D.K. Deshmukh, J.
1. By both these appeals the Appellant challenges common order passed by the learned single Judge of this Court dated 29-6-2007 in Company Petition No. 726 of 1998 and Company Petition No. 171 of 2000. Both these company petitions were filed by two different Petitioners seeking the same reliefs namely winding up of the Appellant-company. The grounds on which the order of winding up of the Appellant-company was sought was also the same, and therefore, in our opinion, both these appeals can be conveniently disposed of by a common order.
2. The facts that are relevant and material for our purpose are that the Company Petition No. 726 of 1998 was filed by M/s. Kunal & Co., a partnership firm registered under the Indian Partnership Act seeking an order for winding up of the Appellant-company and an order for appointment of official liquidator as a liquidator of the company was also sought.
3. In the petition, it was averred that the Appellant-Company was incorporated on 17.2.1982 under the Companies Act, 1956 as a private company, limited by shares. The registered office of the Company was at Mumbai. The authorised share capital was Rs. 3,00,000/- divided into 30,000 equity shares of Rs. 10/- each. The issued, subscribed and paid up share capital of the Appellant Company was Rs. 2,07,000/- divided into 20,700 equity shares of Rs. 10/- each, fully paid up. The objects of the Company as set out in the Memorandum of Association were to carry on business, own, buy, sell, possess, develop, construct, demolish, rebuild or otherwise deal in lands and buildings and to do other ancillary things in relation to the aforesaid objects as set out in detail in the Memorandum of Association. It was contended that the Company was indebted to Kunal for a sum of Rs. 3,91,54,538/- being the balance of the amount lent and advanced by the petitioner-Kunal to the Appellant-Company alongwith interest due at the rate of 18% p.a. with quarterly rests as per the agreement and in accordance with the particulars of claim.
4. It was averred in the petition that in or about March-1994 the Appellant-Company through its Director and a Shareholder Mr. K.K. Motwani approached the petitioner-Kunal and requested for grant of a temporary loan to enable the Company to make payment to the appropriate authority of the Income-tax department from whom the Appellant-Company was to purchase a property situated at Worli for development in an auction sale for a consideration of Rs. 21,75,00,000/-. The Appellant Company agreed to pay interest at the rate of 18% p.a. with quarterly rests on the amount which may be lent and advanced. The Petitioner-Kunal therefore, lent and advanced to the Appellant-Company an amount aggregating to Rs. 3,54,51,000/- during the period between February to March-1994. This amount lent by the petitioner-Kunal was duly received by the Appellant-Company and the Company agreed to repay the same alongwith interest thereon at the rate of 18% p.a. with quarterly rests.
5. The Appellant-Company thereafter, alongwith its forwarding letter dated 7.6.1994 sent to the petitioner-Kunal a cheque for an amount of Rs. 39,40,000/- towards repayment of a part of the loan and another cheque for Rs. 9,31,707/- towards the interest due upto 31.5.1994 at the rate of 18% p.a. as agreed.
6. The Appellant-Company thereafter paid further amounts towards repayment of the loan by a cheque dated 8.7.1994 for Rs. 39,40,000/-, a cheque dated 4.8.1994 for Rs. 39,71,000/- and a cheque dated 8.2.1995 for Rs. 20,00,000/-. The company also paid to the petitioner-Kunal interest due on the amount of the loan upto 31.12.1994. The Appellant-Company thereafter failed to pay the balance amount of the loan or the interest due thereon to the petitioner-Kunal. That from the certificate issued by the Company, it was evident that the Company paid income tax deducted from the interest accrued and payable to the petitioner-Kunal for the years ending on 31.3.1995 and 31.3.1996 although the amount of the said interest accrued had not been paid by the Company to the Petitioner-Kunal. That in the circumstances, a sum of Rs. 3,64,22,825/- remained due and payable by the Appellant-Company to the petitioner-Kunal as on 31.3.1998 with further interest thereon at the rate of 18% p.a. with quarterly rests from 1.4.1998 till payment.
7. It was averred that the Appellant-Company had admitted and acknowledged its liability to the petitioner-Kunal and also confirmed the correctness of the amounts due to the petitioner-Kunal by executing confirmation of the accounts as on 31.3.1995. That the company had also admitted and confirmed the correctness of the interest accrued on the principal amount upto 31.3.1996 vide its letter dated 27.3.1996. The company has also confirmed the correctness of the balance due to the Petitioner-Kunal as on 30.9.1996 by executing a confirmation of the accounts. Lastly, the company had further admitted and acknowledged its liability to the petitioner-Kunal in its accounts and the balance sheet for the year ended 31.3.1996. It was contended that in view of these admissions there was no dispute whatsoever about the liability of the Company to the petitioner.
8. That since the Appellant-Company failed and neglected to make payment to the petitioner-Kunal after February-1995 either towards repayment of the principal or the interest due, the petitioner-Kunal by its Advocate's letter dated 20.07.1998, recorded some of the facts mentioned above and demanded payment of the amount due to the Petitioner-Kunal. The said letter was duly served upon the Company by hand delivery on 22.7.1998. The company however, failed and neglected to comply with the demand made by the Petitioner-Kunal or to respond to the said letter. In the circumstances, a 2nd letter addressed by the Advocate for the petitioner-Kunal dated 24.8.1998, recorded these facts and notified that the petitioner-Kunal was proceeding with the filing of the winding up petition. The company however, failed and neglected to pay the amount due to the petitioner-Kunal or any part thereof. A contention was thus raised in the petition that the Company was unable to pay its debts and was therefore liable to be wound up under the provisions of the Companies Act. It was then averred in the petition that the petitioner-Kunal was a shareholder of the Company holding 3800 equity shares of Rs. 10/- each. In his capacity as a member and a shareholder of the Company the petitioner-Kunal was entitled to receive notices of the Annual General Meetings of the Company as also the copies of the annual accounts of the Company every year. The petitioner-Kunal had however, till date, not received any notice from the Company about the Annual General Meeting, if any, held by it. The petitioner-Kunal was therefore, not aware of the present status or development of the said property purchased at Worli or any other activities, if any, carried on by the Appellant-Company. In the circumstances, the petitioner-Kunal had lost confidence in the present management of the Company and was therefore, entitled to seek winding up of the Company. The petitioner-Kunal averred that it was therefore, just and equitable to wind up the Company in the interest of its creditors and shareholders. After filing of the petition and the service of the same upon the Company, an affidavit-in-reply affirmed by the managing director of the Company Mr. Kanayo Khubchand Motwani duly affirmed on 18.12.1998 came to be filed in the petition. It was contended on behalf of the Appellant-Company that the petition filed by the petitioner-Kunal was malafide, induced by ulterior motive and was an abuse of the process of the Court. The petitioner-Kunal had deliberately suppressed true facts, papers and documents with a view to seeking quick remedy in an inappropriate forum. The Appellant-Company's relation with the Petitioner-Kunal was not that of borrower and lender. The Petitioner-Kunal entered into a business deal through its nominee Shri Ramesh T.Khanchandani in pursuance of the agreement dated 28.3.1994 entered into between (i) Shri K.K. Motwani, (ii) Shri Manohar T. Makhija and (iii) Shri Ramesh T. Khanchandani. The said Mr. Makhija and Mr. Khanchandani who were non resident Indians (NRIs) were introduced to the deponent by one Shri Sunil Mirpuri who was an agent and broker in real estates. That the Company was incorporated on 17.2.1982 by the deponent, his brother and a close friend with an authorised capital of Rs. 3,00,000/- for development and construction business. Though there were several business proposals, none had materialised for want of an appropriate land site. On 19.1.1994 an appropriate authority of the income-tax department held an auction of a property at Worli and the Company made a successful bid at the price of Rs. 21,75,00,000/-. The Company paid Rs. 10/- lacs as earnest money to the appropriate authority. At the time of the bid, there were great potentialities and bright prospects for development and construction business. Hence, after the land was acquired, the aforesaid NRIs through the good offices of the said Shri Sunil Mirpuri, the real estate agent and broker, showed great interest in the project because of the prime location of the land which was acquired by the Appellant-Company from the income-tax department in an auction sale and because such property was presumed to be free from any encumbrances and/or hassles of defective title. Accordingly, an agreement dated 28.3.1994 was entered into between Shri K.K. Motwani and the aforesaid two NRIs namely Shri Manohar T. Makhija and Shri Ramesh T. Khanchandani and the agreement provided that they shall jointly participate in the said Company to carry on the development of the said property at Worli, Mumbai and that the balance equity shares of the Company to the extent of 29,700 shares (30,000 equity shares of Rs. 10/- each less 300 shares issued at the relevant time) were to be issued to these 3 persons and their nominees, so that after such issue their holding in the entire capital of Rs. 3,00,000/- shall be in the ratio of 34:33:33 respectively. It was contended that paragraph-2 of the agreement provided that Shri Manohar T. Makhija shall be the Chairman, Shri K.K. Motwani shall be the Managing Director and Shri Ramesh T. Khanchandani shall be the Director of the Appellant-Company. In paragraph-4 it was provided that the parties to the said agreement shall contribute or arrange such loans and funds as may be required for the purpose of paying for the property, stamp duty and other expenses and development and construction cost. In paragraph-8 it was provided that for the purpose of development of the said property, all major decisions such as appointment of Architects and sales policy shall be taken unanimously. However, other decisions shall be taken by the Managing Director who shall be in-charge of the construction. In paragraph-9 it was provided that Shri K.K. Motwani and his nominees shall bring in loans and deposits of Rs. 6/- crores and interest @ 18% per annum will be paid by the Company thereon. That, Shri Manohar T. Makhija and his nominees shall bring in loans and deposits of Rs. 9/- crores and interest @ 18% per annum will be paid by the Company thereon. That Shri Ramesh T. Khanchandani and his nominees shall bring in loans and deposits of Rs. 9/- crores and interest @ 18% per annum will be paid by the Company thereon. It was submitted that the petitioner-Kunal was a nominee of the aforesaid Shri Ramesh T. Khanchandani and held 13% i.e. 3,900 shares out of 33% i.e. 9,900 shares allotted to Khanchandani's group. The petitioner-Kunal initially paid an amount of Rs. 3,54,51,000/- which was equivalent to 13/33 of Rs. 9,00,00,000/- as its contribution by way of loans and deposit to participate in the Worli project as a nominee of the said Khanchandani group. It was mutually agreed that the payments of such interest to the participants was nothing but an advance against their final profits and was adjustable against their shares in the final profits to be distributed equally in the ratio of 34:33:33 on completion of the said Worli project. That neither the K.K. Motwani group nor the Manohar T. Makhija group took any interest at any time on the advances made by them to the Company and therefore, subsequently such periodical payments of interest earlier made to Shri Ramesh T. Khanchandani and his nominees including the petitioner were also stopped. It was contended that the Worli Project could not take off because of various objections raised from time to time by various authorities. Initial objection was raised to the development on the property by the Coastal Zone Regulations. After that objection was removed the Corporation declined to grant permission and was claiming amount as Corporation premium. With the result the land was not conveyed to the Appellant Company.
9. That as a result of undue delay in having the land conveyed to the Appellant- Company and consequent delays in granting approval of the plans, the Company had taken up the matter with the Finance Minister of India for recission of the contract of purchase of plot by the Company in the public auction held by the appropriate authority of the income tax department and has claimed refund of purchase price together with interest and damages for losses suffered by the Company. The Finance Minister had sought the opinion of the Attorney General of India in this respect to enable him to take a suitable decision. That the Appellant-Company was expecting disposal of its complaint with the Finance Minister within next 3 to 4 months. It was contended that the Appellant-Company was legally obliged to refund in priority, the deposits of the prospective flat owners who have booked the flats in the proposed building to be constructed on the said plot of land at Worli, Mumbai. The petitioner-Kunal as a nominee of Shri Ramesh T. Khanchandani group was duty bound to repay to the Appellant-Company the amount paid to it in advance by way of interest against the final profits of the project to enable the Appellant-Company to return the deposits of the prospective flat owners. That the Directors' reports from time to time had dwelt upon all the problems, obstacles, hurdles, hassles and issues encountered by the Appellant-Company and the petitioner-Kunal was well aware of the same. That the petitioner-Kunal as a nominee of Shri Ramesh T. Khanchandani was fully briefed about the day to day developments, matters and issues faced by the Company as the said Shri Ramesh T. Khanchandani was one of the directors of the Company and the Chairman Shri Manohar T. Makhija and Managing Director Shri K.K. Motwani were regularly in touch with him through fax, informal meetings whenever he came to Mumbai as also through notices for the Directors' meetings. It was contended that neither Shri Ramesh T. Khanchandani nor any other shareholder or Director had raised any dispute of the nature raised by the petitioner-Kunal. It was contended that the petitioner-Kunal's claim for the payment of interest only to the petitioner-Kunal in preference to the depositors and lenders of other groups as also Shri Ramesh T. Khanchandani himself to whose group the Petitioner-Kunal belonged as a nominee was unjust complex and of triable nature as such interest was in any case adjustable against the final profits, if any, of the project. It was contended that when the real estate market had totally crashed, plans for construction of the Worli property not yet approved for the reasons aforesaid and the Company's claim against the income tax department for interest and damages etc. for the delays, not of Company's making, still to be resolved, it was neither justified nor possible for the Company to make any payment to the Petitioner-Kunal in respect of its loan/deposits in the nature of its contribution for participating in the project as also the interest in lieu of final profits in preference not only to contributors of other groups but even the proposed flat owners. It was contended that the main asset of the Company was the said plot of land at Worli, Mumbai and the title of this land was shrouded in the mystery of bureaucratic ways of working. The said land was not capable of being transferred unless the dispute between the income tax department and the Corporation was resolved and the land was duly conveyed to the Company. That the Appellant-Company undertook that it will not transfer and/or mortgage the said land to any outside party, save and except to surrender the same to the income tax department against return of monies paid to it by the Appellant-Company as also compensation in the nature of loss of interest and damages suffered by the Company because of breach of the terms and conditions of the auction sale. It was contended that the presentation of the winding up petition by the petitioner-Kunal was a device to pressurise the Company to submit to an unjust claim and that the Company Court was not the forum for resolving various complex and complicated questions like the nature of contributions by the participants, adjustment of interest against future profits and that these issues required thorough investigation. That therefore, the Court could not be required to investigate several complex facts and evidences in depth. That the amount received by the Company from the petitioner-Kunal and other participants were for the purpose of purchase and development of the said plot of land at Worli and the main asset of the Company was the said plot of land that was very much in existence. There were no business losses as such suffered by the Company and therefore, it was not possible to contend that the Company has lost its substratum. Therefore, there was no question of winding up the Company. It was averred that on receipt of notice from the petitioner's Advocate, reference was immediately made to Shri Sunil Mirpuri and Shri Sunil Mirpuri had assured that he would convince the petitioner-Kunal against filing any winding up petition because the management of the Company was strenuously working to save the financial interests of the Company as stated above. During this time the deponent had also to make trips to Delhi in connection with the follow up of the matter lying with the Finance Minister and hence the notice of the petitioner's Advocate remained to be replied which unfortunately resulted in exparte acceptance of the petition by this Court. In view of what was stated in the reply, it was denied that the Company was liable to pay the amount claimed and that it was just and equitable that the Company should be wound up. That Kunal was a nominee of Shri Ramesh T. Khanchandani group and one of the participants in the said project. The amount advanced by it to the Company was agreed contribution simpliciter and not the amount allegedly lent and advanced by the petitioner as held out by it. It was denied that the petitioner was not given copies of annual accounts, directors' and auditor' reports regularly and that therefore, the petitioner was unaware about the present status of development of Worli property as alleged by the petitioner. It was contended that Kunal never made any such grievance prior to the filing of the petition. That the allegations made by the petitioner-Kunal were absurd and motivated. It was further contended that the order of winding up was not only injurious to the interests of the proposed flat owners, the shareholders and business participants but in the aforesaid circumstances, when the matter was lying for decision with the Finance Minister, it will not be beneficial and will not even be in the interest of the petitioner itself. On behalf of the Company, leave was sought to file an additional affidavit supplementing the Company's say in the matter if there were any further developments therein including the Company's complaint lying for disposal with the Finance Minister. On 1.2.1999 an affidavit in rejoinder was affirmed by Mr. Shreepal S. Dalal, a partner of Kunal. It was contended in this rejoinder that the Appellant-Company had admitted that monies were due and payable to the petitioner-Kunal but had raised a false and bogus story contrary to the documents on record and that the defence was an afterthought. Neither Kunal nor the Appellant-Company were a party to the alleged agreement or arrangement. The alleged agreement or arrangement was not binding on the petitioner-Kunal and could not in any manner affect the liability of the Company to Kunal. That the issues raised were irrelevant and it was not a case of disputed liability. It was denied that the petition was malafide. It was denied that the petitioner-Kunal has deliberately suppressed any facts, papers or documents with a view to seeking a quick remedy in an inappropriate forum. It was denied that the forum was inappropriate and if at all there was anybody misleading the court, it was the Company which had put forward a completely false, dishonest, bogus and irrelevant case in order to dishonestly evade its liability and to confuse the Court. It was denied that the petitioner has entered into a business deal as one of the nominees of Shri Ramesh Khanchandani in pursuance of the agreement dated 28.3.1994 or otherwise. That neither the petitioner-Kunal nor the Company was a party to the said agreement dated 28-3-1994 and therefore, said agreement was irrelevant. It was contended that Kunal had lent money to the Company and had nothing to do with the business deal or any agreement entered into between Motwani, Makhija and Khanchandani. It was denied that the Company's relation with the petitioner-Kunal was not that of a borrower and lender. That the documents on record clearly proved beyond doubt that relationship of the Petitioner-Kunal and Company was that of a borrower and lender. It was contended that the agreement dated 28-3-1994 had no relevance to the petition and deliberately sought to be introduced to confuse the matter. That the terms of the said agreement were neither binding on the petitioner-Kunal nor the company, nor did it any way affects the liability of the Company to Kunal. It was submitted that the petitioners were allotted 3900 shares as the petitioners could give a loan to a private limited company only if they were shareholders. It was contended that Kunal's name was not mentioned as a nominee in the alleged agreement dated 28.3.1994. It was averred that 3900 shares were allotted to the Petitioners as they had agreed to lend monies to the Company and not as nominees of Shri Ramesh T. Khanchandani. It was denied that Rs. 3,54,51,000/- were paid by the Kunal as its contribution by way of loans and deposit to participate in the Worli project as a nominee of the Khanchandani group. It was reiterated that the said amount was lent and advanced as and by way of a loan which was repayable together with interest @ 18% per annum with quarterly rests. It was reiterated that the petitioner had refunded part of the loan and interest thereon @ 18% p.a. and that these payments were not by way of advance against any future profits as falsely alleged. That the notices to the Company went un-replied. That there was no agreement entered into by Kunal regarding distribution of profit or the adjustment as alleged or otherwise. It was denied that the amounts paid to Kunal were by way of interest against the 'final profit of the project' as alleged. It was denied that the petitioner-Kunal as an alleged nominee or otherwise was liable to make any payment or repayment to the Company to return the alleged deposit of the alleged prospective flat owners or for any other reason. It was contended that it was absurd and unbelievable that any person would book a flat and pay a deposit to the developer for a project even without approval of the plans by the Municipal Corporation. It was contended that the management of the Company, with a view to defraud the creditors like the petitioner and deprive them of their legitimate dues and to siphon off the amounts from the Company, created false and bogus liability in the books of accounts of the Company by showing bogus sales of the flats and this indicated the dis-honest intention of the Company. It was prayed that the Court should call upon the Company to produce all the relevant documents and records regarding the alleged sale. It was contended that the petitioner's claim was in respect of the repayment of the loan together with interest and was not in any manner what-so-ever dependent upon or linked to the Company making a profit or repaying the depositors and lenders of other groups as also Mr. Ramesh Khanchandani. It was denied that the petitioner's claim was unjust, complex and triable in nature. It was contended that Kunal was not concerned with the alleged financial difficulties of the Company and that the facts indicated that the Company was unable to pay its debts and should be wound up. It was denied that the amount paid by the Kunal to the Company was agreed contribution simpliciter. The other contentions made on behalf of the Company were also denied and it was stated that the Company had no defences whatsoever.
10. The company petition No. 726 of 1998 was heard by the learned single Judge of this Court for admission on 12-2-1999. The learned single Judge passed a conditional order directing the Appellant-company to deposit an amount of Rs. 3,91,54,539/- within eight weeks from the date of the order, failing which the company petition was to stand admitted. Against the order of the admission, an appeal was preferred, which was registered as Appeal No. 401 of 1999. By order dated 9-4-1999, the Appellate Bench extended the period for depositing the amount by one week. The amount was not deposited. The Division Bench, thereafter, heard the appeal and summarily dismissed the same by order dated 20-4-1999. After admission of the petition it was advertised and an affidavit proving publication of the admission was filed.
11. During the pendency of Company Petition No. 726 of 1998 in this Court, a Company Petition No. 171 of 2000 was filed by Mr.Tarachand H. Khanchandani. (Hereinafter referred to as the Petitioner- Tarachand). It was averred in the petition that on or about 15.4.1994, on a request made by the Appellant Company to provide temporary financial assistance to fulfil and discharge its liabilities to acquire and purchase an immovable property being a plot at Worli on auction sale by the appropriate authority under the Income Tax Act and for meeting the consideration price of Rs. 21,75,00,000/- the petitioner-Tarachand provided advances to the Appellant-Company in the sum of Rs. 4,08,99,000/- by way of temporary financial assistance. The Appellant-Company had agreed to pay interest @ 18% p.a. on the amount so advanced and the amount so advanced was duly acknowledged by the Company. That on 1.4.1996 a sum of Rs. 3,47,83,435/- was outstanding as due and payable by the Company to the petitioner-Tarachand. The Company had shown the said outstanding amount as due in their books of account as credit to the loan account of the petitioner Tarachand to the Company. Since the Appellant-Company was in financial difficulties and unable to pay the said outstanding dues and interest at the aforesaid rates of 18% for the period 1.4.1995 to 31.3.1996, the Company agreed to pay interest by its letter dated 27.3.1996 and confirmed having credited the amount of Rs. 56,35,006/- after deducting a sum of Rs. 6,26,012/- as TDS @ 10% as interest for the period from 1.4.1995 to 31.3.1996 in the loan account of the petitioner Tarachand as shown in its books of account and further confirmed that the outstanding loan as on 31.3.1996 was Rs. 4,04,18,441/-. The company also issued a TDS certificate dated 10.6.1996 confirming the aforesaid facts. That inspite of repeated requests and demands and though promises were made, the Appellant-Company avoided, failed and neglected to repay the said outstanding amount nor did the Company paid interest at the aforesaid rate payable at the end of every year. That the Company had admitted, confirmed and acknowledged its liability to pay the said amount to the petitioner-Tarachand in its accounts and balance sheets published for the years upto 20.6.1998. The petitioner Tarachand contended that he was one of the shareholders of the Company and as such he was entitled to receive notice of the annual general meetings as also copies of the annual accounts of the Company every year. He however, did not receive any such notice or a copy of annual accounts for the period from 1.4.1998. Therefore, he was not aware of the present financial position of the Appellant-Company save as what was stated earlier in the petition. That as recorded in the annual accounts and statements of liabilities for the period ended 31.3.1998, it was seen that the Company was heavily indebted to its creditors including unsecured creditors. That the company was not going to develop the said property and in the circumstances, the petitioner-Tarachand had lost confidence and was therefore seeking winding up of the Company on just and equitable ground also. That the acts of omission and commission on the part of the Company and particularly of its director Shri Motwani who has been in charge of the affairs of the Company were so gross that the said Company had defrauded the various creditors of the Company. To the best knowledge of Tarachand, the Company had so far not obtained sanction of plans, secured the issue of commencement certificate and other orders/approvals from the concerned authorities and therefore, there were no chance of commencing and completing the development of the property purchased in auction from the Income-tax department. That the Company had not shown readiness and willingness to take appropriate steps for the purpose of development of the said property. The company had not given any proposal to this Court in the pending Company Petition No. 726/1998 to discharge its liability to its creditors. The petitioner-Tarachand apprehended that if the said Company succeed in obtaining a refund of the amount of auction price from the Income-tax department, such amount will be siphoned away and none of the creditors will get a return of their amount and claim towards interest or the Company may refund the said amount to its selected creditors to the prejudicial interest of others. That the property was lying vacant and no construction activity had started.
12. In the affidavit in reply filed on behalf of the Appellant-company in Company Petition No. 171 of 2000 the same defences as were raised in reply filed in Company Petition No. 726 of 1998 were raised. The Company Petition No. 171 of 2000 was admitted in view of the admission of the Company Petition No. 726 of 1998. During the pendency of these petitions, additional affidavits were filed on behalf of the Appellant Company as also on behalf of the Petitioners. In those additional affidavits more or less the facts which were stated in the affidavit in reply initially filed were reiterated and some additional facts were also disclosed. The additional facts which were stated in the affidavit were that the understanding as to the contribution to be made by the three groups and the manner in which the interest accrued thereon was to be adjusted, was reflected in the Minutes of Meeting of the Board of Directors of the Appellant-Company held on 24-1-1994 at which Mr. Shripal Dalal the partner of the Petitioner-Kunal was present. It was averred that it was agreed in the said meeting that the understanding reached between the parties would be reduced to writing and that the agreements in this behalf would be drawn up by the Advocate Mr. D.H. Harish. Accordingly the agreements were drawn up by the said Advocate. It was also disclosed that a part of the contribution of Khanchandani group and Makhija group were refunded from out of the funds received from the prospective purchasers of the flats. It was also contended that after admission of Company Petition No. 726 of 1998, discussions were held between three groups to seek a way out of the impasse by selling or developing the plot of land at Worli which was the only substantial asset of the Appellant Company. It was claimed that in or about November, 2004 the Petitioners in the Company petitions indicated that they had a proposal from a party for the purchase of the said plot of land. In this behalf, Mr.Dalal addressed a letter dated 23-11-2004 to Mr.Ramesh Khanchandani setting out the nature of the offer. It appears that an offer of Rs. 18 crores for the property was received from the 'reliable party'. The said letter indicated the total contribution made by member of each group after taking into account the amounts that had been refunded to the Khanchandani group and Makhija group. In view of the fact that an amount of about Rs. 16 crores will be available for distribution, it was suggested that each party including the persons who had booked flats in the said building, accept a pro rata distribution of the said amount of Rs. 16 crores. The proposed pro rata distribution was in the handwritten notes that was annexed to the letter. On the basis of this pro rata distribution the Petitioners were to receive an amount of Rs. 1.2 crores. It was contended on behalf of the Appellant company that the contents of the letter and the hand written notes fully confirmed the understanding that has been pleaded by the Appellant company amongst the three groups. By further affidavit dated 17-10-2005 affirmed by Mr.Dalal on behalf of the Petitioner-Kunal, the balance sheet of the Appellant company for the year 1994-95 till the year 2003-04 were placed on record in order to enable the court to appreciate the financial position of the company. In the affidavit dated 21-9-2005 affirmed by Mr. S.S. Dalal, it was stated that during the pendency of the petitions as offer for purchase of the flats was received by the company, a proposal was prepared for sharing of the sale-proceeds of the flats by all the creditors of the company on pari pasu basis, but nothing came out from those negotiations. It appears that in addition to the various affidavits filed by the parties, on behalf of the Petitioners a compilation of documents dated 13-11-2006 including balance sheets of the Appellant company for the year 1994, 1995, 1996, 1997, 1998 and 2004 was filed. The original minutes books of the company were also tendered and taken on record. Both the petitions were heard by the learned single Judge and by his detail judgment, the learned single Judge allowed both the petitions in terms of prayer Clause (a) with costs.
13. Feeling aggrieved by the order of the learned single Judge , these two appeals have been filed by the Company challenging that order.
14. It is clear from the record that an order for winding up of the Appellant company has been made by the learned single Judge on two grounds; (1) that the company is unable to pay its debts and (2) it is just and equitable to wind up the Appellant company.
15. We propose to take up for consideration the contentions of the learned Counsel appearing for the Appellant that the learned single Judge was not justified in ordering winding up of the Appellant company on the ground that it is just and equitable to wind up the Appellant-company. The learned Counsel submitted that the learned single Judge could not have considered the material which has come on record because of the affidavits filed by both the parties, but should have restricted himself to the averments in the petitions and the material brought on record in support of those averments. The learned Counsel submitted that so far as the averments in the petitions are concerned, an order for winding up of the Appellant company on the ground that it is just and equitable to wind up the Appellant company is impossible to be made. It was claimed that the Petitioners were the share holders of the Appellant company and they have not received notice of the annual general meeting of the company and they have also not received the annual accounts of the company every year and that they have been kept in total dark about the developments of the said property at Worli purchased by the company, and therefore, they have lost confidence of the present management of the company. The learned Counsel submits that, however, the learned single Judge has considered the material which has come on record, which does not necessarily support the averments in the petition in relation to just and equitable ground. In the submission of the learned Counsel this is impermissible. In our opinion, however, the submission is not well founded. The Supreme Court in its judgment in the case of Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla and Anr. : [1976]2SCR226 in paragraph 35 has observed thus: .It is now well established that, the sixth clause, namely, 'just and equitable' is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier Clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable Clause leaves the entire matter to the wide and wise judicial discretion of the court. The only limitations are the force and content of the words themselves, 'just and equitable'. The court in paragraph 42 has further observed that:
42. It is not a proper principle to encourage hasty petitions of this nature without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association. There must be materials to show when 'just and equitable' Clause is invoked, that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders. The company court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between two groups.
16. It is, thus, clear from the observations of the Supreme Court quoted above that when the court is considering the question whether it is appropriate to make an order for winding up of the company, because it is just and equitable to wind up the company, the court has to take into consideration the position of the company as a whole and it has to keep in mind the interest of all the shareholders of the company. In other words, when the court is considering a petition seeking an order for winding up of a company on just and equitable ground, the court cannot shut its eye to the material brought before it and exclude that material from consideration only because there are no averments in the petition in that regard. No doubt, while taking the material which has come on record into consideration the court will have to see that the company against whom the material is to be used is given an opportunity to submits its point of view in relation to that material. In so far as the present petition is concerned, the material that has been placed on record and which is relevant for making an order for winding up of the company on just and equitable ground has come from the company itself. There is also no complaint that the company was not given an opportunity to submits its point of view in relation to the material. In our opinion, therefore, the learned single Judge was perfectly justified in considering the entire material. It is the case of the Appellant company itself that the company was incorporated in the year 1982, and its authorised share capital was only Rs. 3 lakh. There is no material on record to show that before purchasing the Worli property in March, 1994, the company had carried on any business of construction of building. It is, thus, clear from the record that the only tangible assets of the company is the Worli property, for which the company had paid an amount of Rs. 21.75 crores to the income-tax department. The admitted position is that despite expiry of 25 years, even the title to this property is not acquired by the company. In 1998, the Appellant company itself has addressed a letter to the Finance Minister dated 10-6-1998. In that letter, it was claimed on behalf of the company that there is an ab-initio difficulty in the title of the property, and therefore, it was stated 'In the circumstances stated above, we are no more interested in the plot purchased by us. You are requested to personally look into the matter and direct the Income-tax authority to refund the principal amount together with interest at the very early date.'
17. This letter has been placed on record by the Appellant-company itself along with the affidavit of Mr. K.K. Motwani dated 16-11-2006. There is nothing on record to show that this request made by the company for return of the property to the Income-tax Department has at any time been withdrawn by the company. It is the case of the Appellant-company itself that the amounts were advanced by the Petitioners in these two company petitions for the development of the Worli property, because they wanted to participate in the profits that would be made on development of the Worli property. Now, if it is the case of the Appellant-company itself that it is in no position to develop the property because there is an ab-initio difficulty in the title to the property and that it is claiming refund of money paid to the Income-tax Department, in our opinion, it is safe to assume that the substratum of the company itself would disappear, and therefore, in our opinion, no fault can be found with the conclusion reached by the learned single Judge that the company is liable to be wound up on just and equitable ground. We find that the learned single Judge was perfectly justified in recording a finding that there is variance of stand taken by the Appellant-company from time to time and the position that is revealed by the audited balance sheet of the company. The learned single Judge has referred to the affidavit dated 7-3-2007 filed on behalf of the Appellant company in Company Petition No. 171 of 2000 and has observed that in that affidavit a statement was made that five persons have advanced money for purchase of the flats. However, the balance sheet of the company shows that 10 persons had advanced amounts for purchase of flats. It is further to be seen here that the learned single Judge has noted that in the balance sheet a sum of Rs. 6,35,30,972/- was shown as advance towards allotment of the flat made by one Mr. Lal M. Daryanani. Mr. Motwani in the affidavit filed in this Court admitted that out of the amount of Rs. 6,35,30,972/- only a sum of Rs. 1,24,00,000/- was the advance received towards allotment of flat. The balance amount of Rs. 5,11,30,972/- was brought into the company as Motwani's contribution towards the project. Similarly, the amount of Rs. 1,24,00,000/- was shown in the balance sheet as advance paid by Mr. K.K. Motwani towards the allotment of the flat. But it was stated on affidavit that it was actually Mr. K.K. Motwani's contribution towards the project under the agreement dated 28-3-1994. After having gone through the record carefully we find that the learned single Judge was perfectly justified in holding that the company has been maintaining false record and fabricating the records. The managing director of the company was courageous enough to file an affidavit stating that what is shown in the balance sheet of the company is not correct without giving any explanation how income statement came to be made in the balance sheet, and still the company argued before us that it was not just and equitable to wind up the company. We find that there is substance in the submission made on behalf of the Petitioners in the company petition, that the records were fabricated by the company to show that substantial amounts were received from the flat purchasers, when no such amounts were actually received, so as to deny payment to the persons who have advanced loans to the company. Taking overall view of the matter, in our opinion, no exception can be taken to the order of the learned single Judge directing winding up of the company on the ground that it is just and equitable to wind up the company.
18. Now, taking up the other ground on which the winding up of the Appellant company has been ordered, namely inability of the company to pay its debts, there is no dispute between the parties that the amounts have been received from the Petitioners in both the company petitions by the Appellant company. It is not in dispute that interest at the rate of 18% p.a. was payable on those amounts. There is also no dispute that so far as the Petitioner Kunal is concerned, a part of principal and interest for some time has been paid by the company to that Petitioner. It is also not in dispute that interest on the amount advanced by the Petitioner Tarachand was also paid to him by the Appellant-company. The sole defence of the company in this regard is that what was advanced by the Petitioners in both the company petitions was not loan, but it was their contribution as share holders of the company for the development of the Worli property and for that purpose reliance was placed on the agreement dated 28-5-1994, the resolution of the company etc. But the company has not given any explanation as to why in the letter dated 7-6-1994 addressed to the Petitioner-Kunal it is stated that an amount of Rs. 39,40,000/- is being paid 'towards refund of loan' and why in the same letter it is stated that an amount of Rs. 9,31,707/- is being paid by the Appellant-company to the Petitioner Kunal 'on your loan amount upto 31-5-1994'. It is also not explained as to why in the letter dated 27th March, 1996 addressed by the Appellant-company to the Petitioner Kunal it is stated
Re: Payment of interest on your loan account with us.
This is to inform you that a sum of Rs. 2,25,11,451/- was outstanding in our books of accounts as a credit to your loan account with us as on 1/4/1995.
In the same letter it is further stated 'The net interest amount of Rs. 36,46,855/- has been credited to your loan account and the outstanding loan amount as on 31/3/1996 stands at Rs. 2,61,58,306/-'. The Appellant-company has also not explained as to why in its letter dated 27-3-1996 addressed to the Petitioner-Tarachand it states:
Re: Payment of interest on your loan account with us.
This is to inform you that a sum of Rs. 3,47,83,435/- was outstanding in our books of accounts as a credit to your loan account with us as on 1.4.1995.
19. What is further pertinent to be noted is that in the balance sheet of the year ending with 31st March, 1997 the names of both the Petitioners are shown under the column 'unsecured loans'. The same is the position with the balance sheet ending with 31st March, 1998. In the face of these documents and no explanation is being offered by the Appellant-company as to why when the amount advanced by the Petitioners towards their contribution for the development of the property in the balance sheet of the company and in the letters addressed to these Petitioners was described as 'a loan'. In our opinion, therefore, it is clear that the defence put up by the company about there being an agreement between three groups is an after thought and has rightly been discarded by the learned single Judge. This aspect of the matter has been considered in detail by the learned single Judge. After having heard the learned Counsel for both sides at length and after having perused the record we find no reason to disagree with the findings recorded by the learned single Judge on this aspect of the matter. It was contended before us that the Petitioners in the company petitions were given shares at the face value, because they were contributing monies for development of the property. Now, they want to keep the shares and they also want refund of their contribution. When this submission was advanced, on behalf of the Petitioners a clear statement was made before us that in case the Appellant company pays off the debts of the Petitioners in the company petitions, they are willing to return their shares to the company or a such person as may be named by the company. Time was sought to consider this, but ultimately we were told that it is not possible for the company to pay off the Petitioners in the company petitions. In this view of the matter, therefore, we find no substance in the submission made on behalf of the Appellant company that the Petitioners in the company petitions want their money to be returned and also want to retain their shares.
20. It was also contended before us on behalf of the Appellant company that the learned single Judge should not have entertained the petitions, because the Petitioners have suppressed joint venture agreement and had not disclosed that agreement in the petitions. The learned single Judge, in our opinion, has rightly rejected this contention. The joint venture agreement which according to the Appellant has been suppressed by the Petitioners is not signed by the Petitioners. It was contended that one Mr.Ramesh Thadani had signed that agreement and that both the Petitioners in the company petitions are his nominees. Both the Petitioners have denied this allegation. There is nothing on record except bare statement made on behalf of the Appellant-company supporting such allegation. In our opinion, therefore, by no stretch of imagination the Petitioners in company petitions can be said to be guilty of suppressing material fact.
21. Taking overall view of the matter, therefore, we find no substance in these Appeals. They are dismissed with costs. In view of disposal of Appeals, Notices of Motion are also disposed of.
22. At the request of the learned Counsel appearing for the Appellants, the operation of the interim order which is presently operating is continued for a period of eight weeks from today. The learned Counsel for the Appellant states that during this period the Appellants shall continue to abide by the statement made by them which has been recorded in these proceedings. Statement accepted.