Gujarat High Court
Navnitlal M. Shah And Ors. vs Atul Drug House Ltd. And Ors. on 28 April, 1971
Author: D.A. Desai
Bench: D.A. Desai
JUDGMENT D.A. Desai, J.
1. The petitioners have filed this petition praying for an order for winding up the company on toe allegation that it is just and equitable to wind up the company. In the alternative, the petitioners have prayed for appropriate directions under sections 397 and 398 of the Companies Act alleging that the affairs of the company are conducted in a manner prejudicial to the public interest and in a manner oppressive to the petitioners and the supporting members of the company whose names have been set out at pages 208 to 211 of the record, so as to bring to an end the matters complained of. The petition runs in a closely typed 200 pages and allegations are legion. When the petition came up before my learned brother, J. B. Mehta J., he accepted the same and directed notice to be issued to the company and other respondents who are the managing director and directors of the company and three creditors of the company. On the service of the notice bulky affidavits in reply, in rejoinder and sub-rejoinder, have been filed. The petition was then set down for considering whether it should be admitted or not. On a demur filed, Mr. S. J. Sorabji, learned advocate, appeared for respondent No. 1-company and raised three objections against admitting the petition. They were vigorously canvassed and, therefore, even though I am inclined to dismiss it in part and admit it in part, I have considered it proper to dictate a short order.
2. The contentions raised by Mr. Sorabji are as under :
(1) The present petition as filed being a composite petition both for an order for winding up the company and for reliefs under sections 397 and 398 is not maintainable.
(2) Assuming all the averments and allegations in the petition to be true, the petition does not disclose a cause of action for relief under section 397.
(3) Order for winding up of the company is not available to the petitioners on two grounds : (i) because of the previous order of Mehta, J. in Company Petition No. 53 of 1969 [Atul Drug House Ltd., In re [1971 41 Comp Cas 352 (Guj)], which was filed for a prayer for winding up on the same grounds; and (ii) that the petition praying for an order for winding up would be barred by principles analogous to general principles of res judicata.
3. Mr. M. H. Shah, learned advocate who appeared for respondents Nos. 2 to 5, 9, 10 and 11, raised one more contention. It is as under :
Assuming all the averments and allegations in the petition to be correct, the petition does not disclose a cause of action for any relief under section 398.
4. The petitioners had filed a petition under section 433 read with section 439 of the Companies Act being Company Petition No. 53 of 1969 [Atul Drug House Ltd., In re [1971] 41 Comp Cas 352 (Guj)] praying for an order for winding up the company being Atul Drug House Ltd., having its registered officer near Oil Jetty, Kandla, Gujarat, on the ground mentioned in section 433(f) of the Act in that, according to the petitioners, it was just and equitable that the company should be wound up. The specific ground alleged for an order for winding up the company was that though it was a company which was deemed to be a company in view of the provisions contained in section 43A, it was in fact a private limited company in which the petitioners styled as Shah group and respondents - some of whom belong to Khimasia group and some of whom belong to Chandaria group - each has one-third shareholding and that it is a glorified partnership and its affairs have been brought to such an impasse by the action of the majority shareholders and such lack of probity is disclosed that it is just and equitable to wind up the company. This was the only ground on which a winding up, in the words of Mehta, J., of a solvent and flourishing company was sought. At the admission stage, the petition for winding up was contested and it case to be dismissed by an order dated 18th December, 1969. The petitioners have preferred Original Side Appeal No. 1 of 1970 and it is common ground that it is still pending. In the present petition, the petitioners have also prayed for an order for winding up, primarily on the same ground, but one more ground was added which would be covered by section 433(e) of the Act, namely, that the company is unable to pay its debts. Mr. Ramakant P. Bhatt, learned advocate who appeared for the petitioners, specifically stated that the ground for winding up the company under section 433(e) is not pressed and is specifically given up. Therefore, the only ground on which now the petitioners seek an order for winding up the company is the one covered by section 433(f), namely, that it is just and equitable that the company should be wound up and the allegation in support of this ground is that the company is a glorified partnership and it has come to an irresolute impasse and the conduct of the majority shareholders disclosed lack of probity and, therefore, the ground which was in terms agitated before Mehta, J. and which was negatived is now sought to be reagitated in this petition and until that judgment stands, it is not open to the petitioners to reagitate this ground. The question is not finally decided between the parties and, as the appeal is pending, it would not be proper to reject the petition on the ground that it is barred by principles analogous to general principles of res judicata; but it should be rejected on the ground that the judgment of Mehta, J. still stands and it would not be proper to permit the petitioners to reagitate the same ground over and over again. By this approach, the petitioners are in no way prejudiced. If there is any substance in the alleged grounds by them they would be able to agitate the same in the appeal preferred by them. If they succeed, no useful purpose would be served by admitting the petition for the same prayer at this stage. If they fail, and if the decision becomes final, certainly there must be some finality to the orders of the court and even though the principles of res judicata as enacted in section 11 of the Code of Civil Procedure may not strictly apply, such a prayer ought to be negatived to these petitioners on the ground that it would be barred by principles analogous to general principles of res judicata. In either event, at this stage, in view of this position that a petition on the same ground has been rejected and against the order of rejection an appeal is pending, it would not be proper to admit the petition for the same relief on the same ground. I would reject the petition so far as the petitioners seek an order for winding up the company under section 433(f) on the ground that it is just and equitable to wind up the company because it is a glorified partnership. That is the only ground surviving and, at this stage, it would not be proper to admit the petition permitting the petitioners to reagitate this question in this court. Therefore, the petition so far as the petitioners pray for an order for winding up the company must stand rejected.
5. I would now turn to the objections raised by the respondents on the maintainability of the petition for reliefs under section 397 and 398. Once the petition for an order for winding up the company is rejected, this petition is a petition simpliciter for relief under sections 397 and 398. It is not disputed that the petition is supported by the requisite number of members as required by section 398. In the petition, it is alleged that the affairs of the company are being conducted in manner prejudicial to the public interest and in a manner oppressive to the petitioners and supporting members of the company. Petition under section 397(1) can be filed by any member of a company who complains that the affairs of the company are being conducted in a manner therein stated and such members have a right to apply by virtue of section 399. As stated earlier, the petition is supported by the requisite number of members as required by section 398.
6. First contention is that the composite petition praying for an over for winding up and in the alternative for reliefs under sections 397 and 398 is inconceivable and would not be maintainable. In fact this contention would lose all its significance because the petition for an order for winding up is being rejected. However, in fact considerable arguments were advanced on this aspect of the matter and it was stated that the matter has never been approached from this angle hereto before mentioned and, therefore, this aspect may better be examined. I would, therefore, briefly examine this contention.
7. It was strenuously urged that Chapter VI in which sections 397 and 398 are incorporated provide for a procedure and reliefs set out therein is a complete code by itself and the provisions for winding up are set out in Chapter VII of the Act and it is wholly inconceivable that a composite petition in which primarily an order for winding up is sought and in the alternative a relief under sections 397 and 398 is sought can ever be maintainable. It was urged that the requirements of the two sections are so antagonistic to each other that they cannot be reconciled and it would be an attempt at something like riding two horses running away in exactly opposite directions. To dispose of this contention it would be necessary to go briefly into the history of the introduction of sections 153C and 153D in the Indian Companies Act 1913, and introduction of section 210 in the English Companies Act, 1948. It appears that in the past whenever the petitioners sought an order for winding up a company under the "just and equitable" clause, the court would reject the prayer for winding up a company if it was found that there was an alternative remedy available for the redress of their grievance. The situation was that either the court had to wind up the company or to reject the petition for winding up leaving the petitioners to find redress of their grievance. In some of the cases, the courts felt it would be prudent to wind up the company because minority members were oppressed by the majority; or were so maltreated that it would be proper to give them some relief but simultaneously was of the opinion that if the relief by way of winding up was given in the absence of provisions like sections 397 and 398 or section 210 of the English Companies Act, the remedy would be worse than the disease. In this background section 210 was introduced in the English Companies Act and after some time sections 153C and 153D were introduced in the Indian Companies Act, 1913. Sections 397 and 398 of the Companies Act, 1956, are in pari materia with sections 153C and 153D of the Indian Companies Act, 1913. In the absence of these provisions the court had either to wind up the company under the "just and equitable" clause or dismiss the petition, both of which alternative courses may not do full justice to the case. In order to remove this lacuna, these provisions were introduced. Therefore, it is reasonable to believe that relief under sections 397 and 398 is alternative to an order for winding up. It has been so judicially noted by the Supreme Court in Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp Cas 351 (SC). At page 363 it has been observed as under :
"We shall first take up the case under section 397 of the Act and proceed on the assumption that a case has been made out to wind up the company on just and equitable grounds. This is a new provision which came for the first time in the Indian Companies Act, 1913, as section 153C. That section was based on section 210 of the English Companies Act, 1948, which was introduced therein for the first time. The purpose of introducing section 210 in the English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for some time that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That it why section 210 was introduced in the English Act to provide an alternative remedy where it was felt that, though a case had been made out on the ground of just and equitable clause to wind up a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider proper to give. That is the genesis of the introduction of section 153C in the 1913 Act and sections 397 in the Act."
8. At page 365 it was observed :
"Although the word 'oppressive' is not defined, it is possible, by way of illustration, to figure a situation in which majority shareholders, by an abuse of their predominant voting power, are 'treating the company and its affairs as if they were their own property' to the prejudice of the minority shareholders - and in which just and equitable grounds would exist for the making of a winding-up order - but in which the 'alternative remedy' provided by section 210 by way of an appropriate order might well be open to the minority shareholders with a view to bringing to an end the oppressive conduct of the majority."
9. At another place it was observed as follows :
"The power conferred on the court to grant a remedy in an appropriate case appears to envisage a reasonable discretion vested in the court in relation to the order sought by a complainer as the appropriate equitable alternative to a winding-up order."
10. It thus appears well-settled that relief under section 397 and 398 is alternative to an order for winding up. If one relief can be granted as alternative to any other relief parties seeking one can simultaneously ask for alternative relief in order to avoid multiplicity of proceedings. When one relief can be given as alternative to the other, it is indisputable that both such reliefs, one as alternative to the other, can be claimed in the same proceeding. If the relief, one in the alternative to the other, can be asked in the same proceeding, a composite petition would certainly be maintainable. Otherwise, it might lead to a startling situation, where a party must first seek one relief, go through the entire gamut of the proceeding and then come with a second petition saying that as the first relief has been refused, the party is now entitled to the alternative relief. Even in pure civil law such a thing is inconceivable. It appears well-settled that a party who comes to the court for certain reliefs may rely upon several different rights alternatively although they may be inconsistent (vide Philipps v. Philipps [1878] 4 QBD 127 (CA)). Though a party may not be permitted to raise an inconsistent or alternative case by way of amendment in the course of the proceeding, the cases are legion showing such inconsistent beliefs such as a prayer for cancellation of a partnership agreement and in the alternative dissolution of partnership and accounts combined in the same suit. Similarly, prayer for a declaration of title and in the alternative a declaration of the right of easement can be combined together. Such instances can be multiplied by referring to a large number of cases in which courts have dealt with such alternative reliefs inconsistent with each other. Therefore, in a prayer for winding up which, if granted, brings about civil death of the company and in the alternative a prayer for relief under section 397, which postulates continued existence of the company, is sought, there would be no impediment in law in combining these prayers in one composite petition.
11. It was, however, very strenuously urged that the procedure prescribed for presentation and hearing of a winding up petition and procedure prescribed for presentation and hearing of a petition for beliefs under section 397 and 398 are so materially different that the court would not be able to simultaneously proceed with the same in one petition. It was urged that while a petition under section 397 contemplates a case of individual grievance, oppression or harassment, an action for winding up is a representative action. It was pointed out that if a petitioner in a winding up action is bought over substitution is permissible, while in the case of a petition under sections 397 and 398 substitution is impermissible. It was also pointed out that if a petition for winding up is admitted by court, it has to be advertised, while a petition under sections 397 and 398 is not required to be advertised. It was conceded that withdrawal of a petition under section 397 or a petition for winding up would require court's permission. It was lastly urged that material allegations of facts in both cases will be so inconsistent that they will be mutually destructive of each other and, therefore, even though as a general proposition it can be said with some reasonable certainty that inconsistent relief can be prayed for, such a thing is inconceivable or impossible in respect of a petition in which an order for winding up and, in the alternative, relief under section 397 and 398 are sought. The difficulties as enumerated heretobefore are not insurmountable.
12. It is true that in a petition under section 397 grievances would be individual to the complaining members, while a petition for winding up a company is a representative action. It is also true that anyone who comes to support the petition for winding up can ask for substitution. Such procedure is not available in the cases of a petition under section 397, obviously because it is not a representative action and grievance is personal to the member who filed the petition. It is also true that a petition for winding up must be advertised before further action can be taken thereon. But, because of this difference in procedure, the court will have no difficulty in entertaining a composite petition. Assuming that a composite petition is presented seeking two aforementioned reliefs and when the court accepts the petition, notice is ordinarily served upon the company. The company would appear at that stage and may be able to show to the satisfaction of the court that, at any rate, no case for winding up is made out. Composite petition praying for winding up and for relief under section 397 and 398 would be maintainable if winding up is sought on the ground that it is just and equitable to wind up the company. If the company is sought to be wound up on the ground that it is just and equitable, the petitioner must allege and the court must be satisfied that it is just and equitable to wind up the company. Similarly, if relief is sought under section 397, the court must first be satisfied that it would have been just and equitable to wind up the company. That conclusion will have to be reached by the court on proof adduced by the petitioner. Only after that conclusion is reached, the court can proceed to decide whether to wind up the company, or if the court is satisfied that winding up would unfairly prejudice the member of members, the court, instead of winding up the company, may give relief under section 397. Therefore, when a petition for winding up is filed under section 433(f) and, in the alternative, relief under section 397 is sought, the petition must proceed up to a certain stage which is common to both. It is at this stage that a motion is addressed to the discretion of the court whether to wind up the company, or to grant relief under section 397. For reaching that stage, there might be some difference in the procedure to be adopted by the court. But that procedure is not such which cannot be simultaneously gone through. At any rate, when a petition is accepted and notice is served upon the company and the company appears in response to the notice, it can show and the court would have material to find out whether to proceed with the petition for winding up or for an alternative relief. It would also be open to the court to dispose of a part of the petition at that very stage on the materials placed before is, as I have chosen to do in this case, namely, to dismiss the petition for an order for winding up the company. I see no difficulty in proceeding in this manner of approach. I draw some support from some of the observations in this behalf from a decision in Bilasrai Joharmal v. Akola Electric Supply Co. [1958] 28 Comp Cas 549, 553 (Bom). That was a petition presented for winding up the company and an alternative prayer was made for appropriate orders under sections 397, 398 and 402. The situation was exactly identical, the only difference being that at the hearing of the petition, prayer for winding up was given up; while in this case, petition for the prayer for winding up is being dismissed. But Chagla C.J. (as he then was) definitely set out the practice which the court has to follow in this case of such composite petition. It has been observed as under :
"......... if a petition is presented to the court - let us say a petition which is a composite petition, as in this case - it would be open to the court or to the company judge to dismiss it summarily and not to admit it at all. That would apply both with regard to the prayer for winding up and with regard to the directions under section 397 and section 398. But the court may not want to dismiss it summarily and the court may want it to be admitted at least for the purpose of giving notice to the company so that the company should be heard. If the company judge takes that view, at that stage, then he will direct that not only a notice should be given to the company, but also to the Central Government, so that all difficulties with regard to section 400 would be obviated. It would also lead to this useful result, that when the petition comes up before the company judge after it has been accepted, not only the company will be before the company judge, but also the Central Government. At that stage the learned judge will give such directions as he thinks proper. With regard to winding up, if he wishes to go further into the matter, he would have the petition advertised as required under the High Court Rules. If, on the other hand, he thinks that there is no case for winding up, he may dispose of that part of the petition, and with regard to sections 397 and 398 he would give such directions as the Companies Act provides, as we have just pointed out, after hearing both the company and the Central Government."
13. Therefore, even after keeping in view the procedure prescribed for these two types of petitions under section 433 and under sections 397 and 398 a composite petition is conceivable and by reconciling the procedure, the court can properly proceed in respect of both of them though that difficulty is not going to arise in this case because of the order proposed to be passed by me. In Mohanlal Dhanjibhai Mehta v. Chunilal B. Mehta [1962] 32 Comp Cas 970 (Guj), the court had before it a composite petition in which prayer was for a direction under section 153C of the Indian Companies Act, 1913, and in the alternative for an order for winding up the company. Again, it must be stated that the petitioner did not press the relief under section 153C but confined his argument to the alternative relief for winding up. It has been observed that it was open to the petitioners to do so because even for claiming relief under section 153C, the petitioner has to establish that the facts were such as would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up and that it was because, according to the petitioner, to wind up the company would unfairly and materially prejudice the interests of the company or any part of its members that the petitioner did not want the company to be wound up but wanted relief under section 153C. It was also observed that the petitioner had in any event to establish that it was just and equitable to wind up the company. If the facts were such as justified the making of a winding up order on the ground that it was just and equitable to do so, the petitioner could always abandon the relief under section 153C and ask the court to make an order for compulsory winding up of the company. Therefore, such a composite petition is not unknown to law; of course it was urged that the contention as is now raised was not raised in that case. In my opinion, that it neither here nor there. At any rate, I see no difficulty either in law or in the procedural aspect of the matter in entertaining such a petition. In my opinion such a petition would be quite proper and legal.
14. In this connection, reference was also made to Narayana Iyengar v. T. A. Mani AIR 1960 Mad 338. In that case after setting out the history or background and referring to Cohen Committee's Report, it has been stated that before the introduction of section 210, the only effective remedy against oppression which the minority shareholders could avail themselves, if they succeeded in proving their case, was a winding up order under the "just and equitable clause" of section 168 of the English Companies Act of 1929. But this remedy, however, very often proved worse than the disease. For, in practice, it generally meant that the business of the company in liquidation would have passed into the hands of the minority shareholders who would ordinarily be the only available purchasers of such a business. The learned judge then quoted the passage from Buckley On the Companies Acts in which it is stated that since that introduction of section 210 if the petitioners can satisfy the court that they are being oppressed and that they would be unfairly prejudiced by a winding up, the court may impose a solution on the disputants. Relying on these observations it was also contended that not only there must be an averment that the petitioners would be unfairly prejudiced if a winding up order is made but in the same breach they will have to state that it is just and equitable to wind up the company and such a composite petition would not lie. I would presently point out while considering the next submission as to what averments can properly be made in a composite petition which I hold to be maintainable. The decision, however, cannot be taken to be an authority for the proposition that a composite petition would not lie.
15. In this connection, it was also urged that, in order to maintain a composite petition, such contradictory or antagonistic or mutually destructive averments will have to be made that it is impossible to conceive of such a petition. As an alternative, it was urged that in a petition for relief under sections 397 and 398 the petitioner must specifically make four independent averments, namely, that the affairs of the company are being conducted in a manner, (i) prejudicial to the public interest, (ii) or in a manner oppressive to any member or members, (iii) that it would be just and equitable that the company should be wound up, and (iv) that winding up the company would unfairly prejudice such member or members. It was urged that, unless all the four averments are made, a petition under section 397 cannot be entertained. In other words, it was urged that averments of aforementioned four aspects are conductions precedent to the court exercising jurisdiction under section 397. Simultaneously, it was contended that if any petitioner wants to aver that, though the facts would justify making of a winding-up order on the ground that it was just and equitable that the company should be wound up, he would not simultaneously be able to aver that to wind up the company would unfairly prejudice such member or members. The submission is that if a party in one breach seeks a winding up order, that party must satisfy the court that the facts would justify making of a winding up order on the ground that it was just and equitable to do so and he must stop there because if he proceeds further and states that winding up would unfairly prejudice him, he would not be entitled to such an order for winding up. Alternatively, it was contended that unless he avers that to wind up the company would unfairly prejudice such member, he cannot seek any direction or relief under sections 397 and 398. It was, therefore, urged that seeking an order for winding up on the "just and equitable" ground and for a direction under sections 397 and 398 would be so mutually destructive that it cannot be combined in one. As an illustration, they pointed out the very petition of the petitioners. In para. 62 the petitioners have stated that on the grounds and facts alleged in paras. 1 to 61 it would be just and equitable that the company should be wound up. Reference was then made to para. 88 in which the petitioners have stated that the petitioners are seeking a remedy of winding up as, in the opinion of the petitioners, such winding up would not unfairly prejudice the petitioners and the minority shareholders. Relying on this, it was pointed out that in order to be able to obtain the first prayer, namely, winding-up order, the petitioners have stated that it is just and equitable to wind up the company, but while seeking directions under section 397, they were required to state that they would be unfairly prejudiced if the winding-up order is made, yet they have averred exactly to the contrary by stating that such winding up would not unfairly prejudice the petitioners and minority shareholders and this provides a clue which shows that a prayer for a winding-up order of relief under section 397 cannot be combined in one petition. The recitals in para, 88 cannot be read torn out of their context. If the petitioners party primarily for a relief of winding up under the "just and equitable" clause, they must aver that on the grounds and facts alleged in the petition, it is just and equitable that the company should be wound up as winding up would not unfairly prejudice them. Having said that, it would be open to the petitioners to state that in the event the court comes to the conclusion that an order for winding up would unfairly prejudice the petitioners, the alternative relief by way of directions under section 397 should be granted. Such an averment is in fact made and, in my opinion, that would be the only proper way of drawing up a petition of this nature. Where inconsistent reliefs are sought, such a situation is bound to arise. It would be fallacious form such a situation to fall back and say that inconsistent reliefs cannot be combined in a petition.
16. It also appears from the scheme of section 397(1) that for maintaining a petition under section 397(1) the petitioners must allege that the petitioners are requisite number of members as required by section 399 and they complain by making averments of proper facts that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to those member or members. These averments are sufficient to invoke the court's jurisdiction under section 397(1) for entertaining a petition. But, for granting relief, the court must be not only satisfied that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to those member or members but must further be satisfied that even though the fact would justify making of a winding-up order on the ground that it is just and equitable that the company should be wound up, yet to wind up the company would unfairly prejudice such member or members. It is when the court reached such a conclusion that the alternative relief under section 397 can be granted. But Mr. Sorabji contended that no relief can be granted unless proper facts are alleged or found in the affidavit. Therefore, unless the petitioners show that by making the winding-up order they would be unfairly prejudice, it is not open to the court to reach such a conclusion. Where two reliefs can be given by the court, one which is alternative to the other, to some extent the matter is in the discretion of the court. The discretion has to be exercised on sound judicial principles. It appears looking to the scheme of sections 433, 439 and 397 and 398 and the historical background in which the predecessor of sections 397 and 398, viz., sections 153C and 153D of the Indian Companies Act, 1913, were enacted, that a discretion was sought to be conferred on the court. If the court in a given case is satisfied that the facts would justify making of a winding-up order on the ground that it was just and equitable that the company should be wound up but the court in its discretion would not wind up the company because in the court's opinion it would be a remedy worse than the disease. At this stage, the court can examine whether alternative relief by way of a direction under section 397 can be granted or not. If this is the correct approach to the problem, in my opinion, averments have properly been made so as to invoke court's jurisdiction under section 397. It does not appear that the averments which the petitioners would have to make would be such that they would be mutually destructive. The thing which is stated in the alternative may appear to be contradictory but one does not destroy the other.
17. This approach would also dispose of the contention raised by Mr. Shah that a petition under section 398 cannot be combined with a petition for a winding-up order. Therefore, the submission that composite petition for an order for winding up the company and in the alternative for a relief under sections 397 and 398 cannot be maintained, must be negatived.
18. It was next contended that assuming all the averments and allegations in the petition to be correct, the petition does not disclose a cause of action both under section 397 and section 398. The submission is made on the specific allegation that for obtaining relief under section 397 the petitioners must allege that winding up the company would unfairly prejudice the petitioners, and that not only such an averment is not made but exactly a contrary averments is made. In support of this submission reliance was placed on Shanti Prasad Jain's case [1965] 35 Comp Cas 351 (SC) in which it is observed that although the facts relied upon by the petitioners may appear to furnish grounds for making of a winding-up order, under "just and equitable' rules, those facts must be relevant to disclose also that the making of a winding-up order would unfairly prejudice the minority members qua shareholders. It was urged that these observations would indicate that the petitioners for a relief under section 397 must allege and state that the making of a winding-up order would unfairly prejudice him or minority members. If the observations is read in its proper perspective, it only shows that those allegations on which the court is prepared to wind up the company, those very facts must be relevant and further disclose that making of a winding-up order would unfairly prejudice the petitioner or minority shareholders. The facts are the same. It is the conclusion on this part that has to be drawn from the facts alleged. Various allegations made show that a winding-up order may unfairly prejudice the petitioners who have come to the court. It is the court that draws conclusion from the allegations of fact whether the company should be wound up or making of an order for winding up would unfairly prejudice the minority members. The case is not an authority for the proposition that the conclusion which the court must reach before considering the case for an alternative relief must be pleaded as a fact. Reference was also made to Thakur Hotel (Simla) Company Private Ltd., In re [1963] 33 Comp Cas 1029 (Punj), wherein it has been observed that two conditions must be satisfied before an order under section 397 can be made, they being that the company's affairs are being conducted in a manner oppressive to any member or members and, secondly, that the facts of the case are such that it would be "just and equitable" to make an order for winding up of the company, but the making of such an order would unfairly prejudice the members. That of course is true. The question is : what ought to be the pleadings on this point and, as stated earlier, pleadings on this point and averments in the affidavits are clear. The necessary facts have been alleged; the conclusion is for the court to draw. In fact, this second point which is being considered by me was argued along with the first point and what I have stated hereinbefore would also dispose of the contention because if the composite petition lies, averments have to be made in the manner in which they have been made, and it cannot be said that the averments did not disclose any cause of action for relief under section 397. The case is much stronger as far as section 398 is concerned. Therefore, there is no substance in the second submission and it must be rejected.
19. Third contention is that the petition is barred because of the judgment of Mehta, J. or on the ground of principles analogous to general principles of res judicata. As I am dismissing the petition for a winding-up order for the reasons hereinbefore mentioned, this aspect need not be considered.
20. Accordingly, this petition for an order for winding up is rejected at this state and petition for relief under sections 397 and 398 is admitted. Costs of this hearing to abide the final outcome of this petition.