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Rajan Naginds Doshi and anr. Vs. British Burma Petroleum Co. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberCompany Petition No. 76 of 1970
Judge
Reported in[1972]42CompCas197(Bom)
ActsCompanies Act, 1956 - Sections 2(7), 6, 582, 583, 583(4) and 584
AppellantRajan Naginds Doshi and anr.
RespondentBritish Burma Petroleum Co. Ltd. and ors.
Appellant AdvocateP.M. Mukhi and ;S.J. Sorabjee, Advs.
Respondent AdvocatePorus A. Mehta, ;M.R. Parpia and ;R.J. Bhatt, Advs.
Excerpt:
company - winding up - section 583 of companies act, 1956 - petition for winding up of company under section 583 (4) (a) by share holders - contended that company ceased to carry on buisness - company started badli buisness of advancing money - it was not buisness within meaning of objects clauses in memorandum of company - petition allowed. - - the appointment of these three newly elected directors has been challenged by the petitioners in this petition as well as in suit no. this was a necessary and useful activity and would have been a good ground for not winding up the company during that period. it was held that the substratum of the company had failed and it was impossible to carry out the objects for which it was formed and therefore that it was just and equitable that the.....ordernain, j. 1. this is a petition by three of the shareholders of the british burma petroleum co. ltd. (hereinafter referred to as 'the company') for winding up the company. there three shareholders hold between them input 148 shares of the company of the face value of about rs. 300. they are however supported by 210 other shareholders who hold shares of the value of over one lakh of rupees. the petition is opposed by the company and 1,682 shareholders holding shares of the value of about 30 lakhs of rupees. the petition has come up before me for admission, but has been argued in great detail and as if it were fixed for final hearing. 2. most of the facts relevant to this petition are not in controversy and may be briefly stated. the company was incorporated in england on 31st august,.....
Judgment:
ORDER

Nain, J.

1. This is a petition by three of the shareholders of the British Burma Petroleum Co. Ltd. (hereinafter referred to as 'the company') for winding up the company. There three shareholders hold between them input 148 shares of the company of the face value of about Rs. 300. They are however supported by 210 other shareholders who hold shares of the value of over one lakh of rupees. The petition is opposed by the company and 1,682 shareholders holding shares of the value of about 30 lakhs of rupees. The petition has come up before me for admission, but has been argued in great detail and as if it were fixed for final hearing.

2. Most of the facts relevant to this petition are not in controversy and may be briefly stated. The company was incorporated in England on 31st August, 1910. It has a place of business and its head office in Bombay. Its authorised capital is 200 lakhs shares of the nominal value of 1 s. 6 d. each. Its issued and paid up capital is 37,50,000 shares, and 95 per cent. of its shareholders are in India.

3. The main and dominant object for which the company appears to have been started is set out in clause 3(1) of its memorandum and is prospecting for, refining, production of and dealing in petroleum and other mineral oils and in particular to acquire three existing Indian companies carrying on that memorandum on that business in Burma, viz., Aungaban Oil Co. Ltd.,Rangoon Refinery Co. Ltd. and Rangoon Oil Co. Ltd. There were prior to 8th December, 1970, in the memorandum of other object clauses some of which were ancillary to the main object, some were powers to enable the company to achieve the main object, many were such as would in any case be implied and some were inflated objects which it has become customary for draftsmen to insert, which were never needed by the company. Draftsmen resort to this device to avoid the cumbersome procedure of subsequently amending the object clauses. I shall consider some of the object clauses a little later. There was no clause providing that the various clauses were to be construed as independent main objects clauses or that the construction would not be limited by the name of the company. I shall for the sake of brevity refer to such clauses as 'independent construction clause'.

4. The company carried on the business of prospecting for, refining, producing and dealing in petroleum and other mineral oils in Burma from its inception in 1910 to 1942. In the beginning of March, 1942, the British pulled out of Burma and the Japanese occupied it. Before pulling out the British army blew up and destroyed the installations of the company as a part of its scorched earth policy. The company claimed compensation for the loss from the British Government. The legal proceedings for recovery of compensation ended up before the Judicial Committee of the House of Lords, the company succeeding. Thereafter, the British Parliament passed the War Damage Act, 1965, abolishing the right to compensation. This put an end to all the hopes of the company of getting any compensation for the destruction of its property in Burma. Between 1942 and 1965 the company carried on no business. It only devoted itself to the efforts for recovering compensation.

5. The fifty-fourth annual general meeting of the company was held at Bombay on 13th December, 1965, whereat the directors stated that the company carried on no business, it held no assets other than its capital resources and there was no hope of recovery of compensation. They proposed that the company be voluntarily wound up. At this time one Jagdish J. Kapadia was a director of the company holding about 100 shares. He appears to have collected a number of proxies. It was therefore not possible to possible to pass a special resolution for winding up with the requisite majority. The chairman therefore adjourned the general meeting.

6. By the end of March, 1966, the company had cash assets of about Rs. 70 lakhs mostly invested in fixed deposits with Indian companies. After 13th December, 1965, Jagdish J. Kapadia and his associates started acquiring more shares of the company. On 5th April, 1966, the then directors of the company except the said Jagdish Kapadia resigned and, in their place, B. L. Kapadia, T. L. Shah and M. C. Kapadia were appointed as directors under article 106 of the articles of association of the company. On that day, the newly appointed directors did not hold qualification shares viz., 2500 shares each. They did not acquire the qualification shares within two months from the date of their appointment. They, however, acquired the qualification shares after the said period of two months. They however continued to function as directors and appeared to have got themselves re-elected from time to time not as newly proposed directors after a proper notice that they would be so proposed, but without any notice as if they were validly elected directors who had retired and were eligible for re-election. The appointment of these three newly elected directors has been challenged by the petitioners in this petition as well as in Suit No. 862 of 1970, which is pending in this court.

7. The petitioners allege that after taking control of the company on 5th April, 1966, Jagdish Kapadia, B. L. Kapadia, T. L. Shah and M. C. Kapadia began to utilise the funds of the company for granting badli loans to shareholders of various other companies against the pledge of shares and in purchases of shares of other limited companies. It is alleged that they made these investments not only with the funds of the company but also by borrowing about Rs. 10 lakhs. With the funds of the company these directors have acquired the shares of National Rayon Corporation Ltd. and Killick Industries Ltd. and have acquired the control of these two companies. The Killick Industries Ltd., in turn, were the managing agents of about 7 other companies and had 7 more companies as subsidiaries. The petitioners allege that Jugdish Kapadia and his group have acquired the control of these companies by means of ultra vires business carried on by the company. It is alleged that this has been done for self-aggrandizement and to gain personal advantage for Jagdish Kapadia and his group. I may perhaps mention that the facts contained in these allegations are not denied. It is only the contentions based on the facts which are in controversy. The petitioners also allege that Jagdish Kapadia and his group have 'bled the company by taking excessive fees, remuneration and administrative expenses and dissipated its funds'.

8. On 22nd May, 1970, the petitioners filed the present petition for winding up mainly on the following two grounds : (a) that the company has ceased to carry on business and (b) that it is just and equitable that the company should be wound up, as its substratum is gone and there is no. Practical possibility of the company carrying on business under the main or dominant object for which it was formed.

9. This petition came up for admission before my brother, Vimadalal J., on 12th October, 1970, and was heard on 13th, 14th and 15th October, 1970. The company then applied for adjournment of the petition for two months on the grounds that the shareholders desired to call an extraordinary general meeting to consider and, if necessary, to emend the objects clauses. The adjournment was refused. The company appealed against the said order. The said appeal was allowed by consent. Thereafter, at the extraordinary general meeting of the company on 8th December, 1970, a special resolution was passed altering the memorandum of association of the company by deleting the dominant and main objects clauses and introducing a number of other objects clauses which would enable the company not only to carry on the prospecting for, producing, refining and dealing in petroleum but also to carry on other manufacturing business and the business of import and export and dealing in shares. The company also introduced the usual 'independent construction clause' and provided that the several objects clauses shall be deemed to be substantive and independent main objects clauses and that their construction will not be restricted by the name of the company. We shall consider the effect of these alterations a little later. It must, however, be mentioned that the company being a British company under section 5 of the English Companies Act, 1948, the resolution of alteration was not required to be confirmed by court and came into effect without such confirmation. Thereafter, on 30th November, 1970, some of the shareholders of the company other than the petitioners filed a suit in this court being Suit No. 862 of 1070, inter alia, for declarations : (a) that the alteration of memorandum of association at the meeting of 8th December, 1970, was void, and (b) that Jagdish Kapadia, M. C. Kapadia, B. L. Kapadia and S. N. Kapadia were not validly elected directors. The plaintiffs also sought the necessary injunctions in the suit. The said suit is pending.

10. I shall first deal with a preliminary objection as to the jurisdiction of this court taken by the company. The company contends that it is a foreign company registered in the United Kingdom and has its office in London and, therefore, this court has no jurisdiction to entertain the petition. Under section 2(7) of the Companies Act, 1956 (hereinafter referred to as 'the Companies Act'), a 'body corporate' or a 'corporation' includes a company incorporated outside India. The company is, therefore, undoubtedly a 'body corporate' and a 'corporation'. Part X of the Companies Act pertains to winding-up of unregistered companies. Section 582 of the Companies Act provides that, for the purposes of Part X, the expression 'unregistered 'company' shall not include a company registered under the existing or previous Indian law but shall include any other association or company consisting of more than 7 members at time when a petition for winding up is presented. The company not being registered under Indian law and undoubtedly being an association of persons consisting of more than 7 members falls within the meaning of 'unregistered company' in section 582. Section 583 contains provision for winding up of unregistered companies. Section 584 provides that where a body corporate incorporated outside India which has been carrying on business in India ceases to carry on business in India, it may be wound up as an unregistered company under Part X. The company is a body corporate incorporated outside India. Even prior to 1942 it had a place of business and its head office in Bombay. It has therefore been carrying on business in Bombay and has ceases to carry on its business in India. It does not matter that the oil installations of the company were in Burma, nonetheless it was carrying on business in India. It is, therefore, liable to be wound up as unregistered company under the provisions of section 583. I find no substance in the contention that this court has no jurisdiction to wind up the company. I reject the said contention.

11. Now, I come to the principal contention of the petitioners that the company has ceased to carry on business and is therefore liable to be wound up under the provisions of section 583(4)(a) of the Companies Act. From its inception in 1910 to 1942 the company carried on the business of prospecting for, producing, refining and dealing in petroleum and other mineral oils. In 1942 due to exigencies of war and destruction of the company's properties in Burma that business came to an end. From 1942 to 1965 the company carried on no business. It was engaged in litigation and other efforts for recovery of compensation for destruction of its property. This was a necessary and useful activity and would have been a good ground for not winding up the company during that period. But, in my opinion, this was not a business falling within the objects clauses of the company. It can, therefore, be said that from 1942 to 1965 the company did not carry on any business. After 1965 up to 1967 the company admittedly carried on badli business of advancing money on security of shares of other companies. From 1967 to 1970 to company has invested its capital principally in the shares of National Rayon Corporation Ltd. and Killick Industries Ltd. We have to consider whether badli business and the business of investing in shares of other companies was intra vires the company or ultra vires the company. If the said business was intra vires, it cannot be said that the company has ceased to carry on business. If on the other hand the said business was ultra vires, it was not business within the meaning of the objects clauses in the memorandum of the company and it will mean that the company had not carried on business during that period and perhaps what is worse that it had carried on ultra vires business. This requires construction of the objects clauses of the company.

12. As I have stated hereinabove, the first objects clause of the company as it stood prior to 8th December, 1970, was to prospect for, refine, produce and deal in petroleum and other mineral oils and for this it owned the undertakings of three companies in Burma mentioned in its first objects clause. The name of the company itself suggests that it was formed for carrying on petroleum business. From 1910 to 1942 the company carried on no other business than that provided for in its first objects clause. The memorandum of the company did not contain the usual 'independent construction clause' providing that each objects clause was to be construed as the main or dominant objects clause and was not to be restricted by the name of the company. For all these reasons I have no hesitation in coming to the conclusion that the main and dominant object of the company was contained in its first sub-clause and was that of prospecting for, refining, producing and dealing in petroleum and other mineral oils. On behalf of the company reliance has been placed on sub-clauses (3), (5), (6), (12), (14), (19) and (22) of clause 3. Clause 3 permits a variety of businesses including the business of running railways and other transport, construction business, engineering, foundries, running hotels, breweries, churches, chapels. This clause would permit the company to 'fly balloons from the earth to the moon' as the cynical English judge remarked in the Crown Bank case 1, referred to later. Clause 5 permits the company to carry on any trade, business or manufacture. Clause 6 permits the company to manufacture all kinds of articles, but this is qualified by the provision that the articles must be required for the purposes of the business of the company which would, in my opinion, be the business specified in the first sub-clause. Clause 12 gives power to the company to lend money on shares or otherwise, but this sub-clause is also qualified by the condition that it must be directly or indirectly for furtherance of the objects of the company. Clause 14 also permits investments in shares but is qualified by the condition that it must be for carrying out the objects of the company. Clause 19 permits investment of moneys of the company not immediately required for its general purposes. This contemplates the existence of its principal business and obviously a power for investment of surplus funds and not an objects clause enabling the company to invest its entire funds in other companies with a view to control them. Clause 22 is an ancillary clause providing for doing all things incidental to the objects of the company.

13. In order to avoid the cumbersome procedure for subsequent alteration of the objects of companies, it has become customary for companies to inflate the objects clause by adding to their principal objects a large number of objects many of which would in any case be implied and many of which are never needed by the company. Added to this catalogue of possible or conceivable objects is normally a sub-clause which provides that each of the objects specified in the clause would be regarded as independent objects, and shall not be limited or restricted either by reference to any other objects clause or the name of the company. Such an independent clause does not, however, exist in the memorandum of the company. The practice of inserting inflated objects has been criticised by the House of Lords in case of Cotman Brougham. However, as in that case there was an independent construction clause their Lordships held that effect would have to be given to it and the independent construction clause excluded the 'main objects' rule of construction. The 'main objects' rule of construction is a special rule of construction and is applied where the objects of a company are expressed in a series of paragraphs and one paragraph, commonly the first, appears to embody the main or dominant object of the company. In such a case, all the other paragraphs are to be treated as merely ancillary to the main object and as limited and controlled thereby.

14. The 'main objects' rule was expressed by Lindley L.J. in In re German Date Coffee Company as follows :

'In construing ..... any ..... memorandum of association in which there are general words, care must be taken to construe those general words so as not to make them a trap for unwary people. General words ..... must be taken in connection with what are shown by the context to be the dominant or main objects (of the company). It will not do under general words to turn a company for manufacturing one thing into a company for importing something else, however general the words are.'

15. In the above case the memorandum of association of the company stated that it was formed for working a German patent which had been or would be granted for manufacturing coffee from dates, and also for obtaining other patents for improvements and extensions of the said inventions or any modifications thereof or incidental thereto, and to acquire or purchase any other inventions for similar purposes, and to import and export all descriptions of produce for the purpose of food, and to acquire or lease buildings either in connection with the abovementioned purposes or otherwise, for the purposes of the company. The intended German patent was never granted, but the company purchased a Swedish patent, and also established works in Hamburg, where they made and sold coffee made from dates without a patent. Many of the shareholders withdrew from the company on ascertaining that the German patent could not be obtained, but the large majority of those who remained desired to continue the company which was in solvent circumstances. It was held that the substratum of the company had failed and it was impossible to carry out the objects for which it was formed and therefore that it was just and equitable that the company should be wound up although the petition was presented within a year of its incorporation.

16. In In re Haven Gold Mining Company the company was established for working a gold mine in New Zealand, and it turned out that the company had no title to the mine and had no prospect of obtaining possession of it except as to a small portion for a few months. The court was satisfied that the subject-matter of the business for which the company was formed had substantially ceased to exist although there were general words in the memorandum of association enabling the company to purchase and work other mines in New Zealand and large majority of the shareholders wished to continue the company. The court made an order of winding-up. In both the cases of German Date Coffee and Haven Gold Mining, the court referred to name of the company for determining its dominant or main object.

17. In In re Crown Bank the company was registered under the name of Mid-Northamptonshire Bank Ltd. In addition to wide and general objects, the memorandum of association stated particularly numerous objects of diverse character in fifteen paragraphs. The first three paragraphs related to banking, discounting, and money-lending and borrowing, respectively; others referred to purchasing and developing land, investing and dealing in shares and securities, and promoting companies. The company commenced business as a country bank in Northamptonshire, with an office in London. After a short time its name was changed to the Crown Bank Ltd. It gave up its country offices, ceased to do banking business, and carried on in London, in addition to some land speculation, business of investing in shares and securities. On a petition by a shareholder to wind up the company on the ground that its main objects had failed, it was held that the name of a company is important in construing the objects defined in the memorandum of association and that the company was not carrying on business authorised by the memorandum of association and it was just and equitable that it should be wound up.

18. The 'main objects' rule of construction has been followed in India in numerous cases where independent construction clause has not appeared in the memorandum. In this state of law, I have no hesitation in holding that the main and dominant object of the company as ascertained from its name, the first object clause, the business actually done by the company from 1910 to 1942 was to prospect for, refine, produce and deal in petroleum and mineral oils. I am further of the view that badli business of advancing money on shares carried on by the company from 1965 to 1967 and the business of investing money in shares of National Rayon Corporation Ltd. and Killick Industries Ltd. was ultra vires the objects of the company. It was, therefore, no business at all. What the company did was perhaps worse than ceasing to carry on business.

19. On behalf of the company, my attention was invited to case of In re Kitson and Co. Ltd.2 In this case the main and paramount object of the company was to carry on engineering business of a general nature. It had disposed of one engineering business and before an order on winding-up petition could be made, it had shown the intention of carrying on another engineering business. The court refused to make winding-up order. In my opinion, this case has no application. The company has not shown that it has acquired other oil installations with which it could continue the business for which the company was started.

20. Another case cited was In re Taldua Rubber Co. Ltd. In that case the court found that the paramount object of the company was to carry on the business of rubber estates and that it was not limited to the business of carrying on the particular estate. The memorandum also contained the independent construction clause. The company had disposed of a particular estate and showed an intention to carry on business by acquiring another estate. Although the company had no concrete scheme before the court for dealing with the proceeds of the sale of the first estate, the court refused to make a winding-up order. In the case of In re Eastern Telegraph Co. Ltd. the company was formed for acquiring the undertakings of telegraph lines. In 1929 its telegraph lines were acquired by a Government owned corporation. The company, however, had power to and had thereafter continued to carry on one of the main forms of the business authorised by its memorandum. Although not operating a telegraph or cable business itself, it had participated through the medium of its shareholding, in the proceeds of operating of the business carried on by another similar company, the court refused to make a winding-up order. In my opinion, none of the above three cases has any application to the facts of the present case. The present case is governed by the decisions in In re German Date Coffee Co., In re Haven Gold Mining Co. and In re Crown Bank.

21. Now, I come to the alteration of the objects clause on 8th December, 1970, during the pendency of this petition. This enables the company to carry on a variety of businesses and also introduces the independent construction clause. This petition was partly argued before the vacation in April last. The arguments have been continued on the reopening of courts in June. The company has filed an affidavit stating that during the vacation it has entered into three transactions for purchases or sales of mineral oils. I am not at all impressed with the bona fides of the new business and propose to ignore the same for the purpose of this petition. Apart from the new business purporting to have been done under the altered clause, the alteration of the object clauses in the memorandum was itself effected during the pendency of this petition and its validity is under challenge in a pending suit.

22. In England it was held in Stephens v. Mysore Reefs Mining Co. Ltd., that, notwithstanding an independent construction clause, the first few sub-clauses in the memorandum would contain the primary business of the company and the remaining sub-clauses would be ancillary sub-clauses or powers. But in the case of Cotman v. Brougham the House of Lords gave effect to the independent construction clause. House of Lords did not refer to the Mysore Reefs' case but text books such as Palmer have treated Mysore Reefs' case as no longer good law. In the case of Anglo Overseas Agencies Ltd. v. Green Salmon J. took the view that Mysore Reefs' case was no longer good law. I must, however, point out that in Cotman v. Brougham as well as in the case before Salmon J. the question was of ultra vires of certain acts of the company and not the question of substratum. There is considerable difference in construction when one is considering whether a particular act is ultra vires the company and when one is considering whether the substratum of the company is gone. It may perhaps yet be argued in England either in the Court of Appeal or before the House of Lords that the Mysore Reefs' case is still good law.

23. In India in the case of Lawang Tshang v. Goenka Commercial Bank Ltd. G. K. Mitter J. (later a judge of the Supreme Court of India) took a view quite contrary to the view of Salmon J. and he held that, notwithstanding the independent construction clause, the main and paramount objection of the company in that case was still contained in the first few clauses. P. N. Bhagwati J. has taken a view contrary to the Calcutta view in Mohanlal Dhanjibhai Mehta v. Chunilal B. Mehta. In the case of Akola Electric supply Co. Pvt. Ltd., Naik J. took a view similar to the one taken by Bhagwati J., but in that case the observations of the learned judge are obiter dicta and the point did not arise.

24. It would, therefore, appear that this rule of construction based on independent construction clause is not free from doubt. I must also mention that this alteration is being challenged as invalid in suit No. 862 of 1970. Such a suit is maintainable under the very provisions of section 5(9) of the English Companies Act, 1948. I do not think, therefore, that because of the subsequent alteration this petition should be summarily dismissed without further inquiry at the regular hearing.

25. Now, I come to the allegation that the directors of the company are not properly appointed. This contention is the subject-matter of suit No. 862 of 1970 in which a declaration to that effect is sought. There being other remedies available to the petitioners I would not wind up the company on this ground alone. However, as I have come to the conclusion that the business carried on by the company between 1965 and 1970 is ultra vires its memorandum, the fact that such business is carried on by directors improperly appointed becomes relevant for the purpose of coming to the conclusion whether it is just and equitable that the company should be wound up apart from the fact that its substratum is gone. The three directors other than Jagdish Kapadia were appointed on 5th April, 1966. At the date of appointment they admittedly did not have qualification shares nor did they acquire such qualification within two months. In my opinion, their offices fell vacant on 5th June, 1966. Thereafter, these three persons functioned without being validly appointed director. The qualification of directors is prescribed by article 88. It is the owning of 2,500 shares of the company. Article 89 provides that the office of a director shall be vacated if a director does not obtain his qualification within two months after his appointment. It is alleged by the petitioners that in the register of directors, the directors falsely showed that they held qualification shares. This allegation is not denied. Article 105 provides that no person other than a director retiring at the meeting shall, unless recommended by the directors for election, be eligible for the office of a director at any general meeting unless not less than seven nor more than forty-two clear days before the day appointed for the meeting, a notice in writing is given by a qualified member of his intention to propose such person. This previous notice does not apply to a retiring director who is eligible for re-election. It appears that at all subsequent general meetings, the three directors other than Jagdish Kapadia have been elected without any notice given under article 105 on footing date at the date of the general meeting, they were retiring directors. In view of the fact that I have come to the conclusion that these persons ceased to be directors on 5th June, 1966, and were not directors at any subsequent general meeting, they were, in my opinion, not retiring directors and were not entitled to be elected without a previous notice in writing prescribed by article 105. Prima facie it appears to me that directors other than Jagdish Kapadia were invalidly elected from time to time. The only validly elected director was Jagdish Kapadia and he alone could not function as the board of directors. It would, therefore, appear that he could function only under article 111 for the purpose of summoning general meetings of the company, but not for any other purpose. His acts other than those of calling general meeting would therefore be invalid. This may affect the question of the validity of the resolution altering the memorandum on 8th December, 1970. This will have to be considered at the hearing of the petition.

26. During the hearing of the petition, the shareholders supporting the company offered to purchase the shares of the petitioners either at the rate of Rs. 3 per share or at the rate of their own purchase or at the rate of break-up value of shares to be fixed by any chartered accountant appointed by the court. They also offered to purchase the shares of other dissentient shareholders at the rate of break-up value of the shares to be fixed by any chartered accountant appointed by the court. The petitioners and their supporters in turn offered to buy at these prices the shares of the present directors and the shareholders supporting them. It is true that the shareholders supporting the petitioners are very few and that the majority of the shareholders support the company. The offers and counter-offers were made to show that the other party was not acting bona fide. Reference was made on behalf of the company to the cases of George v. Athimattam Rubber Co. Ltd. and A. P. Pothen v. Hindustan trading Corporation Ltd. and it was argued that the petition was mala fide because if the petitioners were interested in retrieving their money and not wrecking the company, they could sell their shares at fair rate and get out. I am, however, not impressed by the fact that the petitioners are minority shareholders. If the business carried on by the company is ultra vires its memorandum and the said business is carried on by meddlers who are not validly elected directors, the petitioners, though in minority, are entitled to say that they would have the company wound up. In In re Haven Gold Mining Co.'s case the winding up order was made at the instance of the minority shareholders.

27. During his arguments, Mr. Parpia, on behalf of the shareholders supporting the company, applied for adjournment of the petition to enable his clients to put the offer of his clients to buy up the minority before a general meeting to be convened for the purpose. I refused this adjournment. The application was made at a late stage. Besides, after the petition is admitted and advertised, all the shareholders would be before the court. It will be open to them to consider the offer at the final hearing.

28. The petitioners alleged that the acquisition of shares of National Rayon Corporation Ltd. and/or Killick Industries Ltd. by Kapadia group is for ulterior purposes. In my opinion, an act of a company within the scope of powers expressed in its memorandum is not ultra vires, because its directors had a foreign purpose in mind when on the company's behalf they performed the act in question. This has been held in Charterbridge Corporation v. Lloyds Bank Ltd. In view of fact that I have taken the view that the business carried on by the company from 1965 to 1970 was ultra vires, the question of ulterior purpose in carrying on such business is also a matter that will have to be inquired into at the final hearing of the petition.

29. It appears to me prima facie that the company has ceased to carry on business, its substratum is gone, it has carried on ultra vires business and that the said business has been carried on by meddlers and that it will be just and equitable that the company should be wound up. These are, however, prima facie views. I do not think that this is a petition which should be summarily dismissed without further inquiry into the allegations. It must be admitted. I am prima facie satisfied that the matter is fit to be inquired into. At the stage of admission normally only contentions of a preliminary nature ought to be considered. I have, however, heard the matter for several days and come to the above conclusion.

30. On behalf of the company it was contended that the admission and advertisement will affect the business of the company. Apart from the alleged 3 transactions in oil entered into by the company a few days back, which do not appear to be bona fide, the company carries on no business. Its capital is invested in shares of National Rayon Corporation Ltd. and Killick Industries Ltd. which are both controlled by the company. There will, therefore, be no adverse effect on any business of the company.

31. In the result, I admit the petition. The company will pay to the petitioners the costs of the petition up to the stage of admission. Counsel certified. The petition will be advertised in the Maharashtra Government Gazette, The Times of India and The Maharashtra Times. The petition will not be advertised for a period of one week from to-day. The petition shall be heard on 2nd August, 1971.


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