K. Kemp, J.
1. This is a petition by a shareholder for winding up the Standard Aluminium and Brass Works, Limited. The company was registered in February 1920 with an authorised capital of 25 lacs divided into 25,000 shares of Rs. 100 each, Rs. 55 being called up on each share, the total amount of the paid-up capital, including sums received on certain forfeited shares reissued, being just over rupees seven lacs. The petitioner is the registered holder of 5 shares and is supported by certain other shareholders alleged to hold about 1600 shares. It has since appeared, however, that certain of these persons had their shares forfeited five or six years ago, and are no longer on the register of the company, a fact which reduces the number of the shares held by the supporters of the petition to about 600. The petition is opposed by the company and by shareholders to the extent of about 6,500 shares.
2. The ground on which the petition is presented is that it is just and equitable within the meaning of Section 162(vi) that the company be wound up, There is little dispute as to the actual figures which represent the working of the company during the past five or sis years, and indicate its present financial position. It would appear from the figures set out in paragraph 12 of the petition, which are taken from the balance sheets duly drawn up at the end of each financial year, that at the end of March 1922 there was a loss of about Rs. 88,500, and at the end of March 1923 a further loss of about Rs. 73,000. Thereafter the losses continued but in a diminished form,-the losses for 1923-24, Kemp J. 1924-25, and 1925-26 averaging roughly from fifteen to sixteen thousand rupees, The last published balance-sheet shows that in the year ending February 1927 losses had risen again to 44,000 rupees. I understand from the statement of counsel opposing the petition that it has been ascertained on a rough calculation that there was also a loss, although only of about Rs. 5,000, in the year ending March 1928. No figures, however, have been produced, and there is nothing on affidavit in that connection.
3. The above being the losses incurred during the last few years, the present position of the company, so far as its assets are concerned, is indicated in paragraph 2 of the affidavit of Mr. Todiwalla, chairman of the board of directors. Mr. B, J. Desai, who appeared for the petitioner, criticised certain of the figures there appearing with a view of showing that they were exaggerated. The Rs. 62,456, for example, is not in fact the present value of the machinery referred to; it is the fixed capital expenditure incurred on that machinery, less the amount deducted on account of depreciation. If the original cost was inflated, as appears to be admitted, it is clear that that cost less depreciation would not represent the true present value. But, however that may be, it is in the circumstances comparatively a small matter. Taking the figures shown as strictly correct, it appears that the assets of the company at the present moment, namely:-
Rs. 50,000 in fixed deposit,
Rs. 62,456 machinery,
Rs. 28,000 stock,
Rs. 16,000 out standings,
Rs. 6,000 in current account with the bank, amount to Rs. 1,62,456.
4. In addition, there is some portion of certain unsatisfied decrees of the face value altogether of Rs. 35,000. On a generous calculation, the assets might approach Rs two lacs, although Rs. 1 1/2 lacs would seem more probable. What then does this imply? It means that out of seven lacs capital already referred to, at least five lacs have entirely disappeared. It is true that the debts are few and the company can in no way be said to be in an insolvent condition. It is a position, however, which, in the absence of some satisfactory explanation of past losses and an assurance in regard to the future, might well give rise to serious anxiety in the mind of any shareholder.
5. In addition to the above facts, it should be added that a previous petition for the compulsory winding up of the company had been presented by a shareholder about the year 1922, but had been dismissed as a, result of a meeting of shareholders held on the directions of the Court, whereat a large majority had apparently expressed themselves in favour of a voluntary winding up. No step, however, was taken to put the company into voluntary liquidation, and, although the question was there-alter from time to time reagitated, nothing was in fact done.
6. In their report to the shareholders, dated February 4, 1927, the auditors, Messrs. S.B. Billimoria & Co., wrote as follows :-
The Profit and Loss Account shows a net loss of Ea. 16,294-7-10, which is mainly due to the lean profit in trading. Otherwise the establishment and overhead charges are less as compared with the last year's figures. It is to be noted with regret that the company has been saddled with heavy recurring losses year after year, and unless some reconstructive measures are taken to place the affairs of the company on a sound basis, the whole of its capital will be wiped out.
7. In commenting on the above statement, the directors in their report, dated February 16, 1927, observed:-
Your directors inquired of the auditors as to what suggestion they proposed to make in connection with the said statement, when they stated that they would suggest that the bad debts should be written off and the capital of the company should be reduced. Your directors are not in favour of the said suggestion and they would prefer to take the company into voluntary liquidstion. It is for the shareholders to consider the matter and the directors will be glad to know the views of She shareholders at the next meeting.
8. What happened at the next meeting and the action taken are described in the directors' report dated March 9, 1928, viz,:-
In the last annual general meeting of the company, views had been expressed by almost all the shareholders present then to have the company taken into voluntary liquidation. In accordance with the desire expressed by the said members, the directors considered the matter and consulted the solicitors of the company and they have come to a conclusion that they should wait till the suit filed by the company against the past directors is over, which suit is expected to reach hearing shortly. And after the said suit is over they would take the necessary steps in the direction.
9. I am told by counsel that the suit referred to was filed in 1924, and stands at present 141st on the prospective list of Davar J. Its decision would, therefore, not appear to be imminent.
10. I should add, while 1 am dealing with the question of the suggested voluntary winding up, that, whatever the wishes of the shareholders may have been in the past and whatever the circumstances may have been in which those wishes were expressed, it is a fact now, which is frankly admitted by Mr. Desai for the petitioner, that there has been a change of front, and at the present juncture there would be no probability of the petitioner ever succeeding in getting the requisite majority of shareholders in favour of voluntary winding up. Apart, there-fore, from the light that may be argued to be thrown on the affairs of the company by the fact that until recently the majority of the shareholders had desired a liquidation, that mere fact is not in itself very material to the present petition. It cannot, for example, in my opinion, be argued that what might be called a partial fulfilment of the condition of Clause (i) of Section 162 can be given any weight in considering whether it is just and equitable within the meaning of Clause (vi) of that section that the company should be wound up.
11. Before passing on to consider the explanations offered by the company, and the legal aspect of the whole matter, I ought perhaps to notice that, in spite of the admittedly serious state of affairs that has arisen as a result of the heavy losses sustained, and in spite of the acknowledged fact that the shareholders have in recent years frequently, if not indeed consistently, been demanding that the company be wound up voluntarily, the usual allegation, the making of which it is apparently so difficult to resist in these cases, has been put forward, namely, that the petition has not been presented bona fide.
12. The petitioner holds, it is said, only five shares, and therefore, even if the company goes on to utter ruin, stands only to lose a matter of Rs. 225. He has, it is added, given in his affidavit an incorrect version, vigorously referred to as 'false and false to his knowledge,' of what happened at the general meeting of April 14, 1928, although it is obvious that the version he actually gave, so far as it is material at all, tells sufficiently against his case. He is a great friend, it is alleged, of one of the old managing agents, and is in addition a friend of a close friend of one of the old directors, and this petition has been filed with a view of embarrassing the company in the prosecution of a suit filed against those agents and directors. A further object with which the petition has been presented is stated to be the shielding of one of the old managing agents, who, with his son, has been adjudicated insolvent, and to avoid their public examination so far as their dealings with the company are concerned, The motives attributed, with the somewhat unfair reflections they involve on the zeal and ability of the official liquidator and Official Assignee, and the efficacy of winding up proceedings generally, were wisely not developed in argument. I have con-scored them and the grounds on which they are based, and have come to the conclusion that they may safely be disregarded, and the petition examined on its merits, without any atmosphere of Prejudice being introduced.
13. It has been said-I refer more particularly to the remarks of Kekewich J. in In re Bristol Joint Stock Bank (1890) 44 Ch. 710 that in cases where a contributory petitions for a winding up, two matters must from first to last be kept in view. The first is the unwillingness of the Court to interfere with shareholders in the management of their own affairs, including the question whether the business shall be continued or not, and the second is that there is, in fact, jurisdiction in an extreme case to wind up a company at the instance of a contributory, notwithstanding that he is not supported by a majority of the shareholders. The jurisdiction referred to has frequently been asserted and exercised under the 'just and equitable' clause. The corresponding clause in the Act of 1882, viz., Section 128(e), ran as follows:-
(e) whenever for any other reason of a like nature the Court is of opinion that it is just and equitable that the Company should be wound up.
14. Whether the initial words above quoted, which found no place in the corresponding English section (Section 79 of the Act of 1862), were intended to restrict the powers of the Court or not, and however even the wide terms of the corresponding English section may at one time have been interpreted, it is now clear, both from the more recent English authorities on the point and from the significant change in the wording of the clause in the present Section 162(vi) to accord with that of the English Act as interpreted by those authorities, that the discretion of the Court in not to be considered as limited by the application of the ejusdem generis rule. In other words, the Court's power to order a, winding up is not confined to cases where grounds exist analogous to those mentioned in the previous clauses of the section.
15. For the correctness of this view I need only refer to the judgment of the Privy Council in Loch v. John Blackwood, Ltd. [1924] A.C. 783. In that case the observations of Neville J. in In re Bleriot Manufacturing Aircraft Company (Limited (1916) 32 T.L.R. 253 were quoted with approval, including the following passage (p. 255):-
The words 'just and equitable are words of the widest significance, and do not limit the jurisdiction of the Court to any case. It is a question of fact, and each case must depend on its own circumstances.
16. I have emphasised this point because it has seemed to me that cases, which are in fact mere illustrations of the sort of circumstances in which a Court will normally consider it just and equitable to order a winding up, are apt to be put forward as indicating both the limits to be set to the Court's discretion and the circumstances in which a Court must definitely interfere. It is admitted, for example, to take a common type of case, that where a company was formed to take over a particular mine and the title to the mine has altogether failed, or was formed to work a particular patent and it has turned out that the patent cannot be obtained, a situation would arise where it would be in the discretion of the Court to order a winding up on the ground, as it is put, that the substratum of the company has disappeared. The use of the expression 'the substratum of the company has disappeared 'tends to imply that the Court would, on this basis, be justified in ordering a winding up on a contributory's petition, if the whole, or substantially the whole, of the paid-up capital had disappeared. In such a case the substratum of the company, using the terms in an ordinary colloquial sense, might certainly be said to have disappeared. I am not sure, however, that that is what is really intended by the decisions under this head. The contract by which shareholders are bound inter se is that the capital they have subscribed, or have agreed to subscribe, is to be applied to the objects specified in the memorandum until the requisite majority has determined that the business shall be discontinued; and I doubt whether the Court would be justified in interfering, so long as the company has, with the capital which remains, whether already paid-up or still uncalled, a chance of producing profit in the way in which it was intended to be produced. If, however, the attainment of the objects of the company has become impossible or obviously impracticable, there would appear to be no reason why the Court should not order a winding up.
17. Similarly, where a majority of the shareholders are using their power unfairly, or where there is something in the management and conduct of the company which shows the Court that the minority are being oppressed, it would be just and equitable to interfere.
18. In this view of the law, then, let me consider the position and prospects of the company as disclosed by the affidavits filed.
19. The company was incorporated in 1920, the principal objects for which it was established being:-
(1) To carry on the business of merchants in aluminium, brass and other metals, and manufacturers of and dealers and Workers in articles of aluminium, brass or other metals.
(2) To carry on any business relating to the wiring and Working of aluminium, brass and other metals and the production, manufacture, and preparation of any other materials which may be usefully or conveniently combined with the said business, etc., etc.,
and various other objects more particularly specified, incidental to, or necessary for the convenient carrying on of the above business.
20. It is alleged, and I think I may say admitted, that for the first two years, at any rate up to the end of 1922, the affairs of the company were thoroughly mismanaged. Machinery and stock were purchased at exaggerated prices, and the vast initial outlay seemed to draw in its train nothing but loss. In December 1922, however, the old directors were removed, and this was followed in February 1923 by the removal of the old agents. A detailed report by the auditors, dated September 27, 1928, discloses acts of apparently gross mismanagement on the part of the old directors and managing agents. According to this report, the heavy losses for the years ending March 1922 and March 1923 respectively, to which I have already alluded, were attributable mainly to three causes :
(i) Leakage in stock ;
(ii) Heavy depreciation in values caused by the rash purchases in January and February 1921, and
(iii) The possible suppression of receipts on account of sales and outside work done.
21. From that time forward the company has apparently, under its new management, endeavoured to do all it could to cut down expenditure. No new agents were appointed. The registered office was removed to the factory, the charges for rent and office establishment being saved. The directors' fees were cut down from Rs. 30 to Rs. 10, and in fact, I understand, no fees have been claimed or paid. Insurance premia, which, under the old management, had amounted to something like Rs. 4,000 a year, owing, it is alleged, to the inflated amounts for which the stock was insured and the high rate paid by the old agents to offices in which they were personally interested, were reduced to a sum of between Rs, 200 and Rs. 300 a year. But in spite of these efforts, further losses were, as I have said, incurred from year to year. It is suggested that all this time there was what was called a 'gross profit' in the 'trading account.' I think it would be unwise to lay too much stress on this 'profit.' For example, it was said to be Rs. 2,920 for the year ending March 31, 1927, and the figure is apparently ascertained by debiting to that account only the cost of oil, coal, fuel, etc., electrical energy and wages of the factory employees. The other obvious ex-pauses do not appear in that account, and are only met with in the profit and loss account. The serious fact remains that the comparatively insignificant increase in the value that was added to the raw material purchased by the working of the factory, was wholly wiped out by the heavy expenses incidentally incurred. There were, however, it is true, other debit items which went to turn the result into heavy loss, and which I think it would be unreasonable to call either incidental or normal, but which were directly or indirectly due to the previous mismanagement complained of. These are placed under three heads, in para. 10 of the chairman's affidavit, as follows :-
(a) loss incurred in selling brass articles which had remained with the company at the time of removal of the managing agents, and which those agents had palmed of' on to the company at very high and exorbitant rates ;
(b) payment of law charges incurred in connection with the various acts of misconduct and mismanagement and breaches of duty on the part of the old directors and managing agents, and in respect of suits filed to recover the large amounts which were due from the friends and nominees of the managing agents, and in respect of suits filed for recovery of amounts due in respect of forfeited shares, and
(c) writing off bad debts incurred during the time of the old management.
22. As to the above, I think there is a good deal in the company's contentions as to law charges and the writing off of the bad debts. Details of these charges and how they come to be incurred are given in the affidavit I have already referred to, and I do not propose to deal with them further than to say that I think they put a somewhat different complexion on the matter. Honest efforts appear to me to have been made to enforce the company's rights, and although those efforts have resulted in more than one instance in a decree which is not likely to prove fruitful, it would be unfair to say either that the present management is to blame for that, or that it has frittered away the company's capital. It Is not reasonable to suppose that these heavy charges will recur indefinitely, and I see no reason, on the whole, to believe that the company will not shortly be in a Bounder position than it has been for the last six or seven years. It is alleged, and not denied, that not only was there a heavy slump in the market recently, but the depression caused by that slump was accentuated by the disruption of the Association of Aluminium Merchants which occurred in the year 1925. This Association has, however, it is said, recently been reformed, and the increase in prices already resolved on will come into effect in September of this year, with a prospect of brighter times for the company.
23. Whether the expectations formed by the company are over sanguine or are likely to be realised, I do not feel called upon to consider, but would adopt, with respect, the view expressed by Lord Cairns in In re Suburban Hotel Company (1867) L.R. 2 Ch. 737 where he observed (p. 751):-
This company may become successful, or may continue to be unprofitable, as I believe it has hitherto been; and it may, therefore, hereafter re-appear in this Court under different circumstances, but it is not for this Court now to pronounce, and, above all, not for this Court to pronounce on opinion-evidence, that this is likely to be an unprofitable speculation; and that, therefore, at the wish of a minority of shareholders, against the will of a large majority, the company should be wound up and put an end to.
24. I, therefore, dismiss the petition with costs, one set of costs to be paid to the company, and one to the opposing contributories. I have heard Mr. Desai on the question of costs, and I see no reason to deprive the company or the opposing contributories of the costs to which I think they are entitled. I do not think there was anything in their conduct either improper or likely to make the petitioner believe that he had a right to have the company wound up by the Court. He took the risk of not being able to make out a case. The contributories were entitled to oppose, and in my judgment he failed.