# S. P. JAIN v. KALINGA TUBES LTD. lanllary 14, 1965 - **Citation:** [1965] 2 S.C.R. 720 - **Court:** Supreme Court of India - **Decided:** 1965 - **Bench:** 1>. B. GAJENDkAGADKAR, K. N. Wanchoo, B S. M. SIKru - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-p-jain-v-kalinga-tubes-ltd-lanllary-14-1965-3439 - **Pages:** 31 ## Headnote Companies A.ct (A.ct 1 of 1956), :rs. 397 and 398-Scope of. In July 1954, two groups of shareholders led by P and L, who, together held an equal number of shares· of the value of Rs. 21 lakbs out of a total share capital of Rs. 25 lakbs in the respondent company (then a private companJC), entered into a private agreement with the Appellant, whereby, (i) the share capital of the company was to be increased by Rs. 10! lakhs and shares of this value allotted to the appellant so that the total shares held by him would be equal to the holding of each of the other two groups; (ii) each of these three groups of shareholders would have an equal number of representatives on the Board of'Directors; (iii) the appellant undertook to arrange certain credit facilities for the company; and (iv) the appellant was to be the Chairman of the Board. In accordance with this agreement, the appellant was made the Chairman and though various resolutions were passed by the company to implement the agreement, these resolutions did not in terms refer to the agreement, and no change was made in the Articles of Aasoclation of the company so as to embody the terms of the agreement. Some time later, the subscribed capital of the company was increased to Rs. 61 lakbs and the new shares were so allotted as to maintain the parity in the shareholdings of the three groups. When one of the two minority shareholders sold 250 shares, these were equally divided between the three groups and one odd share was held by P, L and the Appellant jointly. In 1956-57, the company desired to raise a·toan from the Industrial Finance Corporation and as this Corporation made advances only to 1>Ublic limited companies, in January 1957 the company was converted mto a public company. Appropriate amendments were made in its · Articles of Association, but ·even on this occasion, no attempt was made to incorporate into the Articles tlie terms of the Agreement of July 1954. After sanction had been obtained of the Controller of Capital Issues for the issue of additional share capital, the appellant suggested at a meeting of the board of directors in March 1958 that the new shares should be issued proportionately to the existing shareholders in accordance with the provisions of Section 81 of the Companies Act, 1956. On the other hand, those representing the P and L groups proposed that the new shares should be offered privately in the best interests of the company at the sole discretion of the directors; this proposal was made because these two groups did not have money to subscribe for the new capital and they feared that if shares were offered in the first instance to existing shareholders, the appellant could get all of them and thus acquire control of the company. In view of the majority of the P and L groups in the .Board, their proposal was adopted and subsequently a resOlution to that effect was also accepted at a General Meeting of the shareholders held. in March 29, 1958. The appellant thereafter instituted a suit to have the resolution declared illegal and void and obtained an ex parte injunction against the coml?anY from allotting sliares pursuant to thjs resolution. On July 13, 1958, the appellant's suit was dismissed by the Subordinate Judge and the injunction vacated by him c D E I' G H s. P.' JAIN 11. KALINGA TUBES (Wanchoo, J.) 721 A at 11 A.M. The Board of Directors at a meeting held on that date, immediately on reoeiving the news that the injunction had been vacated, allotted the new shares to seven persons who had previously applied for them. On the same day, the appellant filed an appeal and applied for an~ obtained an order staying the operation of the order of tbe Subordinate Judge. Eventually these appeals were also dismissed and the stay vacated. B In September 1960 another General meeting of the company was called to approve a proposal to increase the share capital of the company from Rs. 1 crore to Rs. 3 crores. It was also intended that these new shares should ## Text _Characters 0–39,066 of 83,065. This is a partial read: ask again with offset=39066 for what follows._ 720 S. P. JAIN v. KALINGA TUBES LTD. lanllary 14, 1965 A [1>. B. GAJENDkAGADKAR, C.J., K. N. WANCHOO AND B S. M. SIKru, JJ.] Companies A.ct (A.ct 1 of 1956), :rs. 397 and 398-Scope of. In July 1954, two groups of shareholders led by P and L, who, together held an equal number of shares· of the value of Rs. 21 lakbs out of a total share capital of Rs. 25 lakbs in the respondent company (then a private companJC), entered into a private agreement with the Appellant, whereby, (i) the share capital of the company was to be increased by Rs. 10! lakhs and shares of this value allotted to the appellant so that the total shares held by him would be equal to the holding of each of the other two groups; (ii) each of these three groups of shareholders would have an equal number of representatives on the Board of'Directors; (iii) the appellant undertook to arrange certain credit facilities for the company; and (iv) the appellant was to be the Chairman of the Board. In accordance with this agreement, the appellant was made the Chairman and though various resolutions were passed by the company to implement the agreement, these resolutions did not in terms refer to the agreement, and no change was made in the Articles of Aasoclation of the company so as to embody the terms of the agreement. Some time later, the subscribed capital of the company was increased to Rs. 61 lakbs and the new shares were so allotted as to maintain the parity in the shareholdings of the three groups. When one of the two minority shareholders sold 250 shares, these were equally divided between the three groups and one odd share was held by P, L and the Appellant jointly. In 1956-57, the company desired to raise a·toan from the Industrial Finance Corporation and as this Corporation made advances only to 1>Ublic limited companies, in January 1957 the company was converted mto a public company. Appropriate amendments were made in its · Articles of Association, but ·even on this occasion, no attempt was made to incorporate into the Articles tlie terms of the Agreement of July 1954. After sanction had been obtained of the Controller of Capital Issues for the issue of additional share capital, the appellant suggested at a meeting of the board of directors in March 1958 that the new shares should be issued proportionately to the existing shareholders in accordance with the provisions of Section 81 of the Companies Act, 1956. On the other hand, those representing the P and L groups proposed that the new shares should be offered privately in the best interests of the company at the sole discretion of the directors; this proposal was made because these two groups did not have money to subscribe for the new capital and they feared that if shares were offered in the first instance to existing shareholders, the appellant could get all of them and thus acquire control of the company. In view of the majority of the P and L groups in the .Board, their proposal was adopted and subsequently a resOlution to that effect was also accepted at a General Meeting of the shareholders held. in March 29, 1958. The appellant thereafter instituted a suit to have the resolution declared illegal and void and obtained an ex parte injunction against the coml?anY from allotting sliares pursuant to thjs resolution. On July 13, 1958, the appellant's suit was dismissed by the Subordinate Judge and the injunction vacated by him c D E I' G H s. P.' JAIN 11. KALINGA TUBES (Wanchoo, J.) 721 A at 11 A.M. The Board of Directors at a meeting held on that date, immediately on reoeiving the news that the injunction had been vacated, allotted the new shares to seven persons who had previously applied for them. On the same day, the appellant filed an appeal and applied for an~ obtained an order staying the operation of the order of tbe Subordinate Judge. Eventually these appeals were also dismissed and the stay vacated. B In September 1960 another General meeting of the company was called to approve a proposal to increase the share capital of the company from Rs. 1 crore to Rs. 3 crores. It was also intended that these new shares should be offered to outsiders with a view to making the company more broad-based. At that stage the appellant filed a petition in the High Court under Section 397 and 398 of the Companies Act, 1956, complaining ;,.!er C alia, that the issue of new shares was in furtherance of a continuing oppression of the appellant's minority group; that by allotting such shares to benamidars of P and L in disregard of the agreement of July 1954, it was intended to exclude the appellant from all control of the affairs of the company; that the resolutions passed in March 1958 as to the manner of allotment of new shares contravened s. 81 of the Companies Act, 1956 and this resolution as well as the hasty allotment on July 30, 1958 were in abuse of the power of the P and L groups and oppressive D of the minority. The petition was allowed by the single Judge but this decision was reversed tn appeal by a Division Bench of the High Court. On appeal to the Supreme Court. HELD : ( i) On the facts no case had been made out, of oppression within the meaning of section 397. For a petition under section 397 to succeed, it is not enough to E show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires, that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of tho petition, showing that the F affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh ar i wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless lack of confidence springs from oppression of the minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity, or fair dealing to a member in the matter of his proprietary rights as a shareholder. [937 C-F] G Elder v. Watson, (1952) S.C. 49; George Meyer v, Scottish CoH operative Wholesale Society Ltd. (1954) S.C. 381; Scottish Co-operative Wholesale Society Ltd. v, Meyer and another, [1958] 3 All. E.R. 66: Re. H. R. Harmer Ltd., [1958] 3 All E.R. 689; discussed and applied. (ii) The agreement of July 1954 on which the case of oppression was based was not binding even on the private company and much less so on the public company when it came into existence in 1957. It wa.• really an agreement between a non-member and two members of the company and although for some time the agreement. was in t~e main carri_ed out clearly some of its terms could not be put m the arttcles of assoc1atio~ of the public company. As the company was not bound by the 722 SUPREME COURT REPORTS (1965] 2 S.C.R. agreement, the mere fact that it was decided at the meeting in March A 1958 to offer the· new shares to outsiders and not the existing shareholders did not necessarily amount to an oppression of the minority shareholders. The majoricy shareholders were not bound to accept a proposal of the minority shareholders that the new shares should be allotted . only to the existing shareholders. Furthermore the general meeting having decided that new shares should not be issued to the existing shareholders but to others, there was no contravention of s. 81 of the Companies Act 8 1956 and the resolution of March 28, 1958 was in accordance with law as it stood at the time. (739 B.C; 740 G-H; 741 C-E; 745 D-F] (iii) It could not be said thal the allottees of new shares were benamidars or stooges of the P or L group and that by allotment of .bares to them, the majority shareholders were oppressing the minority. These allottees were independent persons and the fact that the P and L groups might be able to get the support of the holders of the new shares C did not necessarily mean oppression of the appellant, for the new sharoholders may support the P and L groups on the ground that such support would be for the benefit of the Company. (744 C-E] (iv) The haste in issuing new shares upon the vacation of the injunction of July 30, 1958 could not be held to be a part of the design to oppress the minority. The company was in need of money for expansion and its ability to obtain a loan from the Fmance Corporation depende4 upon the increase of its subscribed share capital. Tlie haste D became necessary because the injunction wlls vacated on that day and it was felt that if immediate action was not taken and the new shares allotted, there might be a further injunction and consequent delay .. The haste in the allotment of shares arose out of circumstances brought about by the appellant's conduct. (743 A-El Held also, that no case had been made out for action under section 398 on the ground that the affairs of the company were being conducted i; in a manner prejudicial to its interests. [749 CJ CML APPELLATE JURISDICTION: Civil Appeals Nos. 734-747 of 1964. Appeals from the judgment and order dated April 18, 1963 of the Orissa High Court in A.H.O. No. 13 of 1961 and A.H.O. Nos. 2 to 14 of 1962. r N. C. Chatterjee, S. Ray Chowdhury, M. L. lhunjhunwa/a, S. Murty and B. P. Maheshwari, for the appellant (in all the appeals). M. C. Seta/vad, A. V. Viswanatha Sastri, Ranadeb Chaudhri, M. K. Banerjee, I. B. Dadachanji, 0. C. Mathur and Ravinder G Narain for respondent No. 1. Ranadeb Chaudhuri and /. B. Dadachanji, for respondent No. 2. G. S. Pathak, B, Dutta and /. B. Dadachanji, for respondent ~1 H A. V. Viswanatha Sastri and/. B. Dadachanji, for respondent No.4. =~ . s. P • .JAIN v. KALINGA TUBBS (Wanchoo, /.) 723 A Sachin Chowdhury, S. N. Andley, Rameshwar Nath and P. L. Yohra, for the respondent Nos. 9, 10, and 12. C. K. Daphtary, Attorney-General, /. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for respondent No. 13. Sachin Chowdhury, B. Sen, Dipak Dutta Chowdhury, for res- • pondent No. 14. c Niren De, Additional Solicitor-General and Rajinder Narain &: Co. for respondent No. 15. S. V. Gupte, Solicitor-General and Rajinder Narain, &: Co. for n:spondent No. 16. The Judgment of the Court was delivered by Wanchoo, 1. J'hese fourteen appeals on certificates granted by the High Court of Orissa raise common questions of law and fact and will be dealt with together. They are a consequence of ~ fight between two groups of business magnates for the control D al Messrs. Kalinga TuJ>es Limited (hereinafter referred to as the Company). They arise out of an application under ss. 397, 398, 402 and 403 of the Indian Companies Act, No. 1 of 1956, (hereinafter referred to as the Act) made by the appellant in the High Court. Most of the facts are not seriously in dispute and it is PeCeSsary to set them out in detail in order to decide the main E point raised on behalf of the appellant, namely, that the affairs al the Company were being conducted in a manner oppressive to him and his group of members. The Company was floated as a private limited company on December 1, 1950 with an authorised capital of Rs. 25 lacs. Ori- :r ginally, the shares were held by two groups of shareholders equally, except a few shares. These groups of shareholders lllllY for our purposes be taken to be represented by Patnaik and Loganathan. The Company raised a sum of Rs. 36 lacs by the issue of two series of debentures which were guaranteed by the Government of Orissa between 1952 to 1954. In 1954, the appellant G was approached by Dr. Mohanty, then Secretary to Government .of Orissa (Industries Department) which was naturally interested in the Company having guaranteed debentures to the tune of Rt. 36 lacs, for helping the Company which was in financial and administrative difficulties. The appellant was requested to help the Company by providing finance and by arranging loans from H banks _and other sources and further by providing the necessary administrative guidance. The appellant agreed to do so and comequently on July 27, l 9S4, an agreement was entered into 7.24 SUPIUIME COURT llPOJlTS (1965) 2 S.C.ll between the appellant, and Patnaik and Loganathan. To this A agreement, the Company was not a party. We shall refer in detail to the various terms of the agreement later. In brief. however, the agreement provided that the appellant wouid be allotted shares in the Company equal to those held by Patnaik and Logan_athan after in.creasing the share capital of the Co!npany. Thus the Company would have three groups of shareB holders represented by the appellant, Patnaik an sanctioned the issue of shares of the face value of Rs. 39 lacs and debenutres of the face value of Rs. 64 lacs subject to the provisions of s. 81 of the Act. Real trouble started after this sanction for the issue of fresh shares. We shall have occasion to refer to s. 81 of the Act. later; it is enough to say here that that sanction provides that the new shares would be offered G in the first instance to the existing shareholders in p.roportion, as nearly as the circumstances admit, to the capital paid up on the existing shares at that date "subject to any direction to the contrary which may be given by the Company in general meeting". So unless the Company decided otherwise at a general meeting, the new issue of shares to the tune of Rs. 39 lacs would H have had to be offered under s. 81 of the Act to the existing shareholders in proportion to their existing shares. At that time as already indicated, the appellant group held one-third share 726 SUPREMI! COURT JlEPOllTS [1'65) 2 S.C.R and Loganathan and Patnaik groups held two-thirds share except A for certain shares held by the French company and therefore in the absence of a direction to the contrary at a general meeting, the new shares would also have gone in equal shares to the three groups subject to the shares which would go to the French Company. B The question of the issue of new shares came up before a meeting of the Board of Directors on March l, 1958, and the differences between the three groups which had already begun came to the surface at that time. The appellant proposed to the Board of Directors that the new shares should be issued to the existing shareholders as provided in s. 81 of the Act. Patnaik on C the other hand proposed that a general meeting should be called for the purpose of passing a resolution for the issue of new shares and for the manner and proportion in which shares were to be offered privately to the shareholders and other persons and for such other incidental matters as provided in the section. It is apparent from this conflict between the appellant grcmp and Patnaik and LogaD nathan groups in this meeting that the groups of Patnaik and Loganathan did not want the appellant's group to get roughly one-third of the new shares. The fear of Patnaik in this connection was that if shares were offered privately to the existing shareholders, the appellant might get all of them, for the groups of Patnaik and Loganathan did not have the money to subscribe to E the new shares if offered in the first instance to the existing shareholders. Thus if the appellant got all the new shares, his group would become the majority shareholder and would thus get control of the Company. Consequently, Patnaik put forward the resolution already referred to at the meeting of the Board of DirecF tors on March 1, 1958 which provided for calling a general meeting for directions as to the issue of new shares, which directions it was hoped would override the provisions of s. 81 of the Act. Patnaik's resolution was passed and the appellant's proposal was outvoted for the obvious reason that the Patnaik and Loganathan groups held the majority of shares. In consequence a general meetG ing of shareholders was called for the purpose on March 29, 1958. The appellant did not attend the meeting of March 29, 1958 though he was present by proxy. Patnaik presided at that meeting. Two resolutions were put · forward at that meeting, one on behalf of the appellant's group and the other on behalf of Patnaik and Loganathan groups. The appellant's resolution H proposed that the new shares should be offered to the existing shareholders of the Company in the proportion of their share- , s. P. JAIN v. KALINGA TUBES (Wanchoo, /.) 727 A holdings and the offer should remain open for a period of fifteen days with the right to accept or renounce the whole or part of the offer in their names or in the names of their nominee or nominees and if a shareholder did not accept within that period the offer should be deemed to have been declined. The second resolution on behalf of the Patnaik Loganathan groups proposed B that the new shares should not be offered or allotted to the existing sliareholders or to the public and that they should be allotted privately in the best interest of the Company at the sole discretion of the directors to such persons as might have applied or thereafter apply on the condition that atleast 5 per centum of the face C value of shares applied for was paid as application money and IO per centum of the face value was paid on allotment and the balance paid as and when called upon in accordance with the Articles of Association of the Company. As was to be expected, the resolution put forward on behalf of the appellant was lost and the resolutions put forward on behalf of Patnaik and Loganathan D groups as to the allotment of new shares were passed. Thus in that meeting there was a complete breach between the three groups. This was followed on April 18, 1958, by a suit by the appellant and some other shareholders of his group for a declaration that the resolutions dated March 29, 1958 were ultra vires, illegal, void i: and not binding on the appellant, the Company and its shareholders with a prayer for permanent injunction restraining the defendnats in the suit (namely, the other two groups) and their ~ervants and agents from giving effect to or acting in any way in pursuance of the said resolutions and further restraining each of the defendants, their servants and agents from issuing and alloting F the new shares in terms of the impugned resolutions. That suit was filed in the court of the Subordinate Judge, Cuttack. It is unnecessary here to refer to the details of that suit. It is enough to say that an ex parte interim injunction was obtained on the same day restraining the Company and other. defendants from issuing and allotting the new shares to persons other than the existing shareG holders and giving effect to the resolutions in that regard passed at the meeting held on March 29, 1958. The Company then made an application for setting aside the ex pane interim injunction. This matter came up before the court on May 15, 1958. At that time an offer was made on behalf of the Company that in view of the urgent necessity for funds, the Company might be permitted ff to issue two-thirds of the shares, keeping back one-third which would have gone to the appellant if the shares had been offered to t!ie existing shareholders; but this was not accepted on behalf of 728 SUPREME COURT REPORTS [ 1965) 2 S.C.ll. the appellant. The hearing of the injunction matter was postponed A on several dates and it appears that the Patnaik and Loganathan groups continued to call meetings of the Board of Directors on the dates fu>ed in the suit, and the agenda always provided for the allotment of the new shares. Eventually on July 30, 1958 the Subordinate Judge delivered judgment and vacated the injunction at about 11 a.m. A meeting of the Board of Directors was B being held on the same day from 10-30 a.m. and as soori as a message was received that the injunction had been vacated the new shares were allotted to seven persons who had applied for the same along with the application money. This happened about midday and the return as required by the Act was duly filed with C the Registrar of Companies at 12-40 p.m. The same day, an application was made at 12-40 p.m. on behalf of the appellant before the Subordinate Judge praying that the order vacating the injunction be stayed till the appellant obtained orders from the High Court where he wished to appeal. The Company's lawyer however intimated to the court that the shares had already been D allotted. Even so, the court passed an order staying the operation of its judgment delivered earlier for two days. The matter was then taken in appeal to the High Court by the appellant. The appeal was dismissed in September 1958. There was a Letters Patent appeal following the dismissal but that was not pres>ed and was eventually dismissed in November 1960. E The case of the appellant was that the seven persons to whom the new shares were allotted were nominees or benamidars of Pat- , naik and Loganathan and therefore these groups really allotted the new shares to themselves through their benamidars. It was also alleged that these seven persons only paid 5 per centum of F the share money and this showed, even though it was said that the Company was in urgent need of money, that the shares were allotted to persons who were not in a position to pay the share money in full. The appellant contended that the allotment of the new shares was made surrei}titiously and deliberately with the sole idea of defeating the rights of shareholders represented by him and G his group and this amounted to oppression of the minority shareholders. To continue the narrative, it appears that an extraordinary general meeting of the Company was called on S~tember 21, 1960 to consider increasing the share capital froin rupees one crore on which it stood after the increase in 1958 to rupees three crores H by issue of additional equity shares numbering one lac of the value of rupees one crore and the issue of another one lac cumulative s. P. JAIN v. KALINGA TUBBS (Wanchoo, J.) 729 A redeemable income-tax free preference shares of the value of rupees one crore subject to such rights and privileges attaching to such preference shares as might be specified in the new Article to be inserted in the Articles of Association. It was also intended that these new shares should be offered to outsiden (i.e. other than the existing shareholders) with a view to making the Company more B broad based. This meeting was called by a notice issued on August 25, 1960. It was the calling of this meeting which led to the application under s. 397 etc. on September 14, 1960 by the appellant. It was urged in the application that this issue of new shares was in furtherC ance of the continuing and continuous process of oppression of the appellant and his group being the minority shareholders and was designed for the purpose of completely excluding the appellant and his group from all control in the affairs of the Company and to deprive the financial advantage to be gained by them by the 0 issue of new shares at par and to retain such advantage exclusively to the Patnaik and Loganathan groups so that the appellant and his group might be forced to sell their holdings to the Patnaik and Loganathan groups at a nominal value. That was why the new shares were being offered to outsiders and not to the existing shareholders, the object being to offer the shares to nominees I: and/ or benamidars of the Patniak and Loganathan groups and to such persons who would be within their control. The result of this would be that Loganathan and Patnaik groups would acquire more than 75 per centum of the voting strength of the Company and would be in complete control of it and so gain enormous financial advantage for themselves. This would cause irreparable ' loss and prejudice to the rights of the appellant and his group of minority shareholders. It was alleged that · this was being done by the Patnaik and Loganathan , groups who were in control of the majority of shares. Finally it was urged that the affairs of the Company were conducted in a manner prejudicial to the interest of the Company by Loganathan and Patnaik groups and G there was mismana~ment in conducting such affairs. It was further alleged that the conduct of Loganathan and Patnaik groups towards the minority shareholders was oppressive, burdensome, harsh and wrongful and the entire manoeuvre was that these groups should be able to control over 75 per centum of the voting strengt!J in the Company. Further it was alleged that the conduct of thest H groups involved a visible departure from the standard of fair dealing and violation of the conditions of fair play to which the appeHant and his group as minority shareholders were entitled. In particular 730 SUPREME COURT REPORTS (1965) 2 S.C.1'. the denial to the existing share holders to subscribe<. to the new A shares in proportion to their respective holdings and the issue of such shares to benamidars of the Patnaik and Loganathan groups was oppressive to the appellant and his group of minority shareholders and also amounted to mismanagement of the affairs of the Company. This was also in breach and violation of the agreement dated July 27, 1954 to which the Patnaik and Loganathan B groups were parties. Further it was said that although in form the Company was a public company in reality it was a partnership consisting of the three groups namely, the appellant's group, and of Loganathan and Patnaik groups. The last two groups had combined together against the appellant group which had C resulted in justifiable lack of confidence on the part of the appellant and his group in the conduct of the affairs of the Company by the other two groups. Such lack of confidence had been caused by lack of probity in the conduct of the affairs of the Company by these two groups, which were acting to benefit themselves personally and were not concerned with the welfare of the Company. D The appellant and his group would not get any relief by calling a general meeting of the Company, and the facts and circumstances aforesaid would justify the making of a winding-up order on the ground that it was just and equitable that the Company should be wound up. Therefore the appellant prayed for directions under s. 397 of the Act, as the winding-up of the Company which was in E a prosperous condition would unfairly prejudice the appellant and other members of the minority group and redress against such oppression could be given by the High Court by making suitable directions in that behalf. The affairs of the Company were _being conducted in a manner prejudicial to the interest of the Company for reasons already stated and there had been F a material change in the management or control of the Company by alteration in its Board of Directors and by fraudulent changes introduced in the ownership of the Company's shares and by reason of the wrongful act and conduct of the Patnaik and Loganathan groups. The appellant therefore prayed for the removal G of the present Board of Directors, for re-constitution of the Board of Directors with at least two permanent representatives from his group and for ensuring equal representation in the Board of the three groups of shareholders, and for alterations in the Articles of Association to incorporate therein the provisions of the agreement dated July 29, 1954. The appellant also sought a declaraH tion that the resolutions passed by the Board of Directors on March 1, 1958 and at the general meeting dated March 29, 1958, s. P, JAIN v. KALINGA TUBES (Wanchoo, /.) 731 A were null and void and were passed in abuse of the power of Patnaik and Loganathan groups and in oppression of the minority shareholders and prayed that the said resolutions be set aside in so far as they related to the issue and allotment of 39,000 new shares. '11te allotment made on July 30 should be declared illegal and null and void as it was made in abuse of the powers B of the Patnaik and Loganathan groups and in oppression of the minority shareholders and was not binding upon the Company, the appellant and his group. It was prayed that directions be given to sell the said 39,000 shares by the allottees to the Company upon payment of the amounts actually paid thereon so far C and the Company be permitted to offer the same to the shareholders as on July 29, 1958 in proportion to their respective shareholdings. An injunction was also prayed for restraining the Company from holding the meeting on September 21, 1960. Finally it was prayed that orders be passed for investigation into the conduct of the affairs of the Company by the Loganathan o and Patnaik groups and suitable directions be made with a view to regulating the affairs of the Company in future and if necessary an administrator of the Company be appointed for carrying out such directions as the High Court might be pleased to make for purposes of removing the oppression and the acts of misconduct and mismanagement and for regulating the conduct of the affairs E of the Company. The seven persons to whom the new shares were allotted in July 1958 were also made parties and injunction was prayed for restraining them from transfering those shares. The application was opposed on behalf of the Company, and its main contention was that the Company was not a party to the F agreement dated July 27, 1954 and was not bound by it. It was further contended that there was no mismanagement and the Company and its affairs were not being conducted in a manner prejudicial to it. It was also contended that there was no oppression on the undisputed facts in the present case. The application was also opposed on behalf of Loganathan and Patnaik groups G and their case was that they had not acted in any manner which could be said to be oppressive of the rights of the minority shareholders represented by the appellant. They also contended that the affairs of the Company were not being mismanaged nor were they being conducted prejudicially to the interest of the Company. Further the seven persons to whom the shares had been H allotted on July 30, 1958 contended that they were not benarnidars of the Patnaik and Loganathan groups. Their case was that they were independent persons of substance and had applied for the 732 SUPllEME COUllT IEPOitTS (1965) 2 S.C.ll new shares themselves and not as benamidars of Loganathan and A Patnaik groups. They denied that there was any oppression of the minority shareholders as alleged or that there was any mismanagement of the affairs of the Company or any conduct which was prejudicial to the interest of the Company. They contended that the resolutions of March 1, 1958, March 29, 1958 and July 30, 1958 were perfectly legal ~d proper and they were entitled B to the shares which had been allotted to them. The application was heard in the first instance by a learned Single Judge of the High Court. He came to the conclusion that the way in which the Patnaik and Loganathan groups had acted in the matter of the issue of new shares was oppressive of the C minority shareholders represented by the appellant and the subsequent conduct of the two groups amounted to continuing and continuous process of oppression of the minority shareholders and also amounted to mismanagement likely to be prejudicial to the interest of the Company. He came to the conclusion that the persistent acts of the Loganathan and Patnaik groups showed that D their motive was to oust the minority group of shareholders completely and the sole object of convening the meeting of September 21, 1960 and to pass the proposed resolutions was in furtherance of the continuing and continuous process of oppression of the appellant and his group, being the minority shareholders. Finally it was held that in view of the oppression there was just :r. and equitable cause for winding-up the Company. The learned Judge therefore allowed the petition and granted certain reliefs to which it is unnecessary to refer. This was followed by fourteen appeals to a Division Bench by the Company and the various shareholders. These appeals I' were consolidated and heard together. The Division Bench came to the conci'Jsion that the agreement of July 27, 1954 was not binding on the public company which came into existence after July 11, 1957, whatever might have been the position under the agreement when it was a private company. It also came to the conclusion that the seven persons to whom the new shares were G offered were not benamidars of Loganathan and Patnaik groups but were independent persons of substance, even though they might be friends of the majority group of shareholders. · But there was nothing to show that they were under the control of the majority group and therefore it could not be said that 7 5 per centum of the voting strength was concentrated in the hands of H Loganathan and Patnaik groups except where these new allottees chose to vote with these groups. On a careful consideration of s. P. JAIN v. KAI.INGA TUBES (Wanchoo, J.) 733 A the facts, the Division Bench came to the conclusion that no such oppression had been established as would justify an order under s. 397 of the Act. As to mismanagement under 5. 398, the Division Bench came to the conclusion that no case had been made out under that section. On this view of the matter, the appeals were allowed and the application of the appellant was B dismissed and the parties were ordered to bear their own costs. Thereupon the appellant applied for and obtained certificates to appeal to this Court and that is how the matter has come up before us. We shall first take up the case under s. 397 of the Act and C proceed on the assumption that a case has been made out to wind-up the Company on just and equitable grounds. This is a new provision which came for the first time in the Indian Companies Act, 1913 ass. 153-C. That section was based on s. 210 of the English Companies Act, 1948, which was introduced therein for the first time. The purpose of introducing s. 210 in the D English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for sometime that though it might be just and equitable in view of the manner E in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why s. 210 was introduced in the English Act to provide an alternative remedy where it was felt that though a case had been made out on the ground of just and equitable cause to wind up F a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider proper to give. That is the genesis of the introduction of s. 153-C in the 1913-Act and s.