LexM/S. KILPEST PVT. LTD. versus SHEKHAR MEHRA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
MIS. KILPEST PVT. LTD.
v.
SHEKHAR MEHRA
OCTOBER 8, 1996
[S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.]
Companies Act 1956, Ss.397 398, 402 and 433(f)--Minority share
holder M's petition for oppression and mismanagement tried as a petition
for winding up under just and equitable claus~High Court finding no ground
for winding up but directing reinstatement of Mas director; requiring inspection
of company's records by the Registrar and directing other director D to return
moneys wrongly appropriated-Held: there was no ground for winding up the
company; having regard to the wide powers under s.402 very rarely would it
be necessary to wind up any company in a petition filed under Ss.397 and
398.
M and D promoted K, a private limited company and were its first
directors. The two fell out and M did not attend the Board or other
meetings of the company after September 1, 1981. In December, 1981 the
M group held 1500 shares and the D group held 1625 shares. Thereafter
A
B
c
D
the D group increased its shareholding to 4500 shares. At a Board meeting E
held on April 9, 1983 it was resolved that M ceased to be a director. M
then filed a petition for oppression and mismanagement under ss.397 and
398 of the Companies Act, 1956 ('Act') in the Bombay High Court. A Single
Judge thought it fit to try the petition as one for winding up, which was
concurred with by this Court.
F
The Single Judge dismissed the petition. M appealed to the Division
Bench which held that the company could not be treated as a partnership
concern and there was no ground for winding it up under the just and
equitable clause. In exercise of its powers under S. 402 of the Act it directed
that M be appointed a director; that D should pay back to the company G
the sum of Rs. 52, 875 wrongly appropriated by him; that the Registrar of
Companies should inspect the records of the company and if the purchases
of raw materials and payments made are found to be to fictitious persons,
D should pay back the amount thereof.
M and D appealed to this Court. During the pendency of the appeals, H
239
240
SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A the operation of the High Court's order was stayed but the inspection was
allowed to be carried on; the company prospered during the pendency of
the appeals.
Dismissing the appeals, this Court
B
HELD : 1.1. The appeal by M would have to be rejected as there was
no case for winding up the company. There was no substance in D's appeal
either. The High Court found D had appropriated to himself moneys
belonging to the company. M's presence on the Board would prevent a
- recurrence, thus protecting M's interest and that of the company.
C
(246-G; 247-A]
1.2. The general interest of the shareholders should not be readily
sacrificed at the alter of squabbles of directors for power to manage the
company. The promoters of a company, whether or not they were thitherto
partners, elect to avail of the advantages of forming a limited company.
D They voluntarily and knowingly bind themselves by the provisions of the
Companies Act. The submission that a limited company should be treated
as a quasi-partnership should therefore, not be easily accepted. Having
regard to the wide powers under Section 402, very rarely would it be
necessary to wind up any company in a petition filed under Section 397
and 398. [244-E; 246-D-E]
E
Ebrahimi v. Westboume Galleries Ltd. and Ors., (1972) 2 All ER 492,
referred to.
Hind Overseas Private Limited v. Raf!!iunath Prasad Jhunjhunwalla
F andAnr., [1976] 3 SCC 259, affirmed.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1974 of
1986.
From the Judgment and Order dated 16.4.86 of the Madhya Pradesh
G High Court in Company Appeal No. 4 of 1985.
H.K. Puri for the Appellants in C.A. No. 1974/86 and C.P. No.
352/96.
A.N. Pareekh, Sushi! Kr. Jain, Pradeev Agarwal and AP. Dhamija
H for the Respondent in C.A. No. 1974/86 and 1975/86.
,_
KILPEST PVT. LTD. v. SHEKHAR MEHRA [BHARUCHA, J.)
241
The Judgment of the Court was delivered by
BHARUCHA, J. These are cross appeals. against the judgment and
order of a Division Bench of the High Court of Madhya Pradesh.
A
The appellant in Civil Appeal No. 1975/86, Shekhar Mehra (Mehra), B
and the second appellant in Civil Appeal No. 1974/86, R.K. Dubey (Dubey)
promoted Kilpest Pvt. Ltd. (the company) and were its first Directors.
Dubey was the Managing Director and Mehra was the Joint Managing
Director. The two fExcerpt shown. Read the full judgment & AI analysis in Lexace.