2) Whether the respondent-company is indebted to the petitioners in a sum exceeding ₹ 500 as on the date of the petition and if so, what is the amount due ? (3) Whether the petitioners made demand requiring the respondent to pay the sum of ₹ 6,56,306.45 as due to the petitioners and has served the said demand of the company by causing it to be delivered at its registered office requiring the company to pay the said sum due to the petitioners ? (4) If so, whether the respondent admits the liability ? (5) Whether the petitioners have issued the statutory notice of 21 days ? (6) If so, whether the respondent-company has complied with the said notice as per law ? (7) Whether the company petition is not maintainable without adding the partners of the petitioner-firm as parties to the company petition ? (8) Whether the petitioners have no locus standi to file the company petition ? (9) Whether the amount alleged to be due to the petitioners is admitted by the company and whether the company is not able to meet the said liability ? (10) Whether C.P. No. 11 of 1983 is not maintainable in view of the suits filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constructions; that Mr. K. S. Rao (RW4) started PEC in the beginning in the year 1966; that himself, Rajendra Prasad and some other relatives of K. S. Rao joined PEC in the year 1977 as partners and that the reason for taking him (PW1) as a partner in PEC is, because the firm wanted to expand business in large scale and the firm also required more solvency of the partners to tender for huge works. The petitioner filed Exh. A-6 and stated that it is the letter addressed by K. S. Rao to the Income Tax Officer, 'A' Ward, Circle I on 24.8.78. He identified the signature on Exh. A-6 as that of K. S. Rao. 12. PW1 further deposed that he has contributed ₹ 4,00,000.00 as his share capital in PEC; that Mr. K. S. Rao has written Exh. A-7 letter to him on 11.4.81 and sent it to him by post in Exh. A-8 envelope; that he was associated with PEC as a creditor even before he joined as a partner of the firm; that after he became a partner, the advances made by him to PEC were converted as his capital in PEC; that Exhs. A-9 to A-13 are the capital statements submitted by K. S. Rao to the Income Tax Department; that though according to Exh. A-5, partnership deed his share was 6 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the liaison works with the connected departments of PEC, YBC and YBS at Hyderabad and other places. 14. In support of the contention that PW1's capital as on 1.4.81 was ₹ 2,80,000, PW1 relied upon the recitals in Exh. A-14 letter written by RW2 to PW1 on 1.4.81. RW2 admitted that Exh. A-14 letter, dated 1.4.81 was written by him. During his cross-examination, RW2 stated that in item 20 of Exh. A-14, he wanted PW1 to pay ₹ 1,20,000 in order to make-up for the deficit capital of ₹ 4,00,000. RW2, however, added that since none of the partners brought ₹ 4,00,000, they have abandoned the idea and that even PW1 did not bring the money. In view of the admission of RW2 that he addressed Exh. A-14 letter calling upon PW1 to bring an amount of ₹ 1,20,000 in order to make-up the deficit of ₹ 4,00,000 towards his capital, it follows that PW1 had to his credit the capital of ₹ 2,80,000. During the course of cross-examination of RW4, he only stated that he does not know anything about Exh. A-14 letter written by RW2 to PW1; that he is not aware of item 20 mentioned in Exh. A-14 and that RW2 made the requisition in item 20 in Exh. A-14 without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deny his signature in Exh. A-990. Exh. A-991 is the personal Income Tax return for the year 1980-81 filed by Mr. K. S. Rao on 28-9-80. He admitted his signature on Exh. A-991. 18. Though so much of cross-examination was made with regard to the comparison of signature contained in Exh. A-7 with the signatures contained in the seven documents referred to above and asserting that the signature contained in Exh. A-7 is that of RW4 only, no steps have been taken to send the document to a hand-writing expert to prove that Exh. A-7 is a forgery. Is is, therefore, open to the court to compare the signature in Exh. A-7 with the admitted signatures of RW4 in Exhs. A-6, A-1006 and A-991. The signatures, appear to be identical and I feel that taking advantage of the fact that in some documents Sri K. S. Rao has mentioned the letters 'Rao' legibly, he has denied the signature in Exh. A-7. Section 73 of the Indian Evidence Act empowers the court to compare the signatures of the person by whom it purports to have been written or made with the admitted or proved signatures of that person. The Supreme Court held in Fakhruddin v. State of M. P. AIR 1967 SC 1326, that even in a case wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first instance denied the authorship of Exh. A-18. His signature contained in Exh. A-18 is marked as Exh. B-140. When he was specifically confronted with the signature in Exh. A-18, RW2 replied that he was not signing like that and that he did not sign Exh. A-18 letter. He, however, stated that he was signing as in Exh. A18 earlier. For the specific question put to him as to when he stopped signing as in Exh. B-140, he replied that he does not remember. Thereupon he was confronted with the signatures in Exs. A-20, A-22 and A-240. He admitted that the signatures in Exh. A-20, A-22 and A-240, which are his admitted signatures, are similar to what is contained in Exh. B-140. Having been cornered like that in the cross-examination and having admitted that the signature contained in Exh. B-140 is similar to his signatures in Exs. A-20, A-22 and A-240, while stating that the signature contained in Exh. A-18 might be his signature, RW2 tried to explain that he was giving blank signed papers to PW1 suggesting thereby that PW1 might have brought into existence Exh. A-18 on a blank signed paper. While discussing Exh. A-7, I have already observed that PW1 who went to Vijayawada to attend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page No. 5 of Exh. B-162 which is the account of PW1 in the ledger of PEC firm which shows a debit of ₹ 2,65,477.30. The said debit entry is arrived at after debiting ₹ 3,84,630.07 to the account of PW1 on 9.1.82. 24. The learned counsel for the respondent submitted that the entries in Exh. B-162 cannot be looked into, because so far as the respondent-company is concerned it is an account book entry of a third-party and, therefore, it does not bind the respondent. Exh. B-162 was not shown to PW1 when he was in the witness box. It is only when RW2 was being examined that Exh. B-162 was pressed into service. It is not as if Exh. B-162 was filed in response to any summon or notice issued by the petitioner for production of the account books. That being the case, the respondent-company having voluntarily filed Exh. B-162 as an exhibit, cannot be permitted to contend that it is an entry in the account books of a third-party and as such; the respondent is not bound by the entries therein. The company came into existence having allegedly taken over the business of PEC as a going concern and the very basis of excluding PW1 from any share in the company is the entries contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the funds of PEC were diverted towards the discharge of Andhra Bank debts of ₹ 8.10 lakhs. Admittedly, PW1 did not authorise RW4 for making any such payment. RW4 tried to depose that he has done so at the instance of RW2. But, the entries in Exh. B-162 show that by the time of the alleged authorisation given by RW2, he was having debit balance in the accounts whereas PW1 was having credit balance. Therefore, the statement of RW4 that he made payments of the amount of PEC to Andhra Bank at the request of RW2 cannot be accepted. There is no request, either oral or in writing, by YBC or YBS to PEC to advance monies to Andhra Bank. Bank account in the books of PEC has not been produced in proof of payment. In Exh. B-162, it is stated that cash has been paid. But, the cash book has not been filed into court to corroborate that fact. 28. The learned counsel for the respondent placed reliance upon section 25 of the Partnership Act and contended that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he was a partner. Relying upon that provision, the learned counsel for the respondent argued that PW1 is bound b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 in Exh. B-162 is totally unauthorised and cannot be considered as a valid debit entry. 30. The entries in page 5 of Exh. B-162 do not show that on the date of alleged transfer of PEC firm into a private limited company called PCPL, PW1's share of goodwill and investment allowance reserve were taken into consideration. The Supreme Court held in K. K. Shah v. Khorshed Banu [1970]3SCR689 , that goodwill of a firm is an asset. Section 48 or the Partnership Act points out the mode of settlement of accounts between the partners; section 55 of the Partnership Act lays down that in settling the accounts of a firm, the goodwill shall be included in the assets. Admittedly, the goodwill of PEC firm was not taken into consideration while determining the share of PW1. Exh. A-221(b) which is said to be the take-over balance sheet as on 9.1.82 values the goodwill of the firm at ₹ 50,00,000. This document was summoned at the instance of PW1 from the Income Tax Department. Exh. A-240 which is the balance sheet of PCPL as on 10.1.82 contains a note which is marked as Exh. A-240 (a) that the goodwill was not purchased by PEC from any other person, but has built up the same by itself. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertained, no attempt was made by PCPL to pay the due share of PW1. However, inasmuch as the amounts due under heads of pending claims, work in progress, works to be billed and difference in the profits credited as per the assessment order by the Income Tax Officer were not ascertained on 9.1.82, there may be justification for PEC for not including those claims to determine PW1's share. But, there is absolutely no justification for not taking into account PW1's share in goodwill and investment reserve while closing the account of PW1 on 9.1.82. Relying upon the above admitted items, I hold that PW1's share of the goodwill and investment allowance reserve come to ₹ 4,26,000. 33. The learned counsel for the respondent argued that there are no bona fides in filing this petition, because of the delay of 18 months in filing the company petition. PW1 has explained in his evidence that he has made some attempts to arrive at an amicable settlement; that the negotiations which went on for a few months have ultimately failed; that Mr. Ratnam Chowdary, brother-in-law of RW 2, and brother of Seshagiri Rao, a partner of PEC, attempted to settle the matter; that nothing h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abused him and warned him and his family with dire consequences. According to PW1, having failed in his attempts to make PW1 sign the dissolution deed RW4 has invented the idea of converting PEC into PCPL and eliminating PW1, from the company. 36. PW1 deposed that the firm PEC was not dissolved by adopting any legal formalities; that no notice of dissolution of partnership was given at any time by any of the partners; that the accounts of the partnership firm were not settled; that the amounts due to him were not determined or settled or paid and that consequent on the alleged conversion, the transferred assets and liabilities of the firm of PEC were not communicated to him. He further deposed that prior to the conversion of PCPL, there was neither settlement of accounts nor dissolution of partnership firm of PEC. 37. PW1 stated that he was an active partner of PEC; that he was given the facilities such as car, phone at the residence and salary of ₹ 2,000 per month on par with RW2 with perks and that the same facilities were enjoyed by RW4 also, because in the firm PEC those three alone were engineers and active partners. RW4 contradicted the evidence of PW1 by deposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RW2 was in the witness box, he admitted that in September, 1981, he met PW1 at Vijayawada and that his father and his uncle Sri Ankineedu accompanied him in the said visit to Vijayawada. But he tried to explain that he went there to discuss with PW1 the issues regarding the settlement of dues of YBC and YBS to the banks and as to why PW1 did not attend the meeting of partners of PEC in June, 1981. If really that is the purpose of RW2 visiting Vijayawada, there is no reason as to why he should be accompanied by his father and uncle. It is suggested to RW4 in the cross-examination that there were mediation talks at the instance of PW1 and that they have failed because of his adamant attitude towards PW1. It is also, suggested to him that in August, 1981, he sent RW1 to threaten PW1 to sign on the dissolution deed of PEC without settling his account and that when that endeavour failed, he sent RW2 and his brothers-in-law to threaten PW1. 40. RW4 when specifically questioned whether there were differences between him and PW1 between April, 1981, and July, 1981, he admitted that there were differences between them but he would verify and state the period when differences arose betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not stated that the notice was handed over to him personally and Exh. A-947 is the certificate of posting filed by the respondent to show that the notice has been sent to three persons including RW2. He has stated that he must have received the letter Exh. B-142 sent by post to him at Barginagar. But, he has not produced the cover and the letter sent to him to his address at Barginagar. Through the original of Exh. A-70 letter, dated 27.4.81 PW1 intimated PEC that he would be staying at Sri Kali Gardens, Nambur Road, Guntur District for about six weeks. Similarly, through the original of Exhs. A-68, dated 28.11.81, he has intimated PEC that he was going to Gudivada and he was likely to be there for about four weeks. RW2 did not deny the receipt of Exhs. A-68 and A-70. He does not remember where he was in the last week of November, 1981, and stated that he will have to check-up where he was in the last week of April, 1981. He, however, deposed that the letters addressed to his office, will be received by the office. It is suggested to him that PW1 had informed RW2 of his correct address in April, 1981, and November, 1981, and that PEC did not send any meeting notices to the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited has already come into existence and that the purpose of the meeting was to go through the memorandum and articles of association of PCPL and to approve the transfer deed for conversion of the firm into PCPL. 44. Exh. B-164 which is the transfer deed said to have been executed on 9.1.82 narrates that all the partners present at the meeting held on 26.12.81 have unanimously approved the transfer of all the assets and liabilities of the firm as on 9.1.82 to the company PCPL and have also approved the draft of the agreement. This is a clear misstatement of fact, because neither Exh. A-161 nor Exh. B-163 shows that the decision to transfer the assets and liabilities of firm as on 9.1.82 to PCPL was taken on 26.12.81. On the other hand, the minutes dated 4.1.82 of PCPL show that the resolution for taking over all assets and liabilities of the firm, namely, PEC as on 9.1.82 as the company's assets and liabilities effective from the said date was passed in the meeting dated 4.1.82. 45. The petitioner challenged the validity of Exh. B-164 - transfer deed dated 9.1.82 as not being a genuine document and brought about subsequently. RW4 in his evidence deposed that RW2 was pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exh. B-162 which is the profit and loss account as on 9.1.82 do not tally with the figures in Exh. A-221(a). 46. There is also no proper transfer of immovable properties belonging to the firm to the company. Exh. B-174 which is the inspection report of Hyderabad branch as on 15.6.83 points out that consequent on the taking over of the defunct firm PEC by PCPL, the Andhra Bank has not obtained specific letter from the newly formed company acknowledging the liabilities due to the bank and which were taken over by PCPL. The conduct of PCPL in not executing any fresh document creating a charge on its properties to enjoy the credit facilities from the bank shows that the alleged taking over on 9.1.82 cannot be correct. 47. It is stated that on 9.1.82, Exh. A-77 balance sheet was prepared which is said to be the going concern balance sheet. It is further stated that at the time of taking over Exh. A-221(b) balance sheet was prepared. The original balance sheet said to have been prepared at the time of taking over of PEC is marked as Exh. A-221(b) and its xerox copy is marked as Exh. A-182. RW2 has spoken to this fact in his evidence. RW2 deposed that M/s. Anjaneyulu and company mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and drafts enclosed therewith were sent to Andhra Bank, Bhopal and Varanasi for collection. Exh. A-173 which is the inspection report of Hyderabad branch reads that even by the date of that report, namely, 16.8.83, the limits were not yet transferred from the firm account, but operations were being allowed in the old name only, though the assets and liabilities of the firm stood transferred to a private limited company as from 9.1.82. Exh. A-223 is a letter, dated 22.2.82 addressed by PEC to the Income Tax Officer with regard to the withholding of an amount of ₹ 46,983 and requesting the Income Tax Officer to refund the amount. This letter is said to have been signed by RW1 for PEC. Exh. A-25 is the letter, dated 28.1.83 addressed by PEC to Income tax Officer furnishing various details as required by the Income Tax Officer in his letter dated 11.1.83. Exhs. A-936 is the letter, dated 25.2.83 addressed by PEC, signed by its accountant, to the Income Tax Officer with regard to the assessment for the year 1983-84. Exh. A-937 is another letter, dated 19.2.83 addressed by PEC signed by its accountant to the Income Tax Officer furnishing some information with regard to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 984 in O.S. No. 163 of 1984 in the Court of the Subordinate judge at Vijayawada. It is stated therein that when the Commissioner entered into one room, Sri K. Sambasiva Rao obstructed him from taking the inventory by stating that he is one of the directors of the Andhra Bank and that it is his personal office room. The report further shows that after police inspectors came to the respondent's premises, Sri K. Sambasiva Rao (RW4), Kameshwar Rao (RW1) and Sri M. Ankineedu left the respondent's premises. The inventory was taken by the Commissioner on 16.4.84. Exh. B-174 shows that for the assessment year 1984-85, RW4 was paid consultancy fee of ₹ 90,000 and for the assessment year 1985-86, RW4 was paid consultancy fee of ₹ 10,000. Such huge amounts would not have been paid to RW4 by PCPL unless he was taking active part in the affairs of PCPL. The above documents falsify the declaration made in Exh. A-157 that Sri K. S. Rao has retired as managing director and also as director of PCPL with effect from 4.1.82 and his statement in cross-examination that after the formation of PCPL he has not been actively involved in its affairs. 51. The next aspect focused by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over balance sheet of PEC as on 9.1.82 gives the value of the machinery as ₹ 94,50,105.70. This variation is not properly explained by RWs 2 and 4. 53. Another act of misconduct complained of against the company is that even after the alleged dissolution of the firm and formation of private limited company, RWs 2 and 4 who were at the helm of affairs of PCPL did not release the properties of PW1 but continued the security given by him for obtaining loans from the banks. RWs 2 and 4 could not explain under what authority they could continue the encumbrance on the properties of PW1 and his brothers after PEC was dissolved and PW1 was not given a place as shareholder in PCPL. The above facts clearly establish the complaint of misconduct against RW4. 54. Section 75(1) of Companies Act lays down that whenever a company having a share capital makes any allotment of its shares, the company shall within thirty days thereafter file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allottees, and the amount, if any, paid or due and payable on each share. But, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulsion. Even otherwise, Exh. B-141 and B-161 do not show that the majority of the partners have taken any decision to expel PW1 from the partnership. Therefore, the only method by which a partner can be pushed out of the partnership is by dissolution of partnership. A Division Bench of Patna High Court held in Ramnarayan v. Kashinath AIR1954Pat53 , that section 33 of the Partnership Act only applies where the power of expulsion has been reserved in the articles of the partnership and where the power has been exercised in good faith by all the partners whose concurrence might be necessary under the articles of the partnership. Their Lordships further held that section 33 does not apply to the case of the expulsion of a partner in direct breach of the contract of partnership. 56. From the findings arrived at by me that PEC did not send notices to PW1 for the meetings, dated 1.6.81 and 26.12.81 to the places where he was residing at the relevant time; that Exh. B-164 transfer deed, dated 9.1.82 is not a true and valid document brought into existence on that day; that there is no proper transfer of immovable properties belonging to the firm to the company; that fraud has been playe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no question of winding up the company and no grounds are made out for winding up the company. 59. The learned counsel for the respondent also placed reliance on an unreported decision of our High Court of B. P. Jeevan Reddy J. (as he then was) in Company Petition Nos. 2 and 3 of 1982. 60. The learned counsel for the respondent relying upon the decision in Re Fildes Bros Ltd. (1970) 2 Comp LJ 173 (Ch D) : (1970) 1 All ER 923 (Ch D), argued that in a petition for winding up, the facts prevailing on the date of hearing only should be considered and the petitioner should be confined to the allegations in the petition. He also relied upon a Division Bench decision of Calcutta High Court in Jagannath Gupta Co. v. Mulchand AIR1969Cal363 , which held that the order for winding up must be confined to grounds set out in petition and that the allegations and circumstances of date of petition should alone be looked into. But, as held in Virendra Singh Bhandari v. Nandlal Bhandari Sons (1982) 52 Comp Cas 36 (MP), though the cause of action must be laid in the petition itself and the court will confine its enquiry to those facts and allegations, if subsequent events constitute relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roups. In this case, no doubt, there is no fight for power between two groups and it is a case of one group dominating and eliminating PW1 from the partnership. 62. A Division Bench of Delhi High Court, following the decision of the Supreme Court held in Eastern Linkers (P) Ltd v. Dina Nath Sodhi (1982) 2 Comp LJ 669 (Del) : (1984) 55 Comp Cas 462 , supra, that in a given case, principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure, and on piercing the veil, it is found that in reality, it is a partnership. In that case, the Division Bench observed that shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there was no hope or possibility of smooth and efficient continuance of the company as a commercial concern. It is under those circumstances that the learned judges held that there may arise a case of winding up on 'just and equitable' ground. In the case before the Delhi High Court, the issue of shares for the benefit of Bali and the ouster of Sodhi was held to be an act of personal aggrandiseme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unauthorised and mala fide. The Supreme Court in Hind Overseas Pvt. Ltd v. R. P. Jhunjhunwalla, supra, empowers the court to pierce the veil in order to find out whether in reality, it is a partnership. The conversion being thus non est, it follows that the firm of PEC is still deemed to be continuing in existence in the garb of a private limited company, namely, PCPL. The petitioner has established beyond doubt that there is utter lack of probity and mismanagement in the conduct of the affairs of the company. There is, absolutely, no scope of the petitioner and RWs 2 and 4 pulling on together any longer as partners of the firm. There is loss of mutual faith and confidence in one another. Clause 5 of Exh. A-5 partnership deed narrates that the partnership of PEC is a partnership at will. I, therefore, hold that it is a fit case for directing dissolution of the firm PEC on just and equitable ground under section 44(g) of the Indian Partnership Act. 65. The next question for consideration is whether the Company Court can give such a direction in a petition filed for winding up ? The learned counsel for the petitioner relied upon the decision of the Supreme Court in Needle Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuing to exist and is making enormous profits. 67. This, no doubt, results in PW1 being entitled to a share in the profits of PCPL though there is no contribution on his part for earning profits for the company. In the firm PEC, PW1, RWs 2 and 4 alone were engineers and active participants in the affairs of the firm. Most of the other partners were also given share though they were not entrusted with any work. I have observed already that the property given by PW1 and his brothers as security is still being utilised by the company for securing banking loans. Hence, the company is liable to share the profits with PW1 in spite of the fact that he has not contributed for the profits of the company. This is a penalty which the company has to pay for the malafide act committed by RW4 in expelling PW1 illegally and without his consent. 68. From the above discussion, I find on this issue that instead of ordering winding up of the respondent-company, it is just and equitable to dissolve the firm PEC and direct settlement of accounts among its partners as per the shares enumerated in Exh. A-5 Partnership Deed. Issue Nos. 4 and 5 in C.P. No. 6 of 1983 69. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd at this stage and to contend that in view of the pendency of the civil suits, the company petition is not maintainable. The respondent cannot be permitted to approbate and reprobate. Having taken the definite stand that the civil court has no jurisdiction to entertain the controversy between the parties, it is not open to the respondent to set up a defence in the company petition that because of the pendency of the civil suits, the company petition is not maintainable. I, therefore, find on these two issues that the company petition is maintainable in spite of the pendency of various suits pending in the civil courts where the parties are agitating their respective rights and the pendency of O.S. No. 616 of 1983 on the file of the Court of the I Additional judge, City Civil Court, Hyderabad which is a suit for dissolution and rendition of accounts of the firm PEC. Issue No. 6 in C.P. No. 6 of 1983 71. This issue has become redundant in view of the fact that an elaborate inquiry was conducted in the company petition and both the parties have let in voluminous oral and documentary evidence. I, therefore, hold that there is no need to consider this issue in the light of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the shareholders of the company does not satisfy the statutory requirement under section 434(1)(a) of the Act in order to invoke the deeming provision under section 434(1)(a) of the Act. The Delhi High Court also held in Kalra Iron Stores v. Faridabad Fabricators (P) Ltd. (1991) 1 Comp LJ 177 : (1991) 73 Comp Cas 337 . That in a petition filed for winding up on the ground of inability to pay debts, the condition precedent for filing of the petition is that the statutory notice must be served on the company. It is held that for invoking the provisions of section 434(1)(a) of the Act, it was incumbent upon the petitioners to serve upon the respondent company, by causing to be delivered at its registered office, by registered post or otherwise, notices of demand requiring the company to pay the sum due to the petitioners and that where no proof was filed in token of service of notice in spite of the fact that the service of the notice was seriously disputed by the respondent company, the petitioners were not entitled to invoke the winding up jurisdiction of the court. To the same effect is a Division Bench decision of Bombay High Court in N. L. Mehta Cinema Enterprises (P) Ltd. v. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay the sum of ₹ 6,56,306.45 as due to the petitioners; but they have not served the said demand on the company by causing it to be delivered at its registered office requiring the company to pay the said sum due to the petitioners. Consequently, I hold that the company petition filed under section 434 read with section 433(e) of the Companies Act is liable to be dismissed in limine. Issues Nos. 10 and 13 in C.P. No. 11 of 1983 75. O.S. No. 1065 of 1984 on the file of the Court of the 11 Additional Judge, City Civil Court, Hyderabad, is not a suit filed against the petitioners in C.P. No. 11 of 1983, but is one filed against PW1 in his individual capacity. I, therefore, find on these issues that the Company Petition No. 11 of 1983 is maintainable in spite of the pendency of the aforesaid suit and other legal proceedings pending in the lower courts. 76. However, in view of my finding on issue No. 3 which is fatal for the main tenability of C.P. No. 11 of 1983, I hold that there is no necessity to deal with the other issues in C.P. No. 11 of 1983. Issue No. 8 in C.P. No. 6 of 1983 77. In view of my finding on issue No. 3, I allow Company Petition No. 6 of 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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