Civil Appeal No 1785 of 1970
From the Judgment and Order dated 25 9 69 of the Calcutta High Court in Appeal No146 of 1967
section V Gupte section B Mukherjee P C Bhartari J B Dadachanji and Dilip Sinha for the Appellant
A K Sen R C Nag O P Khaitan B P Maheshwari Suresh Sethi and R section Agarwal for Respondents
The Judgment of the Court was delivered by GOSWAMI J
This appeal by certificate is against the common judgment of the Calcutta High Court in respect of respondents  application for winding up and appellant s stay application relating to the Hind Overseas Private Limited a private limited company briefly the company
The question that is raised in this appeal relates to the scope of section 433f of the briefly the Act and in particular whether the principles applicable in the case of dissolution of partnership could be involved in the case of the company
The allegations in the winding up petition before the High Court are as follows The company was incorporated under the Act in August 1956
The nominal capital of the company is Rs 500000 divided into 2500 Equity shares of Rs 100 each and 2500 unclassified shares of Rs 100 each the entire nominal capital has been issued and fully paid up
The petitioners respondents herein Raghunath Prasad Jhunjhunwalla and his son Phoolchand Jhunjhunwalla hereinafter to be described as RPJ and PCJ respectively and the members of their family hold 1875 shares in the company and the remaining 3125 shares are held by one V D Jhunjhunwalla and the members of his family
In or about the month May 1956 RPJ and V D Jhunjhunwalla briefly VDJ who was then carrying on business under the name and style of Chimanram Motilal  with his cousin one Mahabir Prasad Jhunjhunwalla for brevity MPJ agreed to start a new business of iron and steel in co partnership and for that purpose an account was 230 opened in the name of Raghunath Prasad Jhunjhunwalla Ke Sir Khata  in the books of Chimanram Motilal 
It was further agreed between the parties that RPJ would have six annas share and VDJ along with MPJ ten annas share in the said proposed partnership business
Before the said proposed business could be started VDJ however changed his mind and some time in the month of June 1956 he suggested to RPJ that a limited company be formed inter alia to carry on the business in iron and steel and the shares in the company would be held by RPJ VDJ and MPJ and the members of their respective families in the same proportion as mentioned above
VDJ further agreed to provide for and arrange along with MPJ the entire finance that may be necessary for the purpose of the business of the company and RPJ and his group would generally look after the day to day business of the company under the general control and supervision of VDJ It is stated in the petition that RPJ in view of the relationship between the parties and having trust and confidence in VDJ agreed to the said suggestions and accordingly the company was formed on or about August 9 1956 under the provisions of the Act
One Anil Chandra Dutta an employee and nominee of VDJ along with RPJ became the subscribers to the Memorandum of Association of the company and also became its first directors
After its incorporation the company carried on for some time the business of controlled stockists of iron and steel and since the end o the year 1958 the company carried on the business of the manufacture and supply of railway sleepers in execution of Government contracts
On or about August 23 1956 VDJ and MPJ were co opted as directors of the company
On or about November 23 1957 Anil Chandra Dutta resigned from the Board of Directors and PCJ was co opted as a Director in this place
RPJ was appointed as Director in charge of the company on November 23 1957 at a monthly remuneration of Rs 1000 
This remuneration was subsequently increased to Rs 1250 per month with effect from October 1 1961 and he was also granted further allowance of Rs 25000 per month on account of maintenance of guest house
His monthly remuneration was again increased to Rs 200000 with effect from September 1964
The monthly remuneration of PCJ was initially fixed at Rs 75000 per month with effect from October 1 1961 and was subsequently increased to Rs 150000 from September 1 1964
Following a family partition between VDJ and MPJ about the year 1958 the shares of the latter were transferred in the name of the wife of VDJ MPJ also resigned from the Board of Directors on or about January 31 1959
Since that date and until October 1965 the Board of Directors of the company consisted of RPJ PCJ and VDJ In or about the month of October 1965 VDJ got his son Vinode Kumar Jhunjhunwalla appointed as the Technical Director of the company
Since the year 1958 and until February 26 1965 the entire business of the company has been the manufacture and supply of 231 railway sleepers in execution of Government contracts
The business of the company during this period had been always managed by RPJ PCJ under the general supervision and guidance of VDJ and the business policy was always dictated by VDJ The Cashier Manager cum Engineer Munim and Cash Peon and other important Officers and employees were always appointed by VDJ of his own choice and on his terms
RPJ has been acting as the Director in charge throughout since his appointment at a Board meeting held on November 23 1957
VDJ asked for and received daily reports of the working of the factory and of the business of the company from RPJ and gave detailed instructions even relating to the daily administration
From 1959 onwards the factory commenced its regular production of railway sleepers and made substantial profits between 1960 and 1965 except in the year 1961 when there was some loss
It is alleged that after trying to take wrongfully and illegally full control and management of the affairs of the company in order to oust RPJ group VDJ ultimately succeeded in getting hold of Directors  Minute Books and the Minute Books of the General Meetings of the company
VDJ with the help of the members of his group wrongfully and illegally took away the keys and the other statutory books and documents of the company from the registered office and refused RPJ group any access to them RPJ was also assaulted by an employee of the company at the instance of VDJ and there were some criminal proceedings against RPJ and PCJ VDJ as a Director called a meeting of the Board on May 27 1966 by Notice dated May 24 1966
RPJ s solicitors on May 27 1966 sent a notice to the company and VDJ calling upon them to desist from holding the meeting which was called with a view to oust the RPJ group completely from the control and management of the affairs of the company
VDJ group did not pay any heed to the Solicitors  letter and passed various resolutions in the Board s meeting held on May 27 1966 whereby the previous resolutions of the Board were countermanded and cancelled and RPJ was deprived of his all lawful authority and powers as a Director including the right to operate the banking account of the company
RPJ was purported to be removed from the office of the Director in charge of the company
VDJ group caused an advertisement to be published in the Vishwamitra on or about May 20 1966 intimating the cancellation of powers in favour of RPJ VDJ taking advantage of the majority holding of shares by himself and the members of group caused to be issued through certain shareholders belonging to his group a requisition dated May 28 1966 for calling an Extra ordinary general meeting with a view to remove RPJ and PCJ as directors of the company and to appoint other persons belonging to their group in their places instead
The explanatory statement to that Notice alleged that there was a loss of about Rs 8 lakhs in the year 1965
It is further alleged that VDJ with the help of goondas and armed guard took possession of the company s factory and ousted RPJ and PCJ therefrom
It is also alleged that the liabilities of the company would exceed its assets and the same was not commercially 232 solvent
That serious disputes and differences had arisen among the shareholders of the company and there was a complete deadlock in the management of its affairs
There was also complete loss of confidence of one group in the other
Lastly it is averred that the company was in substance a partnership and it could not carry on its business any more and the circumstances would justify the dissolution of the company had it been a partnership
The above are the allegations in the winding up petition which came up for admission before the learned Company Judge
There was a counter affidavit filed by VDJ in opposing the prayers
We may only note paragraph 14 of his counter affidavit The respondent Raghunath Prasad Jhunjhunwalla was an employee of the firm of Messrs Kamlapati Motilal of Kanpur of which I am the Managing Partner
Having gained confidence as such employee the said Raghunath Prasad Jhunjhunwalla was taken in as a Director of the Company and entrusted with the powers of management of the Company
The respondents had no money to subscribe for the shares of the Company and moneys were procured by me to enable them to subscribe for the share of the Company
The applicants on their own admission were in charge of the management of the affairs of the Company
While in such management they have mismanaged the affairs of the Company and misappropriated the funds and assets of the company as would appear from the statements made in my affidavit affirmed on June 16 1966  The only point which appears to have been canvassed before the learned Company Judge and later before the appellate court was that the company was formed as a result of mutual trust and confidence and the company was in substance a partnership and therefore the principles of partnership would be attracted
The same arguments are pressed into service by the respondents before us
If it were a partnership says Mr Sen on behalf of the respondents on the facts and circumstances disclosed in the petition dissolution would have been ordered by the court under section 44g of the Partnership Act
A case for winding up has been therefore prima facie made out by the respondents on these allegations
It is submitted that the learned Company Judge committed an error of law in dismissing the winding up petition without admitting it and in allowing the stay petition of the company appellant herein and that the Division Bench in the Letters Patent Appeal was right in setting aside the order of the Company Judge
According to the learned Company Judge the principle of dissolution of partnership applies to companies either on the ground of complete deadlock or on the ground of domestic or family companies
A complete deadlock according to the learned Judge is where the Board has two real members or the ratio of shareholding is equal
In the domestic or family companies says the learned Judge courts have 233 applied the dissolution of partnership principle where shareholdings are more or less equal and there is ousting not only from management but from benefits as shareholders
Lack of probity has to result in prejudice to company s business affecting rights of complaining parties as shareholders and not as directors
The learned Judge relied on an English case In re Cuthbert Cooper  Sons Limited1 which illustrates that if a deadlock can be resolved by the articles there is no deadlock to bring in winding up and if there are alternative remedies the company should not be wound up
The learned Judge was also unable to hold that the substratum of the company was gone
The learned Judge concluded as follows As I have indicated these charges and counter charges raise disputed questions of fact between two contesting parties for power
The petitioners desire that they should be in power and the respondents would go on financing
This was said to be the heart of the matter by counsel for the respondents
This comment is not without foundation
I am unable to hold that there is any mismanagement or misapplication either as regards shareholders or as regards directors
Directors  disputes are not grounds for winding up on the facts and circumstances of the present case
According to the learned Judge the case of In re Yenidje Tobacco Company Limited 2 and the cases following it have established that in applying the principles of dissolution of partnership to companies the following factors were important 1 Equal share holding
2 Complete deadlock in the administration of the company
3 Lack of probity and mismanagement in the conduct of affairs of the company
The learned Company Judge held that the principle in Yenidje s case supra was not attracted in this case
On the other hand according to the appellate court the principles in Yenidje s case were to the effect that if a private company could be fairly called a partnership in the guise of a private company then the things which might be a ground for dissolution of a partnership will apply also in the case of a private company and that in this connection deadlock is not material
The appellate court then described the circumstances which according to Lindley justify the dissolution of the partnership 1 if the partnership agreement is wilfully or persistently violated 234 2 if one partner so behaves in matters relating to the partnership business that the other partners find it impossible to carry on business in partnership with him 3 if some partners are in effect excluded from the concern 4 if the misconduct of one or more partners is such that the mutual confidence which must subsist in a partnership is destroyed 5 if there is a state of animosity which precludes all reasonable hope of reconciliation and friendly cooperation 6 if it is impossible for the partners to place that confidence in each other which each has a right to expect provided that the impossibility has not been caused by the persons seeking to take advantage of if Having noted the above the appellate court held that conditions 2 3 and 4 were unquestionably fulfilled in this case and therefore allowed the application and rejected the stay application
Before we proceed further we may refer to a recent decision of the House of Lords in Ebrahimi and Westbourne Galleries Ltd and Others 1 briefly Ebrahimi s case wherein after reviewing all the earlier cases it was held as follows The foundation of it all lies in the words just and equitable  and if there is any respect in which some of the cases may be open to criticism it is that the Courts may sometimes have been too timorous in giving them full force
The words are a recognition of the fact that a limited company is more than a mere legal entity with a personality in law of its own that there is room in company law for recognition of the fact that behind it or amongst it there are individuals with rights expectations and obligation inter se which are not necessarily submerged in the company structure
That structure is defined by the and by the articles of association by which shareholders agree to be bound
In most companies and in most contexts this definition is sufficient and exhaustive equally so whether the company is large or small
The just and equitable provision does not as the respondents suggest entitle one party to disregard the obligation he assumes by entering a company nor the court to dispense him from it
It does as equity always does enable the court to subject the exercise of legal rights to equitable considerations considerations that is of a personal character arising between one individual and another which may make it unjust or inequitable 235 to insist on legal rights or to exercise them in a particular way The superimposition of equitable considerations requires something more which typically may include one or probably more of the following elements i an association formed or continued on the basis of a personal relationship involving mutual confidence this element will often be found where a pre existing partnership has been converted into a limited company ii an agreement or understanding that all or some for there may be sleeping  members of the shareholders shall participate in the conduct of the business iiirestriction upon the transfer of the members  interest in the company so that if confidence is lost or one member is removed from management he cannot take out his stake and go elsewhere
 The respondents have laid great emphasis on the ratio of the above decision
It is true that section 222f of the English Companies Act 1948 which the House of Lords was considering corresponds to section 433f of the Act
In the above decision the House of Lords had to deal with a private limited company consisting of three members the petitioner therein being one of the three
Lord Wilberforce delivering his reasoned speech has himself noted that It is a fact of cardinal importance that since about 1945 the business had been carried on by the appellant and Mr Nazar as partners equally sharing the management and the profits
It was also noticed that the company made good profits all of which were distributed as directors  remuneration
No dividends have ever been paid before or after the petition was presented In Ebrahimi s case supra the company which was first formed by the two erstwhile partners Ebrahimi and Nazar was joined by Nazar s son George Nazar as the third director and each of the two original shareholders transferred to him 100 shares so that at all material times Ebrahimi held 400 shares Nazar 400 shares and George Nazar 200 shares
The Nazars father and son thus had a majority of the votes in general meeting
Until the dispute all the three remained directors
Later on an ordinary resolution was passed by the company in general meeting by the votes of Nazar and George Nazar removing Ebrahimi from the office of director
That led to the petition for winding up before the court
The following features are found in Ebrahimi s case 1 There was a prior partnership between the only two members who later on formed the company
236 2 Both the shareholders were directors sharing the profits equally as remuneration and no dividends were declared
3 One of the shareholders  son acquired shares from his father and from the second shareholder Ebrahimi and joined the company as the third shareholder director with two hundred shares one hundred from each
4 After that there was a complete ouster of Ebrahimi from the management by the votes of the other two directors father and son
5 Although Ebrahimi was a partner Nazar had made it perfectly clear that he did not regard Ebrahimi as a partner but regarded him as an employee in repudiation of Ebrahimi s status as well as of the relationship
6 Ebrahimi through ceasing to be a director lost his right to share in the profits through directors  remuneration retaining only the chance of receiving dividends as a minority shareholder
Bearing in mind the above features in the case the House of Lords allowed the petition for winding up by reversing the judgment of the court of appeal and restoring the order of Plowman J None of the parties questions the principles as such adumbrated by the House of Lords in Ebrahimi s case supra or even those in the earlier Yenidje s case supra and indeed these are sound principles depending upon the nature composition and character of the company The principles good as they are their application in a given case or in all cases generally creates problems and difficulties
The respondents  counsel is well cognizant of this difficult aspect and therefore rests his argument on the footing that the company is in substance a partnership and necessarily therefore according to him the principles of partnership should be attracted
Before we come to the facts of the present case we have to deal with the principles of the Yenidje s case supra which were the cornerstone of the arguments on behalf of both the parties before the Company Judge as well as the appellate court
Ebrahimi s case supra was not available to the parties at that stage
Yenidje s case supra has acquired celebrity and in application of the ratio of that case varying shades and colour have been sought to be given from time to time in England and appropriate to occasions and to facts and circumstances of cases coming before the courts
It is not necessary for us to go over the labyrinth of cases wherein the Yenidje s principle was applied and it will be sufficient to gather the ratio from the words of Lord Cozens Hardy MR expressed in the decision itself
The learned Master of Rolls posed the question thus in that case I think it right to consider what is the precise position of a private company such as this and in what respects it can be fairly called a partnership in the guise of a private company
 237 This was a company of the two shareholders and two directors who had earlier traded separately but amalgamated their businesses and formed a private limited company
The constitution of the company was such that under its articles of association for any case of difference or dispute between the directors there was a provision for arbitration
In fact in one of such disputes a reference was made to arbitration which resulted in an award to which one of the two shareholders declined to give effect
It was proved in that case that the two directors were not on speaking terms that the so called meetings of the board of directors had been almost a farce or comedy the directors would not speak to each other on the board and some third person had to convey communications between them which ought to go directly from one to the other
Under the above situation it was observed by the learned Master of Rolls as follows Is it possible to say that it is not just and equitable that that state of things should not be allowed to continue and that the Court should not intervene and say this is not what the parties contemplated by the arrangement into which they entered       Certainly having regard to the fact that the only two directors will not speak to each other and no business which deserves the name of business in the affairs of the company can be carried on I think the company should not be allowed to continue
I have treated it as a partnership and under the Partnership Act of course the application for a dissolution would take the form of an action but this is not a partnership strictly it is not a case in which it can be dissolved by action
But ought not precisely the same principles to apply to a case like this where in substance it is a partnership in the form or the guise of a private company  It is a private company and there is no way to put an end to the state of things which now exists except by means of a compulsory order
It has been urged upon us that the just and equitable clause has been held not to apply except where the substratum of the company has gone or where there is a complete deadlock
Those are the two instances which are given but I should be very sorry so far as my individual opinion goes to hold that they are strictly the limits of the just and equitable  clause as found in the Companies Act
     If ever there was a case of deadlock I think it exists here but whether it exists or not I think the circumstances are such that we ought to apply if necessary the analogy of the partnership law and to say that this company is now in a state which could not have been contemplated by the parties when the company formed and which ought to be terminated as soon as possible
238 It is clear that although Yenidje s case supra was a case of a complete deadlock that was not stated to be the sole basis for a conclusion to wind up the company
The House of Lords in Ebrahmi s case supra approved the decision in Yenidje s case supra
We may also point out that the House of Lords did not approve of the undue emphasis put on the contractual rights arising from the articles over the equitable principles derived from partnership law in re Cuthbert Cooper  Sons Limited supra
We may also refer to the Privy Council decision in Loch and Another and John Blackwood Limited1 wherein section 127 of the Companies Act 1910 of Barbados identical with section 433f of the Act was considered
Lord Shaw of Dunfermline quoted in the judgment a passage from the case of Baird vs Lees2 which is as follows  I have no intention of attempting a definition of the circumstances which amount to a just and equitable  cause
But I think I may say this
A shareholder puts his money into a company on certain conditions
The first of them is that the business in which he invests shall be limited to certain definite objects
The second is that it shall be carried on by certain persons elected in a specified way
And the third is that the business shall be conducted in accordance with certain principles of commercial administration defined in the statute which provide some guarantee of commercial probity and efficiency
If shareholders find that these conditions or some of them are deliberately and consistently violated and set aside by the action of a member and official of the company who wields an overwhelming voting power and if the result of that is that for the extrication of their rights as shareholders they are deprived of the ordinary facilities which compliance with the Companies Acts would provide them with then there does arise in my opinion a situation in which it may be just and equitable for the Court to wind up the company
We may also refer to another decision of the Privy Council in D Davis  Co Ltd vs Brunswick Australia Ltd and others3 which was from the decision of the Full Court of the Supreme Court of New South Wales
Section 84e of the New South Wales Companies Act 1899 also provides for winding up inter alia on just and equitable ground
In dealing with that clause the Privy Council observed as follows  The position of the Court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the Company during the short period which had elapsed since 12th May 1930 and the 239 common misfortune which had befallen the two shareholders in the Company does not in their Lordships view involve the consequence that the ultimate desires and hopes of the ordinary shareholders should be disregarded merely because there is a strong interest in favour of liquidation naturally felt by the holders of the preference shares
     Nor on the other hand can any general rule be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase
This Court had to deal with the just and equitable  clause under section 162vi of the Indian Companies Act 1913 in Rajahmundry Electric supply Corporation Ltd vs A Nageswara Rao and others1 and the Court quoted with approved the following passage in Loch s case supra  It is undoubtedly true that at the foundation of applications for winding up on the just and equitable  rule there must lie a justifiable lack of confidence in the conduct and management of the company s affairs
But this lack of confidence must be grounded on conduct of the directors not in regard to their private life or affairs but in regard to the company s business
Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company
On the other hand wherever the lack of confidence is rested on a lack of probity in the conduct of the company s affairs then the former is justified by the latter and it is under the statute just and equitable that the company is wound up
Again in Mohan Lal  Anr
vs Grain Chamber Ltd Muzaffarnagar  Ors2 this Court had held that Primarily the circumstances existing 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 See also Rajahmundry Electric Supply Corporation s case supra and section P Jain vs Kalinga Tubes Ltd3
Keeping the ratio of Ebrahimi s case in the forefront of his argument Mr Sen submits that in the present case also there was a definite understanding and agreement between the two family groups for equal status and equal participation in management and therefore exclusion of the respondents from the directorship is burial of mutual trust and denial of that relationship on which alone the company was formed and hence there is a prima facie case for admitting the petition
240 Although the Indian Companies Act is modelled on the English Companies Act the Indian law is developing on its own lines
Our law is also making significant progress of its own as and when necessary
Where the words used in both the Acts are identical the English decisions may throw good light and reasons may be persuasive
But as the Privy Council observed long ago in Ramanandi Kuer vs Kalawati Kuer1 It has often been pointed out by this Board that where there is a positive enactment of the Indian legislature the proper course is to examine the language of that statute and to ascertain its proper meaning uninfluenced by any considerations derived from the previous state of the law or of the English law upon which it may have been founded
 If it was true in the twenties it is more apposite now that the background conditions and circumstances of the Indian society the needs and requirements of our country call for a somewhat different treatment
We will have to adjust and adapt limit or extend the principles derived from English decisions entitled as they are to great respect suiting the conditions of our society and the country in general always however with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company
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 share holding 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 be 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 241 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 433f of the Act
Section 483 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 222f of the English Companies Act 1948 is in terms identical with the Indian counter part 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 356 of the English Partnership Act 1890 also contains inter alia an analogous provision for the dissolution of partnership by the court
Section 44g of the Indian Partnership Act also contains the words just and equitable 
Section 433f under which this application has been made has to be read with section 4432 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 would 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 433f 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
Coming to the present case we find that the company was formed first with RPJ and Anil Chandra Dutta
Anil Chandra Dutta was admittedly an employee of VDJ and it is also claimed that even RPJ was an employee of a company in which VDJ was a managing partner
Although the entire finance was to be arranged by VDJ it appears the company was started by the above two persons 242 with VDJ remaining in the background
Anil Chandra Dutta soon resigned and other people came in and in 1965 66 there were 19 shareholders nine headed by RPJ and ten headed by VDJ clearly showing two family groups RPJ group had 1875 shares and VDJ group had 3125 shares
VDJ stood guarantee for bank overdraft to the tune of Rs 47 lakhs and as the learned Company Judge has noted the stake of the appellant in the company was about Rs 63 lakhs as opposed to the stake of the respondents amounting to Rs 187 lakhs
It is therefore clear that RPJ group s interest in the company was not of the same magnitude as that of the appellants
The learned Company Judge put the picture as follows The entire affidavit evidence brings in the forefront two broad features
First that there are disputes between the petitioners and the respondents regarding appointment of Vinode Kumar Jhunjhunwalla and Hariram Modi
It is said on behalf of the petitioners that these appointments in breach of articles and in breach of the provisions of the Companies Act are adequate grounds for winding up
It is on the other hand said by the respondents that the allegations of breach of articles and provisions of the Act are denied and these are the subject matter of remedy by suit and are not the subject matter of winding up
The other feature is that the respondents charge the petitioners with misappropriation
The petitioners also charge the respondents with having utilised the funds of the company
 Is this company in substance a partnership or in the image of a partnership as claimed  We may now address to this aspect strenuously emphasised by Mr Sen It as in Ebrahimi s case supra there had been an earlier partnership and the partners later on formed into a company the matter would have stood on a different footing
In the present case however we do not find any special features which would unquestionably lead to the conclusion that the company is in substance a partnership
On the other hand the following aspects are noteworthy Assuming partnership had been contemplated the idea was deliberately abandoned
The company was started with one Anil Chandra Dutta who was no relation of the two families but was an employee of VDJ This would negative the idea of partnership which connotes equal status amongst the partners
While it is true that a director may work in the company on remuneration RPJ however served like an employee on monthly salary not on his own initiative enjoying an equal partner s freedom and prestige but directly under the supervision and control of VDJ acknowledging a status definitely of a subordinate character
The voluntary financial involvement of a large stake by VDJ carefully sought to be protected against erosion of his interests by constant vigil on the day to day working does not fit in with the concept of a partnership
All the above features do not enable us to accept the submission of the respondents that the company in this case is in substance a partnership
243 In the present case there is yet another important feature against the respondents
Serious trouble apparently arose on or about May 23 1966 when a Board meeting was notified
Prior to that even though something might perhaps be brewing inside but nothing came to the surface although the respondents alleged that VDJ s son Vinode Kumar Jhunjhunwalla had been sent to the States at company s expense and was later on after completion of education appointed as Technical Director and that all these were illegal actions
It is significant that RPJ group was present in the meeting when these resolutions were passed and they made no grievance at the time about the same
The petition for winding up was filled on June 7 1966 and the foundation for it was laid in the solicitors  letter to the appellants on May 27 1966
That may be said to be nucleus of the dispute so far as the records show
It is not a proper principle to encourage hasty petitions of this nature without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association
There must be materials to show when just and equitable  clause is invoked that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders
The company court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between two groups
The cases of small companies stand on a different footing from a company like the present with nineteen shareholders although apparently arrayed in two groups
It is not prima facie established on the allegations that the company cannot run smoothly in the best interest of the general shareholders including the RPJ group after exit of the quondam directors
The conclusion of the Division Bench that the company is in substance a partnership venture was based on the following principal reasons 1 The original idea was to start a partnership venture and that idea was given ultimately the shape of a private company 2 The Sir Khata account shows that the starting on a partnership venture the parties set up a private company
3 The shareholding shows division amongst two family groups
4 There was no denial by the appellants of a specific averment of the respondents that the company was in substance a partnership
5 The respondents were all along functioning as working partners and the respondent VDJ was the financial partner
We will examine each of these reasons
244 With regard to the first reason the solicitors  letter of May 27 1966 which is the nucleus of the subsequent winding up petition filed in court is of great significance and the improvement in the version later in the petition will lose its importance
It was stated in the solicitors  letter that some time in May 1956 it was agreed between our client Shri R P Jhunjhunwalla and Shri V D Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla to do some type of business in partnership Shri V D Jhunjhunwalla suggested that a limited company should be formed in which our client could hold shares to the extent of 6 annas and Shri V D Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla to the extent of annas 10 and that our client would manage the business of such company as and when it was formed and that the requisite finance for the working of the company would be made by Shri V D Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla
 There is nothing in the above paragraph which is the corner stone of the plea of partnership in substance that there was any active contemplation about forming of a partnership
Reference to some type of business of partnership  is very casual in the above extract
On the other hand it is more reasonable to conclude that although there might have been discussion about the advantages and disadvantages of partnership vis a vis a private limited company no time was lost in deciding to form a company
If this is the only basis of agreement between the parties to sustain the claim we are unable to accept the same
Regarding the second reason the Sir Khata account which has been heavily relied upon to found an agreement or understanding is wholly misconceived
It merely shows that a joint account was for the time being opened for the purpose of the formation of the company and the account was closed on such formation
It does not indicate any understanding as to the right of management of the company by any group of shareholders
Thirdly because the shareholding is between two family groups it cannot be said that the company thereby takes the image of partnership
On the other hand the fact that after discussion the parties deliberately abandoned the idea of forming a partnership would go to show that there was no intention to carry on business as partners
Fourthly after going through the correspondence it is not possible to say that there was no denial of the averment by the respondents that the company was in substance a partnership
Apart from anything else it is enough to point out that in the letter of VDJ dated June 3 1963 the allegations have been clearly denied
It is therefore a very weak reason to reckon
With regard to the last reason it appears that the respondents themselves took the position in their petition that RPJ was managing the affairs of the company under daily supervision and control of VDJ Whether this position is accepted by the appellants or not their statement in that respect gives no indication of their right to manage the business as a working partner as claimed
Besides working on remuneration by a director is not an unknown feature even in company business and we have already adverted to the status in 245 which he worked
Nothing therefore turns on this feature
All the above reasons therefore fail to convince us that the conclusion of the Division Bench that the company is in substance a partnership is correct
We should observe that nothing observed by us in this appeal may be taken as expression of any opinion on the merits of the allegations and counter allegations of the parties
In the result the appeal is allowed with costs
The judgment of the Division Bench is set aside
The winding up petition stands dismissed and the stay petition of the appellant is allowed
SR Appeal allowed


Summary:
Under section 433f of the  a company may be wound up by the Court if the Court is of opinion that it is just and equitable that the company should be wound up
Section 44g of the Partnership Act also speaks of the just and equitable clause
One RPJ agreed with VDJ and MPJ who are carrying on the business under the name and style of Chimanram Motilal to start a new business of iron and steel in co partnership and for that purpose an account was opened in the name of Raghunath Prasad Jhunjhunwalla Ka Sir Khata in the books of Chimanram Motilal
It was agreed that RPJ should have 38th share and VDJ with MPJ should have 58th share of the proposed business
Before the said proposed business could be started at the suggestion of VDJ actually a limited company was formed in August
1956 under the with the understanding that i VDJ with MPJ should finance the entire business
ii the share in the company should be held by RPJ VDJ and MPJ and the members of their respective families in the proportion of 38th and 58th as agreed to before and iii that RPJ and his group would generally look after the day to day business of the company under the general control and supervision of VDJ
The nominal capital of the company was Rs 5 lacs divided into 2500 equity shares of Rs 100 each
RPJ and another ACD an employee and nominee of VDJ became the subscribers to the Memorandum of Association of the company and also became its first directors
On 23 8 1956 VDJ and MPJ were appointed as directors of the company
On 23 11 1957 ACD resigned and PCJ son of RPJ was opted in his place
RPJ was appointed a director in charge of the company and both RPJ and PCJ were paid monthly remunerations
Following a family partition between VDJ and MPJ in the year 1958 the shares of MPJ were transferred in the name of the wife of VDJ and MPJ resigned from the Board of Directors on 21 1 1959
Since that date till October 1965 the Board of Directors were RPJ
PCJ and VDJ when VDJ got his son VKJ appointed as Technical Director of the company
Though the business of the company was managed by RPJ and PCJ the business policy the appointment of staff general supervision of the work of the business etc were in the hands of VDJ
From 1959 onwards the factory commenced its regular production and substantial profits were made between 1960 and 1965 except in the year 1961 when there was some loss
Finding that there has been a mismanagement of affairs of RPJ and PCJ to the tune of Rs 8 lacs the VDJ group who were holding the major shares numbering 3125 in order to safeguard their interest and the business called the Board s meeting on 27 5 1966 and the Board countermanded all the previous resolutions and thus took away all the powers of RPJ
The extraordinary general meeting called on 28 5 1966 resolved to remove RPJ and PCJ as directors of the company and to appoint persons belonging to VDJ s group as directors
This led to the filing of an application for winding up under section 433f of the by RPJ before the company Judge of the Calcutta High Court contending that the company was in the nature of a 227 partnership and is liable to be wound up in view of the loss of confidence between the two groupsmembers and on the alleged ouster of RPJ group
The Petition for winding up was dismissed by the company Judge inasmuch as i the substratum of the company was not gone ii the deadlock could be resolved by the articles iii there were alternative remedies open and iv lack of probity did not result in prejudice to the company s business affecting petitioner s rights as share holder but only affected his right as director
The appellate Bench however allowed the appeal of the respondent RPJ and ordered the winding up of the company in the facts and circumstances of the case viz impossibility of carrying on business by RPJ as a partner the exclusion of RPJ from the partnership concern and loss of mutual confidence between RPJ and VDJ group
Dismissing the appeal by certificate the Court  HELD 1 In an application under section 433 the company Court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between the two groups
The court should see that a prima facie case has been made out before it is admitted on the allegations in the petition
Even admission of a petition which will lead to advertisement of the winding up proceedings us 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
It is not proper principle to encourage hasty petitions under section 433 without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association
There must be materials to show when just and equitable clause is involved that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders
243 C D 240 H 241 A 2 Section 433 of the is modelled on the English 
The Indian law is developing on its own lines and making progress of its own circle
The courts will have to adjust and adapt limit or extend the principles derived from English decisions entitled as they are to great respect suiting the conditions of our society and the country in general always however with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for powerful to manage the company
240A C D Ramanandi Kuer vs Kalawati Kuer  applied
3 Section 433 of the  provides six recipes so that the company may be wound up by the court
Under section 433f which is identical in terms with section 222f of the English Act of 1948 a company may be wound up by the court if the court is of opinion that it is just and equitable that the company should be wound up
It is now well established that the sixth clause viz just and equitable is not to be read as being ejusdem generis with the preceding five clauses
The just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court
The only limitations are force and the content of the words themselves just and equitable
Section 44g of the Indian Partnership Act also contains the words just and equitable
241 B E Section 433f is to be read with section 4432 of the Act which provides that 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 section 307 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 433f 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
241 E G 228 Madan Lal and another vs Groin Chambers Ltd Muzaffar Nagar and others  and section P Jain vs Kalinga Tubes Ltd   followed
4 In applying the principles of dissolution of partnership to companies the following factors must be present Equal shareholding complete deadlock in the administration of the company lack of probity and mismanagement in the conduct of affairs of the company In re Yenidje Tobacco Co Ltd The just and equitable clause cannot be invoked if a deadlock can be resolved by the articles and if there are alternate remedies
In re Cuthbert Cooper and Sons Ltd 1937 Ch
If there is no justifiable lack of confidence grounded on the conduct of the directors in the conduct of management of the companies affairs Rajahmundry Electric Supply Corporation These are sound principles depending upon the nature composition and character of the company
The principles are good as they are their application in a given case or in all cases generally creates problems and difficulties
233D E 236 D 5 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
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
These are necessarily equitable considerations and may in a given case be superimposed on law
Whether it would be so done in a particular case cannot be put in the strict jacket of an inflexible formula
247G D F In re Cathbert Cooper  Sons Limited 1937 Ch 392 and In re Yenidje Tobacco Company Limited  discussed
In re Ebrahimi and Westbourane Galleries Ltd  discussed and considered
Lackh and another vs John Blackwood Limited   quoted with approval
Baird vs Lees
and D Davis  Co Ltd vs Brunswick Australia Ltd and others AIR 1938 PC 114 referred to
Rajahmundry Electric Supply Corporation Ltd vs A Nageswara Rao and others1955 2 SCR 1066 Mohan Lal  Anr
vs Grain Chamber Ltd Muzaffarnagar and others
 and SP Jain vs Kalinga Tubes Ltd  followed
6 In the present case assuming partnership had been contemplated the idea was deliberately abandoned the company was started with one ACD who had no relation with MCJ group or the VDJ group but an employee of VDJ which would negative the idea of partnership which connotes equal status among the partners While it is true that a director may work in the company on remuneration
RPJ however served like an employee on monthly salary not on his own initiative enjoying an equal partner s freedom and prestige but directly under the supervision and control of VDJ acknowledging a status definitely of a subordinate character The voluntary financial involvement of a large stake by VDJ carefully thought to be protected against erosion of his interests by constant vigil on the day to day working does not fit in with the 229 concept of a partnership Even the account was being opened for the purpose of the formation of the company and the account was closed on such formation
The shareholding is between the two family groups it cannot be said that the company thereby takes the image of partnership
On the other hand the fact that after discussion the parties deliberately abandoned the idea of farming a partnership would go to show that there was no intention to carry on business as partners
242E H There are no special features which would unquestionably lead to the conclusion that the company is in substance a partnership and the principle of just and equitable clause cannot be therefore extended
242 H 245A