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Jagannath Gupta and Co. Private Ltd. Vs. Mulchand Gupta - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 96 of 1968
Judge
Reported inAIR1969Cal363,72CWN872
ActsCompanies Act, 1956 - Sections 235, 433 and 483
AppellantJagannath Gupta and Co. Private Ltd.
RespondentMulchand Gupta
Appellant AdvocateA.C. Mitra, ;S.C. Sen and ;R.C. Nag, Advs.
Respondent AdvocateB. Das, ;S.B. Mukherji and ;N.K. Das, Advs.
DispositionAppeal allowed
Cases ReferredCalcutta v. Oriental Gas Co.
Excerpt:
- ray, j. 1. this appeal is from the judgment and order of datta, j., dated 23rd april 1908.2. the order was made on the summons dated 4th september 19(37 taken out by jagannath gupta and co. private ltd. inter alia for the orders first, that the respondent mule-hand gupta the petitioner in company petition no. 158 be restrained from taking by himself his servant and agents or otherwise any further proceeding upon the said petition whether by advertising the same or otherwise, secondly, that the said petition be removed from the file of the proceedings and thirdly, for payment of costs.3. in support of the summons there is an affidavit of bidya bhusan gupta affirmed on 4th september 19g7.4. mulchand gupta who preferred the company petition no. 158 of 1967 filed an affidavit in opposition.....
Judgment:

Ray, J.

1. This appeal is from the judgment and order of Datta, J., dated 23rd April 1908.

2. The order was made on the summons dated 4th September 19(37 taken out by Jagannath Gupta and Co. Private Ltd. inter alia for the orders first, that the respondent Mule-hand Gupta the petitioner in Company Petition No. 158 be restrained from taking by himself his servant and agents or otherwise any further proceeding upon the said petition whether by advertising the same or otherwise, secondly, that the said petition be removed from the file of the proceedings and thirdly, for payment of costs.

3. In support of the summons there is an affidavit of Bidya Bhusan Gupta affirmed on 4th September 19G7.

4. Mulchand Gupta who preferred the Company Petition No. 158 of 1967 filed an affidavit in opposition affirmed on 13th November 1967. Bidya Bhusan Gupta fifed an affidavit in reply affirmed on 20th November 1967. There are further affidavits of Mulchand Gupta affirmed on 27th March 1968 and of Bidya Bhusan Gupta affirmed on 20th April 1968.

5. Bidya Bhusan Gupta stated in his affidavit in support of the summons that the company from its inception carried on business in manganese and iron ore and brokerage in jute, gunny and hessian and that the company still continues to carry on the business. The further allegations in the said affidavit are that the total bank balance to the credit of the company's account as on 16th August 1967 is about Rs. 1,30,000. The company has been suffering some loss in the business of manganese ore on account of restriction by the Government on the export of ore and general trade depression. The capital of the company has not been exhausted. The assets of the company and the investments are worth Rupees 8,76,432 and are shown separately in Annexure C to the said affidavit.

6. In the said affidavit the other allegations made by Bidya Bhusan Gupta are that the respondent. Mulchand Gupta until 30th April 1906 had been in the employment of the company as an officer at a salary of Rs. 700 per month when be voluntarily left and yet between the months of July 1966 and March 1967 he made claims against the company for his salary for the months of May to August 1966. It is also alleged in the said affidavit that Mulchand Gupta by a letter dated 8th October 1966 claimed partition inter alia of the properties at Ranchi Garden House, Bhaironpur Agricultural land properties and Guuraoro ancestral house and land belonging to the estate of the deceased Jagannath Gupta.

7. It is also alleged in the said affidavit that the company had been holding its annual general meeting and laying its duly audited accounts before the meeting and notices were served on all the members. The respondent, it is alleged, all throughout had notice of the affairs of the company and never raised any objection.

8. It is further alleged in the said affidavit that on or about 9th August 1966 the respondent Mulchand Gupta commenced a proceeding before the Regional Director, Company Affairs, Calcutta, against the company and its directors alleging that the company did not hold meetings and that no notice of general meeting had been received and that the company did not pay dividends and that the company had been continuously losing and dissipating the shareholders' assets and that there was no register of shares and shares were transferred without transfer deed, that address of shareholders and directors was not entered, that the directors did not send profit and loss account and balance sheets, that the directors did not give any information about the activity of the company and that all the properties of the company had been sold at a considerable loss and Vijay Kumar Saraf alias Gupta, aged 16 years, was admitted as a director on 4th September 1902, that he was not qualified to hold any shares of the company, and finally that the director submitted a fabricated report of the company's stock to the Bank of India and the policy of the directors was going against the shareholders.

9. On 2.1-7-1967 Mulchand Gupta filed the Company Petition No. 158 and it was admitted on 1st August 1967. It is alleged that the petition for winding up is not presented bona fide but is intended to bring pressure on the company and is an abuse of process of Court. It is also alleged that except the respondent's group (Mulchand Gupta) all other shareholders are satisfied that the- winding up of the company will be injurious to the interest of the company. It is also alleged that the winding up of the company will gravely embarrass the directors in resisting proceedings before the Company Law Board and that charges before the Board arc identical.

10. Mulchand Gupta in his affidavit in opposition alleged that the company's immovable properties except premises No. 8, Murlidhar Sen Lane, Calcutla-7 had been sold and/or transferred. One of the major disputes centres on the allegation in the affidavit of Bidya Bhusan Gupta that Jagannath Gupta who held 495 shares bequeathed 125 shares to Padam Chand Gupta, 250 shares to Bidya Bhusan Gupta, 65 snares to Go[al Krishna Gupta and 55 shares to Debi Prosad Gupta. Mulchand Gupta in his affidavit alleged that though the shares were alleged to have been, transferred by Jagannath Gupta in 1949, the same was not recorded till 1952. Mulchand Gupta alleged that the proceedings were false and colourable transactions and intended to deprive Mulchand Gupta of his right, title and interest in the said shares. Mulchand Gupta in his affidavit alleged that the brokerage business was speculative and that the company was practically defunct and the company was in a moribund condition. Mulchand Gupta further denied that the assets were worth Rs. 8,76,432 as alleged. With regard to the properties, Mulchand Gupta alleged that Bhaironpur Agricultural land belonging to the company was transferred to Mulchand Gupta s sou Gopal Krishna although no such transfer in fact took place and thereafter the property was acquired by the State of Punjab and the compensation moneys had not been credited in the books of the company. With regard to the Guuraoro ancestral house, Mulchand Gupta alleged that the same was shown to navo been transferred to his son on or about 24th March 1958, but, in fact, no such transfer took place and the property still remains registered in the name of is son Gopal Krishna Gupta and that the benefit of the property was not enjoyed by the company but by Bidya Bhusan Gupta and members of his family.

11. The learned Judge was pleased to hold that on the facts and circumstances of this case the winding up application should be stayed but was eventually pleased not to stay the winding up application because a certain event was brought to the notice of the learned Judge while the judgment was under consideration. The fact which weighed with the learned Judge in refusing the stay was that one of the properties of the company, namely, the Guuraoro building and land which is No. 18 in the schedule of properties to the memorandum and articles of association was sold by the company and the fact of such sale was suppressed by Bidya Bhusan Gupta while the application for stay was heard. The application for stay was filed in the month of September 1967 and the application was heard by the learned Judge on 30th January, 31st January and 1st February 1968 and the judgment was reserved. Mulchand Gupta affirmed an affidavit on 27th March 1968 and in that affidavit alleged that in the petition for winding up it was alleged that all properties except item No. 15 described as 8, Murlidhar Sane Lane, Calcutta, had been sold or transferred. Mulchand Gupta alleged that in the application for injunction made by Bidya Bhusan Gupta, the latter stated that items 1 to 14 in the Schedule A to the memorandum and articles of association had been sold and item No. 17 had been acquired by the Government of Punjab and that the company was still the owner of the other properties. Mulchand Gupta in the said affidavit affirmed on 27th March 1968 alleged that item No. 16 in Schedule A namely, the Ranchi property, was conveyed in the name of the wife or Bidya Bhusan Gupta and that item No. 17 in the said Schedule A being the Bhaironpur property, had been appropriated to have been transferred to Mulchand Gupta's son Gopal Krishna Gupta although no such transfer had taken place and item No. 18, namely, Guuraoro property had also been shown to have been transferred to Mulchand Gupta's son Gopal Krishna Gupta although no such transfer had taken place. In the affidavit in reply affirmed by Bidya Bhusan Gupta affirmed on 25th November 1967, on the Judge's summons dated 4th September 1967 Bidya Bhusan Gupta alleged that Bhaironpur and Guuraoro properties could not be delivered to the purchasers and the conveyances in respect thereof were treated as cancelled and further that Bhaironpur property was eventually acquired by the Government of Punjab. Mulchand Gupta in paragraph 7 of his affidavit affirmed on 27th March 1968 said that he made enquiries during the pendency of the winding up petition and before the application for injunction was made and came to know that Bidya Bhusan Gupta acting on behalf of the company had transferred the said property to Vijay Kumar Gupta alleged to be the adopted son of late Madhav Prasad Gupta and the natural son of Bidya Bhusan Gupta. In paragaph 8 of the said affidavit affirmed on 27th March 1968, Mulchand Gupta alleged that he came to know of the transfer of Guuraoro property on 1st March 1968 and obtained a certified copy of the conveyance on 12th August 1967 and further alleged that the transfer was a false and colourable transaction.

12, Bidya Bhusan Gupta affirmed an affidavit on 20th April 1968 in answer to Mulchand Gupta's affidavit. In paragraph 6 of the said affidavit, he alleged mat the appropriate deed of conveyance dated 12th August 1967 had been retained by the company and was never acted upon and the property was still dealt with by the company and the company is in possession and enjoyment thereof.

13. On these affidavits, the learned Judge was pleased to hold that if it had been brought out in the fast instance, it might have materially affected the position in the matter of granting stay. The main consideration of the learned Judge was that most of the properties were sold between the years 1949 and 1960 and prima facie this might not have been the subject-matter of winding up but the transfer which was effected after the presentation of the winding up weighed with the learned Judge and, therefore, the learned Judge felt disinclined to grant a discretionary order of stay of winding up.

14. There are two questions which call for determination. First, whether an appeal lies. Secondly, whether there should be a stay of the winding up petition,

15. Counsel on behalf of the respondent contended that an appeal was incompetent for three reasons: First, that the order is made in the exercise of inherent power of the Court and, therefore, it is not appeal able. Secondly, that the order is not a judgment within the meaning of the word in Clause 15 of the Letters Patent. Thirdly, Section 483 of the Companies Act cannot be invoked in the present case because there is yet no winding up. Section 483 was construed by counsel for the respondent to be attracted only where a winding up order had been made. Counsel for the respondent relied on the Bench decision in John Herbert and Co. Private Ltd. v. Pranay Kumar Dutta, reported in (1966) 70 Cal WN 516. That was a decision on an appeal from an order refusing to stay proceedings on a Company Petition No. 22 of 1965. It was held that in rejecting such an application, the Court merely decided that there was a prima facie case for enquiry and it could not then and did not in fact adjudicate upon the rights of the parties and therefore it was not a judgment under Clause 15 of the Letters Patent

16. Counsel for the appellant, on the other hand, contended first that the order was not in exercise of inherent power but that the order was made in the matter of winding up. Secondly, it was said that the order was a judgment within the meaning of the word in Clause 15 of the Letters Patent. Thirdly, it was said that it was an order in the matter of winding up under Section 483 of the Companies Act and, therefore, an appeal was competent. Counsel for the appellant relied on the decision of the Sureme Court in Shankarlal Agarwala v. Shankarlal Poddar, reported in : [1964]1SCR717 .

17. It must be stated at the outset that in the Bench decision in John Herbert Company's case, (1966) 70 Cal WN 516, there is no reference to the decision of the Supreme Court in : [1964]1SCR717 . The Bench decision proceeded on a consideration of the question as to whether an order refusing stay is a judgment within the meaning of the word under Clause 15 of the Letters Patent Counsel for the appellant relied on the decision of the Supreme Court in Rani Ashrumati's case, reported in : [1953]4SCR1159 and Bench decisions of this Court in Shorab Merwanji Modi v. Mansata Film Distributors, reported in : AIR1957Cal727 , Royal Nepal Airline case, reported in : AIR1966Cal319 , in the case or M. B. Sirkar and Sons v. Powell and Co., reported in : AIR1956Cal630 , another Bench decision in the case of Mohammed Felumeah v. S. Mondal, reported in : AIR1960Cal582 and a Bench decision of the Madras High Court reported in : AIR1968Mad1 (FB) in support of the proposition that a decision refusing stay would be a judgment,

18. It is necessary to keep in the forefront Section 483 of the Companies Act which enacts that appeals from any order made or decision given in the matter of the winding up of a company by the Court shall lie to the same Court to which and the same manner in which and subject to the same condition under which appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. In Shaukarlal Aggarwala's case : [1964]1SCR717 , the question for consideration was the correctness and legality of an order of a Bench decision of this Court refusing to confirm a sale by the liquidators of the assets of a company which was being wound up. Counsel for the respondent laid emphasis on the feature that the decision of the Supreme Court was confined to a case of a company which had been wound up. I am unable to accept that feature as either the ratio of the decision or as having any logic or principle in controlling the meaning of Section 483 of the Companies Act The reasons are twofold: First, the section itself refers to any order made or decision given. Secondly, orders made or decisions given are to be in the matter of the winding up of a company. To accede to the contention of the counsel for the respondent that only after winding up is made, an order made or a decision given in winding up will be appealable is to restrict the language of the section.

19. The Supreme Court in ShankarlaJ Aggarwala's case, : [1964]1SCR717 , referred to the views of this Court as also the views of the Bombay High Court on orders or decisions under Section 202 of the 1913 Companies Act. Section 202 was in the same language as Section 483 of the Companies Act, 1956. With regard to the meaning of the expression, order or decision used in Section 202 of the 1913 Companies Act, the Supreme Court accepted the Bombay view to be correct, namely, that an order or decision in the matter of winding up would not be merely procedural in character but that it would be an order or decision to affect the rights and liabilities of the parties. The Supreme Court further observed that the right of appeal was conferred by the first limb of Section 202. The first limb of Section 483 of the 1956 Companies Act is the same as the first limb of Section 202 of 1913 Companies Act The first limb of the section states that appeals from order made or decision given in the matter of the winding up of a company by the Court shah' lie to the same Court Therefore, the Supreme Court decision is an authority for the proposition that any order made or decision given in the matter of winding up of a company is appealable. After the decision of the Supreme Court which is the law of the land the Bench decision of this Court will not be of any avail to the respondent to contend that appeal from an order of stay of the matter of winding up does not lie. The Supreme Court decision further held that the second limb of Section 202 of the 1913 Act which was the same as the second limb of Section 483 of the 1956 Companies Act refers to the manner and the conditions subject to which the appeals may be had and the second limb must be construed as merely regulating the procedure to be followed in the presentation of the appeal and of hearing them, the period of limitation within which the appeal is to be presented and the forum to which appeal would lie, and not as restricting or impairing the substantive right of appeal. Therefore, the Supreme Court concluded that on the construction of Section 202 of the Companies Act occasion did not arise to examine the meaning of the expression judgment in the Letters Patent In the present case the order refusing stay of winding up of a company is an order made or decision given in the matter of winding up of a company, I am, therefore, of opinion that the appeal in the present case is competent and me decision of the Supreme Court settles that question.

20. In order to appreciate the controversies as to whether there should be a stay or not it is necessary to refer to three broad features in the present case. First, that the company is really a family concern which was started by Tagannath Gupta. Jagannath Gupta had four sons: Bidya Bhusan, Padam Chand, Mulchand and Bim Sen. Bidya Bhusan had a son Madhav Prasad who died in 1945 and a daughter Bimala who was married to Uma Shankar Sharaf. There was a son by that marriage and the name of the son was Vijay Kumar Sharaf. Vijay Kumar Sharaf was adopted in the month of May 1967 by the widow of Madhav Prasad Gupta. Mulchand Gupta has two sons: Gopal Krishna and Indrajit. Bhim Sengupta had two sons: Debi Prasad and S. Shukla. The second feature is about the distribution of shares in this company. The capital of the company is Rs. 25,00,000 divided into 1000 ordinary shares of Rupees 2,500. The paid up capital is Rs. 25 lakhs. The said 1000 ordinary shares were initially held as follows:

(a) Jagannath Gupta 495 Shares(b) Srimati Bhuran Devi 5 shares (c) Bidya Bhusan Gupta 125 shares (d) Padam Chand Gupta 125 shares (e) Mool Chand Gupta 125 shares (f) Bhim Sen Gupta 120 shares (g) Krishna Devi 5 shares

The first directors of the company were Jagannath Gupta, Padam Chand Gupta, Bidya Bhusan Gupta. Jagaunath Gupta while alive at a meeting of the Board of Directors held on 6 September 1049 passed a resolution whereby he nominated his successors to his 495 shares or bequeathed or transferred his 495 shares in the event of his death and 125 shares were given to Padam Chand Gupta, 250 shares to Bidya Bhusan Gupta, 65 to Gopal Krishna Gupta son of Mulchand and 55 shares to Debi Prosad Gupta son of Bhirn Sen Gupta. The third distinctive feature in the present case is that the company was formed with 19 properties specified in Schedule A to the Memorandum, and Articles of Association.

21. The learned Judge referred to the three features in the present case and as to whether the company being a family concern the principle of dissolution of partnership -should apply. Secondly, whether the allegations of sale of properties and allegations as to distribution of shares should find place in winding up. The learned Judge was also pleased to observe that in view- of the fact that most of the properties had been sold between the years 1949 and 1960 the petition for winding up suffered from the vice of delay. The learned Judge was pleased to hold that if the shareholders had any grievance with regard to loss of properties there was nothing to prevent the shareholders from recovering the properties alleged to have been lost. The learned Judge was also pleased to hold that the reference to the Begional Director Company Affairs about the affairs of the company was also to be taken into consideration.

22. Counsel for the respondent laid emphasis on the suppression of fact by Bidya Bhusan Gupta as to sale of Guuraoro properties. It was stated that the appellant invoked the remedy of injunction which was an equitable relief and the utmost candour was expected in the present case. Reliance was placed in support of that proposition on Kerr on Injunction, 6th Edition, page 323 and the decisions in Dalglish v. Jarvie, reported in (1850) 42 ER 89 and the case of Princess Edmond de Polignac reported in 1917-1 KB 486 and it was contended that if there was possibility of influencing the decision by suppression of fact the exercise of discretion by the trial Court should not be disturbed.

23. Counsel for the appellant on the other hand contended that the petitioner in the winding up petition was guilty of suppression of facts which were grave in nature. First, that Mulchand Gupta was in service of the company and Mulchand Gupta him self gave an indemnity to sell one of the properties in the year 1960. Secondly, that Mulchand Gupta suppressed from the Court the fact that there was investigation called for by Mulchand Gupta by referring the matter to the Company Law Board. Thirdly it was said that the application for stay was of a defensive nature and the application for winding up was on the offensive and therefore the principle of suppression would apply with greater rigour in the case of winding up petition than in the case of application for stay.

24. In the exercise of jurisdiction for staying the winding up petition counsel for the respondent contended that the winding up petition was not controverted by affidavits and therefore the allegations had not been gone into and therefore the court should not stay if the facts reveal the necessity of enquiry. Broadly stated, the proposition would be correct that the court would not stay the winding up if the facts disclosed grounds for winding up. In the present case, one of the most important elements is that Mulchand Gupta was in the employment of the company upto the year 1966 and he did not take any step to object about these affairs as long as he was in employment. In the second place, the allegations are that most of the properties were sold between the years 1940 and 1960. When a petitioner waits for seven years to come to a court of law on a charge of winding up the court will decide as to whether the petition is presented for legitimate grievances or is presented in aid of collateral reasons. In the present case, the facts leave no doubt whatsoever that the sale of properties for over two decades ended in the year 1960. When Mulchand Gupta was in the active knowledge of all affairs of the company and was himself a parry to indemnify the company in respect of sale of Chittaranjan Avenue property at Calcutta it cannot be denied that the allegations for winding up the company on the ground of sale of properties is not the real and legitimate ground for winding up. Winding up is a remedy which will be open to shareholders or other persons who find that the affairs of the company are being conducted in such a manner that there is either no business done according to the objects or that business is done by persons who are not elected in, a specified way or that business is not done in accordance with the principles of commercial administration or commercial probity and efficiency. In the present case Mulchand Gupta was a party to the business and administration of the company for a long time and he participated in the sale of property which sale is now impeached and he gave guarantee to indemnify the company in respect of claims and demands made by Mulchand Gupta himself or by any of the members of his family against the property and the self-same person challenges the transactions as constituting a ground for winding up.

25. With regard to shares of Jagannath Gupta it is alleged in the winding up petition which appears at p. 164 of the paper book that alter the death of Jagannath Gupta his widow Sm. Bhuran Devi, Bidya Bhusan and Padam Chand wrougfully and illegally took possession of the 'shares and divided the shares standing in the name of Jagannath Gupta to Bidya Bhusan and Padam Chand. It is also alleged that prior to the death of Bhuran Devi, Bhim Sen Gupta had sold or transferred his 120 shares in the company to Bhuran Devi and those 120 shares along with 5 shares originally allotted to Bhuran Devi stood in her name. These allegations are made in paragraphs 10 and 11 of the petition for winding up. These allegations are verified by Mulchand Gupta as true to his knowledge. In the affidavit in opposition to the application to the Judge's summons dated 4 September 1967 Mulchand Gupta affirmed an affidavit on 13 November 1967. In paragraph 11 of that affidavit Mulchand Gupta alleged that though the shares were alleged to have been transferred by Jagannath Gupta in 1919 the transfers were not recorded till the year 1952 and that the transfers were false and colourable transactions and were intended to deprive Mulchand of his right, title and interest. Bhim Sen Gupta in his affidavit affirmed on 13 November 1967 alleged in paragraph 3 thereof that he pointed out to his brother Mulchand Gupta that he had never sold or transferred his 120 shares to Bhuran Devi or any other person and that it was false and incorrect to say that the shares had been sold as alleged or at all.

26. These allegations about the shares particularly the distribution of the shares belonging to Jagannath Gupta or transfer of shares by Bhim Sen Gupta are also invoked in aid of the application for winding up on the ground that the group of Bidya Bhusan Gupta is in majority with the aid of these shares. It cannot be disputed that the distribution of Jagannath Gupta's shares took place 15 years prior to the presentation of the winding up petition. It cannot also be disputed that Mulchand Gupta was aware of everything that happened in relation to the transfer of those shares. The letter dated 9 August 1966 written by Mulchand to the Regional Director Company Affairs appearing at page 187 of the paper book indicates that Mulchand Gupta knew that transfers were not supported by properly executed transfer deeds and that no endorsement was made on the back of the share certificate. Yet, Mulchand Gupta never objected to the same or took any step to redress any of his grievances alleged now. Irrespective of delay these facts indicate that Mulchand Gupta was himself not only in the knowledge of those things and affairs but he also acquiesced in the management and business of the company by the persons in charge during those years. Impeachment of probity or commercial morality at a time when Mulchand Gupta has ceased to be in the employment of the company will have to be looked into with certain amount of care and caution. In the light of the facts and circumstances. I am of opinion that the grievances about the shares of Jagannath Gupta and their distribution are not legitimate grounds for winding up but are intended to wreak vengeance on the group of Bidya Bhusan Gupta and to deprive them of their business and management.

27. The question of suppression of the sale of Guuraoro property on which the learned Judge placed reliance was contended by counsel for the appellant not to be a matter material for consideration of winding up. Reliance was placed on the decision in Moody v. Cox and Hatt, reported in 1917-2 Gh 71 and in particular the observation of Scrutton L. J. that suppression is to have material hearing and relation on the matter in issue. In the case of Moody the question for consideration was whether the plaintiff who contracted to purchase from trustees a portion of that trust property and the trustees being a solicitor arid his clerk whether the solicitor who acted through his clerk as solicitor both for vendor and purchaser was guilty of non-disclosure of material facts relating to the matter. In the course of negotiations the plaintiff offered his solicitor's clerk and the latter accepted a bribe. There was an action for rescission and the defendants counter-claimed specific performance. By the claim for specific performance the contract which might have been repudiated on the ground of bribe was affirmed and the plaintiff was not therefore denied his equitable right on the independent ground of non-disclosure by his solicitor of the material facts. Scrutton L. J. said in that case that the bribe had no immediate relation to rectification, if rectification were asked or to rescission in connection with a matter not in any way connected with the bribe. Arguments were advanced that an application for winding up would require greater candour than an application for stay. In regard to statement of facts in petition neither on principle nor on precedent any such distinction can be made.

28. But in the present case an important consideration is whether the petitioner who impeaches sale of certain properties can travel beyond the petition for winding up by additional allegations and thereby prevent a stay of the winding up petition. Counsel for the appellant relied on the Statement of Law in Buckley's Companies Act, 12th Edition at p. 473 that a winding up order could be made only on secundurn allegata et probata. In my opinion, the petition for winding up is to be confined to the grounds set out in the petition and petitioner except with the leave of the Court should not be allowed to travel outside the petition. In' the present case the sale of Guuraoro property appears to be very much in dispute as to whether it is a complete sale or aninchoate sale. In winding up disputed questions of fact are taken into consideration to decide as to whether there should 'be a winding up or not. Similarly, in an application for stay of winding up the Court will look into the affidavit evidence and when the Court finds that there are disputes as to whether there have been sales of properties or not the Court will exercise jurisdiction in the light of facts and circumstances. In the present case, Mulchand Gupta alleged that there were sales in favour of his son but they were not effected. The sale of Guuraoro properties was alleged by Mulchand Gupta to have taken place recently. On the other hand, the appellants contended that though there was a deed of conveyance the property had not beer, sold and the sale was not complete.

29. The impeachment of sale of one property in the present case as against the sale of fourteen properties spread between the years 1940 to 1960 requires consideration as to whether this feature should turn the scales against the appellant as happened at the trial Court. In considering the sale of Guuraoro property the other features in the present case to which reference has been made indicate that Mulchand Gupta is guilty of suppression of facts of much graver importance. The reference by Mulchand Gupta to the Company Law Board does not find any place in the petition. It is said by counsel for the respondent that letters were annexed to the petition and therefore there was no suppression. Counsel for the respondent relied on the decision of the Judicial Committee reported in (1878) 5 Ind App 116 (PC) and the observation at page 121 that allegations could be supplemented by annexures. In that case the Judicial Committee observed that statements in plaint could be supplemented by annexures to the plaint. In the present case, counsel for the appellant contended that reference to annexure would not indicate that there was a statement of facts. Counsel for the appellant relied on the decision in Mica Export Promotion Council's case reported in 1968-1 Com LJ 301 (Cal) where it was not sufficient to file annexures wherefrom facts could be gleaned.

30. It cannot be denied that if annexures are in support of allegations there would not be any suppression of fact. In the present case, the petition for winding-up which appears at page 164 following lit is alleged in paragraph 27 thereof that in the petitioner addressed several letters to the Company or its Directors asking for an explanation of illegal, fraudulent and wrongful acts of the Directors. Copies of correspondence are said to be collectively marked with the letter 'B'. It is true that one or two of the letters written by Mulchand Gupta found place in the annexure but unless and until it appears in the petition as to why the correspondence is relied on the annexures will not be meaningful in regard to the petition. In the present case, Mulchand Gupta alleged that the correspondence would show that the Company and its Directors were written to for explanation of illegal acts. There is no averment by the petitioner that the petitioner preferred complaint before the Company Board. Counsel on behalf of the respondent, contended that annexures would eventually indicate that there was reference before the Company Board. The suppression in the present case is that the petitioner asked for investigation of affairs of the Company by the Company Law Board. The importance of such an allegation is that if investigation of the affairs of the company is pending it may be that the Court will not admit the petition for winding-up. It was said by the Supreme Court in Rajah Mundry Electric Supply Corpn. case, reported in : [1955]2SCR1066 , that there must be a justifiable lack of confidence and business should not be conducted in such a manner as there will be a lack of probity. In such an investigation before the Company Law Board the rival contentions will be gone into and counsel for the appellant rightly contended that if that remedy had been chosen, it would not be just and proper to allow the winding-up petition to be pursued by the same litigant. That is one of the reasons which will weigh with the Court in granting injunction in the facts and circumstances of the present case.

31. Counsel for the respondent contended that proceedings under Section 235 following of the Companies Act did not start and the language of Section 239 of the Companies Act was not such that there might not be both winding up and investigation of the affairs by the Company Board. Reliance was placed by counsel for the respondent on the decisions reported in New Central Jute Mills Co. Ltd. v. Deputy Secretary, Ministry of Finance, : AIR1966Cal151 and Ashoka Marketing Ltd. v. Union of India, 70 Cal WN 742 = (AIR 1967 Cal 159) in support of the proposition that such investigation proceedings would not affect the rights of the company. That is a different matter. If the Company wanted to start proceedings for recovery of properties alleged to be sold or frittered away the company could have done so. Investigation of the affairs of a company is possible under the Companies Act and investigation is not a ground for winding-up. See Palmer's Company Precedents Vol. II, paces 42 and 43, Counsel for the appellant contended that the allegation of the petitioner in the company petition that very recently the properties had been sold was guiltv of the vice of suppression of material facts. In the petition for winding-up in paragraph 17 it is stated that between the years of 1940 and 1966, all the properties mentioned in Schedule except in item No. 15 have been sold. In para. 18 (c) of the petition for winding up it is said that the property at Guuraoro has been sold by the Directors very recently. It will appear from the correspondence that Mulchand Gupta on 8 October 1966, claimed partition of this very property. These facts will indicate that the impeachment of sale of the properties is really intended to nurse the claims of Mulchand Gupta to the properties on the basis of individual claim as heir of Jagannath Gupta. A distinction has been made even between corporate rights and individual rights of shareholders. But Mulchand Gupta's claim to properties is on the basis of heirship and not as a shareholder of the company. It is noticeable that in the present case, though the petition for winding up is presented on the ground of just and equitable principle, the grounds, of complaint relate to disputes between the parties of internal character regarding distribution of shares or distribution of properties. That is another reason why the winding-up petition should not be allowed to be pursued.

32. Counsel for the respondent contended that the appellant in the present case asked for injunction and removal of the petition from file and these prayers were not proper. It will appear that the relief's asked for on the Judge's summons are modelled on Palmer's Company Precedents, Vol. II, Forms Nos. 17 and 18 at page 46. The decision in re: Bharat Vegetable Products Ltd., (1952) 56 Cal 'WN 29 also indicates that the reliefs asked for are in proper form.

33. Counsel for the appellant relied on the decision of the Supreme Court in Seth Mohanlal v. Grain Chambers Ltd., Muzaffarnagar reported in : [1968]2SCR252 in support of the proposition that the materials as on the date of winding up should be taken into consideration and it was, therefore, contended that allegation of the sale ofGuuraoro property should not be decisive of refusal of stay. In Mohanlal's case, : [1968]2SCR252 the Supreme Court considered whether an order of winding-up should be made on the just and equitable ground in the interest of share-holders. In that case the Company's business had come to a standstill because of the long drawn out litigation and that was held not to be a ground for winding up. The company had immoveable property and liquid assets. There was no evidence that the Company was unable to pay its debts. The Supreme Court held that in that case the objects for which the company had been incorporated were not only the business in which there was loss but also others. It was said that the Company could not carry on its business except at a loss, or the existing and possible assets were insufficient to meet the existing liabilities. It was said in the present case that the Company was carrying on business in brokerage and that the business was going on. The Supreme Court said that the business organisation could not be said to have been destroyed merely because the brokers who were acting as mediators had been discharged and their accounts settled. There are two observations of the Supreme Court which should be kept in the forefront. First, that the Company could always restart the business with the assets it possessed, and prosecute the objects for which it was incorporated. Secondly, only the circumstances existing as at the date of the petition are taken into consideration for determining whether an application has been made out for holding that it is just and equitable that the Company should be wound up. Both the principles were invoked by Counsel for the appellant that in the facts and circumstances of the present case there was a running business of the Company and allegations of sale of properties related to events which happened long ago to the knowledge of and with the participation of Mulchand Gupta and any reference to sale of Guuraora property would be beyond the petition and, therefore, would not be a material consideration in refusing stay. It is noticeable on the authority of the decision of the Supreme Court that allegations of circumstances on the date of the petition should alone be looked into. The Guuraora property has been alleged to be sold and it is also claimed on the principle of inheritance. In my opinion, it should not have weighed with the learned Judge in refusing stay on the ground of suppression of fact for the reason that it was beyond the scope of the petition and the sale was a disputed transaction. The learned Judge was correct in coming to the conclusion on the facts and circumstances of the case that there should be a stay . The consideration of the sale of Guuraora property by the learned Judge disentitled the appellant to a stay of the winding up of the petition. In my opinion, the learnec Judge should not have placed reliance on the alleged sale of Guuraoro property in arriving at that conclusion. The facts in the present case indicate that the last transaction took place seven years before the presentation of the petition. Secondly, the petitioner was in the employment of the Company and was a party to the sale and had knowledge of the sale. Thirdly, the impeachment of distribution of shares is made by Mulchand Gupta after fifteen years. He was fully aware of all that happened and he did not take any step. Fifthly, the Petitioner Mul-chand Gupta took steps before Company Law Board and suppressed that fact in Court. This suppression is certainly within the mischief of decision of Nadar Press Ltd. v. N. P. S. N. Ramiah Nadar, reported in : AIR1968Mad374 and the observations appearing at page 341 of the report (Com Cas) = (at p. 376 of AIR) that where remedy of investigation has been chosen winding-up should not be allowed to be pursued. The investigation of a Company under the provisions in Section 235 of the Companies Act, 1956, is in the nature of a thorough investigation and it was therefore, rightly contended that investigation having been adopted the same remedy should not be followed in a Court of law. To borrow the words of counsel for the appellant: 'The quality of the problem could be indicative of the dimension of disputes between the parties' and Counsel for the appellant is right that at the root lies the internal disputes between the parties. The decision in Re; Chapel House Colliery Co., reported in (1883) 24 Ch D 259 shows that facts and circumstances may stand that nothing can be gained by asking for winding-up. In the present case winding-up on the just and equitable principle is rightly contended by counsel for the appellant to be out of the field because in the petition for winding up the gunny business is not mentioned and the gunny business is according to the decision of the Supreme Court in the case of Seth Manilal, : [1968]2SCR252 going on and can grow.

34. For these reasons, I am of opinion, that the appeal should be accepted and allowed and the judgment and order of the learned Judge be set aside. The appellant is entitled to costs.

35. There will be an order in terms of prayer (a) of the Judge's summons.

S.K. Mukherjea, J.

36. It seems to me that : [1964]1SCR717 is a clear authority for the proposition that any order made in the matter of winding-up is appealable under Section 483 unless it is a merely procedural order which does not affect the rights and liabilities of the parties. It is equally clear from the judgment of the Supreme Court that an order to be appealable under Section 483 does not have to satisfy the tests of a judgment' within the meaning of Clause 15 of the Letters Patent.

37. In Shankarlal's case. : [1964]1SCR717 the Supreme Court upheld an order made by a Division Bench of this Court reversing an order of a learned single Judge by which he confirmed the sale of the assets of a Company by Joint Liquidators. The Division Bench held that the order was appealable, as in its opinion, the order satisfied the tests of a 'judgment'. The Supreme Court thought it unnecessary to pronounce on the question whether the order was a judgment or not, because in the opinion of the Court the order was appealable under Section 202 of the Indian Companies Act, 1913 which corresponds to Section 483 of the Companies Act of 1956. The Court also expressly approved the decision of the Bombay High Court in Bachharaj Factories Ltd. v. Hiriee Mills Ltd. reported in : AIR1955Bom355 where it was held that an order adjourning the hearing of a petition for winding up in order to enable certain shareholders to file a suit for the purpose of a declaration that the debentures issued in favour of the petitioners were not valid in law, was an order from which an appeal lies under Section 202 of the Act of 1913. The Supreme Court also approved the iudgment of Chagla C. J. in Western India Theatre Ltd. v. Ishwarbhai Somabhai, : AIR1959Bom386 , where the learned Chief Justice held that an order directing the winding up petition to be advertised is appealable under Section 202 of the Act of 1913. In the recent case of Harinagar Sugar Mills Co. Ltd. v. M. W. Pradhan, : [1966]60ITR508(SC) the Supreme Court decided an appeal arising out of an order by which a learned Judge admitted the winding-up petition and directed advertisements to be published. The appeal could only have been decided on merits on the basis that the order was appealable under S. 202 of the Companies Act. No arguments were addressed on the maintainability of the appeal because no arguments were necessary after the decision in Shankarlal's case where the decision of Chagla C. J. in : AIR1959Bom386 , had met with the Court's approval. Learned counsel for the respondent relied on a recent decision of the Patna High Court in D. C. Mehta v. Lakshmipat Singhania, : AIR1968Pat280 where it was held that an order made in a proceeding under Section 235 of the Indian Companies Act, 1913, directing that some of the Directors be released from the enquiry to be held at the preliminary stage, is not an order appealable under Section 202. Section 235 (1), it will be remembered, provides that where in the course of winding-up of a company, it appears that any Director has misapplied or retained any money or has become liable or accountable for any money of the company, the Court may on the application of the liquidator examine into the conduct of the director and compel him to repay or restore the money or property or any part thereof respectively or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, misfeasance or breach of trust as the Court thinks fit. The learned Judges of the Patna High Court relied on the decision in Shankarlal's case, : [1964]1SCR717 for the proposition that the order or decision referred to in Section 202 would exclude merely procedural orders or decisions which do not affect the rights or liabilities of the parties and observed:

'If a Company Judge, at the preliminary stage of the hearing of an application under Section 235 against several persons considers that, at that stage, there was not a prima facie case against two of the persons, and hence decides to drop proceedings against them, the order cannot be said to affect the rights and liabilities of the parties. The proceeding is still continuing against others and, if in the course of that proceeding, some other facts come to light which have a bearing on their conduct, the Company Judge will undoubtedly have a jurisdiction to reconsider the order. Hence his order under appeal cannot be said to have attained that finality to make it appealable'.

38. It appears that the learned Judges proceeded on the basis that an order to be appealable under Section 202 must attain the character of finality. That this was the principle which lies at the basis of the decision will appear from the following lines in the concluding portion of the judgment.

'An order passed either rejecting the application of the Liquidator finally or allowing it and directing the Directors concerned to recoup the loss to the Company could undoubtedly be a final order affecting rights and liabilities of the parties and, as such, appealable. But where in the initial stage of a proceeding under Section 235, the Company Judge merely says that, at that stage, there is no prima facie case against two of the Directors and decides that the proceeding against them should be dropped and that the enquiry should be continued against some of the other Directors, the order cannot be said to decide finally the rights and liabilities even in respect of those two Directors'.

39. The Supreme Court in Shankarlal's case, : [1964]1SCR717 not only did not express the view that an order or decision to be appealable under Section 202 must affect the rights or liabilities of the parties finally but also made it clear that in order to be appealable under Section 202, the order need not be a judgment within the meaning of Clause 15. The proposition that an order to be appealable under Section 202 must be an order finally affecting rights and liabilities of the parties perilously verges on the proposition that the order must be a 'judgment' in order to be appealable under that section which the Supreme Court rejected in Shankarlal's case, : [1964]1SCR717 . In my opinion, there is nothing in the judgment of the Supreme Court to support the view that in order to be appealable under Section 202 the order must be a final order.

40. Learned Counsel relied on the Bench Decision in (1966) 70 Cal WN 516, where G.K. Mitter, J., in delivering the judgment of the Court held that the Court in rejecting an application for stay of winding-up merely decides that there is a prima facie case for enquiry. It cannot and does not in fact, adjudicate upon the rights of the parties and therefore, it is not a 'judgment' under Clause 15 of the Letters Patent. As in the view the Bench took, the order was not a 'judgment', it was held that the order was not appealable. It is to be noticed that in the judgment no reference is made to Section 483 of the Companies Act nor is there any mention of the decision of the Supreme Court in Shankarlal's case, : [1964]1SCR717 . That no reference was made to Section 483 of the Companies Act can be explained by the fact that in view of the decision Madan Gopal Daga v. Sachindra Nath Sen : AIR1928Cal295 , it has been consistently held by this Court that an order to be appealable under Section 202 of the Act of 1913 must satisfy the test of a 'judgment'. His Lordship, therefore, addressed himself to the question whether the order under appeal was a 'judgment' or not and as he came to the conclusion that it was not a 'judgment, it was not necessary for him to allude to Section 483 of the Companies Act. It is unfortunate that the decision of the Supreme Court in Shankarlal's case, : [1964]1SCR717 was not brought to the notice of the Learned Judge because if it were, the decision in that case might have been different. (1966) 70 Cal WN 516 is still an authority for the proposition that an order rejecting an application for stay of winding-up is not a 'judgment' although it must be acknowledged that the validity of the classical view of 'judgment' as expressed by Sir Richard Couch, C. J. in the case of Justices of the Peace for Calcutta v. Oriental Gas Co., (1872) 8 Beng LR 433 on which the judgment of G. K. Mitter J. is founded, has been widely and persistently questioned. Be that as it may, in so far as the case decides that an order refusing stay of winding up is not appealable because it does not satisfy the tests of a 'judgment' the decision must be held to be contrary to the principles laid down in Shankarlal's case by the Supreme Court and cannot, therefore, be regarded as good law any longer.

41. It was submitted that an order staving or refusing to stay winding-up is not appealable under Section 483 because such an order is not made under any of the provisions of the Companies Act or the Rules made thereunder but in the exercise of the Court's inherent powers. The language of Section 483 is clear. It does not say that an appeal will lie only from an order made in the matter of winding up under the Act, It says that an appeal lies from any order or decision made in the matter of winding up. It will, therefore, be unreasonable to import any restriction on the operation of the section and hold that no appeal lies from an order which though made in the matter of winding up is not made under the Act but in the exercise of the Court's inherent powers which are expressly reserved by Rule 9 of the Companies (Court) Rules. It was suggested at one stage that perhaps the order is not an order in the matter of winding up. Whatever the phrase 'in the matter of winding-up' may precisely mean, to hold that an order staying or refusing to stay wind-ing-up is not an order in the matter of winding up, will be to put the language of Section 483 under a strain which it can hardly bear. Having regard to what I have said before, I have no hesitation in holding that the order under appeal is an order made in the matter of winding up, that is a judicial order affecting the rights and liabilities of the parties, and is therefore, appealable under Section 483 of the Act.

42. The main charges which have been brought in support of winding up are two.

43. First, that the Company has sold most of its immovable properties including a valuable property situated at Chittaranian Avenue at a gross undervalue and secondly, that the shares belonging to the petitioners' father Jagannath Gupta have been illegally and wrongfully transferred to certain members in unequal proportions after his death. It cannot be disputed that the properties belonging to the Company have been sold one after another over years with the result that the Company is now left with only one small property of very little value. It is true that the respondent has never been a Director of the Company but he has been an officer in the employment of the Company which is a private company in the nature of a family concern. He was not only a share-holder who attended or could have attended the general meetings of the Company. The balance-sheets and profit and loss accounts were accessible to him and if they were not accessible, he should have certainly taken steps in that behalf. It will be too much to believe that he was not aware that the properties were being sold one after another and that the shares belonging to his father were distributed and allotted in the manner complained of. As an heir of his father it will be natural to expect that he will not lose sight of his father's properties including the snares in the company which were part of the assets left by his father on his death. Not only he never raised any objection to the sale of the properties but he actively acquiesced in the sale of the Chittaranjan. Avenue property by executing a letter of indemnity in support of the sale. He never questioned the propriety of any of the sales until his service was terminated. He never objected to the transfer of shares. He knew that he never executed any transfer deed and yet he accepted and acquiesced in the transfer of shares. Assuming that the properties were sold at a gross under-value to the prejudice of the Company and that his father's shares were transferred and allotted wrongfully, illegally and to the detriment of some of the share-holders, it is not for the respondent to rely on those transactions for winding up of the Company for the excellent reasons that he has himself been openly or tacitly a party to the injustice and inequity of which he complains. I do not intend to say that the grounds complained of cannot be grounds for winding up, in any circumstances, or that they cannot be agitated as just and equitable grounds by an innocent party, but in the facts and circumstances of the present case, it will not be proper, in my opinion, to permit the respondent to proceed with the hearing of the petition when he has himself contributed to the state of affairs of which he complains or in which he has persistently acquiesced over a long period of time. He cannot be permitted to do so on the principle--In pari delicto, potior est conditio defendants--where both parties are equally at fault, the condition of the defendant is the stronger which is an application of the wider principle: Ex turpi causa non oritur actio--an action does not arise from a base cause. In the present case, the action, in my opinion, is not motivated by the desire to do justice to the Company or to see that justice is done to shareholders but by private reasons, that is to say, to injure the directors for acts of omission and commission in which the respondent has himself participated or acquiesced. In the view that I have taken, I agree that the winding-up proceedings which have been initiated on the application of the respondent ought to be stayed and I, therefore, concur in the order which has been made by my Lord.


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