K. Sukumaran J.

1. The petitioner in Company Petition No. 2-S of 1991 has come up in appeal against the judgment of the learned single judge dated 14-8-1991 by which his petition under sections 433 and 434 of the Companies Act, 1956, for an order of winding up of the company, Messrs. Solitaire Hotels Pvt. Ltd., has been dismissed.

2. The company was incorporated in 1985. The main object was the running of a hotel and allied activities. The capital structure disclosed an authorised share capital of 50,000 equity shares of Rs. 100 each and 5,000 preference shares of Rs. 100 each. Initially conceived as a three-star hotel with 38 rooms, it later underwent a change in conception with extended accommodation of 50 rooms and additional facilities like a swimming pool. At the time of filing of the petition in February, 1991, the construction was complete and the commercial activity was at a take off stage.

3. The petitioner, an estate broker and financier, was attracted to the company some time in 1988 by the representations of respondent No. 2 who, according to him, has functioned as his chartered accountant from about 1984. He invested about rupees eight lakhs in the company. His calculation was that he would thereby obtain a one-third share along with respondents Nos. 2 and 3 (referred to as "the Naik group") and respondents Nos. 4 and 5 (referred to as "the Khandawala group").

4. Escalation in the price of materials and services, understandably, let to a revision in the project cost. Additional capital had to be found. The latter developments were not in accordance with the expectations of the petitioner. He was pessimistic about an early completion of the project or a steady and attractive derivation of profit. The developments thereafter irked him, and he has a variety of complaints against the operational pattern adopted by respondents Nos. 2 to 5.

5. The petition for winding up is based on the just and equitable clause, and no other. This has a significance in relation to the approach to the problem and assessment of the materials.

6. The learned judge has adverted to the serious allegations made by the petitioner but entered adverse findings against him. In view of the course we propose to adopt, it is unnecessary to undertake an exhaustive discussion on the various allegations and attacks made on the findings as rendered by the learned judge.

7. Lack of probity on the part of the respondents in relation to the functioning of the company, siphoning off of the funds of the company to private coffers, omission to account for money actually received, maneuvering in relation to transfer of certain shares, manipulations in regard to the entries in the minutes and other books maintained by the company, are some of the aspects which were highlighted in the course of the arguments addressed to us.

8. We would assume, for the sake of argument, that all these allegations are made out. That could be the highest that the appellant could aspire for. Even then, do circumstances exist for the extreme step of winding u of a company having regard to the existing circumstances Inasmuch as the learned judge has answered the question in the negative, is there any reason or justification for interfering with that finding in appeal.

9. The legal principles that should guide a court are no longer in a grey area. Those who have to deal with corporate entities of the modern world have necessarily to reckon with some hard facts or distressing realities. Instances are not rare where the fiduciary trust is betrayed by those entrusted with the management of the company. Quite often, the facade of the company is maintained for amassing private fortunes by those who had the opportunity to attend to important activities carried on by the company. That has been so even from the time of the East India Company. It has been on the increase in later times. Innovations made by vigilant Legislatures have checked but not altogether eradicated the malpractices in the corporate field. In a sense, history records the evolution of an expertise in corporate manipulations, fly-by-night operations and the like. Prolixity of legislation attempted to plug the loopholes in company administration. What was indeed a lean book of company law has now statutory provisions, greater number of statutory forums, and bulk rules framed by diverse authorities, including the Government and the courts.

10. The scheme of the Companies Act particularly after its amendment in 1956, would make one thing clear : A winding up has to be resorted to only when other means of healing an ailing company are of absolutely no avail. Remedies are provided by the statute in very many matters concerning the management and running of a company. A special forum itself has been created, and with an expertise and daily experience in relation to the problems in the working of the companies-the Company Law Board. It now adjudicates many such disputes which come before it as provided under the law. The Registrar of Companies has got an overseeing authority in relation to enumerated matter. These safeguards are visualised for the protection of the individual shareholder, who in the scheme of things, may not be in a position to have a close view of the working of the company and many of its deals. The important right of the majority of the shareholders to replace a group mismanaging its affairs or lacking in probity is always there. Experience has, however, shown that the majority could be manipulated by those with ideas in mind and money to back. Sections 397 and 398 confer valuable rights even on the minority to seek the aid of a vigilant court in redressing their grievances. If pursued properly and effectively, many of the misdeeds of an erring or dishonest management could be checkmated and/or remedied by resort to such proceedings. This scheme of the Companies Act lies at the bottom of evaluation of the principles which insist on keeping at bay a winding up process, except in very compelling circumstances. Some of the decisions which have indicated the principles, and stretching from 1968 to 1989 are as under :

(1) S. S. Rajakumar v. Perfect Castings Pvt. Ltd. [1968] 38 Comp Cas 187 (Mad). (2) Lokenath Gupta v. Credits Pvt. Ltd. : 72CWN624 . (3) Jose J. Kadavil and K. T. Mathew v. Malabar Industrial Co. Ltd. . (4) Gadadhar Dixit v. Utkal Flour Mills (PVt.) Ltd. .

11. In the present case, one strong circumstance which dissuades us from resorting to the extreme and irretrievable step of proceeding with winding up is the stage which the company and its activities have reached. As noted earlier, it is almost at the threshold of the commencement of commercial operation. The project is in an attractive segment of tourism development. It has been undertaken in a State noted for its scenic beauty and reputed for its tourist attraction, with palmy patches and breezy beaches. Public institutions have also got themselves involved in the working of the company by sizable financial support for working out the project. It will be against the interest of all, and even that of the petitioner, to halt the activities at a crucial stage and to dismantle the entire corporate achievements in an unimaginative manner. In that view of the matter, we would, therefore, affirm the order of the learned judge.

12. Counsel for the appellant rightly stressed that in the light of the findings as entered by the learned judge, he would he denuded of a remedy in the protection of his rights even when he approaches other authorities or forums of ventilation of his grievances. In particular, he commented on the conduct of the respondents in filing a return with six documents initially and a surrejoinder with 41 documents. The petitioner has a conviction that the time gained in between has been abused for tampering with the records and even to fabricate some. In between the surrejoinder and the actual hearing, there had been no effective opportunity for the petitioner to attempt to disabuse the impression that could be formed in the courts mind, on the basis of the facts mentioned and the documents produced at the belated stage. Counsel appearing for the company and the respondents asserted that they have a satisfactory explanation in relation to all the allegations made by the petitioner. There is much force in the contention of counsel for the appellant about the prejudice that may be caused to his client by the adverse findings. The grievance about the inadequacy of time to establish all that the petitioner intended to, also appears to be genuine. The petitioner has to be liberated from the oppression of these prejudicial factors. It is all the more necessary, inasmuch as we have declined to go into the details of the allegations and assess the correctness of the findings of the learned judge. We would therefore, vacate the factual findings on the various allegations as entered by the learned judge. It will be open to the petitioner to approach other authorities in accordance with law and seek ventilation of his grievances. Needless to add, it will be open to the respondents to present before such authorities their version and justification. The authorities, if and when approached by the petitioner, will adjudicate upon the grievances of the appellant uninhibited by any of the findings and observations of the learned judge.

13. Subject to the above observations, we dismiss the appeal.