MOHAMMED ABDULLA THARAGANAR Vs. GOPALA PILLAI

JUDGEMENT

(1.) This petition is by 17 persons 1 to 14 as members and 15 to 17 as creditors of The Cape Comorin General Traffic Company Limited (in liquidation), Ramavarmapuram, Nagercoil. This was presented in the District Court of Nagercoil and numbered there as O.P. 4 of 1124 which was withdrawn by this Court for trial and disposal and re-numbered here as O.P. 147/1951. The application is under S.192 of the Travancore Companies Act (corresponding to S.153 of the Indian Companies Act) and is the first application under Cl. (1) of that Section, praying for liberty to hold a meeting of the members of the company under the orders of the Court for considering an arrangement proposed concerning the continuance of the company. This is opposed by some of the members (contributories) as also by the Official Liquidator.

(2.) We must notice an argument urged by the learned Advocate General as to the maintainability of the application. It is contended by him that under S.153, Cl. (1) which provides that:-

(3.) The Company was incorporated in the year 1906 (1081 M.E.) with a capital of 5 lakhs of rupees made up of 5,000 shares of the face value of Rs. 100 each. Rs. 30 was paid up leaving a reserve liability of Rs. 70 per share. The business that the company carried on was the manufacture of salt. The company obtained a licence in that behalf from the Government of Travancore for a period of 50 years, of which six or seven years have yet to run. The father of the 12th petitioner was the secretary and treasurer of the company from its inception for about 30 years and on his death, the 12th petitioner succeeded him to that position for life. Four out of the five thousand shares are either owned or absolutely controlled by the secretary and treasurer. Instead of calling up the unpaid share capital, the secretary and treasurer functioned as financier to the company imposing onerous terms by way of a high rate of interest besides stipulating for a share in the profits. The liability that the company incurred in this fashion was allowed to accumulate and the factory was put in the possession of the financier to enable him to recoup his dues. There was a sublease of the factory to another party latterly. The result of all this was that notwithstanding the fact that the company was working and working profitably, no dividend was declared to the share holders, all the profits being absorbed in the appropriation of the amounts due to the secretary and treasurer by way of liquidation of the company's liabilities. This state of things was brought about and sustained by the secretary and treasurer by using his voting power with a packed majority, tyrannising over the minority to its detriment. Petitions for winding up the company were filed in the District Court, Nagercoil, in the year 1110, 1111 and 1112, which ended in a compromise the main feature of which was "putting on the Board of Directors, 3 representatives from the minority share holders, that is, shareholders other than the relations of the 4th counter petitioner." This was not given effect to. It would appear that this provision in the compromise was not made honestly with a view to its being implemented but rather as a make shift arrangement to get rid of the petitions for winding up. No impediment to the implementation of the compromise is pointed out and it is noteworthy that the arrangement proposed to be placed before a meeting of the members of the company does not contain a provision to this or similar effect which would tend to avoid opposition by the minority. Its absence is all the more significant in view of the fact that one of the grounds for ordering liquidation was the non implementation of the aforesaid terms of the compromise.