SHAHAMATULLAH QURESHI Versus HI-TECH CONSTRUCTION (PVT) LTD

1. This is a petition under section 305 read with section 309 of the Companies Ordinance, 1984, (in short‑‑‑the Ordinance) for an order that Hi‑Tec Construction (Pvt.) Ltd., the Company be wound up and for certain other incidental relief.

2. The Hi‑Tec Construction (Pvt.) Ltd. is a private limited company (in short‑‑‑the company), which was incorporated under the Companies Ordinance, 1984 in the year 1984. Its authorized capital is Rs.50 lacs, whereas, paid‑up capital is Rs.12 lacs divided into 120,000 shares of Rs.10 each. These 120,000 shares are held by three persons as follows:‑‑

(1) Shujaatullah Qureshi 114,000

(2) Shahamatullah Qureshi 5,000

(3) Shahzadullah Qureshi 1,000

3. The main activity of the company is of construction business. The petitioner has been a promoter/ sponsor and a Director of the Company since its inception having 4.17% shares of total paid‑up capital and claims to be exclusively taking part in the affairs of the company on the contract side, estimating, tendering, cost monitoring and contract administration. Whereas, Shujaatullah Qureshi, the major share‑holder, had and still has the exclusive responsibility to look after the corporate, finance and execution of the project, who is also elder brother of the petitioner. The company is run and managed by Shujaatullah Qureshi who has failed to maintain proper and true accounts and has committed fraud, misfeasance and malfeasance in relation to the company against the requirements of the memorandum and articles of association and the provisions of the Companies Ordinance in a manner oppressive to the petitioner.

4. The grounds on which the relief is claimed, are set out in para 6 of the petition and they are:

(a) No elections were held nor first Annual General Meeting was held since the incorporation of the company. The first ever election that were conducted were on 25‑6‑1995, to oust the petitioner.

(b) The accounts have not been audited since 1988. The Audited accounts of 1985, 1986 and 1987 were never placed before the members in Annual General Meeting.

(c) The change in auditors from Messrs Feroze Sharief and Co. to Messrs Waseem Associates were not brought to the notice of the petitioner. The appointment of auditors have not been made in accordance with the Companies Ordinance.

(d) No register of members has been maintained in spite of request made by the petitioner.

(e) No minute book has been maintained. The inspection of the minute book was never allowed to the petitioner.

(f) The Chief Executive as required under Companies Ordinance and as per Articles of Association was never appointed. Shujaatullah Qureshi is a self‑proclaimed Chief Executive.

(g) The company's assets exceeding Rs.100,000.00 have been sold out without the approval of the Board. The proceeds received from the sale of steel scrap exceeding Rs.27,49,050.00 have not been deposited in the Company account. These figures have not been reflected in the books of accounts of the Company.

(h) The capital expenditure and investments have been incurred without the knowledge and prior approval of the Board and investment made and income earned on such investment has not been disclosed in the so‑called audited accounts. The income on such investment is drawn by Shujaatullah Qureshi to his personal benefits. The instances of the capital expenditure investment are shown as follows:‑‑

(a) Capital expenditure Rs.200,000.00

(b) Investment of Rs.7.20 millions in Khas Deposit from Joint Venture Surplus Funds.

(c) Investment of Rs.10,000,000.00 after withdrawal from Company's account maintained with American Express Bank, Islamabad.

(d) Investment of Rs.2,000,000.00 on 8‑6‑1993 with American Express Bank Ltd.

(e) Withdrawal of Rs.1,700,000.00 on 29‑11‑1994 by Shujaatullah Qureshi from American Express Bank and invested or deposited the same elsewhere.

(f) Withdrawal of Rs.5,000,000.00 from Company's account with N.D.F.C., Shaheed‑e‑Millat Road Branch on 30‑12‑1992 its investment or deposit somewhere else.

(g) Withdrawal of Rs.2,500,000.00 from N.D.F.C. and its investment or deposit elsewhere.

(i) No share certificates have been issued to the members including the petitioner, who is founder member/ promoter, though shares were allotted on 1‑12‑1984 and duly paid for by the petitioner and being reflected in the account book and also the various Form `A' filed with the Registrar of Companies.

(j) An alternate Director not being a share‑holder of the company was appointed without approval of the Board in place of Shahzadullah Qureshi, who remained most of the time out of country and was never involved in any affairs of the Company nor attended any Board Meeting.

(k) The Articles of Association of the company have been altered without the approval of the Board. No General Body Meeting was held to pass the Special Resolution to adopt the altered Articles of Association.

(l) No dividend is paid to the shareholders even after ten years of incorporation, nor has any reserve fund been created by the, company. The profits have been siphoned off. Bulk of the funds so withdrawn has been unlawfully siphoned off by Shujaatullah Qureshi to his own gain and put the company and its share‑holders to unlawful loss.

(m) For the first time, the audited accounts were presented on 5‑6‑1995 for adoption in so‑called 10 th Annual General Meeting held on 25‑6‑1995. No Directors report was submitted with the accounts which was approved by Shujaatullah Qureshi and alternate Director who is not a member. The petitioner was deliberately ignored who had been demanding the audit of accounts.

(n) The company is maintaining Staff Provident Fund. The requirement of Companies Ordinance have been ignored. The recovery of contribution from the employees fund was regular whereas the Company's contribution was not regular rather there was no deposit. The funds deposited by employees were unlawfully and unauthorizedly utilized in the business of the company depriving the staff for many years. Shujaatullah Qureshi was not contributory to the Provident Fund till 1993 but he had drawn a loan of Rs.2.90 lacs from the Provident Fund Account.

(o) The Bonus/Ex gratia payments were made since inception to the staff without the approval of the Board.

(p) Shujaatullah Qureshi had been charging the cost of the maintenance of two residential houses. One in Karachi and one at Islamabad and two Huts at Changla Gali from company without the approval of the Board.

(q) The funds from company accounts are drawn as on account to Shujaatullah Qureshi for the construction of huts at Changla Gali. These amounts were refundable but these payments are never reimbursed to the company nor any approval is sought to draw these on account payments.

(r) The company is maintaining various accounts in the same bank. Shujaatullah Qureshi has been drawing funds from one account of the company and giving the same to the other account of the company. These transfers are being treated as loan from the Director and on these fictitious loans, Shujaatullah Qureshi is drawing mark‑up on the loaned amount through cash cheques. Neither the Board was informed before loaning nor the Board approval is sought for drawing mark-up.

5. Thus approximately Rs.4.00 millions from Hi Tec/M.B.L. Joint venture account and loaned to Hi‑Tec and drawn mark‑up on loaned amount over Rs.3.00 million.

6. The single signatory account operation of Account No.STDA‑19 with N.D.F.C. operated by Shujaatullah Qureshi since 24‑1‑1993 has not been shown in the audited account and was deliberately omitted. As per bank statement, a balance of Rs.2,237,976.00 on 31‑12‑1993 and Rs.5,487,686.00 on 31‑12‑1993, the mark‑up income was also omitted. This reflects that no bank book is maintained by the company for Shujaatullah Qureshi STDA‑19 Account. Though in the said account a sum of Rs.68,275,242.04 was deposited by drawing from FTDAA 010 and TDA 015 of the company inclusive of mark‑up. It was also maintained that he had withdrawn following amounts from STDA‑19 account and deposited in his personal account with Citibank Karachi or transferred elsewhere:‑‑

7. Dated Cheque No. Amount

8. 17‑3‑1993 105351 5,910,000.00

9. 11‑4‑1993 105352 2,550,000.00

10. 9‑5‑1993 105355 11,618,500.00

11. 26‑5‑1993 105358 5,710,000.00

12. 28‑7‑1993 105367 1,618,000.00

13. The instances of other authorized operation/ maintenance of Company's accounts with bank were also pleaded.

14. It was also pleaded that Shujaatullah Qureshi is drawing approximately Rs.25,000 per month against Chokidar/ Cook/ Entertainment and house rent and Rs.8,590 per month as Misc. expenses without approval of the Board. He is also drawing overseas tickets in excess of the approval of the Board.

15. It is the case of the petitioner that when he demanded audited account, he was excluded from the management of the company and was purposely harassed, humiliated and mentally tortured and finally the petitioner was removed from the office in most insulting and humiliating manner on false preconceived charges in an illegal manner with the intention to cover up the financial misconduct as the new Board of Directors would not be aware of the financial misappropriation.

16. The effective opposition to the petition is by the company through counter‑affidavit by Shujaatullah Qureshi, the Director as well as the Chief Executive of the respondent‑Company, maintaining therein that the allegation made by the petitioner as aforesaid are, materially and grossly incorrect and a counter blast to the petitioner's removal from the directorship of the respondent‑Company and termination of his service as Chief Quantity Surveyor as well as to the suit filed by the deponent against the petitioner in Civil Court at Karachi. The locus standi of the petitioner to file the present petition was also challenged on the ground that the petitioner is merely Benamidar in respect of the said shares. Since incorporation, Shujaatullah Qureshi declared in his Wealth Tax Statement a total of 120000 shares and paid tax for past 12 years after being assessed on 120000 shares, whereas, contrary to this, petitioner has not declared a single share nor paid tax as per Wealth Tax returns. He has filed suit in the Court of Senior Civil Judge at Karachi for declaration that the aforesaid shares were his personal property and that the present petitioner was merely his Benamidar. As a counter‑blast to the said suit the present petition was filed on 9th October, 1995 after being served in the said suit. It was also pleaded that his claim to hold 4.17% of the shares of the respondent‑Company even if such claim is correct he would then be only a micro share holder with no right to bring any corporate action for oppression. The position of petitioner as sponsor was also disputed. That he has nothing to do with its founding, constituting or establishment. The petitioner has also not made contribution of even a single rupee to the capital of the company by way of purchase price of the shares or otherwise. The deponent claimed the respondent‑Company is basically his own concern and in order to facilitate the operation of his business, he adopted the mechanism of operation of limited liability company. He claims 1,14,000 shares of total of 120,000 shares i.e. 95% of the total share capital 1000 shares were shown in the name of his own son and 5000 shares were shown as being owned by the present petitioner. On lifting the veil of incorporation it will be clear that the inclusion of the petitioner and his own son each holding only nominal shares was a formality to fulfil the requirements of Corporate Law . The original share certificate claimed by the petitioner are in possession and custody of Shujaatullah Qureshi.

17. In reply to the allegations contained in sub‑paras. of para. 6 of the petition, the plea of the company was as follows:‑‑

(a) 9 General Meetings were held since 21‑11‑1984 and returns in respect of the same were filed with the Registrar of the Companies. These returns except one bear the signatures of the petitioner. Even the Minute Book of the company bears this out. Form Win respect of years 1986, 1987 and 1988 were filed but late.

(b) All the accounts from 1985 to 1994 of the Company have been audited and have formally been placed before the members in the Annual General Meetings.

(c) That in the Form `A' filed with the Registrar of the Companies for the years 1985 to 1988 Feroze Sharif and Company were shown as auditors, who resigned on 15‑8‑1988 and from 1989 to 1994, Wasim Associates were the Auditors. They were initially appointed against a casual vacancy and later in Annual General Meeting.

(d) The position of the petitioner as Executive Director of the company was also challenged, physical removal of the petitioner was also denied and it was maintained that he voluntarily left the office and went home.

(e) The Register of the members has been maintained and is available for inspection. The allegations in Notes have teen fabricated for the purpose of this case and have not been received.

(f) So the Minute Books have been maintained and are available for its inspection. The deponent is all along the Chief Executive of the Company and Form `A' filed with the Registrar and signed by the petitioner as well testifies this effect.

(g) As regards the sale of the steel scrap, it was maintained that as per Hi‑Tec's Contract with Pioneer Cement Ltd. left over scrap steel becomes the property of Pioneer Cement Ltd., who supplied bulk of Reinforcing Steel. As per the contract only the costs of quantity of reinforcing steel which actually is used in the works was payable by the Hi‑Tec. Quantity was arranged by the company through its own sources whenever Pioneer Cement was unable to supply. Any scrap coming out of supplies of Pioneer Cement was the property of Pioneer Cement. and against which the respondent under a Private arrangement had already advanced sums to Pioneer Cement management. Towards end of the contract this sum was adjusted against sale of scrap.

(h) The respondent‑Company had participated as Project Construction Managers in separate construction contracts of which the first contract was for the construction of Building Machinery Training Center at Islamabad, a project of Government of Pakistan sponsored and backed by a grant from the Japanese Government. The construction work was awarded to a Japanese Construction Company by name Komagai Gumi. The said firm sublet this contract to Murshid Builders Limited with a condition that the respondent Company shall be the Project and Construction Managers. The second project was Housing Project of the same Centre which was awarded directly to Murshid Builder Ltd. and the respondent‑Company was only Project and Construction Managers.

(i) With reference to Rs.10 million drawn from the American Express Bank, it was maintained that this account was for the amount received by Hi‑Tec as Mobilization Advance from Pioneer Cement Limited, which was utilized only from time to time while the contract work was in progress. Rs.10 million of the said advance of Rs.15,413,756 was placed in 30 days Call Deposit with the American Express Bank and N.D.F.C. respectively as Call Deposits. These funds and similar other funds were wholly used for the purpose of the construction contracts awarded to the Hi‑Tec and it was maintained that all sums received. by the company are entered in the books of accounts as well as their expenditure. The receiving of Mobilization Advance and placing it in a Call Deposit require Board Resolutions as it is not surplus fund.

(j) Plea against the allegation that amount of Rs.1.7 million drawn on 29‑1‑1994 and deposited elsewhere was that this amount was drawn by company's Admin. Officer Muhammad Younas in whose name the cheque was made and the amount was paid for the purchase of vehicle for Director's use in Northern Area and which purchase was duly authorized.

(k) The withdrawal of Rs.5 million from company's account maintained with N.D.F.C. on 30‑12‑1992 as alleged was denied. No such amount was drawn by him, it was placed in call deposit.

(l) The allegation as against Rs.2.5 million was also denied. Pay order was made in favour of National Assets Leasing Corporation as evident. from the N.D.F.C. Manager later.

(m) So far as the appointment of alternate Director was concerned, it was maintained that the Companies Ordinance does not specify any such requirement nor such requirement spelt out in the Articles of Association of the Company. Mr. Naveed Anwar was appointed as alternate with the approval of the Board as such was duly notified to the Registrar under an appropriate Form. The allegations against Shahzadullah Qureshi were denied a, incorrect and mischievous.

(n) The Articles of Association of the Company were altered on the basis of Special Resolution passed in Extraordinary General Meeting of the company held on 21‑6‑1986. Such alteration/ amendments were wholly for the purpose of conforming them to the requirements of the Companies Ordinance.

(o) With regard to the allegation that company earned a profit of over 70 million since its inception, it was maintained that during the course of the ten years of the business of the respondent‑Company, petitioner has been paid apart from salaries and other allowances a total sum of Rs.10,65,715 by cheques of the company as ex gratia payments. These payments had nothing to do with the petitioner status as a share‑holder as the shares which were in the name of petitioner never belonged to him. A sum of Rs.15,77,537 on account of Directors allowances and expenses, he was further given hundreds of thousands of rupees by way of remuneration and leave fare assistance. The allegations that the funds of the company have been siphoned off, were also vehemently denied being false allegation made to create prejudice in the mind of the Court.

(p) So far as the Directors Report to accompany its audited accounts, it was maintained that in case of private limited company, it is not at all customary for a Directors Report to accompany its audited accounts. The audited accounts of a private Company have to be singed by two Directors before placing it before the Annual General Meeting for its being adopted and the accounts were signed by the deponent and the alternate Director. Thereafter, the accounts were placed before the Annual General Meeting of the company in which the petitioner was personally present and the accounts were adopted. The petitioner has signed the Attendance Sheet in the Annual General Meeting as well as the Notes recorded on the spot of the proceedings.

(q) With regard to the mismanagement in the Provident Fund Account as alleged by the petitioner, it was maintained that petitioner admits only being a Trustee' and single signatory of the Provident Fund Account but avoids to mention his real designation as Secretary of the Fund. The petitioner cannot disown obligations and responsibility of managing the said Account as he was free to operate and was never obstracted. The funds were never misused or diverted as alleged by the petitioner. The petitioner being the Director, Trustee Secretary and single signatory of the Fund Account was solely responsible to Account for the same.

(r) As per para.71‑P of the Article of Association, for the first three years of the respondent's operation due to no profitability, no funds were contributed by the company to the fund which fact had been known to the petitioner who signed the Accounts for 1985, 86 and 87. But the Employees in good faith continued to contribute the same in anticipation that no sooner the respondent will be viable the funds will be contributed and such expectations of the employees were met with the result that as of this day the Provident Fund Account stands at Rs.1638774.00 of which Rs.16,00,000.00 is invested in Golden Certificates of N.D.F.C.

(s) It was maintained that during the teething period of first three years, the liquidity position of the respondent was very weak, so much so that the respondent was unable to pay salary to the deponent and other senior staff and it was out of the cash advanced by the deponent that the staff salaries could be paid. Provident Fund contribution can only be deducted from the salary paid but as no salary could be paid no contribution was deducted on a regular basis from the deponent's salary but was adjusted from the sums advanced by the deponent. It was maintained that the deponent has virtually given his sweat and blood in making the respondent a viable and prestigious concern but respondent was unable to pay the salary of the deponent for many years but the deponent was obliged to pay tax with the result that deponent requested the Board to reduce the salary at a level that no tax will be payable.

18. Due to resignations and terminations for settling dues of Provident Fund the amounts were not drawn from Provident Fund Account but were paid by respondent and then reimbursed when Provident Fund Investments matured. This practice benefited the Provident Fund earning by additional sums.

(t) The bonus/ex gratia payments were made with the approval of the members of the Company which were three and later on increased to seven. The petitioner himself received Rs.10,65,715 as ex gratia payments between April, 1986 to 1994.

(u) So far as the allegation regarding the maintenance of two residential houses at Islamabad and Karachi, he is drawing entitlements in relation to the single residential house at Karachi. The house at Islamabad is rented by the company and is the Northern Regional Office of the company and also has Guest Rooms set apart therein for use of the Directors when they visit Islamabad. Such arrangement is much cheaper than staying in a hotel. The petitioner himself stayed in the Guest Rooms on all his visits to Islamabad. It was denied that company owns or rented any Hut at Changla Gali. The two Huts at Changla Gali belong to the deponent and his daughter as their personal property and company has no concern with them.

(v) It was also denied that any funds were drawn from the company for ‑the construction of the Huts. Sometimes Director do draw from the company money on account but refund the same to the company and whenever he had withdrawn any amount he had returned it to the company.

(w) So far as the maintenance of various bank accounts; it was maintained that the company has to maintain multiple accounts for the convenience of its multiple projects. These accounts were opened in banks after proper Board resolutions. The allegation that the movement of funds are treated as loan from the Directors is false and mischievous. He denied that he has ever drawn Rs.4 million from the Hi‑Tec/M.B.L. Joint Venture Account and lent the same to Hi‑Tec and drawn Mark‑up on loan amount of any account.

19. Rest of the allegations were also denied. The documents were also annexed with the counter‑affidavit, nature of such documents, inter alia, are Wealth Tax Returns and the Assessment Order of the respondent, petitioner w.e.f. 1985 to 1995, bank letters, Form `A', contract awarded by Pioneer Cement Ltd. and various letters of N.D.F.C., statement of Mobilization Advance and receipt of Hazara Hill Tract.

20. Joint Registrar of Companies, Company Registration Office, Corporate Law Authority in parawise comments has stated as follows:‑‑

21. The respondent‑Company was incorporated on 21‑11‑1984, by Messrs Shujaatullah Qureshi and Shahamatullah Qureshi. Subsequently the return of allotment was filed on 22‑6‑1988 reporting the allotment of 1,20,000 shares on 1‑12‑1984 valuing Rs.1,200,000. The allotment of shares was as follows:‑‑

(1) Shaujaatullah Qureshi 1,14,000 shares.

(2) Shahmatullah Qureshi 5,000 shares.

(3) Shahzadullah Qureshi 1,000 shares.

22. The petitioner has 5000 shares of Rs.10 each in the company. The petitioner is a promoter/ sponsor and Director of the Company. Form `A' made upto 25‑6‑1995 was filed by the company on 28‑7‑1995. The petitioner has been reported to have ceased as Director w.e.f. 25‑6‑1995. Most of the returns on Form `A' filed by the company since its incorporation till 1994 have been signed jointly by the petitioner and Shujaatullah Qureshi. No election was reported in Form `A' of first Annual General Meeting made up to 14‑5‑1986 filed on 22‑6‑1988. However, the election are reported to have been held subsequently in the years 1989, 1992 and 1995 as per Form `A' made up to 29‑6‑1989, 30‑6‑1992 and 25‑6‑1995. As regards the holding of Annual General Meeting, the company has been reporting on Form `A' that the Annual General Meetings were held on 14‑5‑1986, 30‑6‑1987, 30‑6‑1988, 29‑6‑1989, 30‑6‑1990, 30‑6‑1991, 30‑6‑1992, 30‑6‑1993, 30‑6‑1994 and 25‑6‑1995 and almost all the returns till 1994 have been signed by the petitioner jointly with Shujaatullah Qureshi. Messrs Feroz Sharif & Co. were shown as the Auditors of the company in Form `A' for the years 1986‑87. In the subsequent returns on Form `A' for the years 1989 to 1995 Messrs Waseem Associates are shown as Auditors of the Company. The prescribed return on Form‑29 for the appointment of Messrs Waseem Associates in place of Feroz Sharif & Co. w.e.f. 22‑8‑1988 has been filed on 5‑7‑1995. The appointment of the Auditors for the years 1985, 1986, 1987 and 1988 were not made in accordance with sections 252 and 205 of the Companies Ordinance. However, the company had been filing the returns on Form‑A and all these returns were signed by the petitioner jointly with Shujaatullah Qureshi. No complaint was ever lodged by the petitioner. As reported on Form‑XII dated 28‑2‑1985 filed on 13-3‑1985 Shujaatullah Qureshi was appointed as Chief Executive w.e.f. 28‑2‑1985. Subsequently in all returns on Form `A' filed by the Company for the years 1986 to 1995, Shujaatullah Qureshi is shown as the Chief Executive of the company. Most of the returns are signed jointly by the petitioner. A return on prescribed Form‑26 dated 21‑6‑1986 was filed on 29‑6‑1986, reporting that an extraordinary general meeting of the company was held on 21‑6‑1986 in which the special resolution for alteration in the Memorandum and Articles of Association was passed by the company. No transfer of shares was reported in Form `A' filed till 1994. In Form `A' made up to 25‑6‑1995 filed on 25‑7‑1995 it has been reported that 602 shares of Shujaatullah Qureshi have been transferred to following persons:‑‑

(1) Feroz Qaiser 500 shares

(2) Mohammad Hasan Hanfi 100 shares

(3) Shahid Mateen 1 share

(4) Fazalullah Khan 1 share

23. The affidavit‑in‑rejoinder by the petitioner to the counter‑affidavit filed by the Chief Executive of the Company was also filed, whereby the most of the pleas taken by the respondent were denied, same need no recapitulation, suffice to mention that petition for winding up is not counter‑blast to the suit filed by the elder brother and also refuted that the shareholding has not been disclosed by the petitioner in his Wealth Tax statement and Copy of Wealth Tax Return, inter alia was produced for the Assessment Year 1995‑96, wherein 5000 shares were shown as movable assets. As against this plea, company has produced the Wealth Tax Returns pertaining to the years 1985‑86 to 1994‑95 (R/12 to R/17) of the petitioner, wherein the shares were not shown as the movable assets of the petitioner, with further plea that for the first time, after the suit filed by Shujaatullah Qureshi on 24‑7‑1995, the petitioner has shown `these shares in his Wealth Tax Return.

24. I have heard Mr. Anwar Mansoor Khan, learned counsel for the petitioner and Mr. Mohammad Ali Sayeed, learned counsel for the respondent‑Company.

25. Before I deal with respective contentions raised, it will be necessary to keep in view the scope of sections 305 and 309 of the Companies Ordinance. First I will refer section 309 which reads as follows:‑‑

26. `309. Provisions as to application for winding up .‑‑‑An application to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section, either by the company, or by any creditor or creditors (including any contingent or prospective creditor or creditors), or by any contributory or contributories, or by all or any of the aforesaid parties, together or separately, or by the Registrar, or by the Authority or by a person authorized by the Authority in that behalf:

27. Provided that:‑‑

(a) a contributory shall not be entitled to present a petition for winding up a company unless:‑‑

(i) either the number of members is reduced, in the case of a private company, below two, or in the case of any other company, below seven; or

(ii) the shares in respect of which he is a. contributory or some of them either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months before the commencement of the winding up, or, have devolved on him through the death of a former holder;

(b) the Registrar shall not be entitled to present a petition for the winding up of a company unless the previous sanction of the Authority has been obtained to the presentation of the petition."

28. A careful reading of the above provision would show that a petition for winding up of a company may be filed either:‑‑

(a) by the company,

(b) by the any creditor or creditors (including any contingent or prospective creditor or creditors), or

(c) by any contributory or contributories, provided in case of private limited company, the number of members is reduced to less than 2 or his name as member appears on the register for the period mentioned in the proviso (a)(ii) of section 309, or

(d) by all or any of the aforesaid parties, together or separately, or

(e) by the Registrar,

(f) or by the Authority or by a person authorized by the Authority in that behalf.

29. Section 305 of the Ordinance enumerates the circumstances in which Company may be wound up which are as follows:‑‑

(a) `305. Circumstances in which company may be wound up by Court .‑‑‑A company may be wound up by the Court‑

(a) if the company has, by special resolution, resolved that the company be wound up by the Court;

(b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting or any two consecutive Annual General Meetings;

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of private company, below two or, in the case of any other company, below seven;

(e) if the company is unable to pay its debts;

(f) if the company is‑‑

(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent activities;

(ii) carrying on business not authorized by the memorandum;

(iii) conducted its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders ;

(iv) run and managed by persons who fail to maintain proper and true accounts or commit fraud misfeasance or malfeasance in relation to the company : or

(v) managed by persons who refuse to act according to the requirements of the memorandum or articles or the provisions of this Ordinance or fail to carry out the directions or decisions of the Court or the Registrar or the Authority given in the exercise of powers under this Ordinance;

(g) if, being a listed company, it ceases to be such company; or

(h) if the Court is of opinion that it is just and equitable that the company should be wound up.

30. Learned counsel for the petitioner maintained that the petitioner being promoter of the company and registered share‑holder of 5000 shares, i.e. 4.17% of the total paid up capital. He is conscious of the explanation II to section 305, a rider clause, which bars the minority share holder having less than twenty per cent of the equity share capital of the company from filing the petition but urged that the petitioner, being `member' as defined in clause (21) of section 2(1) of the Ordinance which includes promoter, therefore he being promoter can file the petition. Clause 21 of section 2 of the Ordinance defines member means, in relation to a company having share capital a subscriber to the memorandum of the company and every person to whom is allotted or who becomes the holder of any share, scrip or other security which gives him a voting right in the company and whose name is entered in the register of members, and, in relation to a company not having a share capital, any person who has agreed to become a member of the company and whose name is so entered.

31. Learned counsel representing the respondent though has challenged the locus standi of the petitioner in presenting the petition for winding up, but not on the ground that his shareholding is less than 20 per cent of the equity share capital but on the ground that the petitioner is a Benami holder of 5000 shares and the real owner is elder brother, namely, Shujaatullah Qureshi and that suit has been filed which is pending in this regard.

32. A petition under section 290 of the Companies Ordinance for an appropriate order on allegation that the affairs of the company are being conducted in a manner oppressive to the member or members may be filed provided the member or the members must have not less than twenty per cent of the issued share capital of a company, so the petition for winding up of a company on the ground enumerated in clause (iii) of subsection (f) of section 305 cannot be filed by the minority shareholders having less than twenty per cent of the equity. The rider clause contained in Explanation II to secti6n 309 ibid is relatable to clause (iii) referred to above provided the petition is filed by the minority shareholders, whereas the petition by person concerned with formation or promotion of the company is not subject to any rider clause. Therefore, the petition on such ground is maintainable by person(s) concerned with the formation or promotion of the company irrespective of his shareholding.

33. I am of the view that petition for winding up of a company is not an appropriate proceedings for the determination of a dispute about the shareholding in the company, therefore, it would be inappropriate to dilate on such aspect least any observation of mine may cause prejudice to the either party contesting the civil suit. However, the plea raised by the respondent that the petition is counter‑blast to the suit filed by Shujaatullah Qureshi against the petitioner will be appropriately considered.

34. It was vehemently urged by Mr. Anwar Mansoor Khan, learned counsel for the petitioner that it is permissible to lift the veil of incorporation and look behind it for ascertaining its true nature or the nature of association of the petitioner with the company. It was vehemently contended that in fact the company, in real sense, is a partnership concern of members of one family and once the veil of incorporation is lifted, the true character of corporate personality would emerge as partnership concern. To support his contention, learned counsel referred the following cases:‑‑

(1) Ladli Prasad Jaiswal v. The Karnal Distillery Co., Ltd. PLD 1965 SC 221; (2) Shahbazud Din Chaudhry and 27 others v. Messrs Service Industries Textiles Limited and 4 others PLD 88 Lahore 1; (3) Ebrahimi v. Westbourne (1972) 2 All ER 492; (4) Loch v. John Bnackwood (1924) All ER 200; (5) Re Jermyn Street Turkish Baths Ltd. (1971) 3 All FR 84; (6) Scottish Cooperative v. Meyer (1958) 3 All ER 66; (7) Iqbal Alain v. Plasticrafters 1991 CLC 589; (8) Messrs Nagina Films Ltd. v. Usman Hussain 8s Co. 1987 CLC 2263 and (9) Re Yenidje Tobacco Co. Ltd. (1916) 17 All ER 1050.

35. As against this, Mr. Muhammad Ali Sayeed appearing on behalf of the respondent contention was that the company has separate legal identity apart from shareholders whether it is private or public company. He maintained that where the apparent structure not real and on piercing the veil it is found that in reality it is a partnership with shareholding more or less equal and not otherwise. He pointed out that in the instant case, if the veil of incorporation is lifted, the company would be a proprietary concern of elder brother Shujaatullah Qureshi as he is holding more than 95% of the shares and referred the case of Salomon v. Salomon 1897 AC 22, wherein the veil of incorporation was not lifted by House of Lord, wherein Aron Salomon was holding 95% shares in the company in absence of any fraud and formation of the company was in accordance with the provisions of Company Law. The facts were that a trader sold his private solvent business to a private limited company which consisted of the vendor, his wife, a daughter and four sons. The company in part payment of the purchase money of the business issued debentures to the vendor by way of a floating security and in addition the vendor held 20000 shares of one pound each. This made him the controlling share‑holder. Subsequently, the company fell into bad days and had to be wound up. In the winding up, after satisfying the debentures issued to the vendor, there was not enough left to pay the other ordinary creditors. The liquidator applied to have the debentures delivered up and cancelled and for a judgment against the vendor, Aron Salomon for all sums paid by the company to him, on the ground that (i) the arrangement made by the said Aron Salomon for the formation of the company was a fraud upon the creditors of the company and (ii) that no Board of Directors of the company was ever appointed as Aron Salomon alone managed the affairs of the company. Vaughan Williams, J. ordered Aron Salomon to indemnify the company against the unsecured debt by treating the company as agent of Mr. Salomon. On appeal by Mr. Salomon, the Court of Appeal affirmed the decision and held that the formation of the company was a mere scheme to enable Aron Salomon to carry on the business in the name of the company with limited liability contrary to the true intent and meaning of the Companies Act. The company was treated as Trustee for Aron Salomon. The House of Lords, however, reversed this finding, because, in its view the charge of fraud against the creditors had no foundation in fact and whatever had been done by Aron Salomon was above board and in full compliance with the provisions of the then Companies Act. The company was, in no sense of the term, either an agent or trustee for Aron Salomon. This case was considered in reference case titled The President v. Mr. Justice Shaukat Ali PLD 1971 SC 585.

36. Learned counsel for the respondent contended that in every case, the veil of incorporation is not to be lifted. He also referred the case of Shahabzud Din Chaudhry and 27 others v. Messrs Services Industries Textiles Limited and 4 others PLD 1988 Lahore 1, wherein the veil of incorporation was not lifted.

37. Mr. Mohammad Ali Sayeed also referred the following cases:‑‑

(1) Ladli Prasad Jaiswal v. The Karnal Distillery Co., Ltd. PLD 1965 SC 221; (2) In re Sulekha Works Ltd. AIR 1965 Calcutta 98; (3) In re Bilasraj Juharmal and another AIR 1962 Bombay 133; (4) Hind Overseas Private Ltd. v. Raghunath Prasad Jhun‑Jhunwalla and another AIR 1976 SC 565; (5) In re Cine Industries and Recording Co. Ltd. AIR 1942 Bombay 231; (6) Rajmundary Electric Supply Corporation v. A. Nageshwara Rao AIR 1956 SC 213.

38. I would not like to burden this judgment by reappraisal of the entire case‑law cited by the learned counsel except few cases.

39. Dealing with the true character of the company in Scottish Cooperative Wholesale Society Ltd. v. Meyer (1958) 3 All ER 66; Lord Keith said that the company was in substance, though not in law, a partnership, consisting of the society of Dr. Meyer and Mr. Lucas and whatever may be the other different legal consequences following on one or other of these forms of combination, one result followed from the method adopted, which is common to partnership, that there should be the utmost‑ good faith between the constituent members'. Finally, it was held that the Court, ought not to allow technical pleas to defeat the beneficent provisions of section 210. The rule as regards the duty of utmost good faith, on which stress was laid by Lord Keith in Meyer, received further and closer consideration in Ebrahimi v. Westbourne Galleries Ltd. (1973) AC 360 (HL) wherein Lord Wilberforce considered the scope, nature and extent of the just and equitable' principle as a ground for winding up a company and it was held by the House of Lords that the words just and equitable' which occur in section 222 (f) of the English Act, (corresponding to our section 305 (h)), was not to be construed ejusdem generis with clauses (a) to (e) of section 222 (corresponding to our clauses (a) to (g) of section 305). Lord Wilberforce observed that the words just and equitable are recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own; and that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, exceptions and obligations inter se which are not necessarily submerged in the company structure:

40. In re Yenidji Tobacco Company Limited, (1916) 2 Ch. 426. Master of Rolls Lord Cozens‑Hardy observed that in affirming the order he had treated it as a partnership, although it was strictly not a partnership, for, according to him, precisely the same principles ought to reply to a case like this where in substance it is a partnership in the form or guise of a private company. It was a case of winding up of private limited company and the winding up order of company made by a learned Single Judge was upheld on appeal, as it was proved that the two Directors of the company were not on speaking terms, that the so‑called meetings of the Board of Directors have been almost a farce or comedy and no business which deserves the name of business in the affairs of the company could be carried on.

41. The leading authority on the point in our country is of Ladli Prasad Jaiswal v. The Karnal Distillery Co. Ltd. PLD 1965 SC 221, the apex Court by adopting the principle enunciated in re: Yenidje Tobacco Company Limited, said that now in case of private limited company the tendency of the Courts has uniformally been to treat it more or less as a partnership and to apply the same principles in the winding up of a private limited company as would entitle a partner to have a partnership firm dissolved, commonly the exclusion of a partner from the management of a firm, the existence of a state of deadlock between the partners or the justifiable lack of confidence in the management have been regarded as just and proper grounds for dissolving a private limited company.

42. The above principle was followed by this court in re: Kruddson Limited PLD 1972 Karachi 376 by late Justice Tufail Ali A. Rehman by observing:------ that, the true position was that a private limited company, in the matter of a winding‑up petition, could be treated as a partnership firm in the sense only that such circumstances as would justify the dissolution of a firm under section 44 of the Partnership Act, 1922, on the ground that it was just and equitable to order a firm to be dissolved, would also justify the winding up of a private company but it was neither possible nor desirable, to attempt an exhaustive enumeration of the circumstances in which a Court would order a winding up under the just and equitable' clause. It was further held that the right to participate in the management of the company does not mean the right exclusively to manage any part of the Company's business and that the right of a shareholder is to‑ participate by the exercise of his voting rights in the management of the company.'

43. In Messrs Nagina Films Ltd. v. Usman Hussain and others 1987 CLC 2263, a Division Bench of this Court comprising of Ajmal Mian and Muhammad Mazhar Ali, JJ., after examination of a number of cases on the subject including Ladli Prasad Jaiswal case, enunciated inter alia, the following principles:‑‑

(a) That principles of dissolution of partnership may be applied if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership.

(b) Generally the exclusion of a partner from the management of the firm, existing of a state of deadlock between the partners or justifiable lack of confidence in the management have been regarded as just and proper grounds for dissolving a private limited company.

44. The same principle was followed in Iqbal Alam and another v. Messrs Plasticrafters (Pvt.) Limited and 4 others 1991 C L C 589.

45. In Mst. Khursheed Ismail v. Unichem Corporation (Pvt.) Ltd. and others PTCL 1996 CL 594, the learned Single Judge held that the petition for winding up was filed under the just and equitable ground for the reasons that (a) the company is family concern analogous to a partnership firm; (b) irreconcilable differences and disputes have arisen between the parties and half a dozen cases in Courts are pending between them and (c) the petitioners have been totally excluded from the management of the company. The facts were that there were three Groups of shareholders. (1) AI Group 4237, (2) SAS Group 3880 and (3) SI Group 1480, in the year 1983. From 1983 to 1984 the petitioner (AI Group) held 44.1492% shares, whereas, respondents Nos. 2 to 5, SAS Group held 40.4293% and SI Group held 15.4241% of the shares. On 12 th March, 1988 the respondents Nos.2 to 5 issued 1221 new shares and allotted them as follows:‑‑

46. 432 shares to AI Group

47. 432 shares to SAS Group

48. 357 shares to Salman son of Sami Ahmed Sheikh of SAS Group.

49. As a result of such allotment, the shares of the petitioner's Group came to 4669 shares, the respondent's Group SAS 4669 and the SI Group 1480 shares and the grievance of the petitioners was that no notice of any resolution to increase the capital of the company and of the offer of new shares was given to them; that the new shares were not allotted in proportion to the shares held by the shareholders; and that 357 shares were allotted to Salman Sami who was not a member of the company. The company was ordered to be wound up with the observation that the company is really a partnership firm; that the petitioners have been excluded from the management of the company, and that there is complete deadlock among the parties on the ground that it is just and equitable.

50. The growing tendency appears to be rather to look at the substance and not to allow the vision to be clouded by the shadow of the corporate personality. Thus where the corporate personality is being used merely as a cloak for fraud or improper conduct or where it can be established that the corporate personality is merely acting as an agent or trustee for someone else, be he an individual or another subsidiary company, or where it is necessary to determine the true character of the corporate personality for other purposes, such as to determine its tax liability or its quasi‑criminal liability or as to whether the corporate body is an enemy concern or not, or a mere trustee for certain purposes, the Court have not hesitated to look behind the veil of incorporation.

51. In Hind Overseas Private Ltd. v. Raghunath Prasad Jhunnhunwalla and another AIR 1976 SC 565, Indian Supreme Court held 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. The principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only 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. In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing veil it is found that in reality it is a partnership.

52. From the above cited case, inter alia, the following principles are deducible:‑‑

(1) That in a particular case, the principles of dissolution of partnership may be applied if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership.

(2) That simpliciter factum that some Directors having to preponderating voting power have not allowed the other shareholders to join in the management of the company is no ground for winding up of the company.

(3) That the ground just and equitable is controlled by the grounds preceding it in section 305 of the Companies Ordinance and is also not confined to cases in which there are grounds analogous to those mentioned earlier.

(4) That in the absence anything contrary in a partnership deed every partner is entitled under the Partnership Act to share in the management of the firm but a shareholder generally in a company, in the absence of a pre‑incorporation agreement/ understanding cannot claim any right to manage the company.

(5) That if a shareholder brings a petition for winding up of a company, the Court will, inter alia, consider the factum whether majority of shareholders and large number of creditors are opposing the petition.

(6) That while considering a petition for winding up the ground of lack of probity must be against the interest of the company itself and on behalf of the company and not in relation to the public exchequer.

(7) That there is a marked distinction between a private partnership firm‑at‑will, of which dissolution can be sought by a partner as a matter of right and a private limited company, of which winding up cannot be obtained by a shareholder without any recognized justifiable ground.

53. Learned counsel for the petitioner, while arguing the petition, has stated that petition is based on the grounds enumerated in clauses (iii) and (iv) of paras, (f) and (h) of section 305 of the Ordinance, which are as follows:‑‑

54. `(f) if the company is:‑‑‑

(i) ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑

(ii) ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑

(iii) conducted its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders;

(iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company; or

(v) ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑

(g) ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑

(h) if the Court is of opinion that it is just and equitable that the company should be wound up.

55. The grounds for winding up of company taken by the petitioner can be conveniently categorized as follows:‑

(1) The affairs of the company are being conducted in a manner oppressive to the petitioner.

(2) The management has failed to maintain proper accounts and its funds are being misappropriated and; lastly

3. The statutory requirement is being violated.

4. It is just and equitable to wind up the respondent company on above grounds.

56. Reverting to the first ground that the affairs of the company were being conducted in the manner oppressive to the petitioner. The acts of oppressiveness have been alleged that the petitioner has been removed from the Directorship of the company in its meeting held on 25‑6‑1995, thus the petitioner had been excluded from, the management of the company and the dividend has not been paid to any member including the petitioner. The petitioner admits the service of notice of Annual General Meeting with agenda inter alia, for appointment of Directors for a period of three years under section 178(1) of the Ordinance except the term used `so‑called meeting', nothing has been said by the petitioner with regard to the lack of quorum, or want of mandatory notice for Annual General Meeting, wherein he was not elected as one of the Directors. The removal of the petitioner in the Annual General Meeting, notice of which was received by the petitioner could hardly be termed as unlawful or in a manner oppressive to the petitioner. Members have no right for active participation as the management of private limited company does not mean a right to manage the company's business only as Director, such right of participation in the management by member is by exercise of his voting right.

57. The plea taken by the respondent is two folds; firstly that petitioner being Benamidar is not entitled for dividend and secondly that he has been paid bonus/ex gratia with the approval of the members of the company and by this way the petitioner himself has received Rs.10,65,715 between April, 1986 to 1994 which was accepted by the petitioner without raising any question.

58. Section 249 of the Companies Ordinance requires payment of dividend from the profit of the company to the registered share‑holder. There is no dispute that no profit was earned. Besides subsection (2) of section 251 caters situation wherein the dividend is declared by a company but has not been paid. It has penal consequences provided no offence shall be deemed to have been committed where there is a dispute regarding the right to receive the dividend.

59. In the present case, the dispute with regard to the shareholding of the petitioner is already sub judice before the Civil Court, therefore, in these circumstances, the non‑payment of the dividend cannot be the basis for the winding up of the company.

60. The term `oppression' has not been defined. It is left to the Court to decide on the facts of each case whether there exists oppression that may be called as ground of winding up.

61. Whether the conduct and affairs of the company by share holders is oppressive or not depend upon facts of particular case. To make out a case for winding up order, it must be established that there is some lack of probity or fair dealing towards the one or more members. Acts of misappropriation and mismanagement cannot be the grounds to support an application for winding up. The denial of right of inspection or other rights of shareholders or failure to comply with formalities required in the matter of giving notice of general meeting or refusal to declare more profit or the dividend even if profit earned justified a higher rate may not be taken by themselves as amounting to oppression. Mere illegal or irregular acts unless they are oppressive or prejudicial to the interest of the company or to the public interest will not support petition for winding up.

62. In Needle Industries (India) Ltd. and others v. Needle Industries Newey (India) Holdings Ltd. and others AIR 1981 SC 1298, while dealing with the appeal involving section 397 of the Indian Companies Act, 1956 (analogous to section 290 of the Companies Ordinance) Chandrachud, C.J. after reviewing the various decisions said on behalf of the Bench that where the party complaining oppression has failed to make out a case of oppression, the Court is not powerless to do substantial justice between the parties and place them, as nearly as it may in the same position in which they would have been if the crucial meeting were not held in accordance with the law.

63. In the instant cage, the notice of Annual General Meeting was served with agenda. The meeting was held, the election of Directors was conveyed to the Registrar, who also admitted the receipt of the return. Therefore, the Annual General Meeting held on 25‑6‑1995, wherein the Directors were elected except the petitioner cannot be held to be illegal, therefore, non‑election of the petitioner could hardly be termed as unlawful or in a manner oppressive to him.

64. The second set of allegations can be summarized as follows:‑‑

65. That no elections were held nor Annual General Meetings were held except so‑called 10 th Annual General Meeting held on 25‑6‑1995. The Auditors and Chief Executive were not appointed as required under the Companies Ordinance and the Articles of Association. No minutes books have been maintained. The Articles of Association of the Company have been altered without approval of the Board. The Audited Accounts were presented to the members for adoption in so‑called 10 th Annual General Meeting held on 25‑6‑1995 without Director's report.

66. The above allegations were denied by the respondent, so also the Registrar in his comments supported the version of the respondent‑Company that most of the returns on Form `A' (list of Annual members filed by the Company) till 1994 have been signed by the petitioner and Shujaatullah Qureshi and the company has been reporting on Form `A' that the Annual General Meetings were held and all the returns have been signed by the petitioner jointly with Shujaatullah Qureshi. The petitioner has admitted that he signed all the statutory returns filed by the company but pleaded that he had signed all the statutory returns in good faith and trust in elder brother. The petitioner admits that all the statutory returns right from the incorporation of the respondent Company till 1994 were signed by him and why he turned his gun in the year 1995 after about ten years of company incorporation on the occasions of the 10 th Annual General Meeting for election of Directors, wherein he was not elected as Director. There seems to be no reason except perhaps for some personal reason. The respondent in such circumstances is correct in its plea that the petition is a counter‑blast to the suit I filed by elder brother.

67. The third set of allegations are that the properties of the company have been sold without approval of the Board. The various amounts have been withdrawn/ transferred to the personal account and utilized. The Staff Provident Fund is not being managed properly. The Chief Executive is maintaining two houses and drawing privileges in excess of his entitlement. In counter‑affidavit all these allegations are denied, making all these facts as disputed.

68. Learned counsel for the respondents' contention was that the jurisdiction of a Company Judge in terms of section 9(3) ibid is summary. His further contention was that where petitioner alleges a fact and respondent disputes such fact it requires detailed inquiry, the Company Judge lacks such power of trial on disputed facts and such disputed facts cannot be gone into in summary proceedings.

69. The facts alleged and disputed by other side will necessarily entail holding of detailed inquiry and recording of evidence in respect of such disputed factual assertions which cannot be gone into by the Company Judge whose jurisdiction in such matters is summary in nature in terms of subsection (3) of section 9. Reference may be made to the following cases:‑‑

(1) Saleh Mohammad v. Mst. Resham Bibi 1986 CLC 2561; (2) Khurshid Ahmad Khan and another v. Pak Cycle Manufacturing Company Ltd., PLD 1987 Lahore 1; (3) Muhammad Suleman v. Abdul Rashid and 13 others PLD 1987 Lahore 387; (4) Salahuddin Khan v. Al Mansoor Limited and 2 others PLD 1987 Lahore 569 and (5) Shaheen Foundation v. Capital F.M. (Pvt.) Ltd. 2002 CLD 188.

70. In Rajmundary Electric Supply Corporation v. A. Nageshwara Rao AIR 1956 SC 213, the Indian Supreme Court accepted and approved well‑recognized three principles of the Company Law. The first principle was that the Court will not intervene at the instance of shareholders in matter of internal management of the Company by the Directors, so long as they are acting within the power conferred on them under the Articles of Association. The second principle approved was that where nothing more is established than that the Directors have misappropriated the funds of the company unless such misconduct has produced insolvency, an order for winding up under the just and equitable' clause would not be made and the last principle approved was that if a private limited or public company which was in nature of private company and there is lack of confidence, that would be ground for an order for winding up but lack of confidence must arise not because the aggrieved party was in minority but must arise from the lack of probity.

71. The allegations relating to internal management or mismanagement of the company's affairs is a matter for the shareholders themselves to deal with and it is not a matter that would call for interference by the Court. Macleod, J. in re Pioneer Bank, Ltd. AIR 1914 Bombay 190 stated that a petition by a shareholder for winding up stands on a different footing to a petition by a creditor. It should be scrutinized more carefully.

72. The misconduct of the Director or that the business has been carried on a heavy loss are even not a ground on which the Court would order for winding up. The Courts have laid down special rule in exercising their discretion in winding up a company on the petition of a share‑holder that the Court to bear in mind that the internal management of the company is its own concern, and it is a much better judge of business prospects of a trading venture than the Court can ever hope to be. If, therefore, the majority of the shareholders show confidence in the management of the company and have faith in L its future prospects, the Court has rarely interfered.

73. The last question which requires consideration is whether the above ground could be treated as just and equitable for an order of winding up. The following grounds were found to be just and equitable for winding up order:‑‑

(a) the company was commercially insolvent; (European Life Assurance Society in re: (1869) L.R. Eq. 122);

(b) it had assets but they were locked up and not immediately available; (British Oil Co., In re., 15 L.T. 601);

(c) its business could only be run at a loss and insolvency was inevitable; (Mahamandal Shastra Prakashak Samity Ltd. I.L.R. 39 All 334);

(d) all the company's capital was lost and the business had come to an end without any prospect of resurrection (In re. Diamond Fuel Co. (1879) Ch. D. 400);

(e) it was a fraudulent company (National Debenture & Assets Corpn. (1891) 2 Ch. 505);

(f) the company had no bona fide desire to carry on business (London and County Coal Co. (1866) L.R.3 Eq. 355);

(g) there was justifiable lack of confidence in the conduct and management of the company's affairs (Loch v. John Blackwood Ltd., (1924) A.C. 783);

(h) where substratum had gone or it is impossible to carry on business except at a loss or the liabilities were far in excess of existing and possible assets (Seth Mohanlal v. Grain Chambers Ltd., AIR 1968 SC 772);

(i) there were grounds justifying dissolution of a partnership, in case of a private company (R. P. Jhunjhunwalla v. Hind Overseas (Pvt.) Ltd. (1970) 1 Comp. L.J. 213).

74. On the following grounds the Courts have refused to make a winding up order on just and equitable ground:‑‑

(a) where there were allegations of mismanagement or misappropriation of funds by Directors and nothing more (Rajahmundry Elec. Supply Corpn. Ltd. v. A. Nageshwara Rao AIR 1956 SC 213);

(b) where there were quarrels and groupings among shareholders (C.P. Gnanasambandam v. Tamilnadu Transport (Coimbatore) (P.) Ltd. 1971 41 Comp. Case 26);

(c) where there were general or mere allegation of oppression of minority shareholders (Bilasrai Juharmal AIR 1962 Bombay 133);

(d) where petitioner had an alternative remedy (Lokenath Gupta v. Credits Pvt. Ltd. (1968) 1 Comp. L.J. 253);

(e) where company was running at a loss (Krishan Iyer & Sons v. New Era Mfg. Co. Ltd., (1965) 1 Comp. L.J. 179);

(f) where petition was not motivated by desire to do justice to company or to see that justice was done to shareholders but for private reasons (Jagannath Gupta v. Mulchand Gupta AIR 1969 Calcutta 363);

(g) where there was deadlock in the management but the allegations were wholly unparticularized (W.R. Willcocks & Co., Ltd., (1973) 2 All E.R. 93).

75. The word `may' used in the opening part of the section 305 ibid clearly indicates that it is the matter of discretion of the Court whether, in the circumstances of the case, it would be in the interest of justice to wind up the company. I am of the view that although the power to wind up is discretionary, it has to be exercised judicially. This means that it is only where the balance of equities is shown by petition to tilt appreciably in favour of a winding up order that it will be made `ex debito justitiae'. It is in this special sense that a petition relying on grounds contained in section 305 can get a winding up order as a matter of right. It is issued as a matter of right when it produces a compelling effect. It, is not granted mechanically as a matter of course on proof of certain fact. In other words, equitable considerations have a decisive effect even when the power to‑wind up a company is involved under a clause of section 305 of the Ordinance.

76. In the light of discussions referred to above, I am of the view that in a petition by member having 5% of equity share in the company and 95% shares vest in majority shareholders, on the concept of partnership‑at‑will in absence of any agreement to participation in the management, an order for winding up cannot be made on lifting the veil of incorporation. Secondly the mismanagement or misappropriation of company's funds unless such misconduct or misappropriation has produced insolvency, the petition for winding up cannot be granted, such allegations relate to internal management or mismanagement of the company's affairs and that is a matter for the shareholders themselves to deal with and it is not a matter that would call for interference by the Court.

77. Consequently, the petitioner had failed to make out a case for winding‑up of the respondent‑Company. In the light of facts and circumstances of the case, at most a direction to the majority shareholder to purchase the share of the petitioner may have been an appropriate order but the matter of shareholding is sub judice in Civil Court, therefore, direction cannot be granted. Resultantly, the petition is dismissed, however, with no order as to costs.

78. M.B.A./S‑18/K Order accordingly.