Winding up should be a last resort, justified by compelling reasons, and mismanagement and lack of cooperation can be valid grounds for winding up.

1. Kerala State Industrial Development Corporation Ltd. (for short 'KSIDC') is the petitioner and the prayer is under S.433 of the Companies Act to wind up the respondent Poonmudi Tea Pack Ltd. (for short 'the Company')

2. The Company was incorporated under the Companies Act, as a public company limited by shares, on 29th September 1981 to carry on the business of manufacturers, blenders, processors and packers of tea in tea bags and other packets and other containers and to buy, sell deal in and export all kinds of tea and tea products. One Shri K. T. Thomas approached the KSIDC with the proposal and KSIDC agreed to associate with him. Ext. P-1 promotional agreement was executed on 14th November 1979. Cost of the project was estimated at Rs. 60 lakhs out of which Rs. 20 lakhs was to be met by way of share capital and Rs. 35 lakhs to be raised by way of term loans and the balance by subsidy from Government. The equity share capital in the Company to be promoted was KSIDC 26 per cent, the joint promoter K. T. Thomas 25 per cent and the balance by public and financial institutions. The agreement provided that the nominee of K. T. Thomas should be the Managing Director and K. T. Thomas is not liable to retire.

3. K. T. Thomas was appointed as Managing Director. He nominated two Directors in the Board and KSIDC nominated three as provided in the agreement. Towards its share of equity participation KSIDC was to contribute for shares of Rs. 6.5 lakhs. Out of this Rs. 2,80,000 was paid and 28,000 shares allotted. The agreement was that further contribution towards share capital by KSIDC would be only after the share capital intended for the public is agreed to be underwritten by brokers, financing institutions or Banks and till then all expenditure should be met by K. T. Thomas. K. T. Thomas claims to have contributed Rs. 4.82 lakhs, the whole of which was, entered in the accounts as having been expended.

4. The project was to be completed and commercial production started by April, 1982. K. T. Thomas was not keeping up promises and taking effective steps to implement the project. He approached several banks and other financial institutions for the term loan of Rs. 30 lakhs. All of them turned down the request on account of his antecedents. Now it has become impossible to obtain finance to implement the project. Due to delay, cost of the project far exceeded from the estimate. The overrun in capital cost rendered the project unworkable and impossible. Report of the Auditors for the year ended on 30th April 1984 revealed several irregularities and mismanagement. Though different alternatives were suggested K. T. Thomas was not taking any effective steps to improve the situation. For these and other reasons KSIDC lost confidence and filed this petition for winding up on the allegation that it is the only course now open. The petition was filed under S.433(c) and (f) of the Companies Act.

5. On behalf of the respondent, the Managing Director K. T. Thomas in his counter and during arguments admitted that it became difficult to get term loan and implement the project, but contended that it was due to the lack of cooperation of the KSIDC. It is said that the petition for winding up is a drastic step which ought to have been resorted to only after attempting all other available steps in order to avoid winding up. It was argued that being a joint promoter and contributor KSIDC had the duty to take steps for implementing the project and their obligation is there in the provisions of Ext. P-1 also.

6. Now we are only at the question of admitting the winding up petition in order to decide whether the advertisement should be made. Hearing given to the Company under rule 96 of the Company (Court) Rules is not for the purpose of deciding the manner of advertisement under rules 24 and 25 but for deciding whether the advertisement should be made at all and the petition proceeded with. The question of advertisement and directions regarding advertisem