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HIGH COURT OF CALCUTTA
S. C. GHOSH
LOKENATH GUPTA - Appellant
Versus
CREDITS PRIVATE LTD. - Respondent
C. P. 27 Of 1964
Decided On : AUGUST 18, 1967
COMPANY - WINDING UP - JUST AND EQUITABLE - SUBSTRATUM GONE - DEADLOCK IN BOARD OF DIRECTORS - OPPRESSION OF MINORITY SHAREHOLDERS - GROUNDS FOR WINDING UP - SECTIONS 163, 167, 210 AND 220 OF THE COMPANIES ACT - CLAUSES 66, 69 AND 73 OF THE ARTICLES OF ASSOCIATION.
Fact of the Case:
The petitioners, three directors of Credits Private Limited, filed an application for winding up the company on the grounds that it was just and equitable to do so. They alleged that the managing director, Anand Mohan Gupta, had ousted the entire board of directors from management, mismanaged the company's affairs, and misappropriated company funds. They also alleged that the substratum of the company was gone and that there was a deadlock in the board of directors.
Finding of the Court:
The court found that the petitioners had failed to establish that it was just and equitable to wind up the company. It held that the substratum of the company had not completely gone and that there were other objects in the memorandum of the company which could be carried out. It also held that mere mismanagement or misappropriation on the part of the directors or managing director was not a ground for winding up. The court further held that the petitioners had alternative remedies for the redress of their grievances under Sections 163, 167, 210 and 220 of the Companies Act and Clauses 66, 69 and 73 of the articles of association of the company.
Issues: 1. Whether the substratum of the company had gone. 2. Whether there was a deadlock in the board of directors. 3. Whether there was oppression of minority shareholders. 4. Whether it was just and equitable to wind up the company.
Ratio Decidendi: 1. The court held that the substratum of the company had not completely gone and that there were other objects in the memorandum of the company which could be carried out. 2. The court held that mere mismanagement or misappropriation on the part of the directors or managing director was not a ground for winding up. 3. The court held that the petitioners had alternative remedies for the redress of their grievances under Sections 163, 167, 210 and 220 of the Companies Act and Clauses 66, 69 and 73 of the articles of association of the company.
Final Decision: The court dismissed the petition for winding up the company with costs.
( 1 ) THIS is an application made by Lokenath Gupta, Kanailal Agarwalla and Ramratan Panday, three directors of the Credits Private Limited, hereinafter referred to as the said company for an order for winding up the said company on the ground that it is just and equitable that the said company should be wound up. The registered office of the said company is situate at No. 65/1, Maharshi Devendra Road, Calcutta. The said company was incorporated in the year 1958 and is a private company limited by shares. The objects for which the said company was established have been set out in paragraph 5 of the petition and sub-paragraphs thereunder.
( 2 ) THE said company was promoted by Kanailal Agarwalla and his son, Lokenath Gupta, two of the petitioners, one Srikrishnadas Agarwalla and his son, Anand Mohan Gupta, both of No. 23, Garanhata Street, Calcutta. The said promoters were appointed the first directors of the company and are still the directors of the said company. On or about November 8, 1958, Anand Mohan Gupta was appointed the managing director of the said company for a period of 10 years by a resolution passed by the board of directors of the said company, The banking accounts of the said company are with the Bank of India Limited, Burrabazar branch and the Punjab National Bank Limited, Lyons Range. The said accounts could be and can be operated by the petitioners, Lokenath Gupta and the said Srikrishnadas Agarwalla.
( 3 ) THE grounds for winding up have been set out in paragraph 16 and the sub-paragraphs thereunder. The main allegations are as follows : (a) Since June 29, 1961, the said Anand Mohan Gupta has ousted the entire board of directors from the management of the company and has been mismanaging the affairs of the company to the prejudice of the company and its shareholders. (b) The balance-sheet of the company as on September 30, 1961, and the profit and loss account of the company for the year ending September 30, 1961, has not yet been filed. (c) The managing director of the company has been committing defaults in filing its annual returns since June 29, 1961, in spite of notices and reminders from the Registrar of Companies. (d) The company has not held any general meeting since 1961 in spite of repeated notices from the Registrar of Companies, West Bengal. (e) In spite of requests Anand Mohan Gupta has not called any meeting of the board of directors of the company. (f) The books of accounts of the company and other papers have been taken possession of and removed by Anand Mohan Gupta from the registered office of the company. (g) Anand Mohan Gupta has been collecting the dues of the company from various parties and misappropriating the same to his own personal use. (h) Anand Mohan Gupta is in possession of the assets of the company, and has been trying to sell or dispose of the properties and assets of the company without sanction of the board of directors. (i) Srikrishnadas Agarwalla used to make over blank cheques signed by him to Ananda Mohan Gupta who used to encash the same and utilise the proceeds thereof for his own personal benefit.
( 4 ) THE allegations of the petitioners further are that the substratum of the company is gone.
( 5 ) THE said company, according to the petitioners is in the nature of and in substance a partnership, the shareholders of the company are relatives and/or friends. Anand Mohan Gupta has taken complete control of the company and has excluded the petitioners from management or control of the company. In the affidavit filed by Anand Mohan Gupta affirmed on 16th January, 1967, Anand Mohan Gupta has stated that one of the business of the company was to act as financiers and the company has been till now carrying on the said business as financiers. The company has also applied for distributorship of condensed milk. The said Anand Mohan Gupta has denied the allegations mentioned in paragraph 16 and sub-paragraphs thereunder of the petition as well as other alle
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