1. This is an application for the winding-up of the Ripon Cotton Press Co., which has its place of business at Bellary and its factory at Raichur in the Nizam's Dominions. It is not suggested that the Company is insolvent and in fact we have a statement in which dividends are shown to have been declared from 1909 till 1922. It is, however, urged that it is just and equitable that the Company should be wound-up within the meaning of Section 162(6) of the Indian Company's Act, because the Company is not being worked for the benefit of the share-holders in general but mainly for the benefit of the family of Mr. Venkata Rao who is one of the Directors of the Company and Chairman of the Board of Directors.
2. In Loch v. Blackwood (1921) A.C. 783 : 93 L.J.P.C. 257 : (1924) B. & C.R. 209 : 131 L.T. 719 : 68 S.J. 735 : 10 T.L.R. 732 it was held to be a good reason for making a winding up order that there was a justifiable lack of confidence in the conduct and management of the Company's affairs owing to the management being held in one family which was in a position to dominate the other share-holders and monopolize the Company's affairs for its own individual benefit. The learned Judge in the Trial Court was of opinion that sufficient facts had not been proved to justify a winding up order. The case just quoted by me was not then brought to his notice as it was decided subsequent to his order of 3rd November 1922. The principal grievance of the petitioning share-holders is that very large balances instead of being kept in a Bank where they might earn interest, are kept in the hands of the Treasurers who are K.V.S. Ramachander and Co., represented by Mr. K. Ramachander, who is Mr. Venkata Rao's son and that while these balances have been accumulating the amount of dividend per share has been diminishing. An enormous advantage was secured by Mr. Venkata Rao's family by a special resolution of an Extraordinary General Meeting of March 26th 1910 when it was resolved that the Firm of Ramachander and Co., should be appointed the Treasurers of the Company on condition of their retaining the Company's moneys without interest and also of lending moneys to the Company without interest whenever required. Simultaneously the office of Secretary was abolished with effect from. 1st April 1910. This was resolved at the meeting of 26th March 1910 and confirmed at a subsequent meeting on the 9th April. As a result of this resolution, Mr. Venkata Rao's family were able to have the control of a large amount of capital for which no security was given and no interest had to be paid. It is not on record that they ever had to lend any money to the Company without interest. It was thus made advantageous to the Directorate to accumulate as large balances as possible in the hands of the Treasurers and to pay as small amounts as possible in the way of dividends. When I say 'Directorate' I mean Mr. Venkata Rao and those who had the same interest. The capital of the Company consists of 250 shares of Rs. 500 each, of which only 200 shares have been issued and Rs. 250 paid up on each share. It is alleged in the petition that Mr. Venkata Rao has control over 75 shares which are directly in the name of himself and his family. But in his evidence Mr. Venkata Rao admitted that he had interest in 142 or 146 shares out of the total 200 shares and thus in all voting he is able to command a preponderating influence. It is also alleged that if the other share-holders do not show compliance with his wishes he coerces them by threatening to call up the unpaid portions of their shares. At one time when there was a question of abandoning the Hospet Sugar Mill, which was one of the objects of the Company, P.W. No. 1 states that Mr. Venkata Rao threatened to call up the unpaid shares capital and put the share-holders to inconvenience and trouble if they did not agree to his proposal. As the Sugar Mill is one of the objects of the Company, declared in the Memorandum of Association, a special resolution of the share-holders and the orders of the Court were required by Section 12 of the Indian Companies Act for altering the Memorandum. As in 1920 to 1922, there were five Directors, of whom Mr. Venkata Rao was one and his son K. Ramachander was another and two of his nephews and a brother-in-law were also Directors, there was every chance of the Directors being able to effect their own purpose and put pressure on the shareholders by using their power under Acts. 24 to 26 of the Articles of Association in Table A of the Act to make the shareholders pay up the calls and to forfeit the shares of those members who did not comply with their demands. Since the appointment of K. Ramachander and Company as Treasurers in 1920, the dividends per share shown a steady decrease until in 1921 and 1922 only Rs. 15 per share were declared, this being equal to a dividends of about 6 per cent. One explanation for keeping such large sums in the hands of the Treasurer is that the money comes in at the end of the year and the expenses have to be incurred during the working season for which a large amount of working capital is necessary but the balance sheets in past years do not show that more than Rs. 10,000 has ever been necessary for the working expenses of the Company whereas the balances that Have been kept have in one year been as much as Rs. 51,000. In addition to this, there have been several irregularities in the working of the Company. Dividends have not been regularly paid. Some shares were pledged in favour of a mortgagee whose transferee brought a suit and although the transfer had been recognised, the Company contested the suit O.S. No. 12 of 1917 and had to pay costs amounting to Rs. 587 and Rs. 1,186 for interest. The officer of the Company evidently did not act in a bona fide manner in defending the suit against the plaintiff's demand after the shares had been registered in the name of the transferee. In Small Cause Suit No. 71 of 1917 a decree was obtained for Rs. 125 on account of dividend which was being withheld without any justification. The balance sheet for 1923 is not yet available in spite of the requirements of. Section 131 of the Act although we are now nearly at the end of 1924. Although the accounts appear to have been audited every year by an auditor named G. Venkata Chellam Chetty, it does not appear that the accounts at Raichur were looked into and compared with the accounts kept at the head office in Bellary. On 27th August 1921 a resolution was passed by a majority of votes of the shareholders for the voluntary winding-up of the Company. But this was not given effect to as the resolution was not passed at an extra-ordinary meeting called for that purpose and did not comply with the conditions of Section 81 of the Indian Companies Act as to a three-fourth the majority of share-holders. It is evident that the affairs of this Company are carried on in such a way that the members of one family are able to exercise a predominating influence over the management of the Company and to secure pertain benefits for themselves. The minority are unable to protest effectually against the actions of the Directors because the majority of the shares are in the hands of one family and the Directors themselves are able to hold over the share holders the fear of having to pay up the unpaid portion of their shares. This causes a lack of confidence in the management of the Directors which there is no hope of improving so long as the present Directorate continues and the funds are in the hands of the present. Treasurers. Under these circumstances, we think that the only course we can take to secure the just rights of the share-holders is to direct the winding-up of the Company and the appeal will, therefore, be allowed with costs here and in the lower Court and the case will be remanded to the Trial Court for the appointment of an Official Liquidator and for making such other direction as may be necessary under the provisions of Part V of the Indian Companies Act.