The court has the power to stay a winding-up petition if it finds that resort to winding up is for ulterior purposes. However, the partnership principle is attracted in a case where the relationship between the parties is not confined to being shareholders of the same company, but they are also partners in other partnerships which are co-related to the company. Proceedings under Sections 397 and 398 of the Act are not a proper remedy in a case where the disagreements between the parties are fundamental and absolute, and the company's assets need to be liquidated.

( 1 ) ORDER dated July 20, 1981 a winding up petition instituted by Harish Bansal and some other praying for the winding up of M/s Moti Films Pvt. Ltd. , was admitted after issue of show cause notice and citation was directed to issue. The company and one of its Directors have appealed to challange the validity of the said order. The order under appeal shows there are five grounds on which the petition has been admitted. These are : (a) that previously a petitition with lessor allegations, being C. P. 64 of 1980 had been admitted; (b) that there were statements in the pleadings showing that the Company was in the nature of a partnership from which the petitioners had been ousted from mangements. The judgment in the case of Ebrahimi v. Westbourne. Galleries Ltd. , (1973 Appeal Cases 360) was relied upon and a document dated May 2, 1980 showing the nature of partnership was relied upon. (e) Sums of money due to Mrs. Madhu Bansal and two of the partnership firms had not been paid, so the Company was unable to pay its debts. Moreover, it was claimed that the capital has been wiped out due to the loss of Rs. 1,20,000. 00 in the first year. (d) There were allegations of lack of probity on the part of the respondents, one such allegation being that a flat beinging to the Company in Bombay which was bought for Rs. l,00,000. 00 was sold to Mrs. Santosh Bhandari, mother of Ramesh Bhandari, for l,55,000. 00. This was after the argeement of May 2,1980 and after another suit relating to M/s Moti Plast Engineering Industury, one of the firms mentioned in the agreement of may 2,1980. That suit was instituted by Shn R. P. Bhandari for dissolution of the firm. (e) There was allegation regarding mainpulation of the accounts of the firm which could only be examined after the evidence was recorded.

( 2 ) LEARNED counsel for the appellants contened that these five reasons are not sound. On the first ground, it is submitted that the original winding up petition was withdrawn and in any case it contained more serious allegations. On the second ground, it is submitted that the Company is not in the nature of a partnership because it was set up by what may be described as the Bhandari Group and the Bensal Group was only allowed to participate in the same subsequently as minority shareholders. As regards the debt, it was claimed that no proper notice was given and, in any case the Company was willing to pay the debt immeddatcly into Court. As far as the financial instability of the Company was concerned, an offer was made to purchase the shares of the petitioners in the winding up proceedings at more than the par value. (This offer was not accepted by those petitioners ). The allegation that there was lack of probity was not justified. The fiat which was purchased for Rs. 1,00,000. 00 was agreed to be sold only a few months later Rs. 1,55,000. 00 to the mother of Ramesh Bhandari due to lack of funds in the Company. This was an act of good management and there was nothing illegal about it. In any case, this matter could be gone into if the proceeding was under Section 397 or 398 of the Companies Act, 1956.

( 3 ) IT may here be stated that the petitioners in the winding up proceedings offered to buy the flat for Rs. 3,00,000. 00 but this offer was not acceptable to the Company or its Director. Lastly, it was stated that this was not a case in which the winding up order could be passed because it was a matter which fell squarely within the provisions of Sections 397 and 398 of the Companies Act, 1956.

( 4 ) THE problem in such cases in which the grounds of winding up are substantially those for winding up of the Company on the ground that it is just and equitable to wind up the same arises because the provisions of Section 443 (2) of the Act are to the effect that the Court may refuse to make an order of winding up if it reaches the opinion that some alternative remedy is open. It is submitted that in the present case the proper remedy of the p