w w w . L a w y e r S e r v i c e s . i n



Dr. S. Mangalam Srinivasan v/s Mani Forgings (P.) Ltd.

    C.P. NO. 27 OF 2004

    Decided On, 20 October 2004

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, MEMBER

    Ms. Anita Sumanth for the Petitioner. T.K. Bhaskar and Srinath Sridevan for the Respondent.



Judgment Text

1. In the company petition filed by the petitioner under sections 397 and 398 of the Companies Act, 1956 (?the Act?) alleging acts of oppression and mismanagement in the affairs of M/s. Mani Forgings Private Limited (?the company?) and seeking various reliefs against the company as well as other respondents, Shri T.K. Bhaskar, learned counsel appearing for the respondents, while raising the plea of demurrer urged for dismissal of the company petition on the following among other grounds:


?The necessary ingredients constituting oppression or mismanagement as required under section 397/398 have not been pleaded in the company petition.


The facts alleged in the company petition, even assuming, without admitting as true, do not make out a case or cause of action falling under the provisions of sections 397 and 398, entitling the petitioners for any relief. There are no pleadings to the effect that the facts of the present case would justify the making of a winding up order on just and equitable grounds, but such winding up of the company would unfairly prejudice the petitioner, as stipulated in section 397(2)(b) or that it is likely that the affairs of the company are conducted in a manner prejudicial to public interest or prejudicial to the interest of the company, due to a material change that has taken place in the management or control of the company on account of any alteration in the company?s Board of directors or manager or in ownership of its shares or membership or in any other manner whatsoever, satisfying the requirements of section 398(1)(b).


There is no averment on loss of substratum due to the acts of mismanagement in the affairs of the Company at the instance of the respondents.


The petitioner holding 32.5 per cent of the paid-up capital and claiming to be the Managing Director has substantial powers of management and, therefore, cannot have any grievance on account of the alleged acts of oppression and mismanagement in the affairs of the Company. There has been no agreement in support of the petitioner?s claim for the office of Managing Director and the petitioner cannot have any special rights to be the Managing Director in the absence of any arrangement or agreement in this behalf.


In the absence of equal shareholding between the petitioner and respondents or of any agreement empowering the petitioner to manage the affairs of the Company, there cannot be any deadlock in the affairs of the Company and cannot result in blocking of corporate rights in the affairs of the Company.


The petitioner cannot claim any relief merely on the ground that the Company is constituted by the family members. Furthermore, there is no agreement to run the Company on the principles of quasi-partnership.


All the grievances of the petitioner, being personal in nature, cannot be agitated in a petition under section 397 or 398 but shall invoke the common law for necessary redressal of her grievances.?


Shri T.K. Bhaskar, in support of his legal submissions relied on the following decisions :?


?R. Ramanathan Chettiar v. A & F Harvey Ltd. [1967] 37 Comp. Cas. 212 (Delhi), wherein the Companies Tribunal, while considering the preliminary issue whether the petition is maintainable under section 397 held that it is necessary for a petitioner to make all the essential allegations in the petition itself so as to bring his case within the ambit of the section and lack of essential allegations cannot be made good by leading evidence. The Tribunal further held that there are no allegations that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interest of the Company and that there are no allegations in the petition which would indicate that by reason of the material change in the management or control of the Company, there is any likelihood of its affairs being managed prejudicial to the interests of the Company or prejudicial to public interest, so as to bring the petition within the meaning of section 398. The Tribunal dismissed the company petition without going into the merits, since the facts alleged in the petition and its Annexures did not make out cause of action under sections 397 and 398.


Subhash Chand Agarwal v. Associated Limestone Ltd. [1998] 16 SCL 212 (CLB-Delhi) - to show that the petitioner shall fulfil the preliminary condition under section 397(2), namely, justification for winding-up of the company on just and equitable grounds and that such winding up will be prejudicial failing which the Court would ignore the allegations of oppression mentioned in the petition. Non-existence of such averment is fatal to the petition. This lacuna cannot be rectified by incorporating the averments in the amended petition.


Ashoka Betelnut Co. (P.) Ltd. v. M.K. Chandrakanth [1997] 1 L.W. 616 - to show that both conditions in clause (a) or clause (b) of sub-section (2) of section 397 must exist before the Court can entertain an application under that section. Where there are no allegations followed by proof thereof to support a winding-up, such a petition cannot be entertained. It must further be proved that an act of winding up should not be made as it would unfairly prejudice the petitioner and other members.


Rattan Singh v. Managing Director, Moga Transport Co. Ltd. [1959] 29 Comp. Cas. 165 (Punj.) - to show that relief can be given under section 397 in cases of oppression where the Court is of the opinion that the company?s affairs are being conducted in a manner oppressive to any member or members; and that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making up of winding up order on the ground that it was just and equitable that the company should be wound up.


Hanuman Prasad Bagri v. Bagress Cereals (P.) Ltd. [2001] 33 SCL 78 (SC) - to show that one of the conditions precedent for granting relief under section 397 is that the petitioner should prove that winding up of the company would unfairly prejudice the petitioners who are complaining of oppression, that otherwise the facts would justify the making of a winding up order on just and equitable grounds.


Kalinga Tubes v. Shanti Prasad Jain AIR 1963 Ori. 189 - to show that in a petition under sections 397 and 398 of the Companies Act, all material facts must be pleaded. If the facts transpiring on the date of the petition and alleged in the petition are not sufficient to make out a case for winding up on just and equitable ground, then facts arising subsequent to the filing of the application cannot be resorted to for the purpose, and the absence of allegations in the pleadings cannot be substituted by further evidence either by affidavits or oral and documentary evidence.


Azhar Hussain v. Rajiv Gandhi [1986] (Supp.) SCC 315 - to show that a petition filed under the Representation of the People Act, 1951 was dismissed in view of the petitioner?s failure to furnish the material facts and particulars as mandated in section 83, which are essential to clothe the petition with complete cause of action relating to charge of corrupt practice.


Maharashtra Power Development Corpn. Ltd. v. Dabhoi Power Co. [2004] 50 SCL 440 (Bom.) - to show that it is not always necessary that there should be a pre-existing family business or partnership for applying the principles of quasi-partnership to a company but, the pre-existence of a partnership or family business is certainly a factor which would be taken into consideration while considering the real nature of the company.


Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla [1976] 46 Comp. Cas. 91 (SC) - to show that in an application for the winding-up of a company under the just and equitable clause, allegations in the petition are of primary importance. A prima facie case has to be made out before the Court can take any action in the matter. There must be material to show that when ?just and equitable clause? is invoked, it is just and equitable not only to the persons applying for the winding-up but also to the company and to all its shareholders.?


2. Shri Srinath Sridevan, learned counsel appearing for the second respondent contended that the pleadings made in the company petition are inconsistent and vague without making out any case under the provisions of sections 397 and 398. The petitioner failed to establish the fulfilment of the ingredients of the provisions of section 397 or 398. The grievances of the petitioner are on account of the family feud among the members and the petitioner cannot resort to any remedy for such personal grievances before the CLB. The petition must, therefore, be rejected without resorting to completion of the pleadings and considering the company petition on merits wasting the time and incurring huge costs by both the parties in support of which learned counsel relied on the following decisions :


?Ravinder Singh v. Janmeja Singh [2000] 8 SCC 191 - to show that no evidence can be led on a plea not raised in the pleadings and that no amount of evidence can cure any defect in the pleadings.


Hari Shanker Jain v. Sonia Gandhi [2001] 8 SCC 233 - to show that the petitions which are hopelessly vague and completely bald not satisfying the requirement of pleading material facts shall be dismissed in limini and that no amount of evidence can cure basic defect in the pleadings.


Rajgopal v. Kishan Gopal [2003] 10 SCC 653 - to show that pleadings must be specific and clear in absence of which no lis exists thereon and the Courts are precluded from taking cognizance of mere evidence.?


3. Ms. Anita Sumanth, learned counsel appearing for the petitioner opposed the plea of demurrer which according to her should be confined to the question of law and not of facts and substantiated the same as under :


?If a petitioner has the right to apply as envisaged under section 399 and complain that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members, the CLB may make appropriate orders with a view to bring to an end the matters complained of provided that the CLB is of opinion (a) that the company?s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members and (b) that the facts would justify the making of a winding up order on the ground that it is just and equitable that the Company should be wound up, but the winding up order would unfairly prejudice the members. Section 397 does not specify any need for making such averments in the company petition. The fulfilment of requirements or otherwise under section 397(2)(a) and (b) being a question of fact, the plea of demurrer does not arise. By virtue of Order XIV rule 2 of the Civil Procedure Code, 1908, a suit must be tried as a whole on all issues. However, trial of preliminary issues is permissible only where the preliminary issue is a pure issue of law, and (a) it touches upon the question of jurisdiction of the Court; or (b) it raises a question that the proceedings are barred by any provision of law. In all other cases, where preliminary objections are taken about the maintainability of the proceedings, even if they are issues either of pure law or issues raising mixed questions of law and fact, they cannot be tried as preliminary issues. The Gujarat High Court in Saurashtra Cement & Chemicals Industries Ltd. v. Esma Industries (P.) Ltd. [1990] 69 Comp. Cas. 372 categorically held that the provisions of Order XIV rule 2 of the Code would apply in their entirety to proceedings under sections 397 and 398 of the Act. Whether the facts alleged in the company petition would make out a case or cause of action falling under sections 397 and 398, being a question of fact cannot be adjudicated as a preliminary issue by the CLB.


The company petition containing the allegations of oppression and mismanagement must be read as a whole, which must be construed in accordance with its substance and not its form. The allegations set out in the company petition elaborately deals with the various acts of oppression and mismanagement indulged by the respondents in the affairs of the Company, which are oppressive to the petitioner. There are specific pleadings to the effect that the petitioner has been removed from the office of Managing Director and further that the units could not be operated on account of the interference and removal of the machinery by the respondents and also large scale misappropriation of the funds of the Company by the respondents, which would establish a deadlock situation in the affairs of the Company justifying an order of winding up of the Company on just and equitable grounds, by which the shareholders including the petitioner would be put to irreparable loss and hardship, in complete fulfilment of the requirements of sections 397 and 398. This Bench by an order dated 20-6-2004 restrained the respondents from operating the bank account which has been floated by the second respondent, as borne out by the certificate issued by the Company?s banker. The averments made in paragraph 25, viz., that ?. . . the petitioner is constrained to approach this Hon?ble Bench for appropriate relief to secure and safeguard the interests of the company as well as the rights and interests of the petitioner. It is just and necessary in these circumstances that this Hon?ble Bench be pleased to admit this Company Petition and deal with the same in accordance with the law and pass appropriate orders in terms to secure the relief sought for hereinafter?, would justify the making up of a winding up order on just and equitable grounds.


The grievances of the petitioner in her capacity as a shareholder are not personal in nature, but they entirely relate to the grave acts of commission and omission in the affairs of the Company and, therefore, the CLB is the competent forum to intervene and pass appropriate orders. Ms. Anitha, learned counsel in support of her legal submission, relied on the following decisions :


Lt. Cdr. D.K. Chatterji v. Rapti Supertronics (P.) Ltd. [2003] 114 Comp. Cas. 265 (CLB), wherein, it has been held that the petitioner could not on one hand file a petition under section 397/398 and on the other hand, seek a direction to wind up the company. Thus, what is required is the satisfaction of the CLB that circumstances exist which would justify the making of a winding up order on just and equitable grounds and that there need not be any specific pleadings to that effect.


Vijay Krishan Jaidka v. Jaidka Motor Co. Ltd. [1997] 1 Comp. LJ 268 - to show that in case of a family company equitable reliefs could be considered, if oppression is established.


The High Court of Bombay in Maharashtra Power Development Corpon. Ltd.?s case (supra) held that the company in that case was not a family company in the nature of a quasi-partnership and that no equitable considerations exist which would justify making an order of winding up of the company. Whereas, in the present case, the Company is a family company and there are equitable considera-tions which would justify making of a winding up order on just and equitable grounds.


S. Palaniappan v. Tirupur Cotton Spg. and Wvg. Mills Ltd. [2004] 50 SCL 293 (Mad.) - to show that if the CLB is pursued properly and effectively, many of the misdeeds of an erring or dishonest manage-ment could be checked and remedied under sections 397 and 398.


Jer Rutton Kavasmaneck v. Gharda Chemicals Ltd. [2000] 23 SCL 71 (Bom.) - to show that a petition under section 397 can be thrown out only if the case put forward is unarguable and the petition can be held demurrable only if the claim put forward cannot be established even if all the allegations made in the petition are accepted to be true.


Eastern Linkers (P.) Ltd. v. Dina Nath Sodhi [1984] 55 Comp. Cas. 462 (Delhi) - to show that a petitioner must establish to sustain a petition under section 397 that the grounds exist which would justify the making up of a winding up order on just and equitable grounds and further that when shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern there may arise a case for winding up on the just and equitable ground.


Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas. 351(SC) - wherein the Supreme Court held that in a petition under section 397, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397.


M. Moorthy v. Drivers & Conductors Bus Service (P.) Ltd. [1991] 71 Comp. Cas. 136 (Mad.) - to show that a Court may find out from the pleading whether there is evidence to fulfil the requirements of sections 397 and 398.


Lundie Brothers Ltd., In re [1965] 1 W.L.R. 1051, wherein the Chancery Division held that in order to make out a case for winding up under section 210, the petitioner must show that the affairs of the company were being conducted in a manner which was oppressive to him as a ?member of the company?.


Yenidje Tobacco Co. Ltd., In re [1916] CA 426, wherein the Chancery Division held that in case of a complete deadlock in the affairs of the company, which was not only just and equitable, but essential in the interests of both the parties that the company should be wound up. In the said case, the parties refused to meet on matters of business, continued quarrelling and there was no scope for reconciliation and friendly co-operation between the parties and there was lack of confidence between the parties justifying dissolution of the partnership.?


4. Shri Bhaskar, learned counsel, in his reply submitted :


The applicability of the provisions of Order XIV rule 2 of the CPC to the proceedings under sections 397 and 398 lost its relevance in view of the fact that the provisions of sections 397 and 398 are now being administered by the CLB in accordance with the Company Law Board Regulations, 1991 and to a limited extent by the provisions of the CPC as envisaged in section 10E(4C) of the Act. By virtue of sub-sections (5) and (6) of section 10E, the CLB, while exercising its power, shall be guided by the principles of natural justice and shall act in its discretion and regulate its own procedure. Moreover, Order XIV rule 2 is not a rule of natural justice, but only rule of procedure and, hence, inapplicable to the proceedings before the CLB.


5. I have considered the elaborate arguments of learned counsel. The short question that arises for my consideration is whether the company petition is demurrable and liable to be dismissed in limini. Before answering the issue, I think it fit, that certain material provisions of the Act must be borne in view.


A plain reading of section 397 reveals that on an application made by any members of a company having the right under section 399, complaining that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, the Company Law Board may with a view to bringing to an end the matters complained of, make appropriate order, if the CLB is of opinion?


(i) that the company?s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive of any member or members;


(ii) that the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; and


(iii) that the winding up order would unfairly prejudice the members.


It is, therefore, clear that it is for the CLB to form an opinion on the facts alleged in the petition whether the requirements of section 397(2)(a) and (b) have been duly met before making such orders as it thinks fit under section 397. Section 398 can be invoked in either of the two circumstances:?


(1) That the affairs of the company are being conducted in a manner which is?


(a) prejudicial to public interest;

or


(b) prejudicial to the interest of the company

Or


(2) It is likely that the affairs of the company will be conducted in a manner


(a) prejudicial to public interest;

or


(b) prejudicial to the interests of the company due to a material change that has taken place in the management or control of the company. Such change may take place due to alteration in the Company?s Board of Directors or manager or in ownership of its shares or membership or in any other manner whatsoever.


At this juncture, the provisions of section 83 of the Representation of the People Act, 1950, relied on by the respondents assumes importance which reads as under:?


?83. Contents of petition.?(1) An election petition?


(a) shall contain a concise statement of the material facts on which the petitioner relies;


(b) shall set forth full particulars of any corrupt practice that the petitioner alleges, including as full a statement as possible of the names of the parties alleged to have committed such corrupt practice and the date and place of the commission of each such practice; and


(c) shall be signed by the petitioner and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908) for the verification of pleadings; [Provided that where the petitioner alleges any corrupt practice, the petition shall also be accompanied by an affidavit in the prescribed form in support of the allegation of such corrupt practice and the particulars thereof].


(2) Any schedule or annexure to the petition shall also be signed by the petitioner and verified in the same manner as the petition.?


Section 83 explicitly stipulates, inter alia, that an election petition must include a concise statement of the material facts, full particulars of any corrupt practice, including the names of the parties alleged to have committed corrupt practices, the date and place of commission of such corrupt practice and an affidavit in the prescribed form in support of the allegations of such corrupt practice and the requisite particulars. The requirements of section 83 are mandatory, non-fulfilment of which is fatal to a petition under that section. The language of these two sections, viz., section 83 of the Representation of the People Act and section 397 of the Act is distinctly different from each other. There is no mandate in section 397 stipulating that the petitioners must plead that the facts would justify the making of a winding up order of the company on just and equitable grounds. By virtue of section 397, it is for the CLB to form opinion on the facts alleged in the petition that the company?s affairs are being conducted in a manner oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts should justify the making up of a winding up order on just and equitable grounds, as enunciated by a number of decisions discussed hereabove. Against this legal position, the main allegations alleged in the company petition must be considered, which are summarized as under:


?The Company was incorporated in April, 1994 by the petitioner and her mother being the second respondent out of the petitioner?s own resources with an authorized capital of Rs. 10 lakhs divided into 10,000 equity shares of Rs. 100 each. The petitioner holds 32.5 per cent of the share capital of the Company. The petitioner and second respondent are the only directors and the petitioner has been the Managing Director of the Company. The Company has been operating two units, viz., Unit-1 and Unit-2, manufacturing forgings.


The respondents 3 and 4, who are brothers of the petitioner are employed as consultants of the Company. With a view to help them certain shares were allotted in their favour, consideration for which was met by the petitioner. They have never been appointed at any point of time as directors of the Company.


With passage of time, the attitude of the respondents 3 and 4 was changed and they started acting detrimental to the interests of the petitioner as well as the Company by interfering with the working of the Company and making false representation before the various suppliers and purchasers that they are directors managing the affairs of the Company. The respondents 3 and 4 being merely the shareholders have no right to interfere with the day-to-day affairs or administration of the Company.


The fourth respondent falsely filed Form No. 32 with the Registrar of Companies declaring that he has been appointed as director of the Company pursuant to an extraordinary general meeting said to have been held on 16-3-2004, when there were only two directors, viz., the petitioner and the second respondent. There was no meeting of the board of directors ever held for the purpose of convening the extraordinary general meeting on 16-3-2004. The directors neither received any request under section 169 from any of the shareholders for convening any extraordinary general meeting and no extraordinary general meeting held either on 16-3-2004 or on any other date appointing the fourth respondent as director of the company. Form No. 32 filed with the Registrar of Companies containing the signature of the second petitioner is forged.


The respondents 3 and 4 representing to be directors of the Company have opened a bank account and started realising the cheques drawn in favour of the Company and collecting the receivables due to the Company for their personal use to the detriment of the petitioner.?


The respondents have in the process unlawfully enriched by themselves to the tune of Rs. 60 lakhs, at the cost of the petitioner and the Company. They have also removed a large volumes of materials comprising of dye and blocks and other materials lying in the units valued at Rs. 15 lakhs. The respondents 3 and 4 have diverted the business of the Company to the family business known as Forge Tools, run by the fourth respondent as his proprietary business.


?The respondents 3 and 4 have been preventing the petitioner from entering the factory premises and obstructing the petitioner from operating the manufacturing units and they have been operating Unit No. 1. When the petitioner attempted to restart the operations in Unit 2, the respondents 2 and 3 unlawfully entered the premises, assaulted the Managing Director and threatened workers of the Company leading to suspension of the work and the police complaint lodged by the petitioner against respondents 3 and 4.?


I shall now consider a plethora of decisions cited by the learned counsel in the light of the alleged acts of oppression and mismanagement in the affairs of the company, to consider whether the requirements of sections 397 and 398 are duly met by the petitioners.


In Kalinga Tubes? case (supra), the High Court of Orissa held that in a petition under sections 397 and 398 of material facts must be pleaded, thereby the validity of a petition under sections 397 and 398, in my view, is to be judged on the facts alleged therein. Unless the facts alleged in the petition are sufficient to make out a case for winding up on just and equitable grounds, the aggrieved petitioner cannot claim any remedy. In Shanti Prasad Jain?s case (supra), the Supreme Court, while considering section 397, held that it must be shown that there is just and equitable cause for winding up the company for granting any relief and further quoted the following summary given in Meyer?s case which lays down certain important considerations to be kept in view in determining the scope of section 397:


?The oppression of which a petitioner complains must relate to the manner in which the affairs of the company concerned are being conducted; and the conduct complained of must be such as to oppress a minority of the members (including the petitioners) qua shareholders.


It follows that the oppression complained of must be shown to be brought about by a majority of members exercising as shareholders predominant voting power in the conduct of the company?s affairs.


Although the facts relied on by the petitioner may appear to furnish grounds for the making of a winding up order under the ?just and equitable? rules, those facts must be relevant to disclose also that the making of a winding up order would unfairly prejudice the minority members qua shareholders.


Although the word ?oppressive? is not defined, it is possible, by way of illustration, to figure a situation in which majority shareholders, by an abuse of their predominant voting power, are ?treating the company and its affairs as they were their own property? to the prejudice of the minority shareholders - and in which just and equitable grounds would exist for the making of a winding up order . . . but in which the ?alternative? remedy provided by this section by way of an appropriate order might well be open to the minority shareholders with a view to bringing to an end the oppressive conduct of the majority.?


The Supreme Court in Hanuman Prasad Bagri?s case (supra), after consi-dering the provisions of section 397 held that ?the petitioners have to make out a case for winding up of the company on just and equitable grounds. If the facts fall short of the case set out for winding up on just and equitable grounds, no relief can be granted to the petitioners?. A careful consideration of the findings of the Supreme Court, suggests that in order to be successful on the ground specified in section 397(2)(b), the petitioners have to make out a case [Emphasis Supplied] for winding up of the company on just and equitable grounds. In R. Ramanathan Chettiar?s case (supra), it is held that it is necessary to a petitioner under sections 397 and 398 to make all the essential allegations in the petition itself so as to bring his case within the ambit of these sections. In Subhash Chand Agarwal?s case (supra), it is categorically held that a petitioner shall establish the justification for winding up of the company on just and equitable grounds and that such winding up will be prejudicial to the interest of the members of the company in order to maintain a petition under section 397. In Ashoka Betelnut Co. (P.) Ltd.?s case (supra), the Court came to the conclusion that the requirements of section 397 must exist before the Court entertains an application under that section, thereby in my view, it is for the CLB to form opinion on the facts alleged in the petition, whether the requirements of section 397 have been met, before making any order with a view to bringing to an end the matters complained of. In Rattan Singh?s case (supra), it clearly held that where the Court is of the opinion that the company?s affairs are being conducted in the manner as envisaged in section 397(2)(a) and (b), then the Court can make appropriate orders on the application made by that aggrieved members. The decision in Hind Overseas (P.) Ltd.?s case (supra) rendered in the cont

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ext of winding up of a company will not be applicable to the present proceedings under sections 397 and 398. Similarly the decisions in Ravinder Singh?s case (supra), Hari Shanker Jain?s case (supra), Rajgopal?s case (supra) and Azhar Hussain?s case (supra) rendered under the Representation of People Act, 1951 are distinguishable from the provisions of sections 397 and 398 and do not go to the aid of the respondents. The CLB must be satisfied that circumstances do exist which would justify the making of a winding up order on just and equitable grounds as held in Lt. Cdr. D.K. Chatterji?s case (supra). A petition can be held demurrable only if the claim made herein cannot be establish-hed even if the allegations are true, as held in Jer Rutton Kavasmaneck?s case (supra). In Eastern Linkers (P.) Ltd.?s case (supra), it is clearly held that the petitioner must establish that the grounds exist which would satisfy the making up of a winding up order on just and equitable grounds to sustain a petition. Simultaneously it is for the Court to find out from the pleading whether there is evidence to fulfil the requirements of sections 397 and 398 as held in M. Moorthy?s case (supra). A careful perusal of the provisions of sections 397 and 398 and the foregoing decisions reveal that neither sections 397 and 398 nor the decisions mandate the requirement of averments that the facts would justify the making of a winding up order of the company on just and equitable grounds or that there is dead-lock in the affairs of the company, but in order to be successful on the ground specified in section 397(2)(b), the petitioner must make out a case for winding up of the Company on just and equitable grounds. The main grievances of the petitioner as seen from the allegations made in the company petition are that the petitioner and the second respondent alone are directors of the Company. The fourth respondent falsely claims to be a director pursuant to the resolution passed at the extraordinary general meeting said to have been held on 16-3-2004. The petitioner being the Managing Director, is not allowed to carry on day-to-day affairs of the Company. The respondents 3 and 4 are further charged with siphoning of funds and diversion of business of the Company and removing the raw materials and machinery belonging to the Company, thereby the Company is made to suffer to the tune of over Rs. 75 lakhs. These disputes are no doubt in relation to the management of the Company. If these acts do not constitute acts of oppression and mismanagement, provided established by the petitioner, I do not understand as to any other act, which would be oppressive to the interests of the petitioner and the Company. The other grievances being personal in nature may not likely fall within the scope of sections 397 and 398. It is for the CLB to form opinion as to whether the alleged acts of oppression would justify the making of a winding up order on just and equitable grounds. In these circumstances, unless the respondents file a detailed reply and the petitioner establishes her grievances set out in the company petition, this Bench will not be in a position to adjudicate the question whether the petition satisfies the requirements of sections 397 and 398. This has to be decided ultimately on the merits, while considering the company petition. Accordingly, the respondents are hereby directed to file counter-statement to the company petition by 30-11-2004 and rejoinder to be filed by 15-12-2004. The company petition will be heard on 20-12-2004 at 10.30 a.m.
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