P L D 1962 (W (PLP)

Mr. Noor Muhammad, the learned counsel for the petitioner, urged before me that if the debt is established and not satisfied, it is open to the Court to refuse winding up of the company. In this connection he referred me to Barclay on Companies Act, 13th Edition, at page

450. But in this country it is now well settled rule of law that where the Court is satisfied that the debt, is a knotty contested debt and doubtful then it would not pass all winding up order. The evidence led by the parties leaves no doubt in my mind that the company is bona fide disputing the petitioner's claim. Moreover, the evidence produced on behalf of the respondents fully establishes that the financial position of the company is quite sound and it can easily meet its liabilities. This ground, therefore, must fail. The next question that arises for consideration in this case is whether it will be proper to order the winding up of the said company under section 162 (vi) of the Companies Act, which is in the following terms: "A company may be wound up by the Court‑ (vi) if the Court is of opinion that it is just and equitable that the company should be wound up." Mr. Noor Muhammad, the learned counsel for the petitioner, contended that the company in question is a small private company and the principles of the partnership law should be applied for winding it up. He also contended that the relation ship between the parties is very strained, they cannot pull on together, there is a deadlock in the company and the respondents have without any justification excluded the petitioner from the management of the company. On the other hand Mr. Munawwar Abbas, the learned counsel for the respondents, contended that during the short period that the petitioner was in the management of the company he incurred huge debts and the company was running at a loss and it was for this reason that the petitioner was removed from the management of the company. He also referred me to the audited accounts of the company (Exh. 7) prepared by Messrs Moosa & Co., Auditors, in support of his contention that after the petitioner left the company the said company is making profit. He further contended that the petition is mala fide because it was made on the next day of the petitioner handing over charge of the company to Mr. Zahir Hussain and according to the learned counsel this is too short a period for finding out and judging whether the respondents are mismanaging the affairs of the company or causing damage to the petitioner's Interest. Therefore the question is whether it is a fit case in which the order of winding up the said company should be passed. Mr. Noor Muhammad, the learned counsel for the petitioner, contended before me that the words "just and equitable" in section 162 (vi) are very wide and that the circumstances which would justify the winding up of partnership should also be taken as a guide for winding up private limited companies under this clause. The learned counsel referred me to Loch and another v. John Blackwood, Limited ((1924) A C 783), decided by their Lordships of the Privy Council. In this case their Lordships approved the following observations of Lord Cozens- Hardy, the Master of the Rolls, In re Yanidje Tobacco Co. ((1916) 2 Ch. 426) "I have treated it as a partnership, and under the Partnership Act of course the application for a dissolution would take the form of an action ; but this is not a partnership strictly it is not a case in which it can be dissolved by action. But ought not precisely the same principles to apply to a case like this where in substance it Is a partnership in the form or the guise of a private company 7 . . . . . . I think that in a case like this we are bound to say that circumstances which would justify the winding up of a partnership between these two by action are circumstances which should induce the Court to exercise its jurisdiction under the just and equitable clause and to wind up the Company." But the broad propositions of law which their Lordships laid down on this question are as under: "It is undoubtedly true that at the foundation of applications for winding up, on the `just and equitable' rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of Company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the later and it is under the statute just and equitable that the company be wound up." Mr. Noor Muhammad then referred me to a decision of the Indian Court in Jaldu Anantha Raghurama Arya v. East Coast Transport and Shipping Co. (A I R 1958 A. P 259), in support of his contention that facts justifying an order for dissolution of a partnership would equally justify the making of a winding up order in the case of a small private company. In that case there were serious mis understandings among the share‑holders of the company ; one of the share‑holders was actively engaged in promoting the interests of a firm which was conducting the same business ; and there had been no satisfactory accounting with regard to the sum of Rs. 50,000 by two of the share‑holders, and on these grounds the company was ordered to be wound up. Mr. Munawwar Abbas, the learned counsel for the respon dents, has referred me to In re Janbazar Manna Estate, Limited (A I R 1932 P C 1), The Ripon Press and Sugar Mill Co. Ltd. v. Gopal Chetti and others (A I R 1931 Cal. 692); D. Davis & Co. Ltd. v. Brunswick (Australia) Ltd. and others (AIR 1936 P C 114) and In re Cuthbert Cooper & Sons, Ltd. ((1937) 1 Ch. D 392). The case reported in A I R 1932 P C 1 is of a public limited company and not of much assistance for the decision of this case. The case of 1937, 1 Ch. D. 392 is also not applicable to the facts of the case because in that case the Directors of the company declined to register the transfer of shares in favour of the executors of the deceased which they were entitled to do under the provisions of the Articles of the Company and on this ground the Court declined to order the winding up of the company. In A I R 1936 P C 114 at page 121 their Lordships were considering the case of a private limited company and also considered the decision given in Loch and another v. John Blackwood, Ltd. Their Lordships in this connection observed as under:‑ "In this connection it should be remembered that the Company was formed to exploit in Australia and New Zealand an enterprise which originated with the Brunswick Company. It is well settled that the subsection in the (Imperial) Companies Act giving power to the Court to wind up a company on the just and equitable ground‑a subsection similar in terms to the section obtaining in New South Wales‑is not confined to causes in which there are grounds analogous to those mentioned in the other parts of the section : (1 924) A C 783, where the previous cases are referred to. Nor on the other hand car any general rule be laid down as to the nature of the circum stances which have to be borne in mind in considering whether the case comes within the phrase. Holding an even hand between the two conflicting interests in the present case their Lordships are of opinion that the decisive question must be the question whether at the date of the presentation of the winding up petition there was any reasonable hope that the object of trading at a profit, with a view to which the Company was formed, could be attained. In considering that question, the guarantee of the preference shares should be left out of sight, except in so far as it may have biased the evidence on either side. It should be observed that in this case there is no question of a deadlock, nor is there any question of share‑holders who have the voting power using that power for their own commercial interests outside the Company in disregard of the interests of a minority. Nor again, is there any question involved of an improper management of the Company by the directors who are in control. The problem involved is of the nature of a business problem. If there was at the relevant time a reasonable hope of tiding over the period of deep depression and of emerging into a region in which the Company might reasonably expect to carry on at a profit, there would seem to be no sufficient reason why the Court, regard being had to the essential character of the bargain made between the parties on the formation of the Company, and considering the matter from much the same stand‑point as if the Company were a private partnership should wind up the Company under the just and equitable clause." In the light of the above discussion it appears to me that as observed by their Lordships of the Priyy Council no general rule can be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase `just and equitable' for purposes of winding up. The decisive question must be the question whether at the date of the presentation of the winding up petition there is any reasonable hope that the object of trading at a profit, with a view to which the company is formed, can be attained, or that there is such a deadlock between the various share‑holders of the company which are bound to frustrate the object for which the company was formed. The mere fact that the directors had a prepondera ting voting power and that they have not allowed the other share‑holders to join in the management of the company is no ground to order its winding up. The real question for deter mination will be whether the confidence of the share‑holders is lost not only in the policy but also in the probity of directors, and if that is so it will be a good case for winding it up. Now, in this case the petition was made on the next day after the petitioner handed over charge of the company. There is no company evidence before me to show that the directors of the respondent who were functioning thereafter have mis-conducted themselves or the confidence of the petitioner has been shaken in the probity of the present directors. The only ground on which the learned counsel for the petitioner has urged for the winding up of the company is that the minority share‑holders in the company are unable to pull on well with the majority of the share‑holders. This, in my opinion, in the absence of other factors, is not sufficient for winding up the company. I have suggested to the directors who are now In control of the company in question that in future they should inform the petitioner about the affairs of the company, about its accounts and they should also see that the dividends are declared at the proper time. Mr. Munawwar Abbas has informed me on behalf of the Directors that they will try to accommodate the petitioner in this respect in future. In the circumstances of the present case, therefore, I hold that the petitioner is not entitled to get the company in question wound up under section 162 (vi) of the Companies Act. In the result I hold that the petitioner has failed to make out a case for the winding up of the said company and the petition is dismissed with no order as to costs. K. M. A. Petition dismissed.