RAGUNATH PRASAD JHUNJHUNWALA Vs. HIND OVERSEAS PRIVATE LTD

JUDGEMENT

(1.) These two appeals are directed against a judgment and order dated 6th July, 1967, by which the learned trial judge disposed of two applications. In the first application, namely, Company Application No. 183 of 1966, which was an application praying for stay of winding-up proceedings of a company, the learned trial judge ordered such stay and at the same time dismissed the connected winding-up petition, namely, Company Petition No. 123 of 1966, which had been filed by the appellants herein. The second application, viz., Company Application No. 136 of 1966, which was one for appointment of a provisional liquidator and also for an order of injunction restraining the respondents Nos. 2, 3 and 4 herein from acting or holding themselves out as directors of the company, was dismissed by the learned trial judge. These two appeals were by agreement of parties heard together and we are disposing of these two appeals by one judgment.

(2.) On or about 9th August, 1966, the Hind Overseas Private Ltd. (hereinafter referred to as "the company") was incorporated with a share capital of Rs. 5,00,000 consisting of 5,000 shares of Rs. 100 each. Though there is no dispute as to who were the shareholders at the inception, there is some dispute regarding the basis on which the division of shares had been made. According to the appellants, the company was at its very inception constituted more or less on the lines of a partnership firm. Indeed, it is said that the original idea of the promoters was to have a partnership and not a limited company on the basis of 10 annas and 6 annas shares. The 10 annas shares were to be held by a group led by the respondent, V.D. Jhunjhunwala, and 6 annas shares were to be held by a group led by the appellant, R.P. Jhunjhunwala. Later on, the promoters changed their minds and formed a private limited company instead of a partnership firm. It has been stated by the appellants that, prior to the incorporation of the company, a partnership account had been opened in the books of Chimonram Motiram, a firm belonging to the group of V.D. Jhunjhunwala. The appellants also say that, when the company came to be set up, it was agreed between the parties that the group led by V.D. Jhunjhunwala would be the financiers and the group led by R.P. Jhunjunwala would manage the company. We would refer to these two groups hereinafter as the " V. D. J. Group " and " K. P. J. Group ", respectively. The story about the original idea of forming a partnership and subsequent change of mind and formation of a company instead is not accepted by the respondents. In any case, both the parties admit that the first directors of the company were R.P. Jhunjhunwala, one of the appellants in this appeal, and Anil Chandra Dutt, who was a typist of V.D. Jhunjhunwala. The respondents say that both R. P. Jhunjhunwala and Anil Chandra Dutt were employees of V.D. Jhunjhunwala at one time or the other.

(3.) On 23rd August, 1956, V.D. Jhunjhunwala and M.P. Jhunjhunwala were co-opted as directors. The respondents suggest that they went to the board to represent the interest of the V.D.J. Group. Thereafter, on 23rd November, 1957, Anil Chandra Dutt resigned and P.C. Jhunjhunwala, son of R.P. Jhunjhunwala, became a director and R.P. Jhunjhunwala was made the director-in-charge. On this day, therefore, the board of directors consisted of R.P. Jhunjhunwala, P.C. Jhunjhunwala, V.D. Jhunjhunwala and M.P. Jhunjhunwala. It may be pointed out in passing that on this date there was a declaration that V.D. Jhunjhunwala had vacated office as director for not having attended three consecutive meetings of the board but that he was reappointed. According to the appellants, the key posts of the company were always held by the nominees of V.D. Jhunjhunwala, who used to be very often living outside Calcutta. It is stated that daily reports and copies of all correspondence used to be sent to V.D. Jhunjhunwala, who exercised complete financial control and who also supervised the policy of the company. On 31st January, 1959, M.P. Jhunjhunwala vacated his office as director and the board came to consist of R.P. Jhunjhunwala, P.C. Jhunjhunwala and V.D. Jhunjhunwala. About this time M.P. Jhunjhunwala ceased to have any interest in the company and all the shares in the company originally issued in his name or in the names of the members of his family were transferred to and in the name of V.D. Jhunjhunwala's wife. The company started producing railway sleepers from its factory some time about 1959 and by all accounts started making profits.