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

The grounds on which the relief was claimed were that the affairs of the Company were being grossly mismanaged, that large amounts were owing to the Government for charges for electric energy supplied by them, that the directors had misappropriated the funds of the Company, and that the directorate which had the majority in voting strength was "riding roughshod" over the rights of the shareholders.In the alternative, it was prayed that action might be taken under S. 153-C and appropriate orders passed to protect the rights of the shareholders. The only effective opposition to the application came from the Chairman of the Company, Appanna Ranga Rao, who contested it on the ground that it was the Vice-Chairman, Devata Ramamohanrao, who was responsible for the maladministration of the Company, that he had been removed from the directorate, and steps were being taken to call him to account, and that there was accordingly no ground either for passing an order under S. 162, or for taking action under S. 153-C.The learned Judge of the Andhra High Court before whom the application came up for hearing, held that the charges set out therein had been substantially proved, and that it was a fit case for an order for winding up being made under S. 162 (vi).He also held that under the circumstances action could be taken under S. 153-C, and accordingly appointed two administrators for the management of the Company for a period of six months vesting in them all the powers of the directorate and authorising them to take the necessary steps for recovering the amounts due, paying the debts and for convening a meeting of the shareholders for the purpose of ascertaining their wishes whether the administration should continue, or whether a new Board of Directors should be constituted for the management of the Company.3. Against this order, the Chairman, Appanna Ranga Rao, acting in the name of the Company preferred an appeal to a Bench of the Andhra High Court. The learned Judges agreed with the trial Judge that the affairs of the Company, as they stood, justified action being taken under S. 153-C, and dismissed the appeal. Against this order, the Company has preferred this appeal by special leave.

Court's reasoning:
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.