The court held that the substratum of the company had failed, there was a complete deadlock in the company due to lack of probity in management, the company was in the nature of a partnership and the facts justified dissolution, there was no alternative remedy, and the majority of creditors/shareholders supported the winding up, and therefore, the company should be wound up on just and equitable grounds.

LAKSHMANAN, J.

Company Petition No. 44 of 1989 has been filed under section 433(f) of the Companies Act, 1956 (hereinafter referred to as "the Act") for winding up of the respondent-company on the just and equitable ground. The respondent-company was incorporated on October 25, 1985, for manufacture of fibre glass reinforced plastic (FRP) light fittings. The authorised share capital of the respondent is Rs. 3 lakhs and the amount paid up is Rs. 2.4 lakhs. Of this amount, the petitioner, his father, brother and wife had invested Rs. 1.05 lakhs. The managing director of the respondent, Mr. P. Venkatasubramaniam, and his family have invested Rs. 1.25 lakhs and the balance Rs. 10, 000 by a friend of P. Venkatasubramaniam, namely, Mr. Sivajothi. The respondent is a small private limited company in the nature of a partnership as the bulk of the shares are owned by members of two families who are closely related to each other. After the incorporation of the company on October 25, 1985, Mr. P. Venkatasubramaniam who was the initial subscriber and managing director of the company wrote to the petitioner at Bombay, vide letter dated November 30, 1985, and sought his participation in the business venture. By the said letter, the said P. Venkatasubramaniam proposed to have only relatives as shareholders and the share capital will be Rs. 1.10 lakhs. Pursuant to the said request, the petitioner met the said Mr. P. Venkatasubramaniam on February 3, 1986, for a discussion and, in the meeting held on the said date, the said Mr. P. Venkatasubramaniam, hereinafter called PV, agreed with the petitioner's family that the petitioner's family will invest and hold 50 per cent. shares of the company and that the petitioner will be made a working director of the company. This was also confirmed by the letter dated February 18, 1986, sent by PV stating that, for all practical purposes, the petitioner is deemed a director of the company with immediate effect. Upon this understanding, the petitioner and his family members contributed rupees one lakh towards share capital between March and May 1986 and another Rs. 50, 000 in December, 1986. But the said PV disappointed the petitioner by violating this understanding for maintaining the 50 per cent. ratio of shareholdings or making the petitioner a working director of the company. The contribution of PV and his family members was Rs. 1.35 lakhs being the value of shares taken on various dates between March, 1985 and April, 1987. Despite the understanding for equal shareholding between PV and the petitioner's family, PV allotted more shares to himself, though PV states in his letter dated February 10, 1986, that out of Rs. 1.10 lakhs meant for the petitioner, he had already allotted Rs. 1.10 lakhs to his friend D. Sivajothi. By May, 1986, PV and his family had subscribed Rs. 66, 000 towards shares which includes Rs. 10, 000 from Sivajothi. From March, 1986 to May, 1986, the petitioner and his family contributed share capital of Rs. 1 lakh and another Rs. 5, 000 in December, 1986. From May, 1986, to April, 1987, PV had allotted to himself and his family members Rs. 60, 000 on various dates without reference to the petitioner and with a view to hold majority shares contrary to the understanding and against the interest of the petitioner.As the petitioner was not appointed as a wholetime director of the company as agreed upon, he took up the matter with the said PV and, on May 19, 1986, at the residence of the petitioner at Bombay, PV declared that the petitioner was being nominated as a director of the company and took the petitioner's signature in a newly purchased note book calling it an "attendance register". PV said that the official appointment letter would follow after he reached Madurai. The petitioner states that his appointment was finally confirmed only on May 23, 1988. In between, PV made several excuses for not confirming the petitioner as a director. The petitioner states that it became