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1988 Supreme(AP) 94
Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY
B.V.S.S.Mani - Appellant
Versus
Kowtha Business Syndicate Pvt.Ltd. - Respondent
C.P.No.2 & 3/1982
Decided On : 03-03-88
Advocates Appeared :
Mr. P. Venkatarami Reddy,Mr. K.G. Kannabhiran,Mr. V. Jagannadha Rao
Headnote:COMPANIES ACT, Secs165, 166 and 433 (b) and [f] - Winding up of a Company at the instance of a 1/3rd share-holder without establishing any mismanagement resulting in prejudice to the affairs or business of the company but only on account of personal and temperamental differences - Cannot be ordered - Not holding of Annual General Body Meeting as required by Section 166 is not a ground to order winding up
Held: A court will not order the winding up of a private company merely because a 1/2 shareholder, or a group holding 1/3 or even 40% shareholding just choose to ask for it The Court must see whether their request is genuine and whether it is just and equitable to the company and to all its share-holders to wind it up The Court is not bound by every caprice or whim of a shareholder, or a shareholding group even though he/they may be holding a onethird or 40% share There must be material to show that the petitioner, or petitioner s group, as the case may be, has been oppressed or has been unjustified excluded from management and affairs of the company The very fact that it is left to the discretion of the court and the Court has to be satisfied that it is just and equitable to wind up a company, means that the Court is entitled to see the conduct of both, or and the groups, and see whether the demand for winding up is justified or not
If, however, there is any proof, in future, of any mismanagement on the part of others, resulting in prejudice to the affairs or business of the company, it may certainly be a ground for this Court to act; but, in the absence of any such evidence or record before me, or in the absence of evidence of such conduct until now, the above fact alone cannot and does not warrant the winding up of the company
( 1 ) C. P. No. 2 of 1982 is a petition filed under section 433 of the Companies Act, 1956, by a shareholder to wind up the respondent-company, Kowtha Business Syndicate (KBS) P. Ltd. , having its registered office at Kowtha Building, Buckinghampet, Vijayawada. C. P. No. 3 of 1982 is a similar petition filed by the same petitioner (shareholder) to wind up the respondent-company. Beehive Engineering and Allied Industries P. Ltd. , having its registered office at 10, Padmarao Nagar, Secunderabad. The petitioner in both the petitions is B. V. S. S. Mani. Though it is not specified in the petitions, it is clear that winding up is sought of both the companies under clause (f) of section 433, i. e. , on the ground that it is just and equitable that the company is wound up. In C. P. No. 3 of 1982, an additional ground is raised, viz. , that the company has defaulted in delivering the statutory report to the Registrar and also in holding the statutory meeting, within the meaning of clause (b) of section 433. I will first state the facts and circumstances relevant to C. P. No. 2 of 1982.
( 2 ) KOWTHA Business Syndicate P. Ltd. (hereinafter referred to as "the company") was incorporated in July, 1943, as a private limited company. At the times of its incorporation, it had five shareholders, namely, (1) Kowtha Suryanarayana Rao, (2) C. V. Subba Rao, (3) C. Authikesavulu Chetty, (4) Swadharma Swarajya Ltd. (a trust registered in Madras), represented by its Honorary Secretary, C. V. Subba Rao, and (5) Indian Commerce and Industries Co. Ltd. , represented by its director, Kowtha Mohanram Sastry. Its capital was Rs. 1,00,000 divided into 80 shares of 7 1/2% tax-free cumulative preference shares, and 20 ordinary shares, both of Rs. 1,000 each. At the time of incorporation, the person mentioned at Nos. 1 to 4 held one ordinary share each, while the fifth person, namely, India Commerce and Industries Co. Ltd. , held for shares.
( 3 ) IN course of time, C. V. Subba Rao went out of the picture and ceased to have any interest in this company. We are no longer concerned with him. Swadharma Swarajya-Sangha Ltd. is a trust constituted by three families of Kowtha Suryanarayana Rao, C. V. Subba Rao and C. Authikesavulu Chetty. Similarly, the Indian Commerce and Industries Ltd. was also a company promoted and controlled by the said three families. Since C. V. Subba Rao has gone out of these concerns, only two families continue, i. e. , the families continue, i. e. , the families of Kowtha Suryanarayana Rao C. Authikesavulu Chetty.
( 4 ) MOHANRAM Sastry is the son of Kowtha Suryanarayana Rao, while the petitioner, Mani is the son of Ramalingeshwarudu, who is the son-in-law of Kowtha Suryanarayana Rao. Mohanram Sastrys daughter is, in turn, marries to the petitioner, Mani. K. L. Manohar is the son of Mohanram Sastry. The interest of Kowtha Suryanarayana Rao in the said company as also in other companies came to be held by Kowtha Mohanram Sastry/k. L. Manohar, and the petitioner, Mani. C. Authikesavulu Chettys family is represented by his son, C. Srinivasan. The petitioner, Mani, resides in Madras, while Mohanram Sastry and his son, Manohar, reside in Secunderabad.
( 5 ) UNTIL 1981, the company had only two directors, namely, Mohanram Sastry (based at Hyderabad) and Mani (based at Madras ). C. Srinivasan was not a director, but was acting as the business secretary of the company.
( 6 ) IN course of time, differences arose between Mani, on the one hand and Kowtha Mohanram Sastry, his son, Manohar, and C. Srinivasan the other, which is evidenced by the correspondence placed before that court in these petitions. However, the spark that lit the fire between that two groups was the letter, exhibit A-1, dated 15/04/1980, written by C. Srinivasan and his son C. Ramesh Kumar, requisitioning an extra ordinary general body meeting of the company for the purpose of considering, and if thought fit, to pass a resolution appointing Sri K. L. Manohar as
