S S RAJAKUMAR Vs. PERFECT CASTINGS PRIVATE LIMITED

JUDGEMENT

(1.) THIS is a petition filed by one S. S. Rajakumar under section 433(f) and 439 of the Companies Act (I of 1956) for winding up the company known as "Perfect Castings Private Limited". The petitioner is a holder of 14 fully paid equity shares and he also claims to be a creditor arbitrator. Besides the petitioner, his two brothers hold amongst themselves 11 shares. According to the petitioner, the holding of 25 shares as between himself and his two brothers do constitute one group of the shareholders. The other group of shareholders, according to the petitioner, consists of N. Subbiah Asari, who is the managing director, his wife, his brother and his brother's wife, who held amongst themselves 42 shares, which, along with the 25 shares held by the petitioner and his group, are the only paid up shares of the company. There is thus a totality shareholding of 67 paid up shares. The latter 42 shares held by Subbiah Asari and his group are characterised by the petitioner as the other group of shareholders. The petitioner's case is that he was induced to join the company by Subbiah Asari, who was unable to find the working capital necessary for the running of the firm. At the instance of Subbiah Asari, the petitioner is reported to have joined the company. His complaint is that, though he was on the board till March 31, 1965, he was not served with any notice of the annual general meeting held in June, 1965, and his further case is that himself and his brothers were eliminated from the directorate at the said annual general meeting. He also alleges that Subbiah Asari is bent upon completely and totally ignoring the interest of the petitioner's group and is conducting the affairs of the company in a manner totally incompatible with the normal functioning of the company. The petitioner has alleged that the directors were talking salaries contrary to the practice and law, Subbiah Asari's group are unable to do real business and that the company is working at a loss. He would also state that the machinery has become unserviceable and the company is unable to play its debts. The petitioner is apprehensive that all tangible assets of the company would disappear and that his investment would be completely lost. He alleges that he has lost faith in the commercial integrity of Subbiah Asari and in view of the alleged fraudulent misapplication of the company's funds and as the substratum of the company has already gone, it is a fit case that the company should be wound upThe petitioner alleges that at the time when he associated himself with Subbiah Asari, and therefore with the company, Subbiah Asari held out a promise that the petitioner and his brothers would be associated with Subbiah Asari in the nature of a partnership, so that at all material times the management of the company, its business and affairs would be with Subbiah Asari and his group of shareholders as also that of the petitioner and his group.

(2.) AFTER June, 1965, when the petitioner and his group were eliminated from the board of directors, it is alleged by the petitioner that there is wanton of breach of the promise held out by Subbiah Asari at the time he joined the company and therefore on the principle that a dissolution of partnership should be made when there is no confidence inter se between the partners, this company also should be wound up Subbiah Asari expressly denies that he held out any promise to the petitioner as stated by him, nor did he induce him to become a member of the company. On the other hand, the case of Subbiah Asari, who happens to be the managing director, is that the petitioner voluntarily offered to become a member of the company by purchasing shares, that he also made his brothers shareholders contemporaneously along with him and purchased shares for Rs. 15, 000 in the first instance. Thereafter, he secured a transfer of certain shares which were available of the value of Rs. 10, 000 and that therefore the allegation that the petitioner was induced by Subbiah Asari to join the company is baseless. It is further alleged that salaries were paid in accordance with the resolutions of the board of directors in which the petitioner and his brothers participated and they cannot therefore complain that such salaries were paid irregularly and improperly. The counter petitioner also alleges that the business of the company is run on normal lines and that he was able to secure certain important contracts after the petitioner and his group of shareholders left the board of management and that he has substantially brought down the mortgage debt of the company and that at no time there was any effort on his effort on his part to deliberately keep out the petitioner and his group of shareholders from acquainting themselves with the affairs of the company.

(3.) THE Registrar of Companies who had notice of this proceeding, filed an affidavit stating that there was an annual meeting on June 3, 1965, and that the directors, who are the other defendants, were re-elected to the board and that the petitioner and his two brothers were not re-elected to the board. He also states that the auditors have filed an unqualified report as regards the working of the firmWhen the case was opened by Mr. M. V. Ganapathi, learned counsel for the petitioner, he asked for permission to let in oral evidence since the petitioner wanted to establish an understanding between him and Subbiah Asari, the managing director, that the petitioner would always be consulted in the management of the affairs of the company and that the petitioner and his brothers are always assured of seats in the board of directors of the company. Though there is no infallible rule of law which guides the company court in the matter of accepting oral evidence as is available in the common law courts of our country, yet it is desirable in a given case to permit such oral evidence if the circumstances and propriety of the case require. Such a procedure is adopted only to foster justice and right a wrong. As pointed out by a Division Bench of this court, in Veeramachineni Seethiah v. Venkatasubbiah