9911796707
TMI Blog1969 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves out as directors of the company, was dismissed by the learned trial judge. These two appeals were by agreement of parties heard together and we are disposing of these two appeals by one judgment. 2. On or about 9th August, 1966, the Hind Overseas Private Ltd. (hereinafter referred to as "the company") was incorporated with a share capital of ₹ 5,00,000 consisting of 5,000 shares of ₹ 100 each. Though there is no dispute as to who were the shareholders at the inception, there is some dispute regarding the basis on which the division of shares had been made. According to the appellants, the company was at its very inception constituted more or less on the lines of a partnership firm. Indeed, it is said that the original idea of the promoters was to have a partnership and not a limited company on the basis of 10 annas and 6 annas shares. The 10 annas shares were to be held by a group led by the respondent, V.D. Jhunjhunwala, and 6 annas shares were to be held by a group led by the appellant, R.P. Jhunjhunwala. Later on, the promoters changed their minds and formed a private limited company instead of a partnership firm. It has been stated by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany originally issued in his name or in the names of the members of his family were transferred to and in the name of V.D. Jhunjhunwala's wife. The company started producing railway sleepers from its factory some time about 1959 and by all accounts started making profits. 4. On 2nd September, 1963, a resolution was passed at an extraordinary general meeting of the company to the effect that V.K. Jhunjhunwala, son of B.D. Jhunjhunwala, should be sent to the United States for studies in chemical engineering. P.C. Jhunjhunwala himself seems to have proposed the resolution and as far as one can see the two groups who are now fighting were in agreement at that time about the company bearing all the expenses of V.K. Jhunjhunwala's education in the United States. The appellants now contend that the resolution was not a special resolution. 5. Troubles apparently started brewing some time about 1964. In April that year, R.P. Jhunjhunwala is said to have appointed his brother-in-law, Hariram Modi, to an office or place of profit of the company. It is not known if V.D. Jhunjhunwala knew about this at the material time but now, of course, the respondents are complaining that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are kept out of the office premises. 8. On 23rd May, 1966, V.D. Jhunjhunwala and three others served a requisition on the company for calling an extraordinary general meeting with the purpose of removing P.C. Jhunjhunwala and R.P. Jhunjhunwala from their respective office of a director of the company "with immediate effect" and for appointment of Prakash Chandra Jhunjhunwala and Biswanath Purohit in their place and stead and also for appointing a committee for investigating into the affairs of the company in connection with certain losses alleged to have been suffered by the company. Added to this requisition notice there is an explanatory note, the first paragraph of which is important for our purpose and is set out verbatim hereunder : " The requisitionists feel that the company has been mismanaged by Shri Raghunath Prasad Jhunjhunwala and Sri Phoolchand Jhunjhunwala who were in charge of the day-to-day working bf the company and have lost confidence in them and their any further association with the management of the company is considered very detrimental to the interest of the company. Hence resolutions Nos. 1 and 2 are being proposed to be passed. The third r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take note of the fact that all the powers and authorities whatsoever given to you from time to time have been cancelled and for all the acts if done by you henceforth for and on behalf of the company, you shall be personally liable for any loss or damage which may be caused to the company." 10. On 28th May, 1966, a notice was issued for the holding of an extraordinary general meeting on 22nd June, 1966, for removal of the directors belonging to the group of R.P. Jhunjhunwala. Advertisements were also published in Biswamitra by which a general notice was given to the public that powers and authorities given to Raghunath Prasad Jhunjhunwala and Phoolchand Jhunjhunwala including the power to operate banking accounts of the company had been cancelled ; on 30th May, 1956, a notice was issued by V.D. Jhunjhunwala calling a meeting to be held on 4th June, 1966. The petitioners requested V.D. Jhunjhunwala not to hold this meeting as well, but that request was rejected. On 4th June, 1966, a meeting was held and the letter dated 27th May, 1966, of Messrs. Khaitan & Co. placed and considered at the meeting. It is stated that there was a resolution that no reply was necessary to that le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limited company was really in the nature of a partnership and, therefore, since ouster of a group of partners has unquestionably taken place and the two groups cannot carry on business together again, the company ought to be wound up on the same principle on which partnerships are dissolved when the partners fall out between themselves. Mr. Sen relied no doubt on the celebrated judgment of Lord Cozens-Hardy, Master of the Rolls, in the case of In re Yenidje Tobacco Company Ltd., [1916] 2 Ch. D. 426 where the learned Master of the Rolls had held that the principle which operates in the case of dissolution of a partnership firm can also be invoked in regard to an organisation which, though in the guise of a private company, is, in substance, a partnership. Mr. Sen made this principle the cornerstone of his arguments and, at one stage when he was challenged by Mr. S.D. Mukherjee on this point, he conceded that if he fails on this point his case is bound to fail. Mr. R.C. Nag who gave the reply on behalf of the appellants also relied on this principle, though it must be said his enunciation of the principle was slightly different to that of Mr. Sen. We shall deal with this aspect in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyle V.D. Jhunjhunwala used to carry on business with his cousin, Mahabir Prasad Jhunjhunwala. " Sir Khata " admittedly means " Partnership account ". Mr. Sen says that the reference to this partnership was really a reference to the partnership venture between R.P. Jhunjhunwala and V.D. Jhunjhunwala. The account was, according to Mr. Sen, opened specifically for the purpose of a proposed partnership business. Mr. Sen strongly relied on the statement of account, a translation of which has been reproduced as annexure " A " to the joint affidavit of R.P. Jhunjhunwala and P.C. Jhunjhunwala affirmed on 8th June, 1966. The account shows a sum of ₹ 11,000 on the credit side. This sum, Mr. Sen argued, had been deposited by R.P. Jhunjhunwala on 19th February, 1956, and was credited to the " Sir Khata " account. Two several sums of ₹ 1,000 and ₹ 10,000 aggregating ₹ 11,000 were paid to R.P. Jhunjhunwala on 20th June, 1956, and 1st August, 1956, respectively. The balance sum of ₹ 8,680 was advanced by V.D. Jhunjhunwala and the " Sir Khata" account was credited with the said balance sum by debiting ₹ 500 agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abhama Devi Jhunjhunwala. In a letter dated 29th October, 1962, addressed by V.D. Jhunjhunwala to P. B. Mishra, a copy of which was endorsed to R.P. Jhunjhunwala, V.D. Jhunjhunwala admitted with reference to the foundry of the company that he was running the foundry in partnership with Raghunath Babu, i.e., R.P. Jhunjhunwala. The letter is to be found at page 8 of a supplementary paper book filed by the appellants. Mr. Sen argued that if the share registers of the company were to be examined it would be found that the entire shareholding of the company was confined to the members of the respective families of R.P. Jhunjhunwala and V.D. Jhunjhunwala. Further, even the original allotment and subsequent issue of the shares were held by the members of these two families in such a manner that the ratio of 6 and 10 annas between the holdings of these two families was always maintained. Moneys were advanced by V.D. Jhunjhunwala to P.C. Jhunjhunwala, son of R.P. Jhunjhunwala, in order to enable him to buy the subsequently issued shares in order that the parity of the holding of 6 annas and 10 annas shares in the capital of the company could be sustained. This has been clearly stated by R.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materialised out of that proposal. He pointed out that if the affidavits of R.P. Jhunjhunwala and Phool Chand Jhunjhunwala dated 8th June, 1966, were to be the grounds of the appellant's application for appointment of a provisional liquidator of the company, there is a clear admission in paragraph 11 to the effect that V.D. Jhunjhunwala changed his mind even "before the said proposed business could be started", that is to say, before the partnership could be formed. V.D. Jhunjhunwala in his affidavit of 16th June, 1966, states emphatically that no deed of partnership was ever executed. He says that : "All that was agreed to was to float a limited company in which the shares were to be subscribed according to the convenience of the subscribers and the amounts intended to be invested by them in the shares of the company." 18. V.D. Jhunjhunwala denies that there was any suggestion at any stage that there would be a group formed for this purpose. In regard to the "Sir Khata Account", on which Mr. Sen relied heavily, Mr. Mukherjee argued that the "Sir Khata Account" does not make any mention of shares or any mention of iron and steel busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his point of view the company in this case does resemble a partnership. There are, however, several important features which strengthen the contention that the company was constituted in the image of a partnership. There is considerable evidence to show that the parties did treat the company as if it was a partnership. I have already briefly referred to the evidence on this point but I may as well summarise some of the features and also some of the evidence which to my mind prove that the company is in substance a partnership venture : (i) The original idea was to start a partnership venture. Later on, however, the form that was given to the venture was the form of a private company. The respondents do not contest that a partnership was, in fact, proposed to be set up. Indeed, the correspondence and the affidavits prove this fact conclusively. Mr. Mukherjee's contention that the partnership that was at first contemplated did not materialise makes no difference to the position. In fact, the petitioners are also saying the same thing. What started with the idea of partnership was ultimately given the shape of a private company and this seems to us to be the agreed version of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio of 6 annas to 10 annas in which, according to the petitioners, the parties had originally contemplated their interest in the partnership venture to be divided. Paragraph 7 of the petition for appointment of provisional liquidator and for injunction contains the specific allegation that the shareholding of the company has been distributed between the members of the family of R.P. Jhunjhunwala and V.D. Jhunjhunwala. V.D. Jhunjhunwala has not denied these allegations. All that he says is that he has no interest in the shares held by the other members of his family. The averment that V.D. Jhunjhunwala has no beneficial interest in all the shares held by his group does not, in my opinion, alter the position. (iv) It is admitted by V.D. Jhunjhunwala that the shares which were originally held by M.P. Jhunjhunwala and his brother, S. S. Jhunjhunwala, and their wives were sold to and bought by the wife of V.D. Jhunjhunwala. (v) The specific averment of the petitioners in paragraph 48 of their petition for provisional liquidator that the company was in substance a partnership is not denied by V.D. Jhunjhunwala at all. (vi) I take no notice of the so-called admission by V.D. Jh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that there is a breakdown of confidence. It would have to be shown that there are justifiable grounds for such breakdown. Mr. Nag, in reply, slightly went beyond the case that was originally made out by Mr. A.K. Sen and sought to argue that under two conditions any member or a group of members of a private limited company can ask for the winding-up of a company as a matter of right. If those two conditions are satisfied, the court must make a winding-up order merely upon the asking of it. The conditions, Mr. Nag said, are as follows:-- (1) When the bond of amity which was the basis of the original association has come to an end, and (2) when one partner has been excluded from management though, in fact, he had been associated with the management with or without an agreement. So far as the second condition is concerned Mr. Nag admitted three exceptions, namely, (i) if the private limited company is of a nature when outsiders are members and are in no way concerned with the dispute between the persons who are associated with the management, (ii) if the private limited company happens to be an investment company holding shares in a public limited company so that public interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that it was a case of absolute deadlock as the directors could not agree with each other on any single subject. Warrington J., who heard the application, found on facts that the two directors were unable or unwilling to get on together in managing the affairs of the company. To that extent there was a deadlock between the two directors. His Lordship did not say anything about the relative merits of the deadlock but proceeded on the basis that it was impossible for the directors to manage the company satisfactorily unless they adopted a more reasonable frame of mind. The question was whether, under these circumstances, there was ground under the " just and equitable " clause for winding-up the company. His Lordship found that the clause had been given a wider meaning " in recent years " and that a winding-up order be granted as being " just and equitable " on grounds which were not ejusdem generis with the grounds mentioned in the four preceding sub-sections of Section 9. " For example, a winding-up order could be made under that clause if the substratum of the company had disappeared, or if it could be shown that it was not reasonably p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They formed a private limited company in which they arranged to have equal rights of management and voting powers. They were the only two shareholders and directors. The articles of association were so drawn that neither party was in a position to outvote the other or to carry any resolution in opposition to the other. One director was to form a quorum and the first directors, namely, W. and R., were to hold office so long as they lived. If any dispute or difference were to arise consequent whereon it became impossible to pass a director's resolution the matter in dispute was , to be referred to arbitration and the award was to be entered in the company's minute book as a resolution duly passed by the board. Company's business was successfully carried on until June, 1915, when differences arose between W. and R. One of such differences was referred to arbitration which resulted in an award. But R. declined to give effect to the award. R. brought an action against W. for fraudulent misrepresentation and ultimately the parties became so hostile that they were not on speaking terms and any communication that has to be passed between them was conveyed through the secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible for them to work together in the manner in which they ought to work in the conduct of the partnership business. His Lordship then goes on to observe : " Is it possible to say that it is not just and equitable that that state of things should not be allowed to continue, and that the court should not intervene and say this is not what the parties contemplated by the arrangements into which they entered. They assumed, and it is the foundation of the whole of the agreement that was made, that the two would act as reasonable men with reasonable courtesy and reasonable conduct in every way towards each other, and arbitration was only to be resorted to with regard to some particular dispute between the directors which could not be determined in any other way. Certainly, having regard to the fact that the only two directors will not speak to each other, and no business which deserves the name of business in the affairs of the company can be carried on, I think the company should not be allowed to continue. " 29. His Lordship held that, though the company was not strictly a partnership, still precisely the same principles were to apply to a case like this where in subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of their contentions. That is one reason why I have dealt with the case in so much detail and have quoted from the judgments of Lord Cozens-Hardy M.R. in extenso. I have very carefully read and re-read the judgment of Lord Cozens-Hardy M.R. on this occasion. I have not the slightest doubt in my mind about the real ratio of his Lordship's judgment and I find it difficult to understand how the leading trends of his Lordship's argument may be lost in or overlaid by other ancillary considerations. His Lordship has stated not once but several times that if a private company is in substance a partnership, then the principles of partnership would apply and the circumstances which would justify a dissolution of a private partnership would justify a compulsory winding up of the company. His Lordship does not qualify this ratio anywhere in his judgment. With regard to the question whether this principle ought to operate only where there is a deadlock in the company, his Lordship has not left the least room for doubt or confusion. His Lordship specifically says that an attempt was made before him to show that the "just and equitable" clause, though not strictly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that any shareholder who was desirous of withdrawing from the company was to offer his shares to the other two shareholders and in the event of neither of them purchasing the same, the shareholder desirous of withdrawing should be entitled to have the company wound up. The affairs of the company came to a deadlock as a result of dissensions between the shareholders. One of the directors offered his shares to the two other shareholders respectively. But neither of them agreed to purchase his shares. Thereupon, in terms of the articles of association of the company he presented a petition for the compulsory winding up of the company. The petition was opposed by the two other shareholders. Counsel appearing for the petitioner relied on the decision in the Yenidje Tobacco Company's case. It was argued that there was a complete deadlock in the conduct of the business of the company. Such a deadlock would clearly be the ground for a dissolution in the case of a partnership and, since the company in this case was in substance a partnership, the same principle ought to apply. The respondents, however, resisted this submission by pointing that in the Yenidje Tobacco Company's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny guidance in regard to the case before us. 37. The case of Loch v. Blackwood (John) Ltd. [1924] A.C. 783 is a Privy Council decision which was also decided under the " just and equitable " clause. The decision was under an analogous provision of the Companies Act, 1910, of Barbados. Lord Shaw, who delivered the judgment of the Judicial Committee of the Privy Council, expressly negatived the proposition that the " just and equitable " clause was restricted to cases ejusdem generis with those enumerated in other sub-sections of the Act. After elaborate discussion of the case law on this subject his Lordship sets out an observation of Lord Clyde in Baird v. Lees [1924] S.C. 83 where the learned President of the Scottish Court of Sessions sets out the various circumstances which would bring a case within the scope of the " just and equitable " clause. Lord Shaw expresses his concurrence in this view of Lord Clyde. It is not really necessary for me in this case either to set out Lord Clyde's observations or to summarise them. This case is not, strictly speaking, a direct authority on the question which we are investigating. The Judicial Committee, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on which it would be just and equitable within the meaning of Section 168 of the Companies Act, 1929, to make a winding-up order. This, it is clear, is an affirmation of the partnership principle though, on facts, the principle could not be applied. 42. In re Anglo-Continental Produce Company Ltd. [1939] 1 All E.R. 99 (Ch.D.) which has been cited before us and also before the learned trial judge, is not a case where the question of applying the partnership principle arose. The petition in that case was based upon the ground that it was just and equitable that the company should be wound up. The Yenidje Tobacco Company's case was neither cited nor considered by Benett J., who dismissed the petition. 43. The case of In re Davis Investments (East Ham) Ltd. [1961] 3 All E.R. 926, 929; [1961] 1 W.L.R. 1396 (C.A.) was cited before us briefly. The Yenidje Tobacco Company's case was cited and considered by the Court of Appeal in this case. The case was, however, really decided on a demurrer. Plowman J., who heard the petition, dismissed it on the ground that the articles of association of the company not being before him, his Lordship could not understand the legal rights of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The object of the company was to acquire for payment in shares the whole of the issued share capital of a public company "Forte's (Holdings) Limited". The Directors of Forte's (Holdings) Limited and the directors of the plaintiff company were the same persons. The articles of the private company incorporated Regulation 3 of Part 2 of Table " A " which gave to the directors an absolute discretion to decline without assigning any reason therefore to register any transfer of any shares. The defendant, Amanda, held 10,000 shares in the private company which he acquired while he was employed by the public company. In March, 1963, the defendant, Amanda, submitted to the board of directors of the private company three transfers together covering the whole of his holding of 10,000 shares. The board of directors refused to register the transfers and in the correspondence that ensued declined to say in what circumstances they would be prepared to register them. The defendant then sent a letter through his solicitor to the company's solicitor threatening a petition for winding up of the company by the court on the ground that the director's refusal to reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as. 233, 244-45 that those two cases, - " are utterly remote from the question that has to be dealt with in this case. Yenidje's case, for instance, was a case of a two-man company, and it so happened that the two men fell out with each other and could not get on, with the result that deadlock ensued and the business of the company could not be carried on. It was in that context that it was held that a winding-up order ought to be made on the same basis as an order might be made for a dissolution of partnership." 47. Willmer L.J. described the defendant as a very small shareholder with practically no part in the running of the company and then observed : " There is nothing, as I see it, in his relationship to the company which remotely resembles that of a partnership such as there was in the Yenidje Tobacco Company's case. I do not think that there is any room for the application of that principle in the circumstances of the present case." 48. It is on these grounds that Willmer L.J. allowed the appeal. 49. On a careful analysis of this case I find that Willmer L.J. refused to apply the principle of Yenidje Tobacco Company's case on two ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition was for relief under Section 210 of the Companies Act, 1948, alternatively for an order under Section 222 for the winding up of the company. The petitioner was one of three directors and shareholders of the company. The company had been formed to take over a business started by Mr. C.R. Lundie and Mr. R.W. Lundie after the war. In 1958 the capital of the company was 100 pounds divided into 15,000 shares of I shilling each designated ' A shares which carried full voting and dividend rights and 5,000 shares of I shilling each designated ' B' shares which ranked pari passu with the ' A' shares so far as voting rights were concerned but carried no rights to dividend. C.R. Lundie and R.W. Lundie, who were brothers, and the petitioner each held 5,000 of the ' A ' shares. But the petitioner held all 5,000 ' B ' shares. The chairman had a casting vote. By a resolution passed at a meeting of the directors in November, 1959, the petitioner was ousted and R.W. Lundie was appointed chairman. In December, 1962, a resolution was passed terminating the employment of the petitioner as a working director. It was further resolved that instructions should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and, after quoting a passage which I have also quoted, comments : " As I understand those last words, they mean that such impossibility has not been caused exclusively by the person seeking to take advantage of it. In that case, the Court of Appeal decided that in a case where in substance a partnership existed between the persons who were carrying on the business of the company, any ground which would justify an order for the dissolution of a partnership, had it been a partnership, would justify an order for the winding up of the company." 55. His Lordship also refers to the decision of Crossman J. in In re Davis and Colleti Ltd. [1935] Ch. 693 ; 5 Comp. Cas. 467 (Ch.D.) and sums up the ratio of that decision in the following language : " In that case it was held that where the capital of a private company is so held as to make the company in substance a partnership and one director has purported by means of his irregularities to acquire complete control of the company and to exclude the other director or directors from the management of it, it may be ' just and equitable' within the meaning of Section 222 that the company should be wound up," ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m was abandoned before his Lordship. Therefore, the only other question that remained for consideration was that of applying the partnership principle. Indeed, both parties proceeded on the basis that this was a partnership. The petition, however, was decided only on two issues, namely, (i) whether in view of the fact that the company was insolvent the petitioner had any locus standi to present a petition as a contributory, and (ii) if the petitioner had such locus standi whether he had made out a case for a winding-up order on the facts. On the first issue, Plowman J. found that the petitioner had no locus standi to present a petition. It is of interest to know that in deciding this issue his Lordship did not consider the partnership analogy. His Lordship held that the partnership analogy may be of assistance for considering in certain circumstances whether it is just and equitable to wind up a company. His Lordship, however, did not feel that the analogy should be pressed too far. His Lordship refused to allow the analogy to be invoked for the purpose of giving a locus standi to the petitioner who by company law had no locus standi. His Lordship thought that the analogy broke dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his point of view, Plowman J. considered the framework of the articles of the company and found that the petitioner had failed to establish that the matters of which he complained, all of which were carried out within the framework of the articles, were not carried out bona fide in the interest of the company. His Lordship says : " Once it is accepted, as I consider it must be that the constitution of the company is not one of which the petitioner is entitled to complain, then, in the absence of any proof of what Lord Shaw in the well-known case of Lock v. John Blackwood. Ltd., [1924] A.C. 783 (P.C.) referred to 'as a lack of probity in the conduct of the company's affairs,' the petition must, in my judgment, fail." 62. In this view of the matter, Plowman J. dismissed the petition on both the grounds. 63. The important thing to note about this case is that, since Plowman J. found against the petitioner on the first issue and held that he had no locus standi, it was unnecessary for him to consider the second issue as to whether the petitioner succeeded in making out a case for winding-up. Therefore, Plowman J.'s finding on the second issue is completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinarily. It does not appear from the judgment that the extreme doctrine of the Yenidje case was pressed before their Lordships. Their Lordships only considered the question whether, in the circumstances of the case, it could be said that it was just and equitable to wind up the company. Their Lordships also preferred to follow the principle that the mere fact of one shareholder in a company having a preponderating influence in its affairs by reason of owning or controlling a large block of shares is by itself no reason for its winding-up. For this principle their Lordships derived inspiration from the observations of the Judicial Committee of the Privy Council in Ripon Press and Sugar Mills Co. v. Gopal Chetty MANU/PR/0001/1931. 68. The appellants also relied on an unreported judgment which I delivered, sitting singly, in the case of In re John Herbert and Company (P.) Ltd. (unreported). In that case, it was not necessary for me to examine the Yenidje doctrine as closely as I have done in the instant case. Therefore, I do not consider it necessary to refer to this judgment of mine. I may, however, say that I followed the Yenidje doctrine in that case. 69. In re Bilas Roy Juharm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs Ltd. case [1966] I All E.R. 877 ; 36 Comp. Cas. 497 (Ch.D.). 71. I shall now briefly refer to two other Division Bench decisions of this High Court on which reliance was placed by the counsel for the appellants before us. One was a judgment of Harries C.J. in which the learned Chief Justice sitting with Mr. Justice Das heard an appeal from an order of Banerjee J. directing the winding up of a private limited company. In Great Indian Motor Works Ltd. v. Chandi Das Nundy [1953] 23 Comp. Cas. 287, 293 Harries C. J. in his judgment refers with approval to what Banerjee J. stated as a good ground for winding-up of the company : " Banerjee J. has pointed out that where a company is a private company and particularly where it is nothing more than a partnership converted into a company, the court in winding up will apply to a very great extent the rules applicable to winding up a partnership. Where two partners cannot agree and cannot carry on business the court will always wind up the partnership. The court will wind up a partnership also if one partner was acting dishonestly towards the other or acting unfairly." 72. The learned Chief Justice then refers to various facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known case of Lock v. John Black-wood Ltd., in which a statement has been made regarding the various circumstances which would bring a case within the scope of the just and equitable clause. After referring to the propositions laid down by Lord Clyde, Chakravarty C.J. observed : " The wider principles underlying those propositions put the duty of the court beyond doubt although the limited principle applicable to a private limited company as laid down in Yenidje Tobacco Company's case would quite suffice." 75. From this observation it is quite clear that Chief Justice Chakravarti accepted and was relying on the Yenidje doctrine. 76. Now that I have discussed both the English and the Indian decisions on the question of winding up a private limited company on the partnership analogy, I am in a position to indicate what, to my mind, seems to be the effect of these decisions. In particular, it is essential for me to determine precisely the scope and effect of the English decisions, for, as I have already said, the Yenidje doctrine, though not overruled or expressly disavowed, has been overlaid with various other principles which do not strictly follow from the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all. Danckwerts L.J. rejected this contention. By implication, therefore, Danckwerts L.J. thought that the application of the partnership principle was not automatic in the case of a private limited company. Donovan L.J. also, by implication, seemed to be of the opinion that evidence regarding the rights of the petitioner and the respondents, i. e., to say the nature of the constitution of the company, had some importance in such matters. This case, therefore, seems to me to be a slight departure from the Yenidje Tobacco Company case. The case of Charles Forte's Investments Ltd., in my opinion, does not interpret the decisions in Yenidje Tobacco Company case and the Dams and Collett Ltd. case which were decided in the context of a deadlock. This is factually wrong because both Lord Cozens-Hardy in the earlier case and Crossman J. in the later case categorically and expressly stated that the question of deadlock did not affect their decisions. Besides, Wilmer L. J. thought that in this case the company did not resemble a partnership. In my opinion, one should not look to this case for any guidance in regard to the application of Yenidje principle. Lundie Brothers Ltd. [1965] 2 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case left no room for qualification of the partnership principle and as soon as a private limited company was found to be in substance a partnership firm there was no escape from the proposition that any member of that company could have the company wound up by invoking the partnership principle. If we confine our attention to Yenidje Tobacco Company's case , there is no doubt at all that this was the precise ratio of Lord Cozens-Hardy's judgment. While canvassing all the time for a strict application of the Yenidje doctrine, Mr. Sen, of course, tried to formulate the reasons lying at the root of the Yenidje doctrine. He said that the principle of partnership has been projected into the law regarding private companies, because the essence of the constitution of a private company lies in the personal tie and mutual confidence among its members very much in the same way in which the basis of association in a partnership firm was mutual confidence restricted to a close group from which others are excluded. Therefore, he said as soon as the basis disappears a private limited company should be wound up just as much as a partnership firm should be dissolved. This explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied by later decisions. It appears to me that Mr. Nag formulated the second rule in order to make room for certain observations of Crossman J. in Davis and Collett Ltd. as well as certain observations of Plowman J. in Lundie Brothers Ltd. The exceptions that Mr. Nag suggests to his second rule are obviously concessions made in view of the decision in Charles Forte Investments Ltd. v. Amanda. 84. While speaking of the rules that he formulated, Mr. Nag, at one stage, contended that there was not a single decision either in England or in India where winding up has been refused even though a person who has been associated with the management is later on ousted from participating in the management and has come up and asked for winding up. This, in my opinion, is a claim which cannot be justified in view of the case, In re Davis Investments (East Ham) Ltd., or the case of Charles Forte Investments Ltd. v. Amanda and finally the case of In re Expanded Plugs Ltd. 85. Mr. S.B. Mookerjee appearing for the respondents also made an attempt to formulate certain principles which, according to him, have now crystallised from the case-law on this subject. He contended that the principle of part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Ltd. is not a case where the question of applying the partnership principle arose at all. Therefore, there is no point in bringing this case under either class. The case of Charles Forte Investments v. Amanda is correctly placed in this group of cases. Lundie Brothers Ltd. does not fall within this group. The case of Expanded Plugs Ltd. is also a case where the decision was not placed on considerations of deadlock. In the light of the foregoing analysis I have no hesitation in rejecting Mr. Mookerjee's classification. 86. I shall now attempt to record my own answers to the two questions which I have framed just now. My answers are as follows : 87. As regards the ratio of Yenidje doctrine it is safer to go back to the judgment of Lord Cozens-Hardy than to rely on what other decisions say about the ratio of the Yenidje case for, as I have been shown, some of the later cases have attributed to Lord Cozens-Hardy's judgment propositions which directly contradict certain express statements made by the learned Master of the Rolls. At the risk of repetition, it is well worth saying what seems to me to be the true ratio of Yenidje Tobacco Company case ". The ratio is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple in accordance with the Yenidje doctrine. But what is the partnership principle ? That also should be stated clearly in order that no room is left for doubt or confusion. It will be remembered that Lord Cozens-Hardy has himself stated the principle of partnership law in the Yenidje Tobacco Company's case. His Lordships refers to "the principles enunciated by Lindley in his celebrated treatise on partnership. The relevant passage occurs in the 8th edition of Lindley's, A Treatise on the Law of Partnership, at page 657, and is as follows : " The court may dissolve a partnership on the ground that a partner fully or persistently commits a breach of the partnership agreement, or so conducts himself in matters relating to the partnership business that it is not reasonably practicable for his co-partners to carry- on business in partnership with him. But it is not considered to be the duty of the court to enter into partnership squabbles, and it will not dissolve a partnership on the ground of the ill temper or misconduct of one or more of the partners, unless the others are in effect excluded from the concern ; or unless the misconduct is of such a nature as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been caused by the persons seeking to take advantage of it. 90. If the judgment of Lord Cozens-Hardy in the Yenidje Tobacco Company's case is carefully read along with this passage from Lindley, I believe that most (though not perhaps all) of the English decisions can be reconciled by the application of the Yendije Tobacco Company's case. 91. In the particular circumstances of this case, I have no doubt that', of the conditions which I have enumerated above, conditions 2, 3 and 4 are unquestionably fulfilled in this case. Even the admitted facts leave no room for doubt on this matter. 92. Reference to the notice under Section 169 of the Companies Act, 1956, dated 23rd May, 1966, and issued by V.D. Jhunjhunwala, Krishna Kumar Jhunjhunwala, a minor by the hands of V.D. Jhunjhunwala, Nirmal Kumar Jhunjhunwala and Satyabhama Devi Jhunjhunwala and served on the company will remove the last vestige of any doubt on this point. We have already referred to this notice and we have also referred, in particular, to the explanatory note contained in that notice. The notice and the explanatory note make it abundantly clear that the group of V.D. Jhunjhunwala are not in a mood t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me amount of expedition. Due to unavoidable reasons, disposal of the applications at the trial stage as well as at the appeal stage has been delayed. The judgment under appeal was delayed because of certain unfortunate circumstances stated by the learned trial judge in his judgment. In the court of appeal also these matters had no better fate. During the hearing of the appeals there was a break, first, due to intervention of a very urgent matter which demanded some amount of priority to all other matters, and, secondly, because this Bench had to break up on account of the absence of one of us. After the hearing had been resumed and completed there was another break because one of us had to leave the High Court on the call of important State duties so that the judgment could not be delivered for a very long time. Now that we have re-assembled and have delivered this judgment sending the matter back for completion of the winding up proceedings with appropriate formalities, we feel it is desirable that these applications should be dealt with the utmost possible expedition. 95. There will be a stay of operation of this order until three weeks after the long vacation and in the meantim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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