Case: Rajahmundry Electric Supplycorporation Ltd Vs. A. Nageswara Rao And Others:

600 (F), and the question must now be taken to be settled by the pronouncement of the Judicial Committee in Loch v. John Blackwood Ld. (1924) A C 783 at p. 790 (G), where after an elaborate review of the authorities, Lord Shaw observed that,"...it is in accordance with the laws of England, of Scotland and of Ireland that the ejusdem generis doctrine (as supposed to have been laid by Lord Cottenham) does not operate so as to confine the cases of winding up to those strictly analogous to the instances of the first five sub-sections of S. 129 of the British Act".The law is thus sated in Halsburys Laws of England Third Edition, Volume 6, page 534, para 1035 :"The words, just and equitable in the enactment specifying the grounds for winding up by the Court are not to be read as being ejusdem generis with the preceding words of the enactment".When once it is held that the words "just and equitable" are not be construed ejusdem generis then whether mismanagement of directors is a ground for a winding-up order under S. 162 (vi) becomes a question to be decided on the facts of each case.Where nothing more is established than that the directors have misappropriated the funds of the Company, an order for winding up would not be just or equitable, because it is a sound concern, such an order must operate harshly on the rights of the shareholders.But if, in addition to such misconduct, circumstances exist which render it desirable in the interests of the shareholders that the Company should be wound up, there is nothing in S. 162 (vi) which bars the jurisdiction of the Court to make such an order. (1924) AC 783 (G) was itself a case in which the order for winding up was asked for on the ground of mismanagement by the directors, and the law was thus stated at page 788 :"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 companys 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 companys business.Furthermore the lack of confidence must spring not from dissatisfaction at being out-voted 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 companys affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up".9. Now, the facts as found by the courts below are that the Vice-Chairman grossly mismanaged the affairs of the Company, and had drawn considerable amounts for his personal purposes, that arrears due to the Government for supply of electric energy as on 25-6-1955 was Rs. 3,10,175-3-6, that large collections had to be made, that the machinery was in a state of disrepair, that by reason of death and other causes the directorate had become greatly attenuated and "a powerful local junta was ruling the roost", and that the Shareholders outside the group of the Chairman were apathetic and powerless to set matters right. On these findings, the courts below had the power to direct the winding up of the Company under S. 162(vi), and no grounds have been shown for our interfering with their order.10. It was urged on behalf of the appellant that as the Vice-Chairman who was responsible for the mismanagement had been removed, and the present management was taking steps to set things right and to put an end to the matters complained of there was no need to take action under S. 153-C.But the findings of the Courts below are that the Chairman himself either actively cooperated with the Vice-Chairman in various acts of misconduct and maladministration or that he had at any rate, on his own showing abdicated the entire management to him, and that as the affairs of the Company were in a state of confusion and embarrassment , it was necessary to take action under S. 153-C. We are of opinion that the learned Judges were justified on the above findings in passing the order which they did.11. It was also contended that the appointment of administrators in supersession of the directorate and vesting power in them to manage the Company was an interference with its internal management.It is no doubt the law that Courts will not, in general, intervene at the instance of shareholders in matters of internal administration, and will not interfere with the management of a company by its directors, so long as they are acting within the power conferred on them under the Articles of Association.But this rule can by its very nature apply only when the company is a running concern, and it is sought to interfere with its affairs as a running concern. But when an application is presented to wind up a company, its very object is to put an end to its existence, and for that purpose to terminate is management in accordance with the Articles of Association and to vest it in the Court. In that situation, there is no scope for the rule that the Court should not interfere in matters of internal management.And where accordingly a case had been made out for an order for winding up under S. 162, the appointment of administrators under S. 153-C cannot be attacked on the ground that it is an interference with the internal management of the affairs of the company. If a Liquidator can be appointed to manage the affairs of a company when an order for winding up is made under S. 162, administrators could also be appointed to manage its affairs, when action is taken under S. 153-C. This contention must accordingly be rejected.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Though the objection was raised in the written statement, the respondents did not press the same at the trial, and the question was never argued before the trial Judge.The learned Judges before whom this contention was raised on appeal declined to entertain it, as it was not pressed in the trial court, and there are no grounds for permitting the appellant to raise it in this appeal. Even otherwise, we are of opinion that this contention must, on the allegations in the statement, assuming them to be true, fail on the merits. Excluding the names of the 13 persons who are stated to be not members and the two are stated to have singed twice, the number of members who had given consent to the institution of the application was 65.The number of members of the Company is stated to beIf, therefore, 65 members consented to the application in writing, that would be sufficient to satisfy the condition laid down in S. 153-C, sub-cl. (3) (a) (i). But it is argued that as 13 of the members who had consented to the filing of the application had, subsequent to its presentation, withdrawn their consent, it thereafter ceased to satisfy the requirements of the statute, and was no longer maintainable.We have no hesitation in rejecting this contention. The validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation. In our opinion, the withdrawal of consent by 13 of the members, even, if true, cannot affect the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its own merits.6. It was next contended that the allegations in the application were not sufficient to support a winding up order under S. 162, and that, therefore, no action could be taken under S. 153-C.We agree with the appellant that before taking action under S. 153, C, the Court must be satisfied that circumstances exist on which an order for winding up could be made under S. 162.The true scope of S. 153-C is that whereas prior to its enactment the Court had no option but to pass an order for winding up when the conditions mentioned in S. 162, were satisfied, it could now in exercise of the powers conferred by that section make an order for its management by the Court with a view to its being ultimately salvaged. Where, therefore, the facts proved do not make out a case for winding up under S. 162, no order could be passed under S. 153-C.It was also contended that the appointment of administrators in supersession of the directorate and vesting power in them to manage the Company was an interference with its internal management.It is no doubt the law that Courts will not, in general, intervene at the instance of shareholders in matters of internal administration, and will not interfere with the management of a company by its directors, so long as they are acting within the power conferred on them under the Articles of Association.