Case No: Company Matter No. 150 of 2012
Judge: Md. Rezaul Hasan,
Court: High Court Division,,
Advocate: Mr. Ahsanul Karim,Mr. Aminul Hoque,Mr. Md. Abu Taleb,Mr. Shamim Ahmed Mehedi,Mr. T. H. Khan,Mr. Md. Ziaul Haque,,
Citation: 4 LNJ (2015) 43
Case Year: 2015
Appellant: Mr. Sayem Sobhan and others
Respondent: Registrar of Joint Stock Companies and others
Subject: Company Matter,
Delivery Date: 2013-02-17
(ORIGINAL CIVIL JURISDICTION)
|Md. Rezaul Hasan, J.
|Mr. Sayem Sobhan and others
Registrar of Joint Stock Companies & Firms, TCB Bhaban, 6 Kawran Bazar, Rejgaon, Dhaka and others
Sections 241 and 245
It was one time held that the power to winding up under this clause (clause-vi) was a power only exercisable upon grounds of the same class as those specified in preceding clauses [Ref: Exparte Spackman, (1849) 1 Mac & G170; Suburban Hotel Co. Re, (1867) 2 Ch App 737; Anglo-Greak Steam Co. Re, (1866) 2 EQ1]. But this view is not prevailed and the reasons for holding ‘just and equitable’ to winding up are not to be considered ejusdem generis with the reasons given in the preceding clauses of the section. . . . (10)
Companies Act (XVIII of 1994)
Sections 241 and 245
Circumstances which would justify the winding-up of a partnership between these two by action are circumstances which would induce the court to exercise its jurisdiction under the ‘just and equitable’ clause and to wind-up the company.” ... (10)
Companies Act (XVIII of 1994)
It must therefore now be taken as established that the just and equitable clause confers upon the court a separate ground of jurisdiction to make-up to winding-up order. The order under this clause rests upon the opinion of the Court to be formed on the circumstances of the case whereas the previous clauses each prescribe certain definite conditions and are quite different in character. The court will not be fettered in forming its opinion under this clause (i.e. clause-VI) by the necessity of finding the existence of facts analogous to those which constitute the previous grounds. . . . (11)
Companies Act (XVIII of 1994)
Clause (vi) of section 241 of the Act is not to be considered with the reasons given in preceding clauses (i) to (v), in passing an order of winding up on the ground ‘just and equitable’. . . . (11)
Companies Act (XVIII of 1994)
The provisions of section 83, requiring a company limited by shares or having a share capital, to hold the ‘the statutory meeting’ and to prepare “statutory report” is not applicable to a private company, as has been rightly submitted by the learned Advocate for the respondents. . . . (12)
Companies Act (XVIII of 1994)
When there was no board meeting recommending any dividend to be distributed amongst the share holders and there was no AGM approving distribution of any dividend, this ground alone is sufficient to invoke application of clause-(VI) of section 241 of the Act on the ground of mismanagement of the affairs of the company by the directors. . . . (21)
Companies Act (XVIII of 1994)
A petition filed with malafide intention or in a case where petitioner has not come before this court in clean hands, the petition should not be allowed. . . . (24)
Companies Act (XVIII of 1994)
The words ‘Official Liquidator’ when used singly shall not refer to ‘Additional Official Liquidator’ and the words “Official Liquidators” shall refer to both the liquidators. . . . (24)
Exparte Spackman, (1849) 1 Mac & G170; Suburban Hotel Co. Re, (1867) 2 Ch App 737; Anglo-Greak Steam Co. Re, (1866) 2 EQ1]. [Loch V. Johnblackwood, 1924 AC 783], Loch V. John Blackwood Ltd. 1924 A.C. 783. vide AIR 1956 SC 213: Rajahmundry Electric Supply Corpn. Vs. Nageswara Rao. Besides, the law is thus stated in Halsbury’s Laws of England, 3rd Edition, Vol.6, p.534, para 1035: AIR 1956 S.C. 213: Rajahmundry Electric Supply Corporation Ltd vs. A. Nageshwara Rao. 34 DLR (AD) 47, at paragraph No.32, Vol. 52 page-36: Virendra Sing Bhandari V. Nandalal Bhandari & Sons Ltd. 34 DLR(AD) 47: Bengal Water Ways Ltd. V. Rahimuddin Ahmed & ors, at paragraph No. 24, AIR 1976 (SC) 565: Hind Overseas Private Ltd Vs. Raghunath Prashad Jhunjhunwalla, AIR 1956 (SC) 213: RES Corpn Ltd. v. Nageshwara Rao, AIR 1956 (SC) 213 ref.
Mr. Khairul Alam Choudhury,
Mr. Aminul Hoque,
Mr. Md. Abu Taleb, and
Mr. Shamim Ahmed Mehedi, Advocates
Mr. T. H. Khan, Senior Advocate with
Mr. Fida M. Kamal, Advocate and
Mr. Md. Ziaul Haque, Advocate
Company Matter No. 150 of 2012
This is an application under section 241 read with section 245 of the Companies Act, 1994 (the Act) for winding up of the respondent No.2 company, namely Jamuna Bashundhara Housing Development Limited, herein after referred as ‘the company’.
Facts, in brief, leading to filing of this application and as stated therein are that the petitioner Nos.1 to 5 are members of same family. The petitioner Nos.1 to 5 represent the most renowned and prestigious business house of the country, namely-Bashundhara Group; that the respondent No.1 is Registrar of Joint Stock Companies and Firms. The respondent No.2 is Jamuna Bashundara Housing Development Ltd. The respondent No.3 to 7 are members of same family. The respondent No.8 is Banker of the respondent No.2 company; that the respondent No.2 company was incorporated in the year 2009 with the objects to carry on businesses, inter alia, of real estate, construction, housing, apartment project and housing facilities, developing land by earth filling and also by preparing layout for plots and selling those plots at home and at abroad. Certified copy of the Memorandum and Articles of Association of the respondent No.2 has been annexed to the petition as Annexure-A; that because of the wide spread reputation of Bashundhara Group, the respondent Nos. 3 to 7 approached the petitioners to establish a joint venture company. The petitioners, as a bona fide gesture, accepted their proposal. Since, two business groups have established the respondent No. 2 company, Article 4 classifies the petitioner Nos. 1 to 5 as Group-B share-holders, and the respondent Nos. 3 to 7, on the other hand, as Group-A share-holders, each group shall hold 50% of the total subscribed shares. Accordingly, both groups have formed respondent No. 2 Company under the name and style “Jamuna Bashundhar Housing Development Ltd (‘the company’ in brief). Articles 4 and 7 of the Articles of Association reads as follows:-
“4. Group of share holders:-
The share of the company is comprised of Group “A” and Group “B” shares. The shares of both the groups have the same status. The Group has been made for identification purpose of the shareholders as follows:
The following shareholders will be Group “A” shareholders:
Md. Shamim Islam
Mrs. Salma Islam
Monika Nazneen Islam
The following shareholders will be Group “B” shareholders:
Mrs. Aforza Begum
7. The share in the Company shall be held by the following group of shareholders:
Group- “A”: 50%
Group- “B”: 50%
7.1 The shares shall be under the disposal and control of the Board of Directors.
7.2 Any issue of further or new shares at any shall be made in such manner so as to preserve and maintain the respective percentage set out in Article 4.1. above;” that in the management of the respondent No.2 company, i.e in the board of directors, each group maintains equal strength. Article 39 states that each group shall represent five directors in the board of directors. Article 49 of the Articles of Association provides that at least two directors from each group shall constitute quorum in the board of directors, Articles 39, 48 and 49 of the Articles of Association is quoted below:
“39. The member of Directors of the company shall be ten. Each group shall represent five directors.
48. No business shall be transacted at any meeting of the Board unless a quorum is present when the meeting proceeds to business.
49. 4(four) directors at least two from each group present personally will form the quorum for transaction of business at a meeting of the Board of Directors. All questions arising at any meeting of Directors shall be decided by majority of votes.”;
that the respondent No.2 company collected money from various persons for allotting plots. But due to mismanagement and reluctance of Group-A directors, the respondent No.2 company could not acquire enough land to allot to the persons from whom the respondent No.2 company collected installments. Due to irresponsible attitude of respondent Nos.3 to 7, the petitioners’ other companies and Bashundhara Group, which the petitioners represent, have been earning bad name. The respondent No.2 company is in total stand still situation. The respondent Nos.3 to 5 who are 50% shareholders and hold equal strength in the board and in the company is not cooperating to carry on the smooth business of the respondent No.2 company. There is no likelyhood that the respondent No.2 shall regain its business. Hence, for the better interest of all concerned, the petitioners have filed this application for winding up of the respondent No.2 company. Considering all the facts and circumstances of the case, this Court maybe pleased to consider that winding up of the respondent NO.2 company is just and equitable; that the respondent No.2 company maintains two accounts with the respondent No.8 bank. The accounts are current Deposit Account being Account No.02333000379 and Short Notice Deposit Account being Account No.02336000047. The balance as on 18.06.2012 in Current Deposit Account No.02333000379 stands at Tk.7,02,507.50. The balance in other account being Short Notice Deposit No.02336000047 as on 18.06.2012 stands on Tk.55,60,36,100.32. The petitioners and the respondent Nos.3 to 7 withdrew Tk.31 crore each. The petitioners intends to refund the said amount of Tk.31 crore to the respondent No.2 company as and when the liquidator directs, if any, is appointed in the instant case; that the respondent NO.2 company only acquired 20.3562 acres of land in various mouzas. The description of the said lands are narrated in details in the schedule of land below; that certain clients of the company declined to receive plots from the said company and rather requested the company to transfer the amount already deposited to the respondent No.9 company. The letters of such clients of the company have been annexed to the petition as Annexures “D” series; that apart, the respondent No.2 company is not doing any business, the respondent No. 2 company never held the statutory meeting, neither has held any AGMs as yet. Therefore, on this account as well this Court may be pleased to winding up the respondent No.2 company. Hence this application for winding up of the company.
The respondent Nos.3-7 have appeared in this matter and filed an affidavit-in-opposition denying all the material allegations made in the petition and further stating, amongst other, that the real facts of the case are that Jamuna Group is a leading company of Bangladesh engaged into the business of spinning, weaving, garments manufacturing, electronics, distillery, housing development and construction of real estate building etc. Jamuna Future Park is one of the biggest shopping mall of Asia, which is an excellent and noble works of Jamuna Group. Bashundhara Group is also a leading company engaged into the business of housing development, construction, ship building, steel engineering etc; both of them have a very strong economic background and logistic supports in their respective fields of business. In the year 2006, the founders of two groups i.e Mr. Md. Nurul Islam alias Babul, Chairman of Jamuna Group and Mr. Ahmed Akbar Sobhan alias Shah Alam, Chairman of Bashundhara Group met in a friendship meeting and decided to start a joint venture housing project by amalgamating their respective lands lying in the project area nearby the 300 feet wide ‘Dhaka-Purbachal Road’, the project comprising about 2000 bighas of land of Dumni Mastul, Bauther, Barua, Barokau and Delna etc Mouzas. They also agreed to surrender their respective lands lying in their respective project. Consequently, they have entered into a Deed of Agreement on 17.10.2006, bearing Deed No.23549 dated 17.10.2006 registered with the Sub-Registry Office, Gulshan Dhaka. The project was initially proposed in the name and style of “NB Agricultures Ltd” (Jamuna Bashundhara Agricultures Ltd) in view of clause 5 of the Deed of the said Agreement. The project comprising of the same area of land were re-named as “Jamuna-Bashundhara Housing Development Ltd” and the project proposal was materialized by establishment of a company under the name and style of Jamuna-Bashundhara Housing Development Ltd (respondent No. 2), comprising the sand land of JB Agriculture Ltd and lay out plan was prepared for the self-same land in the name of Jamuna-Bashundhara Housing Development Ltd instead of JB Agriculture Ltd. The company was registered with the office of the Registrar of Joint Stock Companies and Firms Bangladesh, having registration No. C-77178 dated 10.05.2009; that the petitioner No.1 is authorized by the Articles of Association of the company for holding AGM or Board Meeting etc and he has taken a lot of signatures from the respondent No.3 regarding Board Meeting from time to time for opening Bank account and for business transactions and issuance of cheques for withdrawal of money from the Bank from time to time. A lot of properties have been procured at the instance of the petitioner No.1 in the name of the company and the grounds taken in the petition are not cogent grounds for winding up and as such the petition is liable to be rejected; that the parties to the agreement were agreed to transfer their respective lands to the project and accordingly Bank account was opened by taking the resolution of the Board of Directors and the Company maintains an account with the respondents No.8 in which there is a deposit of Tk.32.00 crores arising out of allotments of plots to 534 numbers of allotment holders. Besides, Jamuna Builders have 445 numbers of allotment holders, who will merge with the Joint Venture Project of Jamuna Bashundhara Housing Development Ltd. and the lands of the ‘Bashundhara Group’ and of the ‘Jamuna Group’ would be transferred to the project equally, against which Bashundharha Group has already taken a sum of Tk.31.00 crores from the common fund of the project and the Jamuana Group has also taken the same amount for giving equal lands to the project.
Besides 4 sets of applications have been submitted in this matter, namely- (1) Aminur Rahman Khan and others, (2) Kazi Shakhawat Hossain and two others (3) Global Multipurpose Property Ltd. and 3 others (4) Md. Mossaraf Hossain. After hearing the applicants order has been passed to keep these applications on record.
The learned Advocate Mr. Ahsanul Karim, appearing along with the learned Advocate Mr. Shamim Ahmed Mehedi, Mr. Khairul Alam Chowdhury and Mr. Md. Abu Taleb, Advocates, having placed the application and drawing my attention to other materials on record, firstly submits that there is a total dead lock in running and managing the affairs of the company and more so the share holder-directors are holding shares, in the company, in equal proportion. As a result, for lack of co-operation of respondent Nos.3-7 a total dead lock has been created in convening or holding the meetings of the board of directors or the general meeting or to take any decision to run the business of the company. Next, referring to Article 39, 48 and 49 of the Articles of Association, the learned Advocate submits that since the directors of Group-A are not attending the board meetings, so for lack of quorum as well for lack of majority in taking decision for want of support of the respondent Nos. 3-7 (Ground-A share holders) all affairs of the company now stands still and there is no hope to overcome this prevailing situation, as would be evident from paragraph No.10(e) of the affidavit-in-opposition wherein the respondent Nos.3-7 have also expressed their intention to buy off the shares of the petitioners instead of offering any concrete proposal or practical solution to overcome the dead lock. As such, the company has failed to proceed towards achieving any of its objects and there is a practical uncertainty that the company would at all be able to be run and be managed by these two groups of directors/share holders, holding equal shares and voting rights and having lack of trust or support between them, so that the objects for which the company has been formed can be actualized. Then, referring to paragraph No.7 of the petition, the learned Advocate submits that each group of directors/ share holders have withdrawn Tk.31,00,00,000/- (Tk.62,0000000/- in total) from the accounts of the respondent No. 2 company and this position has also been admitted by the petitioner as well as by the respondent Nos.3-7 in their affidavit-in-opposition. The learned Advocate continues that no dividend was recommended by the board of directors nor any divided was approved in any Annual General Meeting of the company and such withdrawal of money, by both group of directors alone is a ground that it will be just and equitable to wind up the company before it falls into further financil and management disaster to the great prejudice of the persons who have made applications and paid several installments to purchase plots from the respondent No. 2 Company. Although, he further submits, the petitioners have made clear promise, at paragraph No.7 of the petition, that they are willing to refund Tk.31,00,00,000/- to the account of respondent No.2 company as and when the liquidator directs, if any, appointed in the instant case, but the respondent Nos.3-7 (Group-A directors), although admitted to have received the same amount of money, vide their affidavit-in-opposition, but they did not make any such commitment to refund this amount of the money to the company, which is the money of the company and forming part of assets of the company. Hence, it reveals a clear risk to continue business with group-A share-holders and the group-B share-holders are not willing to expose themselves to the risk of misuse of the allottees money or of their own equity. The learned advocate also submits that, there exists a clear distrust in the mind of group-B share-holders as to whether they would take further risk by executing personal guarantees and/or by mortgaging their personal properties. The group-B share-holders apprehends loss of their good will as well, in continuing business with group-A share-holders. He strenuously submits that these kind of conducts has already frustrated the object for which the company has been formed and, as such, the company has, meantime, lost its substratum. Next, referring to the Annexures, particularly to those submitted alongwith the affidavit-in-opposition, the learned Advocate for the petitioner submits that these are not title deeds showing that the company has purchased any properties towards achieving its objects or for which it has received a huge amounts of money from the allottees. The mouza map or project plan etc, annexed to the affidavit-in-opposition, are not title deeds. Nor, he continues, any title deed could be annexed, to the affidavit-in-opposition to show that the company has allotted any plots to any of the allottees, although the company has been incorporate long back in the year 2009. As such it is evident that the company is not doing any business. The learned Advocate for the petitioner next submits that, mere operation of the Bank Account, either before or after presentation of the application, does not mean that the company is doing business in as much as the company has various obligations to several parties, either to pay or to deposit monies and for that purpose the Bank Account can and should remain operative, but this fact alone does not mean that the company is doing business. He submits that even a person, who is not a business, for instance a govern servant, can operate a bank account, but for operating a bank account it cannot be said that he is doing business thereby. The learned Advocate thereafter submits that, since both Group of Directors are holding equal shares i.e at 50: 50 ratio in the company, one group of directors-share holder cannot compel the other group to consent to the proposal placed before the board or in any other meeting or to remain present in any meeting to constitute quorum required to transact any business in any meeting or to cast their vote in order to adopt any resolution that essentially requires majority votes. Hence, the learned Advocate has insisted that this is a clear case of dead lock being created in running and managing the affairs of the company and unless, in such a situation, the company is wound up by the court the money of the allottees, held by and paid to the company, would not be able to be returned to them and these are still debt of the company owed to the allottees because no plots could have been transferred to them as yet and there is no certainty that the required quantity of land could be purchased by the company. In support of his contention the learned Advocate has referred to the 4(four) sets of petitions for addition of parties in which the allottees stated that they have paid crores of Taka for allotments of plots by several installments, but they doubt allotment of any plot can be made by the company and prayed for their addition as parties, so that they can get back their moneys as creditors of the company. This desire or agony of the allottees deserve serious consideration. He then submits that the company has not filed any statutory report as required under the provisions of section 83 of the Act and it is duty of all members of the Board of Directors to ensure compliance of the provisions of law. But, in this case, owing to non-co-operation of the ‘Group-A’ share-holder directors, no statutory report could be submitted, nor any AGM could be called or held till now. He then submits that although the Joint Venture agreement dated 17.10.2006 has been referred to in the affidavit-in-opposition, but none of the joint venture parties are share holders in the company (respondent No. 2) and as such the said joint venture agreement has no relevance and cannot be referred to or relied upon in the mater of winding up of the respondent No. 2 (company). Next, the learned Advocate has referred to paragraph No.24 and 32 of the case reported in 34 DLR(AD) 1982: Bengal Water ways vs. Rahimudden and submits that in view of the dead lock crated in running and managing the affairs of the company and there being lack of confidence in each group holding equal number of shares in the company, it is desirable and expedient that the relationship should be ended. The respondents No.3-7 have proposed to buy off the shares of the petitioners and thereby they have expressed their clear intention not to continue the business together with the petitioners. Hence, there is no hope to break the dead lock. Besides, the respondent Nos. 3-7 having shown no intention to return Tk. 31 crore withdrawn from account of the company, in the manner aforesaid, there is no hope that this company would be able to achieve its objects, rather it has already deviated from the object for which it has been established and uncertainty in refunding monies of the allottees is apparently visible. In this situation, the learned advocate emphasizes that, it would be just and equitable to wind up the company by the court under section 241 clause (VI) of the Act, otherwise further prejudice to the allottees, to the company and to the petitioners cannot be prevented.
The learned Counsel Mr. T.H.Khan appearing along with Mr. Fida M. Kamal and Mr. Md. Ziaul Haque, learned Advocates, on the other hand, having placed the affidavit-in-opposition and drawing my attention to the materials on record, submits that a mere perusal of the petition, filed by the petitioner, would show that no case for winding up has either been stated nor been made out in the petition. Then, categorically referring to clauses (1) to (VI) of section 241, of the Act, the learned Advocate for the respondent Nos.3-7 submits that none of the clauses is applicable to the facts and circumstances of the case stated in the petition or from the documents annexed therewith. Besides, the ground ‘just and equitable’ should be considered alongwith other grounds narrated in clause (I) to (V) of section 241 of the Act. Clause (VI), the learned advocate submits, empowering this court to pass an order of winding up on the ground of “just and equitable”, should not be considered by the court unless any of the other grounds, stated in clauses (I) to (V), is found to exists. While containing their submissions, the learned Advocate for the respondents has drawn my attention to the statement of accounts of Bank Asia, annexed to the affidavit-in-opposition as Annexure-III, and has shown that the bank account is being operated since 1.2.2009 and that it was operated on 15.7.2012 i.e before filing of the application and also on 5.8.2012 i.e. after filing this application as well. As such, the learned lawyer for the respondents, strenuously argued that it is not at all true that the company is not doing any business as alleged. Rather, instance of operation of the Bank Account before and after filing of this application clearly shows that the company is doing business and it is fully functional. Suppressing all these facts the petitioners have filed this application with malafide intention and, as such, this petition is liable to be rejected on this count alone. The learned Advocate for the respondents further submits that the company has received monies from several allottees and it should be allowed to perform its obligation by allowing it to continue as a going concern, so that the interest of the allottees is not prejudiced and that the company can survive as a going concern, particularly when there is a good prospect of this company doing real estate business. The learned Advocate for the respondents has also referred to the project plan and Mouza map which is to be acquired by the company for achieving its object i.e. for allotment of plots pursuant to the allotment letters issued to the several allottees. The learned Advocate further submits that it is duty of the petitioner No.1, who is the Managing Director, to call the Annual General Meeting or to submit the statutory report and in case of default, if any, it should be the responsibility of the petitioners for which the company should not be allowed to suffer or be ordered to be wound up. The learned Advocate for the petitioner, in conclusion, submits that clause (VI) of section 241 refers to the courts discretion or power to pass an order on the ground of ‘just and equitable’ and that this refers to equity as a ground for passing winding up order. Hence, in order to maintain the application under clause (VI) of section 241, the petitioner themselves should have come in clean hands. But the facts stated in the affidavit-in-opposition and as pointed out in the course of submissions clearly shows that the petitioners have not come in clean hands. On these grounds the learned advocate for respondents submits that this petition is liable to be dismissed.
On query made from the Bench, the respondent sides has confirmed that both Group-A and Group-B directors/shares holders of the company, each has withdrawn Tk.31,00,00,000/- from the account of the company, although no dividend was declared by the Board or approved in any AGM and that this money is company’s money.
Heard the learned Advocates, perused the petition filed under section 241 read with section 245 of the Act, the supplementary affidavit, the affidavit in opposition and the documents annexed thereto.
Let the supplementary affidavits filed by the petitioner do form part of the substantive petition/application.
I have taken for consideration, at first, as to whether clause (vi) of section 241 of the Act can be considered separately or independently of the clauses (I) to (V) of section 241of the Act as a ground for passing an order of winding up by the court, if the facts and circumstances of the case so justify. Then, having considered several authorities on this point I find that, it was one time held that the power to winding up under this clause (clause-vi) was a power only exercisable upon grounds of the same class as those specified in preceding clauses [Ref: Exparte Spackman, (1849) 1 Mac & G170; Suburban Hotel Co. Re, (1867) 2 Ch App 737; Anglo-Greak Steam Co. Re, (1866) 2 EQ1]. But this view is not prevailed and the reasons for holding ‘just and equitable’ to winding up are not to be considered ejusdem generis with the reasons given in the preceding clauses of the section. In the case reported in In re Yenidje Tobacco Co. (1916) 2 Ch 426 Cozens Hardy, M.R., observed as follows:
In the same case at page 435 Warrington, L.J., observed as follows, as regards the ejusdem generic rule; “That opinion (the opinion previously pre-veiling) has long been abandoned. These views have been confirmed by the Judicial Committee of the Privy Council in a more recent judgment [Loch V. Johnblackwood, 1924 AC 783], in the course of which the authorities were carefully reviewed. This judgment is a very important and leading one ……….. . It must therefore now be taken as established that the just and equitable clause confers upon the court a separate ground of jurisdiction to make-up to winding-up order. The order under this clause rests upon the opinion of the Court to be formed on the circumstances of the case whereas the previous clauses each prescribe certain definite conditions and are quite different in character. The court will not be fettered in forming its opinion under this clause (i.e. clause-VI) by the necessity of finding the existence of facts analogous to those which constitute the previous grounds. The aforesaid Privy Council case in Loch V. John Blackwood Ltd. 1924 A.C. 783, has been considered and followed in a recent case decided by the Supreme Court, vide AIR 1956 SC 213: Rajahmundry Electric Supply Corpn. Vs. Nageswara Rao. Besides, the law is thus stated in Halsbury’s Laws of England, 3rd Edition, Vol.6, p.534, para 1035: “The words ‘just and equitable’ in the enactment specifying the grounds for winding-up by the court are not to be read as being ejusdem generis” with the preceding words of the enactment. This law has been cited to and relied upon in AIR 1956 S.C. 213: Rajahmundry Electric Supply Corporation Ltd vs. A. Nageshwara Rao. In our jurisdiction, in the case reported in 34 DLR (AD) 47, at paragraph No.32, the apex court has held that, “there cannot be any precise definition or inflexible formula of the principle just and equitable clause. Whether or not there are equitable consideration for the application of the principle, must necessarily depend upon the facts and circumstances of the case and the judicial discretion of the court.” As such, having considered the authorities cited I hold that clause (vi) of section 241 of the Act is not to be considered with the reasons given in preceding clauses (i) to (v), in passing an order of winding up on the ground ‘just and equitable’.
Then adverting my attention to another contention as to whether clause (ii) of section 241 of the Act is applicable in this particular case. I have considered the provisions of section 83 of the Act and I find that the provisions of section 83, requiring a company limited by shares or having a share capital, to hold the ‘the statutory meeting’ and to prepare “statutory report” is not applicable to a private company, as has been rightly submitted by the learned Advocate for the respondents.
Next, considering that the Articles of Association of the company, vide Articles 39, 48 and 49, quoted in paragraph No.4 of the petition (and as recorded herein above) as well as contained in Annexure-A to the petition (Memorandum & Articles of Association), I find that both groups of share holders, namely petitioners NO.1-5 forming group-B and the respondent Nos.3-7 forming group-A share holders, are holding shares in equal proportion, i.e. 5(five) share holders forming Group-A are totally holding 50,000 shares, each holding 1,000 shares, and 5 (five) shares holders forming Group-B are holding 50,000 shares in total, each holding 1,000 shares, out of 1,00,000 (One Lac) shares, as has been shown against the names of the subscribers to the Memorandum & Articles of Association. In this back ground, I have looked into the provisions of Articles 39, 49. These 3(three) Articles read as follows:-
48. No business shall be transacted at any meeting of the Board unless a quorum is present when the meeting proceeds to business.
49. 4(four) directors at least two from each group present personally will form the quorum for transaction of business at a meeting of the Board of Directors. All questions arising at any meeting of Directors shall be decided by majority of votes.” (underlining is mine).
Now, apparently group-B share holders, holding 50% shares in the company, has filed this petition for winding up alleging that non-cooperation of group-A share holders, holding the rest 50% of share. Therefore, in this situation, according to the submission made on behalf of the petitioner, no quorum could be formed, no decision could be arrived at or adopted on majority basis, hence no business could be done and that there no possibility to implemt the objects for which the company has been formed and that even no board meeting or AGM can be called or held on behalf of the company. I find substance in the submission, advanced on behalf of the petitioner, that Group-A share holders, holding 50% shares, cannot be compelled by the other group of the share holders (i.e. Group-B) to consent to or to pass an agenda which one group considered material or important to achieve the object for which the company has been formed.
Besides, Article 49 of the Articles of Association prescribed that at least two directors from each group of the directors shall remain personally present to form the quorum to transact any business and that, as per Article 49, the decision in any meeting of the board of directors shall be decided by majority of the votes, whereas there is no provisions for any casting vote, in the Articles of the Association. As such no meetings of the board of directors or any general meetings, for want of quorum, can be held or called for non co-operation of other group of directors, namely respondent Nos.3-7, as alleged, and that there is no certainty that quorum will be present or that any decision can be carried out by the majority of the votes as per Articles 48 and 49. Indeed, I find no material on record to think or presume otherwise. This contention of the learned advocate of the petitioner gets support from the statements made in at clause-(e) of paragraph No.10 of the affidavit in opposition, wherein allegations has been made that “the petitioner No. 1 is not providing necessary informations or documents to the contenting respondent with bad intention to create misunderstanding between the two groups of Directors and as such contesting respondents have decided to buy off the shares of the petitioners to run the company in accordance with law and the respondent No.3 is ready to take over the charge of the Managing Director of the company in view of the Article 61 of the Articles of Associations”.
As such, I find that the admitted position is that the parties are not willing to continue or to do business together and that the provisions have been made in Article 48 and 49 in a way, by omitting the provision for casting vote, that there is no way out of the dead lock created, as has been alleged in this case, in the process of taking any decision upon forming quorum in the manner provided for under Article 48 and 49. Hence, I am of the considered opinion that the company can not exist or run or be managed as a going concern by the existing board of directors, clearly divided into two groups, namely Group-A and Group-B and each group holding equal number of shares.
Moreover, the fact of keeping no provision for casting vote, in my view, is a glaring instance of distrust between the two groups and is responsible for creating a total dead-lock situation in running and managing the affairs of the company as a commercial concern. As such, from absence of the materials on record to draw any inference to the contrary, I find that a case of total dead lock in running and managing the affairs of the company as a commercial concern has been made out, in this case, on facts and from the circumstances revealed from the averments made by the parties as well as from the materials on record, and no device has been kept in these Articles to over come such dead lock either by forming quorum or by using casting vote, while the intention for separation in both groups is obvious from the fact of filing this petition by Group-B and from the allegations made in clause (e) of paragraph No. 10 of the affidavit in opposition by Group-A shareholders.
In this respect I should refer to the decision reported in Company Cases, Vol. 52 page-36: Virendra Sing Bhandari V. Nandalal Bhandari & Sons Ltd., wherein it has been held that, “principle of dissolution of partnerships can be applied to dead lock among members of the private company and that in such situation the company should be wound up”. Besides in our jurisdiction, in the case reported of the 34 DLR(AD) 47: Bengal Water Ways Ltd. V. Rahimuddin Ahmed & ors, at paragraph No.24, it has been held that “No doubt deadlock in the affairs of the company by itself, has not been made a ground under section 162 of the Companies Act, for winding up a company, but clause (vi) provides that if the court is of opinion that it is just and equitable that the company should be wound up, the court may wind up a company”. Then, at paragraph No. 32 of the same judgment, it has been held that, “there cannot be any precise definition or inflexible formula of the principle of ‘just and equitable’ clause. Whether or not there are equitable considerations for the application of the principle, must necessarily depend upon the facts and circumstances of each case and the judicial discretion of the Court. …………… . Where there is lack of confidence in each other, the partnership cannot simply work and in that case it is desirable and expedient that the relationship should be ended.” The apex court then, at paragraph No. 23 of said case has held that “the long line of decisions from the courts down to the Supreme Courts of the sub-continent tend to show that the principles applicable in the case of dissolution of partnership equally applied in the case of winding up of a private limited company and to treat the case of a private limited company more or less as a partnership”. It is to be noted here that clause (VI) of section 162 of the Companies Act, 1913 is now clause (VI) of section 241 of the Companies Act, 1994. (underlining is mine).
Again, in the case reported in AIR 1976 (SC) 565: Hind Overseas Private Ltd Vs. Raghunath Prashad Jhunjhunwalla, (at paragraph No. 32) it has been held that “Besides, it is only when share holding is more or less equal and there is a complete case of dead lock in the company on account of lack of probity in management of the company and there is no hope or possibility of smooth and efficient continue of the company as commercial concern there may arrived a case of winding up on just and equitable ground”. (underlining is mine).
I respectfully agree with these views cited above and find these views applicable in the facts and circumstances of this case.
Considering the facts that admittedly both groups of share holders have withdrawn an amount of Tk.62 crore, each group Tk. 31 crore, from the fund of the company (which forms the part of asset of the company), when there was no board meeting recommending any dividend to be distributed amongst the share holders and there was no AGM approving distribution of any dividend, this ground alone is sufficient to invoke application of clause-(VI) of section 241 of the Act on the ground of mismanagement of the affairs of the company by the directors. In the case reported in AIR 1956 (SC) 213: RES Corpn Ltd. v. Nageshwara Rao, it has been held at paragraph No. 8 that, “The words “just and equitable” in S. 162 (vi) are not to be construed ‘ejusdem generis’ with the matters mentioned in cls. (i) to (v) and, therefore, whether mismanagement of the directors is a ground for a winding up order under S. 162(vi) becomes a question to be decided on the facts of each case. Where nothing more is established then that the directors have misappropriated the funds of the company, an order for winding up would not be just or equitable, because if it is a sound concern such an order must operate harshly on the rights of the shareholders. But if, in addition to such misconduct, circumstances exist which render it desirable in the interests of the share-holders that the company should be wound up, there is nothing in S. 162(vi) which bars the jurisdiction of the court to make such an order”. I also find the view expressed in AIR 1956 (SC) 213 applicable in the facts and circumstances of this case as I have found and recorded the circumstances of total dead lock created in this case, in addition to mismanagement or misconduct of both group of directors in withdrawing Tk. 62 crores, each group admittedly taking Tk. 31 crore from the account of the company. Moreso, Group-B share holders have expressed their intention to refund the money to the account of the company, vide paragraph No. 7 of the petition, while Group-A has made no such commitment, though they also admitted to have received the equivalent amount.
Besides, I have considered alongside the applications for addition of parties. I find that there specific assertion of making payment of several instruments since 2010, against several plots, raising the figure above croes of taka, but no allotment of any plot could have been made to this applicants, as yet, and out of their anxiety they have submitted these 4 sets of application to add them as parties to this proceeding, so that, as claimants, they can get back their money invested in the company with the hope of getting allotment of the plots allotted to them, since they see no prospect of allotment of any plot.
Then referring to Annexure-D series, annexed to the petitions, I am not inclined to consider the grounds taken in these applications in deciding the merit of this application with reference to clause (vi) of section 241 of the Act, in as much as this is not an application filed by the creditors for voluntarily winding up of the company. But, significance of these 4 sets of applications lie in taking into consideration the interest and intention of the creditors (they are creditors of the company since no plot has yet been transferred to or registered in their name). However, I am of the view that because of supervening impossibility resulted from and due to the total dead lock in managing the affairs of the company and owing to mis-management and withdrawal of money from the accounts of the company as recorded above, the allottees are not bound to further perform their obligations, in this particular case, with reference to the terms and conditions of the allotment letters issued in their favour and they are entitle to receive their entire money back.
Before parting of, I should record that no doubt a petition filed with malafide intention or in a case where petitioner has not come before this court in clean hands, the petition should not be allowed. But in view of the facts and circumstances of this case, recorded herein above, I consider this ground as not tenable and not attracted in this case.
Hence, in the facts and circumstances of this case and the decisions quoted and consulted herein above, I am of the considered view that it will be just and equitable to pass an order of winding up of the respondent No. 2 (company). I find merit in this application.
In the result this petition is allowed and the company is hereby wound up as per provisions of clause (vi) of section 241 of the Act.
(A) Accordingly it is ordered-
(2) that, in exercise of the power vested in that behalf and pursuant to the provisions of sections 251(2) and 255(3) of the Act, read with Rule 76 of the Companies Rules, 2009, the Official Receiver and learned advocate Mr. Akheruzzaman, a member of the Supreme Court Bar, having his law chamber named THE LAW FOCUS, Aptt. C2, House 3G, Road 104, Gulshan-02, Dhaka, are hereby appointed as “the Official Liquidator” and the “Additional Official Liquidator” of Jamuna Bashundhara Housing Development Ltd,” (herein after referred to as the company in liquidation). The Official Receiver shall be the Official Liquidator and advocate Mr. Akhaturuzzaman shall act as the Additional Official Liquidator. The words ‘Official Liquidator’ when used singly shall not refer to ‘Additional Official Liquidator’ and the words “Official Liquidators” shall refer to both the liquidators.
(3) that both group of shares holder are hereby directed to refund Tk.31 crore, each, to the account to be opened by the Official Liquidators, within 60 days, and to submit affidavit of compliance within one week thereafter.
(4) that the persons who have filed applications for addition of parties may submit their claim to the Official Liquidator, with copy to Additional Official Liquidator, alongwith adequate proof, so that their claim should be considered and settled accordingly by making payment to them or to their nominated/ authorized persons, giving top priority, subject only to the claims of secured creditor, if any, provided that they had no knowledge that the allottees of the plots have acquired equitable title to the lands of the company, if any, mortgaged to them.
(ii) to inform this order of winding up by issuing notice upon the company, as required by Rule 77 (since company is not the petitioner and did not appear in this matter).
(iii) to open a bank account with Sonali Bank, Supreme Court Branch, or in any other schedule Bank in the name and style “Official Liquidators of Jamuna Bashundhara Housing Development Ltd. (in liquidation)”, as required by Rule 103. The account shall be opened, maintained and operated under joint signatures of the Official Liquidator and the Additional Official Liquidator.
(iv) to maintain, in his custody and office, all books, records and accounts as required under section 251(3) of the provisions of the Companies Act and the Rule 110 of the Companies Rules, 2009, showing all assets and liabilities of the company and to be jointly signed by both the liquidators, in token of proof the correctness of particulars, contents and/or entries recorded or made therein. Office of the “Official liquidator” shall work as usually in this respect as they do in respect of all matters of winding up.
(v) to submit quarterly reports of the accounts of the company, duly signed by both liquidators, to the court, till it’s dissolution is ordered by this court.
(vi) to exercise the powers and discretion, vested in him under section 262 of the Act with due regard being had to interest of the company, its creditors and contributories, in consultation with the Additional liquidator, and subject to the control of the court.
(vii) to prepare and to furnish before this court a list of all contributories, under joint signature of both liquidators (subject to this court’s right to rectify the same, if so required according to law), for the purpose of making call (if any) or to distribute the surplus assets and/or landed properties, if any, to be divided/partitioned for distribution equally and equitably between the Group-A and Group-B shareholders (contributories), subject to prior approval of the court.
(viii) to submit statement/report, further and/or supplementary statement/report under joint signature of both liquidators, to this court, as required by section 259 of the Act, read with Rules 119 and 120, as soon as practicable upon receiving the statement of affairs to be filed under section 258(since winding up order is made).
(IX) to take into custody of the Official Liquidator all movable (by marking an inventory) and immovable properties of the company, if any, including the title deeds and to dispose of the same, if so required to settle the claims of the claimants, as well as to exercise all powers, upon prior consultation by and between both the liquidators, as permitted by section 262 of the Act, with prior sanction of this court (vide Rules 168 to 170) as and where required, and to use the sale proceeds, if any, towards settling the liabilities of the petitioner company, if any, in the manner prescribed by Rules 148 to 162 and regard being had to the provisions of section 325 concerning preferential payment as well as to show separately the list of secured creditors (if any), the allottees, the employees or to their nominee ( to Respondent No. 9 in those cases where the allottees have made such requests or other person duly nominated by the claimants, if any, or to their heirs), the employees, as the case may be, and the unsecured creditors, if any, giving their name, full particulars and the amount of their claim, in tabular form, subject to receiving adequate, reliable and genuine proof. They shall, to that end, submit application accordingly, to the court, under joint signature of both liquidators, for settling the claims of the claimants, to pay the cost and expenses incurred and also showing the assets and liabilities as well as the cash if any, at hands, and/or the landed property, if any, and to show 5% commission payable to the government. The surplus assets and/or landed and other properties, if any, is to be divided and partitioned by the liquidators and be distributed equally and equitably, by observing all legal formalities, between Group-A and Group-B shareholders, subject to prior sanction of the court.
(D) The company or its Managing Director or the CEO or the Chief Financial Officer shall furnish, to both the Lequidators, the name of the bankers of the company, giving account numbers, enclosing statement of accounts, name of the signatories and also enclosing authenticated copies of the resolution regarding operation of the bank accounts, within the time limit prescribed in the proceeding paragraph.
(E) The persons named at preceding paragraph No. (D) and/or the official in charge of the estate, stores, stocks and other properties, as the case may be, of the company shall give particulars of and handover all title deeds of immovable and movable properties of the company (if any) to the Official Liquidator, and one set of photocopies of the same to the Additional Official Liquidator, within the same time limit prescribed in the preceding paragraph.
(F) Since the official liquidators are permitted by law to take into custody all assets and properties of the company, as per provisions of section 262, so the concerned bank manager(s) and the Managing Director(s), in which the company (in liquidation) has accounts is/are directed to open bank account in the name and stayle “Official Liquidators of Jamuna Bashundhara Housing Development Ltd (in liquidator)” and to hand over specimen card, forthwith on demand being made, to the official liquidators to transfer the amount to the account to be opened and maintained by the official liquidators, on their signing necessary papers, and also to hand over cheque book to the Official Liquidator, so that the official liquidators can bear all necessary cost and expenses incurred in the process of winding up and to pay the salaries, rents, bills, wages etcetra, if any. The signatories of the bank account of the company is directed to transfer the entire balance, if any, from the account of the company to the accounts to be opened by the Official Liquidators, at their demand. All cheques shall be account payee cheques, be signed jointly by both liquidators. For this purpose a copy of this judgment along with the request letter shall be submitted by the Official Liquidators to the banks concerned.
(G) The petitioner company shall submit an affidavit of compliance as regards compliance of the directions Nos. (C) to (E) above, within one week thereafter.
(H) The Company, the members of the board, all share-holders/contributors are hereby restrained to operate bank accounts (subject only to the directions given hereinafter to deposit Tk. 20,00,000/-), to remove or transfer or encumber any moveable or immovable properties of the company including, but not limited to, the vehicles, equipments, furnitures, fittings, machineries electra of the company and not to remove any documents without leave of the court. However, the official liquidators, shall have discretion to keep in safe custody (jmma) any property of the company, if they consider fit and proper; but upon taking written inventory and undertakings to be signed by the jimmadar in presence of witnesses, preferably from the concerned parties or from independent persons, as they may consider fit.
(I) The Official Liquidators are permitted to appoint lawyer, to be selected by them in consultation with each other, and settle his fees subject to permission of the court.
(J) The official Liquidators shall follow and comply with all such provisions as are laid down in the Act and the Rules, and as are applicable in the process of winding up and they shall be jointly and severally responsible for the default, if any, committed in the process of winding up. They shall not withdraw any amount more than that as may be required to meet or pay the lawful and reasonable cost and expenses, salaries, bills, rents, taxes or duties, fees etc and/or to settle the lawful claims and/or to distribute the surplus assets amongst the cortributories, if any, as per law and rules, and with prior sanction of the court.
(K). They (the liquidators) shall bring, in writing, to the knowledge of the court all facts that are material to ensure compliance of the provisions of law and of the Rules as well as to protect interest of the creditors/allottees, claimants, contributories and the company, as the case may be.
(L) All courts, subordinate to this court, authorities, officer-in-charge of the local police station and his superior authority (the Assistant Commissioner, Deputy Commissioner and the IGP, as the case may be) is hereby directed, forthwith and on request being made to him/ them, to render all assistances to the official liquidators in performing his/their functions and in exercising his/their powers and duties as per law and in the implementation this judgment and order as well as to ensure maintenance of law and order at the concerned places and or offices, if so required, as the case may be. They should also act in aid of the Supreme Court as required under Article 112 of the constitution.
The matter of the dissolution of the company will be considered only after receiving and considering the statements/affidavit of facts and/or compliance to be submitted by the official liquidator, pursuant to the directions given above.
The remuneration of the Official Liquidator and of the Additional Official Liquidator, as per provisions of section 256 read with Rule 131, is initially fixed at Tk. 3,00,000/- to be paid to each of them from the asset of the company. Each of the groups and the signatories, from both ‘A’ and ‘B’ groups who are operating the bank account(s) of the company, is directed to deposit Tk. 10,00,000/- to the account mentioned above, within 1(one) week (which is to be adjusted from the asset of the company, if found surplus), and to submit an affidavit of compliance within the next week thereafter, subject to which this order will be effective. It is also directed that the liquidators shall submit to this court, intimation, within two days, of their entering into office and shall be entitled to receive 33% of their remuneration thereupon. The rest of their remuneration shall be withdrawn in such manner and to such extent as the court shall, upon receiving their application, order.
Let a copy of this judgment and order be sent to the Official Receiver and another copy to the Additional Official Liquidator.
Reference: 4 LNJ (2015) 43