Misconduct and mismanagement alone are not sufficient for a winding up order, and the court must satisfy itself that there are prima facie grounds before admitting a winding up petition.

1. When this winding up petition, brought by a contributory under the just and equitable clause, came on for admission, Mr Meenattoor entered appearance for the company and asked for an opportunity to be heard on the question whether the petition disclosed a case for ordering a winding up. Subsequently the company made an application praying for the dismissal of the winding up petition in limine on the score

that it disclosed no adequate grounds, that it was prompted by mala fides, and that the petitioner, if he was really aggrieved, had other remedies and was acting unreasonably in seeking to have the company wound up instead of pursuing those other remedies.

2. The very institution of a winding up petition against a company, more so its advertisement, adversely affects the reputation of the company, and, if done without reasonable and probable cause, is a wrong which can be restrained by suit. It is also the duty of the court before admitting a winding up petition, especially one brought by a contributory, to satisfy itself that there are prima facie grounds; and it is well-settled that, even after the court has admitted a petition, it can, on being moved for the purpose by the company or some other interested person, stay proceedings and revoke the admission. R.96 of the Companies (Court) Rules, which deals with the admission of winding up petitions and directions as to advertisement, recognises this, for, it says that the judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the advertisement of the petition the hearing to be given to the company is not for the purpose of deciding the manner of the advertisement, but for deciding whether the advertisement should be made at all and the petition proceeded with. (See in this connection Cercle Restaurant Castiglione Company v. Lavery (18 Ch. D. 555), In re A Company (1894) 2 On. 349, pioneer Bank, Limited, In the matter of Chaniram In re (I. L. R. XXXIX Bombay 16), W. I. Theatres v. Asst. Bom. Cinemas (A. I. R.1959 Bombay 170), Lord Krishna Sugar Mills Ltd. V. Abnash Kaur (1961) 31 Comp. Cas. 587 and Charles Forte Investments Ltd. v. Amanda (1963) 3 W. L. R.662). In fact the maintainability of the application made by the Company is not questioned; nor is it suggested that I would be wrong in hearing the company before deciding whether the winding up petition should be admitted or not.

3. As I have said, the winding up petition is brought under the just and equitable clause and the grounds alleged are:

(1) that the directors of the company, who are closely related to one another, are mismanaging its affairs for their own benefit and have been guilty of mis appropriation and other misconduct;

(2) that the company has been working at a loss; and

(3) that the company has sold a number of its undertakings and is about to sell its two remaining undertakings with the result that its substratum has disappeared or is disappearing.

4. I am satisfied that there is not much substance in any of these grounds so that they add up to little and can, even cumulatively, scarcely justify a winding up order. Taking the first ground first, it is true that four of the five directors of the company are closely related to one another, two being brothers, a third being their first cousin, and the fourth, a son-in-law of one of the brothers. The fifth is, however, not related to the remaining four and is, in fact, the paternal uncle of the petitioner. Close relationship between the several directors of a company is however no ground for winding up although it is a factor to be considered in cases where that close relationship has fostered misconduct and mismanagement and has enabled the directors to dominate the other share-holders and monopolise the company for their own individual benefit as in B, Sabapathy Rao v. Sabapathy Press (A. I. R.1925 Madras 489) and Gopal Chetti v. The Ripon Press & Sugar Mill Co. Ltd. (A. I. R.1925 Madras 633). I might a