Madras High Court
K.S. Mothilal vs K.S. Kasimaris Ceramique (P.) Ltd. on 19 October, 2001
Equivalent citations: [2004]50SCL116(MAD)
JUDGMENT
1. C.P. No. 60 of 1996 has been filed by K.S. Mothilal under Sections 433(f), 439(1)(c) and 439(1)(b) of the Companies Act, 1956, praying for appropriate orders or direction under the Companies Act, 1956, as amended and with reference to the memorandum and articles of association to safeguard the assets of the first respondent-company from destruction by respondent Nos. 3, 4 and 5 by winding up of the first respondent-company to safeguard the petitioner's genuine share in the assets of the first respondent-company.
2. C.P. No. 199 of 1998 has been instituted by K.S. Damodaran claiming to be the contributory chairman under Sections 433(f), 439(1)(c) and 439(4)(h) of the Companies Act, 1956, praying this honourable court to order winding up of the first respondent-company, namely, K.S. Kasimari Ceramique Pvt. Ltd. appoint the official liquidator and distribute its assets and share value to the contributors and creditors and as a partner to allot 60 per cent share to the petitioner by way of intestate succession or 80 per cent share to the petitioner by way of testamentary succession and render justice.
3. C.P. No. 274 of .1998 has been filed by Mrs. Mangala Vijayalakshmi under Section 433(f) of the Companies Act, 1956, praying this court to order winding up of the company, K.S. Kasimari Ceramique Pvt. Ltd. at No. 50, Pulla Avenue, Shenoy Nagar, Madras, by the provisional liquidator to take charge of the assets of the company and pass such further or other orders.
4. As all the three company petitions relate to winding up of the same company, namely K.S. Kasimari Ceramique Pvt. Ltd., with the consent of counsel appearing for the petitioner and respondents in the respective company petitions, the three company petitions were consolidated and taken up together for final disposal.
5. All the three company petitions have been filed under Section 433(f) of the Companies Act. In C.P. No. 199 of 1998, while seeking for winding up under Section 433(f), the petitioner had sought not only for appointment of official liquidator, but also to distribute the assets of K.S. Kasimari Ceramique Pvt. Ltd., and their share values to the contributors and creditors and as a part thereof, allot 60 per cent share to the petitioner by way of intestate succession or 80 per cent share to the petitioner by way of testamentary succession. The latter part of the relief prayed for, namely, distribution of assets and share values or allotting 60 per cent or 80 per cent as the case may be, will not arise nor could it be the subject-matter of a winding up petition at this stage, nor could the claim by the petitioner be the subject-matter of adjudication in this winding up petition.
For convenience, C.P. No, 199 of 1998 is taken up at the first instance following it with C.P. No. 274 of 1998 and C.P. No. 60 of 1996. To begin with, the parties will be referred as arrayed in C.P. No. 199 of 1998.
Case of the petitioner in C.P. No. 199 of 1998:
6. The late K. Shanmugasundaram alias Shanmugasundaram Nadar also known as Kasimari Shanmugasundaram, an entrepreneur, started a mechanized brick manufacturing unit with the assistance of the Tamil Nadu Industrial Investment Corporation. The said Kasimari Shanmugasundaram promoted M/s. K.S. Kasimari Ceramique Pvt. Ltd. (hereinafter referred to as "the company"). The promoter, Shanmugasundaram, had married Paulthai and through the said wedlock, Shanmugasundaram had three sons, namely, (1) K.S. Damodaran (petitioner in C.P. No. 199 of 1998), (2) K.S. Mothilal (third respondent in C.P. No. 199 of 1998) and (3) K.S. Anantharaman (fourth respondent in C.P. No. 199 of 1998). Apart from the said three sons, the said Shanmugasundaram had left his wife, Mrs. Paul Thai (second respondent in C.P. No. 199 of 1998) and his only daughter Mrs. Mangla Vijayalakshmi (fifth respondent in C.P. No. 199 of 1998). It is claimed that the said Shanmugasundaram took the help of his son K.S. Damodaran, an engineering graduate to start the project for manufacturing mechanized bricks, while promising equal share, benefits and profits in the said company.
7. The company was incorporated on January 7, 1970, by the said Shanmugasundaram and his son K.S. Damodaran. K.S. Mothilal was appointed as the general manager from the date of incorporation. K.S. Mothilal had purchased 200 shares of Rs. 100 each of the first respondent-company after incorporation. The deceased Shanmugasundaram and the petitioner K.S. Damodaran have been the directors of the first respondent-company from its inception. The first respondent-company, though flourished well at its inception, grew sick and came to a standstill around March, 1976. The immovable properties remained intact and there have not been any tangible creditors till date. Though there is reference to promoting of other partnership firms, such as M/s. Kasimari Auto Products. M/s. Kasimari Machine Tools Company, etc., by the deceased Shanmugasundaram or one or more of his sons, since we are not concerned with those firms, it is not necessary to refer to the same in detail. It would be sufficient to add that there are allegations and counter-allegations with respect to those firms as well as the first respondent-company.
It is the further case that the late Shanmugasundaram transferred all movables including all machines, lathes and shaping machines from the first respondent-company without any consideration or reward or returns to the new partnership firm where he was also holding 30 per cent shares along with K.S. Ananlharaman, the managing partner of the firm. The father Shanmugasundaram was biased towards K.S. Anantharaman and the said firm was started for the benefit of the said Anantharaman. The deceased Shanmugasundaram did No. t take any preventive or punitive action over misappropriation of funds and profits by the said Anantharaman. The said firm was highly indebted to the first respondent-company. It is also the claim that the said firm is a holding company of the first respondent-company. (How it is a holding company and which is the holding company is not clear from the averments).
8. It is also stated that the first respondent-company is owning a rice mill at No. 216, L. R. Road, Arumuganeri Village, Tiruchendur Taluk to an extent of one acre of land and also holding about 25 acres of land in the same village with palmirah grove. The first respondent-company owns 13.77 acres of land at Maduravoyal village in the outskirts of the city of Madras, which is a substantial asset.
9. It is alleged that K.S. Anantharaman had entered into an agreement of sale with some party to deceive the other legitimate owners and legal heirs entitled to the assets of the first respondent-company. The said lands of 13.77 acres exit out of 42.19 acres owned by the first respondent-company in Maduravoyal village. 28.47 acres were acquired for the Tamil Nadu Housing Board, the compensation therefrom was utilised to discharge the major portion of the known liability to the Tamil Nadu Industrial Investment Corporation during 1989-90, which mortgage loan was incurred on April 24,1970, by the first respondent-company. The petitioner Damodaran arranged for a loan of Rs, 16.50 lakhs from the Indian Bank and also offered a sum of Rs. 10 lakhs to enable his father to settle all the liabilities emanating from the TOC loan. The title deeds were released and handed over to the father Shanmugasundaram and Anantharaman or anyone else had no role in the above activities.
10. The late Shanmugasundaram deposited the title deeds of the existing Maduravoyal property belonging to the company with the Indian Overseas Bank, Sowcarpet branch as security for a loan of Rs. 5 lakhs to meet his family expenses and a mortgage by deposit of title deeds was created to secure repayment. The mortgage had not been redeemed till date. It is alleged that the youngest brother, K.S. Anantharaman had played a fraud on the bank with the collusion of his mother and sister and redeemed the title deeds for his use in his: attempt to generate funds for his self-misappropriation. K. Shanmugasundaram passed away on July 24, 1995, and he was cremated by Mothilal in his native place at Arumuganeri village on July 27, 1995. The following are the legal heirs of Shanmugasundaram alias Shanmugasundara Nadar :
"1. Paul Thai Shanmugasundaram -- 72 years; -- Widow
2. K.S. Mothilal -- 53 years; -- 1st son
3. K.S. Damodaran -- 51 years -- 2nd son
4. C. Mangala Vijayalakshmi -- 43 years -- Daughter
5. K.S. Anantharaman -- 41 years -- 3rd son."
According to the petitioner, being an intestate succession, all the legal heirs are entitled to 1/5th share of the 50 per cent share of Shanmugasundaram in the company with 10 per cent to each legal heir and the remaining 50 per cent owned exclusively by the petitioner, K.S. Damodaran in the first respondent-company. The petitioner claims that he owns 60 per cent share of the total assets of the first respondent-company.
11. It is claimed that the petitioner as the sole surviving director and founder director of the first respondent-company, appointed K.S. Mothilal by co-option as director on August 9, 1995, which appointment he had accepted and took the place of the late Shanmugasundaram. The said change in the director was intimated to the Registrar of Companies apart from passing of resolutions. The board of directors also met on November 13, 1995, and January 20, 1996, and passed necessary resolutions.
12. After the said appointment of K.S. Mothilal, the youngest brother, K.S. Anantharaman and Mangala Vijayalakshmi colluded and seized the company records and handed them over on September 29, 1995, to panchayat committee, in the nature of arbitration called family welfare committee comprising P.K. Soundarapandi Nadar, T. Jayaram Nadar, G. Ramasamy Nadar and P. Arumugam Nadar.
13. One Johnson, son of V. Samy Nadar, residing at Rajamaniyapuram, Arumuganeri, Tiruchendur taluk, is instrumental in organising the fraudulent alienation of company's lands at Maduravoyal by K.S. Anantharaman, even though neither of them has any right or share or claim in the first respondent-company's assets.
14. Apprehending fraudulent sale and cheating, the third respondent, K.S. Mothilal filed C.P. No. 60 of 1996 against the legal heirs of the deceased Shanmugasundaram praying for winding up of the respondent-company and distribution of assets/share value and dues. The third respondent had filed a company petition on March 4, 1996. Notice has been served on all the parties in the said company petition as well as in the company application seeking for appointment of interim official liquidator. At the same time, the bare injunction suit was filed by K.S. Anantharaman against the first respondent, K.S. Mothilal, the second respondent, K.S. Damodaran in O.S. No. 5560 of 1996 on April 19, 1996, which was disclosed as seen from the counter affidavit filed by the third respondent in I.A. Nos. 7375 of 1996 to 7378 of 1996 on April 30, 1996. The said Anantharaman was served with the notice on May 4, 1996, itself. All the company records, it is alleged, have been confiscated by this hon'ble court by deputing an Advocate Commissioner to Arumuganeri during January, 1998, in C.A. No. 2556 of 1997 in C.P. No. 60 of 1996.
15. An order of injunction was enforced in C.A. No. 1882 of 1997 in respect of the immovable properties of the first respondent-company at the instance of the third respondent, since May, 1997, against everyone including all the directors as alleged by Anantharaman.
16. Winding up of the company in terms of Section 441(2) shall be admitted to have commenced from the date of presentation of the petition for winding up. C.P. No. 60 of 1996 was presented on March 4, 1996. Further, in terms of Section 442, the company Court has the power to stay or restrain the judicial proceedings before any other court. Sections 464 and 465 deal with the appointment and proceedings with the committee of inspection to assist the winding up proceedings. In terms of section 465, all the company's properties vest with the custody of the official liquidator, where a provisional liquidator is appointed or where a winding up order is made. The hearing of C.P. No. 60 of 1996 is being delayed at the instance of the third respondent as he is colluding with other parties by way of secret and unjust enrichment and withdrawing C.P. No. 60 of 1996 or else by neglecting the case. Hence, the present company petition.
17. On April 29, 1996, one S. Shanmugam, an astrologer, resident of No. 9, Govinda Singh Street, Pulianthope, Chennai 12, who was the astrologer for the late Shanmugasundaram, came to the petitioner herein and handed over a will stating to be the last will dated March 22, 1994, of the said Shanmugasundaram. By the said will, the late Shanmugasundaram had appointed K. S. Damodaran, the petitioner herein, to be the executor. The contents of the will refer to various reasons for the disposition of assets made therein and the way the properties of the testator arc to be enjoyed. All the properties have been bequeathed in the name of the legatees therein. Clause 4 of the will reads as under :
"I own 42.19 acres of land in Muduravoyal village, in the name of K.S. Kasimaris Ceramique Pvt. Ltd. started and maintained by myself and son, Damodaran, who signed wherever I wanted. Others do not have any share or right in this company. The State Housing Board acquired 28.42 acres of land. My son, Damodaran shall fight in Court and take the enhanced compensation in full. The property of 13.77 acres of encumbered land in sub-divisions of survey No. 127 of Maduravoyal village, Saidapet Taluk, shall go to my son Damodaran with 60 per cent share and to my son Mothilal with 40 per cent share. The properties of Pandian Rice Mill and 25 acres of lands also be shared by the said two sons with 60 per cent and 40 per cent. The title deeds shall remain with Damodaran. I owe a lot to my son Damodaran, morally and financially. I hereby give Damodaran my 30 per cent share in Kasimari Son Auto Products in full..."
The petitioner had already taken steps as the executor of the will to probate by filing O.P. No. 147 of 1997 on the original side of this court as early as February, 1997. All the legal heirs of the late Shanmugasundaram have entered appearance in the said probate proceedings. In terms of the will, the late Shanmugasundaram had not allotted the shares to the respondents, but the will emaciates and castrates the claim of everyone except the legatees including the claims of K.S. Anantharaman, Paul Thai, Ms. Mangala Vijayalakshmi and Johnson.
18. As per the memorandum and articles of association of the first respondent-company, the petitioner herein alone is competent to sue or be sued on behalf of the first respondent-company in the status of chairman and founder director having 60 per cent share in the case of intestate succession and 80 per cent share in the company in the case of testamentary succession. The first respondent has already filed a suit even during the year, 1997, on the file of this court for declaration of his shares in the first respondent-company and the same is now pending on some technical grounds. The petitioner is the owner of the 50 per cent shares of the share capital in the first respondent-company, which cannot be denied. One Mr. Johnson, son of V. Swamy Nadar is instrumental in abetting K.S. Anantharaman, Mangala Vijayalakshmi and Paulthai to conspire and collude to play a fraud and usurp the company's assets and other valuables. The memorandum and articles of association of the company clearly prove the absence of the name of M/s. Pandian Brick Works. There is no office for the first respondent-company nor has it any staff nor does it incur expenditure or any activity whatsoever for the company except the watchman's salary to safeguard the valuable vacant lands at Maduravoyal and for whom salaries are being disbursed by the petitioner from the first respondent-company's accounts.
19. Even without admitting the claims of shares of the respondents, there should be at least 25,000 shares to repay the initial share capital of Rs. 25 lakhs, each share carrying the value of Rs. 100. But only 20,500 shares have been mentioned. The conspirators have done a lot of spade work in manipulating the records according to their evil designs. It appears that the respondents have colluded and harmed the share certificate vested with Arumuga Nadar. It is stated that 12,500 shares of Rs. 100 each were given to and owned by the petitioner as a 50 per cent shareholder of the entire share capital as well as in the assets of the company, which is manifest in the memorandum and articles of association of the company, The two directors of TIIC and the company director remained in the company's board till the discharge of mortgage on April 22, 1990. Any dispute between the father and the petitioner could only mean a split in the company resulting in winding up. Appointment of Shanmugasundaram unilaterally as no other person as the director is illegal and untrue. Except Damodaran and Shanmugasundaram, nobody has any share or right in the assets or share capital of the first respondent-company.
20. The petitioner appointed K.S. Mothilal, the third respondent as a shareholder-director on August 9, 1995, considering his shares in the company as well as the legal heir of the deceased Shanmugasundaram. This is in accordance with article 27 of the articles of association of the first respondent-company.
21. There is no superstructure to be demolished because the entire superstructure and machineries of the first respondent-company were taken away by K.S. Anantharaman to Ambattur for M/s. Kasimari Auto Products. The petitioner does not know about the fate of M/s. Southern Peninsula Housing Ltd. who paid an advance of Rs. 10 lakhs by demand draft on September 23, 1996, for MoU for the loan, but gave up its claim later. The MoU was also terminated. By a later development, the will gives the petitioner herein 60 per cent right in the late Shanmugasundaram's shares in the company's properties in addition to the petitioner's original 50 per cent shares in the assets and share capital of the first respondent-company. Already steps have been taken to probate the will left by the late Shanmugasundaram. C.P. No. 60 of 1996 is pending and interim injunction was granted in C.A. No, 1882 of 1997 on May 27, 1997. When Anantharaman and his group tried to violate the orders of this court, emboldened by their success in LA. No. 7375 of 1996 in the bare injunction suit and also in C.M.A. Nos. 228 of 1996 and 230 of 1996 dated May 6,1997, they landed themselves in Cont. Appln. No, 199 of 1997 and this court ensured the maintenance of status quo at that stage.
22. The third respondent in C.P. No. 60 of 1996 filed his reply during August, 1997, in the said company petition. Paras 24, 25 and 26 are material for the purpose of the present company petition. The hearing of C.P. No. 60 of 1996 is being delayed at the instance of the third respondent, who is the petitioner in C.P. No. 60 of 1996, since he is, with ulterior motives, colluding with other parties for secret, unjust enrichment and is withdrawing C.P. No. 60 of 1996. Hence, the present company petition has been filed for joint hearing of both the petitions.
23. While setting out the above averments, the petitioner had prayed for winding up of the first respondent-company and to distribute its assets and share values to the contributors and creditors and as a part thereof, allot 60 per cent shares to the petitioner by way of intestate succession or 80 per cent share to the petitioner by way of testamentary succession.
24. Pending C.P. No. 199 of 1998, the petitioner herein filed C.A. No. 1033 of 1998 repeating the same averments and the company petition as well as the company application proceed as if it is a dispute between the family members for the assets, besides claiming succession either intestate or testate succession. A reading of the company petition also would show that the petitioner had not only described himself in more than one place as the plaintiff and proceeds as if it is a claim by the plaintiff against the defendant in respect of the assets. C.A, No. 996 of 1999 also was taken out. K.S. Anantharaman had filed a counter in C.A. No. 996 of 1999. In fact in C.P. No. 199 of 1998, the first respondent and K.S. Anantharaman, who is the fourth respondent, took out C.A. No. 2548 of 2000 for clarification of earlier orders passed in C.A. No. 1033 of 1998, etc., on July 1, 1999. C.A. No. 2548 of 2000 was taken out by the petitioner herein also for a clarification.
25. Case of the petitioner in C.P. No. 274 of 1998 Mrs. C. Mangala Vijayalakshmi, who is the fifth respondent in C.P. No. 199 of 1998 has filed C.P. No. 274 of 1998 under Section 433(f) for winding up of the same M/s. K.S. Kasimari Ceramique Pvt. Ltd. According to the petitioner in C.P. No. 274 of 1998, the company was incorporated on January 16, 1970, At the time of inception, the then directors were K.S. Damodaran and K. Shanmugasundaram each holding one share. In due course shares were allotted to family members of Shanmugasundaram and some of the family members were also designated as directors. The company carried on business up to 1976 and the company acquired immovable properties. After 1976, the business operations were stopped. Shanmugasundaram passed away on July 24, 1995. The deceased Shanmugasundaram was the chairman of the first respondent-company and was holding more than 50 per cent shares out of the total shares issued. The details of the shares held by the members in the first respondent-company as on the date of the death of K. Shanmugasundaram Nadar are :
1. Thiru Shanmughasundaram Nadar 15,801
2. Smt. Paulthai Shanmugasundaram 1,100
3. Mrs. Mangala Vijayalakshmi 1,150 4. Mr. K.S. Damodaran 201 5. Mr. K.S. Mothilal 150
6. Mr. S.Johnson 1,200 7. Mr. A. Arulraj 200 8. Mr. T. Thirumani Nadar 100 9. Mr. T. Jayaraman 200 10. Mr. John Jayakumar 200 1. Mr. V. Thangamani Nadar 84 12. Mr. A. Thangavelu Nadar 100 13. Mr. Swamy Nadar 84 Total 20,570
26. Shanmugasundaram Nadar died intestate on July 24, 1995, and on his death his shares devolved on his legal heirs, namely, his widow, one daughter and three sons. Though some of the shares were held by some of their nearest relatives, the entire business was carried on only by Shanmugasundara Nadar and other shareholders did not show any interest in the business of the company. The petitioner got married on June 2, 1978. The relationship between the petitioner and her three brothers and mother is not disputed. K.S. Mothilal studied up to S.S.L.C. and was assisting Shanmugasundaram till 1974 and, thereafter, he did not have good terms with his father and worked in various other places. Mothilal was not on talking terms with his father since 1974. The petitioner's second brother, Damodaran, the second respondent in the company petition, an engineering graduate was looking after M/s. K.S. Kasimari Machine Tools established by Shanmugasundaram Nadar, but in due course the second respondent had converted the said business as a proprietary concern and appropriated the same for himself. Since then, the second respondent is not on good terms with the father till his death in 1995. The deceased Shanmugasundaram incorporated M/s. Kasimari Sons Auto Products at Ambattur as a partnership firm consisting of Shanmugasundaram, Anantharaman, Thirugnanam, Mothilal and Mangala Vijayalakshmi, the petitioner herein.
27. After the death of Shanmugasundaram, disputes arose among the sons and compromise talks went on thrice in the presence of P.S.K. Soundarapandi Nadar, a close relative of the family of the petitioner. However, no settlement could be effected or arrived at.
28. After the death of Shanmugasundaram, notice was given to the directors on December 30, 1995, for convening a board meeting on January 12, 1996. K.S. Damodaran, the second respondent did not attend the meeting nor applied for leave of absence. In the said meeting, the fourth respondent was inducted as one of the directors and the third respondent was appointed as managing director to look after the day-today affairs of the company. Presently there are five directors of the first respondent-company, namely:
"(1) K.S. Anantharaman (2) Mrs, Paulthai Shanmugasundaram (3) K.S. Damodaran (4) Mrs. Mangala Vijayalakshmi (5) S, Johnson."
Respondent Nos. 2 and 5 joined together and started to declare themselves as chairman and director respectively of the first respondent-company. Hence, the third respondent instituted O.S. No, 5560 of 1996 on the file of the Second Assistant Judge, City Civil Court, Madras, and prayed for declaration that respondent Nos, 2 and 5 herein are not the chairman and director respectively.
29. The first respondent-company owes dues to the Electricity Board, Indian Bank and also property tax to revenue authorities, Panchayat tax to local bodies as well as tax arrears of capital gains tax, etc., and the first respondent has not shown any interest to pay or discharge the said dues. Respondent Nos, 2, 3 and 5 are interested only in promoting the properties of the first respondent-company for themselves with a view to divide the rights of other directors or shareholders including the petitioner. The second respondent attempted to alienate the property owned by the first respondent-company and entered into an agreement with M/s. Southern Peninsula Housing Ltd., and received Rs. 10 lakhs as advance. The petitioner further states that the third respondent has entered into an agreement with third parties and has received advance amounts. The fifth respondent has joined the second respondent and have acknowledged receipt of the amounts from M/s. Southern Peninsula Housing Ltd. No amount was brought to the credit of the company nor was used for the discharge of debts due to the Government. Hence, the first respondent-company has to be ordered to be wound up on the ground that it is just and equitable.
30. The company is a private limited company founded on personal relationship involving mutual confidence between the members of the family. The substratum of the company had gone since the main object for which the company was started has become impractical. The company stopped its manufacturing operations and business as early as 1976. Respondent Nos. 2 and 3 refused to co-operate with other directors and have taken an adverse attitude with the intention to appropriate the properties of the company. The petitioner had not received any profit or any amount from the first respondent-company from the date of death of her father. Respondent Nos. 2, 3 and 5 have joined together and are appropriating the profits.
31. The third respondent received huge amounts by way of advance for sale of the properties belonging to the first respondent-company. However, the amount was not brought to the account of the company and the entire amount had been taken away by the third respondent. Thus it is an oppression as against the petitioner had as such it is just and equitable to wind up the company. The third respondent is also investing funds realised from the property belonging to the first respondent-company in his own name in one new business, where he and his wife are the directors. The third respondent had committed breach of good faith, which the members owe to each other and thereby acted inequitably and, hence, it is just and equitable that the first respondent-company has to be wound up.
32. While setting out the same, the petitioner had sought for winding up of the first respondent-company and also sought to settle the claims of the petitioners. Pending C.P. No. 274 of 1998, various applications were also taken out. These applications were also contested. In C.P. No. 274 of 1998 and applications, respondent Nos. 1, 3, 4 and 6 filed a common counter statement and it is sufficient to refer to common case.
33. As seen from the counter filed in C.P. No. 274 of 1998 by respondent Nos. 1, 3, 4 and 6 stand together, while respondent Nos. 2 and 5, namely, K.S. Damodaran and K.S. Mothilal, the first and second son of the late Shanmugasundaram stand aloof.
Counter case of respondent Mas. 1, 3, 4 and 6 in C.P. No. 274 of 1998 :
According to the said respondents, M/s. Kasimari Sons Auto Products was a partnership concern and managed by the third respondent, K.S. Anantharaman. It is incorrect to state that the third respondent, Anantharaman had not taken any interest in the first respondent-company. The third respondent, Anantharaman was appointed as director in the meeting held on November 17, 1989, along with the petitioner and the second respondent. Article 36 of the company does not provide any qualification shares being held for anybody to become a director of the company. Therefore, the appointment of the third respondent as director cannot be undermined on that score. It is stated that no compromise was arrived at the Panchayat held at Arumuganeri. In the meeting held at Arumuganeri on January 12, 1996, the second respondent had not chosen to attend and in the said meeting, the fourth respondent, Mrs. Paulthai Shanmugasundaram was nominated as director and the third respondent, K.S. Anantharaman was appointed as the managing director.
34. The claim of the second respondent that he had nominated the fifth respondent as director without conducting a board meeting and without notice to the other directors and, further, declared himself as the chairman of the company are invalid and illegal. The third respondent instituted the suit O.S. No. 5560 of 1998 on the file of the City Civil Court, Madras, in terms of the resolution, seeking for a relief of declaration and injunction against the second respondent and it is binding.
35. The allegation of collusion of the fifth respondent with the third respondent is denied. It is further stated that the petitioner's counsel agreed to the suggestion made by the Hon'ble judge and also suggested expedient means for settlement. As per the discussions, the petitioner was even ready to accept a slightly lower share whereas the second respondent was not willing for a settlement as his claim was to the extent of 60 to 80 per cent. Hence, the settlement talks failed. The fifth respondent, who desired an amicable settlement, instituted C.P. No. 60 of 1996 on his own so that there could be family peace and harmony. It is incorrect to state that respondent Nos. 3 and 5 are colluding.
36. The liabilities of the company are true. When the first respondent-company was pressurized for payment, it was decided at the meeting held on January 12, 1996, to dispose of the immovable property at Maduravoyal and pay all the debts. Mrs. Paulthai Shanmugasundaram was the chairman of the meeting wherein various resolutions were passed in the presence of some of the other directors. Suitable purchasers were located and sale agreements were entered into with 25 persons. The petitioner in this company petition is signatory to those agreements.
37. The second respondent further claiming to be the owner of the aforesaid property agreed to sell the same to M/s. Southern Peninsula Housing Ltd. and illegally received Rs. 10 lakhs from the company, which has not been accounted for nor been brought into the accounts of the company. This necessitated the filing of O.S. No. 5560 of 1996 by the company for declaration and injunction against the second and fifth respondents as also resorting to the filing of O.S. No. 13337 of 1996 against the said M/s. Southern Peninsula Housing Ltd. for injunction. The fourth respondent was not willing to accede to the unreasonable request as the allotment was made according to the requirements of individual children. The petitioner is permanently residing at Kalpakkam. Though the petitioner had been allotted a decent residential portion of her family in the same property, she has refused to take possession of the same, the fourth respondent being an absolute owner has every right to deal with the property in such manner as he deems fit.
38. The averments made against the third and fifth respondents are denied. What happened to the sum of Rs. 10 lakhs is not known and they were commented upon by the said civil court as well as by this Court. The third respondent has not entered into unilateral agreement for sale. The petitioner being a signatory to the resolution as a director and for sale of the company's property and receiving advance on behalf of the company, has dealt with the property of the company and, therefore, she is precluded from seeking the relief of winding up. Family or shareholders disputes have to be settled only by ordinary civil courts and/or the Company Law Board. The petitioner is prevented from seeking any discretionary relief of winding up before this Court. No money was received by the third respondent as alleged. The petitioner had already signed the agreements of sale. The petitioner was accompanied by her husband. S. Chandrasekaran, working as Scientific Advisor, has filed the present winding up petition as she could not get the property at No. 50, Pulla Avenue, Shenoy Nagar. It is highly improper for the petitioner to institute a company petition for personal vendetta.
39. After much persuasion only, the third respondent agreed to be the managing director. There was no compelling circumstance for any of the directors such as the petitioner, the third and fourth respondents to subscribe to all the resolutions. The petitioner had voluntarily signed all the 25 agreements for sale. The petitioner's counsel was also present in all these occasions and never was a plea raised at any stage regarding her signature being made under compulsion. Even during the contempt proceedings before the civil court the petitioner has never raised a plea of being compelled to sign any agreement. The petitioner at the behest of her husband is deliberately sabotaging the settlement process by filing the winding up petition and unlawfully retaining the title deeds of Shenoy Nagar property and the 25 agreements of sale entered into with the third party purchasers. Family disputes raised, which requires elaborate evidence and cannot be agitated in winding up proceedings, which are summary in nature. The petitioner is estopped from seeking for winding up as she is a signatory to the board resolutions authorising sale of the property at Maduravoyal and has also signed all the 25 agreements of sale.
40. It is incorrect to contend that the petitioner's signature was obtained by compulsion. The petitioner had refused to hand over the agreement with the company solely on the ground that she has not been given a major share in the house property at Shenoy Nagar. Respondent Nos. 1, 3, 4 and 6 pray that this Court may dismiss the winding up petition.
41. The contesting respondents in C.P. No. 199 of 1998 have filed counter-affidavit in the applications and the same is being treated as counter. As and when required, the very counter filed in the company applications, which is to be treated as part of the counter in the company petition, will be referred for convenience.
42. According to the contesting respondents, the petitions are not maintainable, there is no bona fides, there are no merits and the entire company petition is a misconception. The contesting respondents also filed detailed typed set of papers wherein they have included the resolutions of the board, authorised sale agreements as well as various interim orders passed by the civil court between the parties as well as the pleadings in the pending suits. The respondent also pleaded that the entire case of the petitioners is false and they have come before this court with unclean hands and on this short ground the petitions are liable to be dismissed,
43. The shares claimed by the petitioner in C.P. No. 199 of 1998 is denied and the will put forward by the said petition is also denied. It is also contended that the petitioner in C.P. No. 274 of 1998 is estopped by her conduct, in that she was a party to the agreement as well as the resolutions passed by the board. The petitioner in the respective petitions cannot invoke either Section 433(f) or any other provisions of the Companies Act. The petitioners are not entitled to seek for windingup under Section 433(f) and such a petition is not maintainable.
44. The company petition is an abuse of the process of the court. It is also contended that the substratum has not been lost nor is the company unable to pay its debts. The value of the assets owned by the company is substantial and it is growing day by day. The company has got a rice mill, besides garden land, which is also fetching income. The petitioners attempt to treat the company's assets as their private property is also impermissible in law and such a claim is a misconception. In respect of the will put forward by the petitioner in C.P. No. 199 of 1998, it is contended that the will is not genuine, nor is it true, nor is it binding and it has been brought up at a belated stage. All the averments set out in the company petitions are denied and the petitioner in the respective petition is put to strict proof of the averments. The contesting respondents prayed for dismissal of the company petitions.
44A. Counter of respondent Nos. 1, 2 and 4 in C.P. No. 199 of 1998 :
It may not be necessary to set out in detail the counter statement filed on behalf of respondent Nos. 1, 2 and 4 in C.P. No. 199 of 1998 as it is verbatim the same plea in C.P. No. 274 of 1998.
45. Counter of fifth respondent in C.P. No. 199 of 1998 :
In C.P. No. 199 of 1998, the fifth respondent, Mrs. Mangala Vijayalakshmi, had filed a counter. It is also verbatim reproduction of the winding up petition in C.P. No. 274 of 1998 wherein she is the petitioner. Hence, it is unnecessary to set out the same once over.
Heard Mr. Rajendran, learned counsel appearing for the petitioner in C.P. No. 199 of 1998. Mr. R. Subramanian and Ms. Hemalatha, learned counsel appearing for the petitioner in C.P. No. 274 of 1998 and Mr. Aravind P. Datar, learned senior counsel for Mr. K.M. Kodaiarasu, appearing for respondent Nos. 1 and 4 in C.P. No. 199 of 1998 and for respondent Nos. 1, 3, 4 and 6 in C.P. No. 274 of 1998.
In respect of C.P. No. 60 of 1996, it is not necessary to refer to any other material or pleadings as counsel for the petitioner had made an endorsement as early as September 4, 1998, that the company petition may be permitted to be withdrawn. Such an endorsement has been made on September 4, 1998. However, arguments were advanced initially on September 4, 1998, and it came to be posted for continuation on September 11, 1998. Orders were reserved on September 11, 1998, but on October 9, 1998, the matter was reopened for further hearing and since then, the other company petition came to be filed. However, counsel for the petitioner had not made any different representation than what has been endorsed by him on September 4, 1998. In the light of the said endorsement, it is unnecessary to examine C.P. No. 60 of 1996 on merits. In the light of the endorsement made, C.P. No. 60 of 1996 does not deserve any further consideration.
Since all the three petitions relate to the same company and all of them have been filed invoking Section 433(f) on the ground that it is just and equitable to order winding up of the same company, all the three company petitions could be taken up together.
In these three company petitions, the following points arise for consideration :
"(1) Whether C.P. Nos. 199 of 1998 and 274 of 1998 filed under Section 433(f) seeking for winding up of M/s. Kasimari Ceramique Pvt. Ltd. as just and equitable is maintainable ?
(2) Whether Section 433(2) of the Companies Act is a bar to C.P. Nos. 199 of 1998 and 274 of 1998?
(3) Whether substratum of the first respondent-company is lost ?
(4) Whether the petitioner in each of the company petitions has made out a case to order winding up of the company as just and equitable clause ?
(5) Whether the filing of company petitions is an abuse of the process ?
(6) Whether the petitioner in each of the company petitions has come before this Court with unclean hands ? If so, whether the company petition is liable to be dismissed on that score ?
(7) Whether the petitioner in each of the company petitions by their conduct is disentitled to seek for winding up of the company under section 433(f) ?
(8) Whether the disputed claims of testamentary succession with respect to the shares left by the late Shanmugasundaram could be the subject-matter of adjudication under Sections 433(f) and 439 of the Companies Act?
(9) What are the rights of the shareholders like the petitioner and contesting respondents in the first respondent-company ?
(10) Whether the shareholder could claim any specific share or interest in the property held or owned by the company or seek for partition of the company's assets ?
(11) Whether the first respondent-company is liable to be wound up on one or more of the grounds pleaded by the petitioner in the respective company petitions ?
(12) To what relief, if any ?"
Admittedly, the company was promoted by the late Shanmugasundaram Nadar during his lifetime. Shanmugasundaram Nadar and his family members were holding major share. There were a few third parties holding minimum shares. It is admitted that substantial shares in the company are held by the family of Shanmugasundaram Nadar. The promoter, Shanmugasundaram Nadar was holding a substantial number of shares. Shanmugasundram died leaving his widow, his three sons and a daughter. It is the claim of one set of the heirs of Shanmugasundaram that he died intestate, while another branch mainly set up a will claimed to have been executed by Shanmugasundaram and substantial portion of the shares held by Shanmugasundaram is claimed under the said testament. The alleged will is being disputed seriously, challenged by the contesting respondents. It is also admitted that the executor under the will has already moved the original side of this court for issue of succession certificate, the same is being disputed and denied and the same has been converted as a testamentary original suit and it is pending.
46. At this stage, this court will not be justified in entertaining any issue nor the company court has such a jurisdiction to go into the validity of the testamentary disposition made by the late Shanmugasundaram by the alleged will. Already the civil court is seized of the matter. Hence, this court not only will not be justified, but also will not have jurisdiction to decide the dispute as to whether the will left by the late Shanmugasundaram is true, valid and binding and truth or otherwise of the said will cannot be gone into. Therefore, it is essential to point out that this company court has to confine itself to the winding up petition filed under Section 433(f) of the Companies Act and any other incidental question as sought to be advanced only could be the subject-matter of consideration or trial before the civil court. It is the ultimate judgment of the civil court with respect to the will executed by Shanmugasundaram Nadar and the decree and judgment of the civil court alone will bind the parties.
47. Point Nos. 9 and 10:
At the first instance, it is essential to take up points 9 and 10 for consideration.
48. Also let us not lose sight of the fact that the petitioner in both the company petitions and at least one or two of the respondents in the company petitions proceed as if they are the owners of the entire assets of the company, while forgetting the fact that they are mere shareholders and they cannot claim to be the owners of the property owned or held by the company. In fact, proceedings have been instituted as if the petitioners and contesting respondents are entitled to share in the properties held by the first respondent-company, which is a misconception. Merely because sons, widow and daughter of the late Shanmugasundaram Nadar hold substantial shares, it does not mean they become the owners of the land or the assets of the company. Substantial portion of the case and claim has been made only on that misconception.
49. It is well-settled legal position that there is nothing to warrant for the assumption that a shareholder has any interest in the property of the company, which is a juristic person and which is entirely distinct from the shareholders. The true position of a shareholder is an investor, he will be entitled to participate in the profits of the company in which he holds shares as and when the company declares, subject to the articles of association that the profits or portion thereof should be distributed by way of dividends among the shareholders. That apart, the shareholder has got a further right to participate in the assets of the company, which would be left over after winding up, but not in the assets as a whole. This legal position is well-settled by the pronouncement of the Apex Court in Mrs. Bacha F. Guzdar v. CIT [1955] 25 Comp. Cas. 1
50. In Chiranjitlal Chaudhari v. Union of India [l951] 21 Comp. Cas. 33 (SC), it has been held that the right of the shareholder is to elect directors, to give direction by passing resolutions and in case of loss, to present a petition for the winding up of the company, which are incidental to the ownership of the shareholders, but that does not mean the shareholders apart from being shareholders are the owners of the assets of the property owned or held by the company.
51. A five-judge Bench of the Apex Court in Mrs. Bacha F. Guzdar's case (supra) held thus :
"... A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-avis the company was explained in the Sholapur Mills Case ; Chiranjilal Chaudhari v. Vnion of India [1950] SCR 869. That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the articles of association, to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company.
The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in Buckley's Companies Act (12th Ed., page 894) where the etymological meaning of dividend is given as dividendum, the total devisible sum, but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company.
The proper approach to the solution of the question is to concentrate on the plain words of the definition of agricultural income which connects in no uncertain language revenue with the land from which it directly springs and a stray observation in a case which has no bearing upon the present question does not advance the solution of the question. There is nothing in the Indian Law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders.
The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole. ..." (p. 5)
52. The same has been followed by a three-judge Bench of the Apex Court in Chiranjilal Chaudhary's case (supra). It is unnecessa to multiply the pronouncements in this aspect. No pronouncement to the contra or taking a different view had been brought to the notice of the court by the learned counsel for the petitioner in both the company petitions. In the circumstances, the entire arguments of the petitioner in both the company petitions as if they are the owners of the land and entitled to proportionate shares in the land is a misconception of law. Hence, point Nos. 9 and 10 are necessarily answered against the petitioners.
53. Point Mo. 3 Taking up the next question whether the company has lost its substratum, it is to be pointed out that except making a bald averment that the company has lost its substratum in C.P. No. 274 of 1998, it cannot be even suggested that the company has lost its substratum. Mere stoppage of brick manufacturing unit is pointed out as the loss of substratum. Apart from the Maduravoyal lands, the company owns extensive agricultural lands in Tuticorin District and a rice mill. Assuming for the purpose of argument that Maduravoyal land is being offered for sale, the value of the land is so phenomenal even as admitted by either side, the liabilities referred to, namely, the liability to pay to the bank, Electricity Board, Revenue dues, etc., are only marginal and sale of one acre will be more than sufficient to wipe out the liabilities, yet there is substantial surplus and valuable lands are available.
54. The company has several projects which it could carry out by passing a suitable resolution by the board. In fact on November 27, 1999, in the board meeting, not only is there an approval regarding the sale of the lands, but also a resolution has been passed resolving that the company shall not be wound up on any account, the company may take up manufacturing of bricks and its allied products by acquiring new loans or probe other avenues as they are the objects of the memorandum of association for continuance of business. It is resolved to authorise the managing director to probe avenues for utilising the sale proceeds as and when received, in new profitable ventures in line which the objects of memorandum of association. Therefore, as long as funds and valuable assets are admittedly available, the objects for which the company has been registered could very well be carried on. Therefore, it cannot be said that the company had lost its substratum.
55. It is sought to be contended that loss of substratum or disappearance of substratum of a company is evident, since the object for which it was incorporated has substantially failed or that it is impossible to carry on the business of the company except at a loss or the existing and possible assets arc insufficient to meet the existing liability. This contention is based upon a misconception of the legal position. In Seth Mohan Lal v. Grain Chambers Ltd. [1968] 38 Comp. Cas. 543 (SC), in a case arising out of the 1913 Act, it has been held thus :
"Finally, it was urged that by reason of the notification issued by the Central Government, the substratum of the company was destroyed and no business could be carried on by the company thereafter. It was said that all the liquid assets of the company were disposed of and there was no reasonable prospect of the company commencing or carrying on business thereafter.
The company was carrying on extensive business in 'futures' in gur, but the company was formed not with the object of carrying on business in 'futures' in gur alone, but in several other commodities as well. The company had immovable property and liquid assets of the total value of Rs. 2,54,000, There is no evidence that the company was unable to pay its debts. Under Section 162 of the Indian Companies Act the court may make an order for winding up a company if the court is of the opinion that it is just and equitable that the company be wound up. In making an order for winding up, on the ground that it is just and equitable that a company should be wound up, the court will consider the interests of the shareholders as well as of the creditors. Substratum of the company is said to have disappeared when the object for which it was incorporated has substantially failed, or when it is impossible to carry on the business of the company except at a loss, or the existing and possible assets are insufficient to meet the existing liabilities. In the present case the object for which the company was incorporated has not substantially failed, and it cannot be said that the company could not carry on its business except at a loss, nor that its assets were insufficient to meet its liabilities. On the view we have taken, there were no creditors to whom debts were payable by the company. The appellants had, it is true, filed suits against the company in respect of certain gur transactions on the footing that they had entered into transactions in the names of other persons. But those suits were dismissed. The business organisation of the company cannot be said to have been destroyed, merely because the brokers who were acting as mediators in carrying out the business between the members had been discharged and their accounts settled. The services of the brokers could again be secured. The company could always restart the business with the assets it possessed, and prosecute the objects for which it was incorporated. It is true that because of this long drawn out litigation, the company's business has come to a standstill. But we cannot on that ground direct that the company be wound up. Primarily, the circumstances existing as at the date of the petition must be taken into consideration for determining whether a case is made out for holding that it is just and equitable that the company should be wound up, and we agree with the High Court that no such case is made out." (p. 556) The above pronouncement and the principles laid down by the Apex Court squarely apply to the present case and this contention deserves to be rejected.
56. In Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125, the Apex Court, while examining the question whether the substratum of the company has gone, held that it is to be alleged and proved as a fact and in that context held thus :
". .. In determining whether or not the substratum of the company has gone, the objects of the company and the case of the company on that question will have to be looked into. In the present case, the company alleged that with the proceeds of sale, the company intended to enter into some other profitable business. The mere fact that the company has suffered trading losses will not destroy its substratum unless there is no reasonable prospect of it ever making a profit in the future, and the court is reluctant to hold that it has no such prospect... .The company has not abandoned objects of business. There is no such allegation or proof. It cannot, in the facts and circumstances of the present case, be held that the substratum of the company is gone...." (p.134)
57. The Calcutta High Court in Lokenath Gupta v. Credits Private Ltd. [1968] 38 Comp. Cas. 599, 601, 602, while considering an identical situation in respect of a company whose shareholders were either family members or relatives, held that where the substratum is not completely gone and other business could be carried on, the company should not be directed to be wound up on the ground that it is just and equitable. In that context, the Calcutta High Court held thus :
"The allegations of the petitioners further are that the substratum of the company is gone.
The said company, according to the petitioners is in the nature of and in substance a partnership, the shareholders of the company are relatives and/or friends....
Mr. Subrata Roy Chowdhury appearing on behalf of the petitioners contended before me that it is just and equitable that the said company should be wound up inasmuch as (1) the substratum of the company has gone, (2) there is a deadlock in the board of directors for reasons for relationship of parties and (3) there is oppression of minority shareholders which has led to justifiable lack of confidence in the person or persons, namely, Anand Mohan Gupta and his relatives who are in control of the said company. Mr. Roy Chowdhury has relied on the relevant passage in Palmer's Company Precedents, Part II (17th edition) pages 28, 29, 30, 35 and 36. Mr. Roy Chowdhury has also relied on the case of Great Indian Motor Works Ltd. v.Chandi Das Nundy [1953] 23 Comp. Cas. 287 (Cal.) and the case of Loch v. John Blackwood Ltd. [1924] AC 783....
It is true that where the substratum of the company has gone or its only business has become impossible it has been held that it was just and equitable ground for winding up (see Haven Gold Mining Co., In re [ 1882] 20 Ch. D. 151; TalduaRubber Co., In re [1946] 2 All ER 763; Hindustan Cooperative Insurance Society Ltd., In re [1960] 65 C.W.N. 68. But where the substratum has not completely gone and other business can be carried on, the company should not be directed to be wound up on the ground that it is just and equitable that the said company should be wound up. In the instant case, in my opinion, it has not been established that the main business or the only business of the company is gone or that there are no other objects in the memorandum of the company which can be carried out (see Murlidhar Roy v. Bengal Steamship Co. Ltd. AIR 1920 Cal. 722).
Mere mismanagement or misappropriation or misconduct on the part of the directors or the managing director, as has been alleged in the instant case, by itself is no ground for winding up (see Lawang Tshang v. Goenka Commercial Bank Ltd. [1961] 31 Comp. Cas. 45 (Cal.), Halsbury's Laws of England(3rd edition) volume 6 page 535, article 1035, Cuthbert Cooper & Sons Ltd, In re [1938] 8 Comp. Cas. 131 (Ch. D.); (Anglo-Continental Produce Co. Ltd., In re [1939] 1 All ER 99). General allegations of oppression of minority shareholders also is not a ground. In the instant case, it has not been alleged that Anand Mohan Gupta and his nominees or supporters are the majority of the shareholders. Such allegations, if any, are contained in paragraph 22 of the said petition. The said paragraph 22 has been verified as submission to this court and cannot be relied upon, in my view, on a question of fact. In the instant case it has not been proved that prejudice is being caused to the company by abuse of majority voting power or that it is impossible for the business of the company to be carried on for the benefit of the company as a whole, in view of the fact that they show the way in which the voting power is held and used.
In the instant case, the petitioner has alternative remedies for the redress of his grievances. The said remedies can be found in Sections 163, 167, 210 and 220 of the Companies Act. The said remedies can also be found in clauses 66, 69 and 73 of the articles of association of the said company (see Anglo-Greek Steam Co., In re [1866] 2 Eq. 1; Cuthbert Cooper and Sons Ltd., In re case (supra); Janbazar Manna Estate Ltd., In re [1931] 1 Comp. Cas. 243 (Cal.)." (p. 601) This court is in respectful agreement with the said enunciation of legal proposition.
58. In the present case, on the admitted materials, liability, if any, is only minimal or marginal when compared to the value of properties or assets owned by the company. There may be a misunderstanding between the members of the family, who hold majority shares among themselves and attempt to overreach other members of the family. It may be that the only major business that was being carried on had been stopped, but on that score, it cannot be held that the substratum of the company has been lost. Even after the sale of the lands, there will be sufficient surplus and the company could very well proceed with one or more of the objects, which is approved in the memorandum and articles of association and already steps have been taken as seen from a resolution.
59. Therefore, this contention that the company has lost its substratum cannot be sustained and on that score there cannot be an order of winding up on the facts of the present case. This contention advanced by the petitioner deserves to be rejected as it is nobody's case that it is impossible to carry on one or more business of the company as provided in the memorandum, except by loss or the existing assets are not sufficient to meet the liabilities.
60. Point Nos. 5 and 6 :
Taking up the next point whether the company petitions instituted are a mere abuse of the process of this Court, though counsel for the petitioner in both the petitions represented themselves that the company cannot be continued and that the company has to be wound up, the entire focus relates to personal dispute between the family members of the late Shanmugasundaram Nadar and major portion of the dispute is whether the will left by Shanmugasundaram Nadar, bequeathing his share is genuine and true or whether the rule of intestate succession applies is the major controversy, which was concentrated by the petitioner in both the petitions. In fact, it is to be pointed out that the very relief prayed for in the company petition reads thus :
"Winding up of the respondent-company and distribution of its assets and share value to the contributories and creditors and as a part thereof allot 60 per cent share to the petitioner by way of intestate succession or 80 per cent share to the petitioner by way of testamentary succession,"
61. In fact in several places the company petition proceeds as if it is a plaint where the plaintiff claims for reliefs of personal nature against the defendant and this would disclose not only the mind of the petitioner, but also their object. That apart, the substantial portion of the averment set out in the company petition relates to personal disputes or disputes among the family members and regarding the will. This is clear from paragraphs 1 to 21 in C.P. No. 199 of 1998 as well as paragraphs 6 to 17 in C.P. No. 274 of 1998.
62. Though it may look incidental, it is the main onslaught by the petitioners that there is an attempt to dispose of all the company's property by entering into an agreement and appropriate it. It is rightly being pointed out that the agreement entered into by the petitioner, K.S. Damodaran with Southern Peninsula Housing Ltd., was without any authority or board resolution and being a private limited company, there could be no alienation of the company's assets or property without there being a valid resolution. It is true a suit in O.S. No. 5560 of 1996 is instituted on the file of the City Civil Court and it is pending in this respect. Hence, for the limited purpose of this company petition, this court has to point out that not being supported with the resolution by the board, there could be no sale agreement, which is binding the company, that could be entered into by K.S. Damodaran with Southern Peninsula Housing Ltd. At the same time, it has to be pointed out in respect of the very same lands, there is a resolution by the board of directors, and the board of directors have resolved to disburse all the property by way of twenty-five agreements to various buyers. The said sale agreements are in terms of the resolutions passed by the board. No one had challenged the said 25 sale agreements nor any proceedings have been initiated in this respect.
63. Having come to know of the sale agreements entered into by the board of directors pursuant to a resolution of the board, if the other shareholders or anyone interested desired to avoid the same, they should have initiated appropriate proceedings. As already pointed out, by being the shareholders in the first respondent-company, neither the petitioners nor the contesting respondents could claim share in the properties or immovable assets held by the company and a shareholder has not got a right in the property of the company.
64. In Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1995] 83 Comp. Cas. 30, [1994] 2 SCL 157, the Apex Court held that a shareholder has no interest in the assets of the company when the company is in existence. Courts have taken a uniform view that a shareholder of a company has no right in the assets of the company and he has no right to interfere with the day-to-day administration by its board of directors.
65. On an overall consideration of the pleadings, material documents and the contentions advanced by either side, this court holds that both the company petitions could very well be held as an abuse of the process and it is not a bona fide action, but it is an action, which has been initiated out of personal animosity or personal grudge or enmity, each member of the family had nourished against the other both during the lifetime of Shanmugasundaram Nadar and after the lifetime of the promoter, Shanmugasundaram Nadar. Winding up proceedings are not meant for settling personal scores among the family members. The company proceedings cannot be a proceeding for vendatta among the members of the family, though the family may be holding substantial shares and third parties may be minority shareholders and they may not be interested or they may even keep themselves aloof from the disputes. Hence, the points 5 and 6 are answered against the petitioner in both the company petitions.
66. Point Nos. 1 and 2 :
Taking up the next question whether it is just and equitable to order winding up of the company, it has to be pointed out that the expression "just and equitable" appearing in Section 433(f) is not ejusdem generis with. the preceding five clauses in the same section. On a perusal of the pleadings in both the company petitions and the materials placed, this court is at a loss to find that there are no pleadings at all to show that it is just and equitable to order winding up nor a ground has been made out to order winding up of the respondent-company as just and equitable. The Apex Court in Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla [1976] 46 Comp. Cas. 91, 104 held thus :
"When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground. In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company.
The principle of just and equitable clause baffles a precise definition. It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case. These are necessarily equitable considerations and may, in a given case, be superimposed on law. Whether it would so done in a particular case cannot be put in the strait-jacket of an inflexible formula.
In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding up proceedings is likely to cause immense injury to the company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition.
The question that is raised in this appeal is as to what is the scope of Section 433(f) of the Act. Section 433 provides for the circumstances in which a company may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the Company should be wound up. Section 222(f) of the English Companies Act, 1948, is in terms identical with the Indian counterpart, Section 433(f). It is now well established that, the sixth clause, namely, 'just and equitable' is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court, the only limitations are the force and content of the words themselves, 'just and equitable'. Since, however, the matter cannot be left so uncertain and indefinite, the courts in England for long have developed a rule derived from the history and extent of the equity jurisdiction itself and also born out of recognition of equitable considerations generally. This is particularly so as Section 35(6) of the English Partnership Act, 1890, also contains, inter alia, an analogous provision for the dissolution of partnership by the court. Section 44(g) of the Indian Partnership Act also contains the words 'just and equitable'.
Section 433(f) under which this application has been made has to be read with Section 443(2) of the Act. Under the latter provision where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
Again under Sections 397 and 398 of the Act there are preventive provisions in the Act as a safeguard against oppression in management. These provisions also indicate that relief under Section 433(f) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company." (p. 104) Applying this pronouncement of the Apex Court, this court holds that the petitioners in both the company petitions have not made out a case to order winding up of the company as just and equitable and the contention advanced by learned counsel for the respondents deserves to be sustained.
67. Incidentally it is also contended that the petitioners in both the company petitions have not come before the court with clean hands and their objects, as disclosed by their conduct would disable them from getting an equitable relief before this court. Equitable relief, namely, making a winding up order on the ground that it is just and equitable, deserves to be rejected summarily if the petitioner is found guilty of misconduct with reference to the affairs of the company or had acted in a manner prejudicial to the interests of the company or had proceeded as if he is entitled to the share in the assets of the company and that he is entitled to deal with the company's assets in any manner he likes. It is rightly pointed out that the petitioner in C.P. No. 199 of 1998, Mr. K.S. Damodaran had caused an advertisement to be issued in a daily where he had declared himself to be the owner of the property, while factually the owner of the property is the company itself. In the advertisement caused by the said petitioner, K.S. Damodaran, through his advocate Mr. G. Ramalingam, the following is the text:
"Notice Please take notice that Mr. K.S. Damodaran is the absolute owner of the land and properties of K.S. Kasimari Ceramique Pvt. Ltd. comprised in Survey Nos. 127, etc., situate at Maduravoyal village, Saidapet Taluk.... Except my client, nobody else has got any right, title, interest over the above said properties... the public arc hereby warned not to deal with any person except my client in respect of the above stated properties."
This would show that the petitioner would go to any extent forgetting the fact that he is only a shareholder and the company is the owner of the property and he had mixed up the entire legal position with a view to enrich himself.
68. That apart, the petitioner, K.S. Damodaran had entered into an agreement of sale on March 23, 1996, on behalf of the company with Southern Peninsula Housing Ltd. agreeing to sell 13.77 acres of the company's lands for a consideration of Rs. 3.15 crores after receiving Rs. 10 lakhs as advance. So also the very same petitioner on March 23, 1996, on the same day, has entered into an MoU with Southern Peninsula Housing Ltd. for sale of 13.77 acres of the company's lands for a total consideration of Rs. 4.65 crores. In other words, by some underhand dealing, the said K.S. Damodaran had made arrangement to drain or pocket Rs. 1.5 crores out of the very same dealing, which is to the detriment of the company and its shareholders. Such is the conduct of the said petitioner. It is rather shocking that in respect of the same sale agreement there could be one sale agreement and a separate memorandum of understanding for different consideration by which a sum of Rs. 1.30 crores is attempted to be pocketed. Such a sale agreement is not backed by any resolution or authorisation by the company and the board of directors. This shows the anxious conduct to knock away the company's property, which speaks volumes.
69. It is also being pointed out by counsel for the respondent that the sum of Rs. 10 lakhs received as advance from Southern Peninsula Housing Ltd., had not been brought to account nor has it been credited to the bank account of the company nor any other arrangement has been made to make the said sum of Rs. 10 lakhs available by opening an account. The amount had not been refunded to the purchaser nor deposited into the company's accounts, despite undertaking given before the learned judges of this court. In fact, Southern Peninsula Housing Ltd. has filed a suit for recovery in C.S. No. 768 of 2000 and the same is pending. The said K.S. Damodaran had made very many averments, which are untrue and those statements are false to his knowledge. As claim of shareholding of 50 per cent, existence of two directors, claims that he is the founder chairman or the composition of directors, creditors as well as the valuation of the lands are not true nor is it correct and this would belie the very bona fides of the petitioner.
70. So far as the petitioner, Mrs. Marigala Vijayalakshmi in C.P. No. 274 of 1998 is concerned, it is to be pointed out that the petitioner is a party to all the decisions or resolutions of the board of directors including the resolution authorising sale of the lands at Maduravoyal. The petitioner had also signed the sale agreements in favour of 25 intending purchasers. Being a party to the sale agreement and resolutions, it is rather extraordinary on the part of the petitioner, Ms. Mangala Vijayalakshmi to turn round and accuse the respondent or refute her action in being a party to the resolutions, being a signatory to the 25 sale agreements. Belatedly, the said Ms. Mangala Vijayalakshmi had chosen to suggest for the first time that her signatures were secured by compulsion or force. There is no merit in the said suggestion. To a certain extent, as has been rightly pointed out, Mrs. Mangala Vijayalakshmi, petitioner in C.P. No. 274 of 1998 had been taking not only different but also shifting stands and different attitudes from time to time. In fact, in the Cont. Application No. 199 of 1997, the said Mrs. Mangala Vijayalakshmi had supported the board resolutions and admitted that she had signed the same. Having said so, it is too late in the day for her to plead that her signature had been secured forcibly. In Cont. Application No. 199 of 1997, the very same Mrs. Marigala Vijayalakshmi had filed a counter-affidavit and the material portion reads thus :
"I submit that as early as January 12, 1996, the board of directors passed resolution to dispose of excess lands of the company in Maduravoyal on the basis as negotiated by my late father chairman Sri K. Shanmugasundaram Nadar. The board also authorised the present managing director Mr. K.S. Anantharaman to negotiate with probable buyers and submit proposal to the board. In the subsequent board meeting held on February 10, 1996, under my mother as chairperson, a resolution was passed to authorise Mr. K.S. Anantharaman to receive original documents from Indian Overseas Bank, after paying the dues. In all the above meetings Mr. K.S. Damodaran as a director was absent."
Thus, it is clear that the petitioner, Mrs. Mangala Vijayalakshmi, was a party to the resolutions and she cannot turn around and say that she had been a signatory due to compulsion. The above conduct on the part of the petitioner in the company petitions would show that they have neither a consistent stand nor have they approached this court with clean hands nor their conduct is above board nor had they taken a consistent stand right through.
71. So far as the petitioner, K.S. Damodaran in C.P. No. 199 of 1998 is concerned, there had been much comment and substantial portion of it relates to the will, this court is of the considered view that it is unnecessary to refer to the same in detail, lest it will affect the pending proceedings initiated by the said K.S. Damodaran for probate. It is, therefore, clear that both the petitioners have come before this court with unclean hands and they have invoked the equitable jurisdiction with unclean hands and this is sufficient to reject their respective petitions.
72. Taking up the controversy regarding holding of shares by the heirs of the late Shanmugasundaram Nadar, in particular the petitioner in both the company petitions, and the claim made on the basis of the alleged will, this court will not be justified in examining such a dispute or issue as it is a complex question of fact. Shareholding cannot be decided by the company court. The petitioners have made reference to various aspects such as appointment of the petitioner as director, which is a self-appointment, the number of directors, the extent of shareholding the claim of share in excess of what is shown in the share register, the validity of meetings held on August 9, 1995, the validity of meetings held by the board on January 12, 1996, are all questions, which cannot be gone into in summary proceedings. Further, all these matters are pending consideration before the civil court and this court will not be justified in permitting the petitioner to agitate the same in this winding up proceedings, which is summary in nature. The company court, having summary jurisdiction, will not at all be justified in investigating complex questions of fact, which are to be decided by letting in evidence. Further, suits or other proceedings are pending and this court persuades itself not to enter into these disputes, as it is for the courts having competent jurisdiction to examine these disputed questions of fact.
73. Point No. 1 :
Taking up the issue regarding maintainability of the company petition, it is pointed out that the company petitions have been filed invoking Section 433(f) of the Companies Act, 1956, namely, winding up the respondent-company as just and equitable.
74. Section 433(f) provides that a company may be wound up if the court is of the opinion that it is just and equitable that the company should be wound up. In this respect, Sub-section (2) of Section 433 of the Companies Act provides that where the petition is presented on the ground that it is just and equitable, the court may refuse to make an order of winding up, if it is of the opinion that some other remedy is available to the petitioner and that they are acting unreasonably in seeking to have the company wound up instead of pursuing such remedy. The court has a discretion to ask the petitioner to pursue the alternate remedy available to the petitioner and the court has to satisfy itself whether such an alternate remedy is available and also address the question as to whether the petitioner is acting unreasonably in seeking for winding up.
75. In the present case, in respect of a substantial portion of the dispute, which has been raised by the petitioner in C.P. No. 199 of 1998, already civil suits have been filed either for probate or for seeking a declaration in respect of certain resolutions passed or other proceedings, which the petitioners have not chosen to disclose and it may be that during the pendency of the company petition or just at or about the time of filing the company petition they came to be instituted. Yet, it is clear that there are prosecuting the alternative remedies, which are available. Alternative remedy is definitely available to the petitioner and the petitioners cannot contend that there is no alternative remedy at all.
76. That apart, the petitioners mainly seek the relief in respect of their personal rights, shares in the father's estate. The probate proceeding is pending at the very instance of one of the petitioners. Such issues cannot be gone into in a winding up petition. Such issue can be decided only by a competent civil court before which probate has been applied for and it cannot be the subject-matter of adjudication before the company court.
77. The petitioner has already filed C.S. No. 477 of 2000 on the original side of this court seeking for a declaration with respect to the number of shares which he claims to hold. The petitioner has also filed T.O. S.No. 23 of 1998 seeking for a probate of the alleged will, which is the subject-matter of serious challenge on the original side of this court. O.S. No. 5560 of 1996 is pending on the file of the City Civil Court, where a declaration has been sought for that K.S. Damodaran is not the chairman of the company and he has no right to deal with the property of the company and for other consequential reliefs. The said suit is also pending. The petitioner in C.P. No. 274 of 1998, Mrs. Mangala Vijayalakshmi, had already instituted Suit C.S. No. 372 of 2001 for partition of all her properties, including the company properties, which would show that the said petitioner and one or two of the family members have been treating the company properties as if they are the family properties and that each one of them is entitled to a share. These are the alternative remedies, which the respective petitioners, who had come before this court have already instituted, availed of and which are pending before the competent court.
78. Further, the petitioners in both the company petitions have nowhere pleaded that they have no other alternative remedy other than the present company petition, which is a primordial requirement in a company petition filed under Section 433(f).
79. If for any reason the interest of the petitioners as shareholders is affected or prejudiced, under Section 397 of the Companies Act, the shareholders could move the Company Law Board. If the board of directors of the first respondent-company act in any manner prejudicial to the company or suppress one set of shareholders, a relief under Section 398 is also very much available to them by moving the Company Law Board. The Company Law Board has been conferred with requisite powers under Section 402 of the Companies Act. These aspects, in my considered view, would disable the petitioners from maintaining the company petitions,
80. In Hind Overseas (P.) Ltd.'s case (supra), the Apex Court had emphasised that when alternative remedies are available, the company court may refuse to exercise the jurisdiction under Section 433(f). In that context, it has been held thus :
"Section 433(f) under which this application has been made has to be read with Section 443(2) of the Act. Under the latter provision where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
Again under Sections 397 and 398 of the Act there are preventive provisions in the Act as a safeguard against oppression in management. These provisions also indicate that relief under Section 433(f) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company." (p. 106)
81. In Malabar Industrial Co. Ltd. v. A. John Anthrapper [1985] 57 Comp. Cas. 717, a Division Bench of the Kerala High Court held thus :
"Section 433(f) enables the court in appropriate cases to order winding up of the company only when the court is of opinion that it is just and equitable so to do. If the court finds that the petitioner before it has other efficacious remedy, the court will refuse to make an order of winding up. It is, therefore, necessary for a contributory seeking the discretionary powers of the court under Section 433(f) not only to establish that the circumstances obtainingin the company are such that a winding up of the company is the only alternative but also to show that he has no other remedies available."
In Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla.[1976] 46 Comp. Cas. 91, the Supreme Court has observed as follows (page 106 of 46 Comp. Cas.):
"Section 433(f) under which this application has been made has to be read with Section 443(2) of the Act. Under the latter provision where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
Again under Sections 397 and 398 of the Act, there are preventive provisions in the Act as a safeguard against oppression in management. These provisions also indicate that relief under Section 433(f) based on the just and equitable Clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company.
It is necessary to bear in mind that the relief under Section 433(f) is in the nature of a last resort, thus obliging the court to give relief to the party when moved under the section only under compelling circumstances." (p.723) This court is in respectful agreement with the above two pronouncements and the same squarely apply to the facts of the present winding up petitions.
82. In V.V. Projects and Investments (P.) Ltd v. 21st Century Constructions (P.) Ltd [1997] 90 Comp. Cas. 346, the Andhra Pradesh High Court had occasion to consider the scope of Section 433(f) and held that an alternative remedy of approaching the Company Law Board either under Section 397 or 398 or Section 325 for causing investigation by the Central Government, if available, then such a petition cannot be admitted. In that context, it has been held thus :
"Mr. Kannabhiran, learned senior counsel for the respondent, raised a preliminary objection that the petition cannot be admitted for two reasons, namely, (i) that the petitioner is not a shareholder and, hence, has no locus standi to move under Section 433(f) of the Act, and (it) that there is alternative remedy available under Sections 397 and 235 for investigation by the Central Government. Regarding the first contention, the parties are at issue regarding the shareholding. While it is the case of the petitioner that it is still holding 5,730 shares, the respondent-company says that the petitioner has transferred all its shares for Rs. 9,00,000. The question whether the petitioner holds 5,730 or for that matter any shares at all in the respondent-company cannot be decided unless full enquiry is made. For this reason, the first objection fails. But, the respondent has to succeed on the second objection. The respondent relies on Section 443(2) which says :
'443(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.' As the petitioner has alternative remedy of approaching the Company Law Board either under Sections 397 and 398 or under Section 235 for causing investigation by the Central Government, the petition cannot be admitted.
In Lokenath Gupta v. Credits Pvt. Ltd [1968] 38 Comp. Cas. 599 (Cal.), it was held that mere mismanagement or misappropriation or misconduct on the part of the directors or the managing director, by itself or general allegation or oppression of minority shareholders is not a ground for winding up. It was also held that the petition for winding up has to be rejected on the ground that the petitioner has alternative remedy.
In Atul Drug House Ltd. In re [1971] 41 Comp. Cas. 352 (Guj.), it was held that at the time of admission of a petition for winding up under Section 433(f), the petitioner must convince the court not only of a just and equitable ground for so doing but also that there is no alternative remedy open to the petitioner, that this is because if such a petition is admitted and there is a public advertisement it could cause irreparable harm to a solvent company even if the company succeeds ultimately.
The next decision is Jose J. Kadavil v. Malabar Industrial Co. Ltd. [1986] 59 Comp. Cas. 969 (Ker.). There it was held that the court can refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing the other remedy. The court, while interpreting Section 433(f) of the Act, held that there is no restriction or limitation to the effect that an order under Section 433, Sub-section (2), can be made only after taking evidence at the time of the enquiry or at the conclusion of the enquiry. As against these authorities, Mr. S. Ravi, learned counsel for the petitioner, has relied on a Division Bench decision of the Bombay High Court in Jeeva Bai Munga Bai Patel v. Extrusion Processes (P.) Ltd. [1966] 2 Comp. LJ. 74. But, neither the said report is available nor a copy of the judgment filed. Hence, it is not considered.
In view of the above, I have no hesitation in dismissing the petition on the ground of alternative remedy either under Section 397 or under Section 235 or any other provision of the Act. No costs." (p. 348) This court is in respectful agreement with the above pronouncements, which apply to the facts of these two petitions.
83. When alternative remedies are definitely available and in fact for substantial portion of the grievance alternative remedy has already been invoked and are pending, the petitioner in each of the company petitions cannot maintain an application under Section 433(f) of the Companies Act apart from the fact that there arc no pleadings on this aspect by the respective petitioner. Failure even to suggest that there are no other alternative remedy in the company petition is also fatal since admittedly the petitioner in each of the company petitions has already invoked the other remedies available to them. It is also not in dispute that the petitioner in each of the company petitions has a remedy under Sections 397, 398 and/or 402 of the Companies Act, as the case may be. Therefore, on this ground also, this court holds that both the petitions are not maintainable.
84. There has been much controversy and allegations as well as suggestion and challenge either with respect to the land owned by the company or the attempt to dispossess the same. The company's properties cannot be dispossessed to all the liking of the individual shareholders, whether he be an ordinary shareholder or a director unless the procedure prescribed in this behalf is followed. Definitely in respect of the petitioner, K.S. Damodaran, there is no resolution signed nor even a copy of the resolution has been placed nor been pleaded before this court to support his action. One party claims that the value of the land is Rs. 32 lakhs per acre, while the other claims it to be Rs. 70 lakhs per acre. Be that Rs. 70 lakhs or Rs. 32 lakhs per acre as the case may be, this court is not called upon to examine the issue relating to sale agreement or as to what is the market value or as to whether it is beneficial for the company to dispose of its assets.
85. A notice from K.S. Damodaran, petitioner in C.P. No. 199 of 1998, which finds place with the enclosed agenda would show how some of the shareholders, namely, the family members of the promoter the late Shanmugasundaram Nadar, had attempted to divide the company property and as to how the arrangement is sought to be entered into and this will show not only the approach, but also the mind of the said petitioner and others who support him. It is only the board that has the power to sell and not the individual directors, much less, treating it to be their property or property of their own.
86. In the circumstances, on a consideration of the entire matter, this court holds that there are no merits and all the company petitions deserve to be dismissed. In the light of the above discussions, the points are answered as hereundcr :
"(a) On the first point, this Court holds that C.P. No. 199 of 1998 and C.P. No. 274 of 1998 filed under Section 433(f) seeking for winding up of K.S. Kasimari Ceramique Pvt. Ltd. as just and equitable are not maintainable.
(b) On the second point, this court holds that Section 443(2) is a bar with respect to both the company petitions.
(c) On the third point, this court holds that the substratum of the first respondent-company has not been lost.
(d) On the fourth point, this court holds that the petitioner in each of the company petitions has not made out a case to order winding up of the company under the just and equitable clause.
(e) On the fifth point, this court holds that the filing of the company petitions is an abuse of the process, besides being a misconception of shareholders' right.
(f) On the sixth point, this court holds that the petitioner in each of the company petitions has come before this court with unclean hands and the company petitions are not bona fide action and arc liable to be dismissed on that score.
(g) On the seventh point, this court holds that the petitioner in each of the company petitions by their conduct are disentitled to seek for winding up of the company.
(h) On the eighth point, this court holds that the dispute with respect to the claim of testamentary succession or otherwise with respect to the shares left by the late Shanmugasundaram Nadar could not be the subject matter of adjudication before the company court.
(i) On the ninth and tenth points, this court holds that the petitioner in each of the company petitions and the contesting respondents are mere shareholders, who have got a right to share the income or in the case of winding up, share what remains ultimately of the assets of the company and they cannot claim any interest in the company's assets such as movable and immovable properties. The attempt on the part of the petitioner as to claim a share in the company's property, as if the property of the company is divisible among the shareholders of the company, is totally unknown to corporate law.
(j) On the eleventh point, this court holds that the first respondent-company is not liable to be wound up in these company petitions.
(k) On the twelfth point, this court holds that C.P, No. 60 of 1996 is dismissed as not pressed. C.P. Nos. 199 of 1998 as well as 274 of 1998 are dismissed on merits."
87. In the result, C.P.No. 60 of 1996 is dismissed as not pressed. C.P. Nos. 199 of 1998 and 274 of 1998 are dismissed. Consequently, the connected company applications are also dismissed. Though these petitions are eminently fit cases where this court would be justified in awarding costs, but, however taking into consideration the relationship between the parties, this court directs that the parties shall bear their respective costs.