Chandrachud, CJI.

(1) THESE three appeals by special leave arise out of a judgment of a division bench of the High court of Madras dated 6/10/1978 allowing an appeal against the judgment of a learned single Judge, dated 17/05/1978 in Company Petition 39 of 1977. The main contending parties in these appeals are: (i) the Needle Industries (India) Limited and (H) the Needle Industries-Newey (Indian Holdings) Limited. These two companies have often been referred to in the proceedings as the Indian Company and the English Company respectively, but it would be convenient for us to refer to the former as NIIL and to the latter as the Holding Company. The Holding Company has been referred to in a part of the proceedings as NINIH.

(2) IN Civil No. 2139 of 1978, which was argued as the main appeal, NIIL is appellant I while one T. A. Devagnanam is appellant 2. The latter figures very prominently in these proceedings and is indeed one of the moving spirits of this acrimonious litigation. He was appointed as a Director of NIIL in 1956 and as its Managing Director in 1961. He is referred to in the correspondence as TAD or Theo but we prefer to call him Devagnanam. The Holding Company is respondent 1 to the main appeal, the other respondents being some of the Directors and shareholders of NIlL. Civil 2483 of 1978 is filed by some of the shareholders of NIIL while Civil 2484 of 1978 is filed by some of its Directors and officers. The Holding Company is the contesting respondent to these two appeals. We will deal with the main appeal and our judgment therein will dispose of all the three appeals.

(3) THE NIIL was incorporated as a Private Company under the Indian Companies Act, 191 3/07/1949 with its Registered Office at Madras. Its factory is situated at Ketty, Nilgiris. At the time of its incorporation, NIIL was a wholly owned subsidiary of Needle Industries (India) Ltd., Studley, England (hereinafter called NI-Studley). The authorised capital of NIIL was Rs. 50,00,000.00 divided into 50,000.00 equity shares of Rs. 100.00 each. Its issued and paid-up capital prior to 1961 was Rs. 6,75,600.00 divided into 6756 equity shares of Rs. 100.00 each. The issued and paid-up capital was increased to Rs. 11,09,000.00 in 1961. In that year, NI-Studley entered into an agreement with Newey Bros. Limited, Birmingham, England, (herein- after called NEWEY), under Which NEWEY agreed to participate in the equitycapitalofNIlLto the extent of Rs. 4,33,400.00, consisting of 4334 equity shares of Rs. 100.00 each. Thus, in 1961, the position of the shareholding in NIIL was that NI-Studley held approximately 60-86 per cent of the issued capital and NEWEY held the balance of 39-14 per cent. In 1963, NIIL in- creased its share capital by issuing 2450 additional shares to NI-Studley, as a result of which the latter became the holder of about 68 per cent shares in NIIL, the rest of the 32 per cent belonging to NEWEY. Later in the same year, NI-Studley and NEWEY combined to form the Holding Company, of which the full official name, as stated earlier, is the Needle Industries- Newey (Indian Holding) Ltd. The Holding Company was incorporated in the United Kingdom under the English Companies Act, 1948 with its Registered Office at Birmingham, England. The entire share capital of NIIL, held by NI-Studley and NEWEY, was transferred to the Holding Company in which NI-Studley and NEWEY became equal sharers. As a result of this arrange- ment, the Holding Company came to acquire 9995 per cent of the issued and paid-up capital of NIIL. The balance of 005 per cent, which consisted of six shares being the original nominal shares, was held by Devagnanam.

(4) THE NIIL, it shall have been noticed, was incorporated about two years after India attained independence. As a result of an undertaking given by it to the government of India at the time of its incorporation and pursuant to the subsequent directives given by the said government for -ach