1. This is a petition to wind up the Cine Industries and Recording Company, Limited. The company was incorporated under the Companies Act (7 of 1913) on 12th April, 1937. The nominal capital of the company is Rs. 5,00,000 divided into 5000 shares of Rs. 100 each. The issued capital of the company is 2500 shares of Rs. 100 each. The subscribed and paid up capital of the company is Rs. 1,69,600, consisting of 1696 fully paid up shares of Rs. 100 each. The principal objects for which the company was established were to produce and get produced talking or television films of a high standard, to carry on the business of cinematograph trade and industry, to carry on and undertake the business of manufacturers, producers, exhibitors and importers of cinema films, photo plates, talkie or silent pictures, etc. The last balance sheet of the company was filed on 5th December, 1940, and the last annual general meeting of the company was held on 28th October, 1940. The petitioner alleges that though the time for the meeting and the report as reguired by the provisions of the companies act and the articles of association of the company has long since expired, the company has not filed the balance sheet for the period ending 31st March 1941, and has not called the annual general meeting for the year 1941. Mr. Daphtary for the petitioner has conceded that there is no force in this contention of the petitioner. According to the balance sheet for the year ending 31st March 1940, a dividend of 15 per cent, was declared. The petitioner says that the dividend was paid otherwise than out of the profits of the company and the directors of the company are responsible for the same. The petitioner further alleges that the management of the company has not been properly carried on and large expenses have been incurred and debited in the books of account of the company. It is further alleged that Chimanlal Maneklal Trivedi, who was the managining director of the company till 16th April, 1941, has managed the company and that his management has been highly prejudicial to the interests of the company and that the company has been put to loss of large sums of money on account of his mismanagement. The petitioner further alleges that Chimanlal Maneklal Trivedi has secured to himself illegal pecuniary advantage to the knowledge of the other directors to the detriment of the company and no steps have been taken against Chimanlal Maneklal Trivedi for proper accounts of his management or for making good the sum recoverable from him. It is the petitioner's case that the affairs of the company have been grossly mismanaged and the report of the affairs of the company for the year 1941 has been deliberately not published in order to keep back the mismanagement of the affairs of the company.
2. Under cl. 30 of the memorandum of association the company was authorized to borrow or raise or secure the payment of moneys in such manner as the company should think fit. Under art. 72 of the articles of association, it is provided that the directors may, from time to time, at their discretion borrow, or secure the payment of, any sum or sums of money for the purposes of the company, provided that the directors shall not, without the sanction of a general meeting of the company, so borrow any sum of money which will make the amount borrowed by the company and then outstanding exceed the issued amount of the capital for the time being of the company. According to the petitioner, the directors of the company have borrowed more than Rs. 6,00,000 from various persons on the security of the assets of the company, and he alleges that any borrowing beyond the issued capital of Rs. 2,50,000 is ultra vires and not binding on the company. The petitioner further alleges that a substantial portion of the amount borrowed by the directors has not been so borrowed for the use of the company or for the company's advantage and has not been used for the company. He says that the company is not now, nor, is likely to be in a position, to undertake the production of new films as, he submits, that the whole substratum of the company is gone, and it is not possible to carry out at profit the essential purposes for which the company was formed. The petitioner further alleges that the directors have committed several breaches of the provisions of the companies act and the memorandum and articles of association of the company. According to him, questions of considerable difficulty will arise in the winding up of the company and the mismanagement of the directors will have to be investigated and proceedings taken out against the directors in respect of the ultra vires borrowings and other acts of mismanagement and for the purpose of compelling the directors who are substantial parties to make good the loss caused to the company by their mismanagement and by defaults. He alleges that if the company is wound up on this petition there will be a substantial surplus for distribution amongst the share-holders. On these grounds he petitions to this Court to wind up the company.
3. I might state at the very outset that one marked feature of this curious petition is the carefree manner in which the most serious allegations are made with a complete absence of particulars. The petitioner is a holder of five shares. In the course of the arguments, Mr. Daphtary has stated to me that he was supported by holders of eleven shares, but there is nothing before me on affidavit on which I can hold that. It is a significant and important fact that not a single creditor is supporting the petition. Mr. S.T Desai, who appears for creditors for about Rs. 3,00,000, is opposing the petition. Mr. Fazalbboy, who is appearing for a creditor who has leased to the company an R.C.A Recording Equipment for the production of films, is also not supporting the petition. The other creditors — in all there are creditors in the sum of Rs. 8,63,000—have not put in their appearance on this petition. I may at least infer from that fact that they are completely indifferent as to whether the company should be wound up or not. Mr. Parikh appears for 1246 shareholders out of a total of 1696 shareholders and opposes this petition. I agree that the mere fact that the petitioner only holds five shares should not by itself prevent the Court from making the order asked for. But in coming to the conclusion whether I should wind up this company or not, the main consideration I have got to keep before me is the interests of both the shareholders and the creditors, and the fact that the overwhelming majority of the shareholders are opposing the petition and a large number of the creditors are also doing the same and the rest are taking no part is a fact which must bear with me in coming to my decision.
4. The first ground urged by Mr. Daphtary in support of the petition is that the substratum of this company is gone, and he supports that contention by urging that this company has become commercially insolvent. Let me, therefore, first consider what the present position of this company is. As I have pointed out, the subscribed and paid up capital of this company is Rs. 1,69,000. There are secured creditors in the sum of Rs. 2,50,000 and Mr. Munshi has stated tome—and it is not seriously contested — that there will be a surplus of about Rs. 25,000 after the creditors have been paid off from the exploitations of the various films mortgaged to them. Then there are creditors for Rs. 7,00,000 and there are trade debts of Rs. 1,62,000. As against that, the company has a studio which had been valued by the company at Rs. 1,50,000 and at a smaller figure by the petitioner. It also has three films in the process of being made, one almost nearing completion and the other two, according to Mr. Munshi, counsel for the company, to be ready by about January next year. The films under production are Apna Ghar, Bhakta Vidur and Nai Duniya, and the company in its affidavit states that it has high hopes of not only meeting all the liabilities but of making considerable profits out of these films. According to the company, these three pictures will yield at least Rs. 11,00,000 in view of the attractive cast and the stories which are of first rate character and two of the pictures Apna Ghar and Bhakta Vidur being double version pictures in Hindi and Marathi.
5. The history of this company is that after its incorporation it did not produce pictures itself but worked in partnership with a Calcutta film company, the New Theatres, Limited. It was only after March 1939, that it started producing films and it was only in 1940 that the company managed to secure the services of reputed artists in the cinema world. The company declared 10 per cent, dividend for the year ended 30th June, 1938, 10 per cent, dividend for the year ended 31st March 1939, and 15 per cent, for the year ended 31st March 1940. As regards the dividend for the year ended 31st March 1940, the petitioner alleges, as I have already pointed out, that this dividend was paid otherwise than out of the profits of the company. The balance sheet has been audited by auditors, it has been passed at the annual general meeting, and till the petitioner came to this Court no question on this point has ever been raised. The point particularly made by Mr. Daphtary is that if one were to look at the profit and loss account for the year ended 31st March 1940, one finds on the credit side Rs. 1,60,000 being the amount in respect of production revenue being realisations from distributors and estimated revenue in respect of pictures under distribution. Mr. Daphtary says that this item could by no stretch of imagination find it place in a profit and loss account. Mr. Munshi on the other hand contends that this is the usual manner in which film companies prepare their profit and loss account. A film takes a long time to prepare, sometimes two or three years. Large sums are spent on the preparation and the returns begin to come in after a film starts being exploited. If revenue was only to be shown when a film was being exploited, the result would be that for two or three years the company would have to show a large loss due to monies being spent on the preparation of films. Therefore, in the profit and loss account, the film companies as a rule show estimates of the revenue they expect to get from exploitation of their films. Whether Mr. Daphtary is right or whether Mr. Munshi is right, I am not prepared to go behind the balance sheet duly audited by the auditors, the more so when it was open to the petitioners to take necessary action in other proceedings if his contention was sound. As regards the dividends for the years 1938 and 1989, except a bare and bald denial that they were paid out of profits no particulars have been pointed out to me. Now the question is whether on these facts it can be said that this company is commercially insolvent. The expression “commercially insolvent” has been defined in (1869) 9 Eq. 1221 by Sir William James V.C to mean (p. 128):
“Not in any technical sense but plainly and commercially insolvent — that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain — as to make the Court feel satisfied—that the existing and probable assets would be insufficient to meet the existing liabilities.”
6. In this case the petition was presented to wind up the company on two grounds, one was inability to pay debts and the other was that it was just and equitable that the company should be wound up; and it was urged on behalf of the petitioner that the company was commercially insolvent and, therefore, it was just and equitable that it should be wound up by the Court. There is another test laid down by the Privy Council in A.I.R 1936 P.C 1142. In that case their Lordships stated (p. 121)… “the decisive question must be the question whether at the date of the presentation of the winding-up petition there was any reasonable hope that the object of trading at a profit, with a view to which the company was formed, could be attained.” It is, therefore, for Mr. Daphtary to satisfy me that there is no reasonable hope, as far as this company is concerned, that the object of trading at a profit, with a view to which the company was formed, can be attained. I have it on affidavit, as I have already stated, that the company has today three films in process of completion, and the company expects to make profits by exploiting those films. They have, as I have stated, employed on large salary well-known stars. Mr. Daphtary does not dispute that these three films are being produced, but what he disputes and strongly disputes is the high hope held by the company as to the prospects of those films, and he wants me to decide whether the company is right in the expectations it has formed about the future of these films. In the language of Cairns L.J in (1867) 2 Ch. A. 7373, this petition seems to have been presented for the object of evoking a judicial decision as to the probable success or non-success of this company as a commercial speculation. Following the example of the distinguished Lord Justice I refuse to be tempted into giving any such decision.
7. Mr. Daphtary has relied on a passage appearing in Halsbury's Laws of England, Vol. V, Hailsham Edition, p. 547, Art. 885, that it may be just and equitable to wind up a company where it is carrying on business at a loss and its remaining assets are insufficient to pay its debts. I do not think that this proposition of law in its bald form is justified by the authorities cited by the learned editor in the foot-note on which it is based. The four cases relied upon are (1867) 4 Eq. 1974, (1879) 13 Ch. D. 4005, (1869) 20 L.T 2646 and (1890) 44 Ch. D. 7037 In (1867) 4 Eq. 197, the company was a canal company incorporated by special Act of Parliament, and Sir R. Malins in his judgment expressly stated (p. 198): “The canal is now useless and profitless, its revenue scarcely being sufficient to pay the working expenses.” It was on this ground that the winding-up order was made. In (1879) 13 Ch. D. 400 the company was formed for the object of purchasing certain inventions, patents, and patent rights for the manufacture of artificial fuel, and working and granting licenses for working the same. The business of the company had been carried on at a constant loss; all its capital had been expended; a dividend had never been declared; and as pointed out by James L.J the company had, to all intents and purposes, come to an end without the slightest hope or prospect of ever being resuscitated. I might point out the remarks of Baggalley L.J (p. 408):
“The mere fact that the Court is of opinion that the business cannot be carried on, or probably will not be carried on, in a successful manner is not sufficient. So, again, mere misconduct or mismanagement on the part of the directors, even although it might be such as to justify a suit against them in respect of such misconduct or mis-mangement, is not of itself sufficient to justify a winding-up order.”
8. In (1869) 20 L.T 264, the company had made no profit for the last four years and the working of it had been actually suspended for six months. As a matter of fact, the petitioner had come up before Lord Romily in 1865, and he dismissed it on the ground that it was for the shareholders to determine whether the company should go on or not. The petitioner came back to Lord Romily after four years and stated that the company was in a worse condition than it was before, nothing substantial having been done from that time till the time this petition was presented. Lord Romily in his judgment stated that he was very much disposed to think that upon the evidence the whole of the sub stratum of this company was gone; that in fact they had not the means to work one mine to test it accurately;and that with respect to the other, they had not the means to take away the water and to make a shaft which should be sufficiently deep to enable them to test it. Further he found that these mines practically had produced nothing for the last four years and that they had not been worked in earnest. In (1890) 44 Ch. D. 703, there was a special contract between the shareholders and the company under which by the constitution of the company a portion of its uncalled capital was not capable of being called no except in the event of and for the purpose of the company being wound up. The business of the bank was commenced with a considerable staff in extensive offices but had now been carried on in an office which was not in a principal street and was rented at £28 a year and attended by a person who might or might not be properly described as an “office boy.” Eekewich J. made the order with considerable hesitation after going through all the authorities. He was of opinion that the first question that the Court must consider was the unwillingness of the Court to interfere with the shareholders in the management of their own affairs—and in their own affairs had been included the questions whether the business should be continued or not, and whether, if the company was wound up at all, the winding up should be voluntary or by the Court. At page 712 of the report Kekewich J., says:
“I take it, therefore, that notwithstanding that the instances with which the Court has had to deal, and to which I have referred as illustrations of the state of circumstances under which the Court has come to the conclusion that it was impossible to carry on the business of the company, have been cases in which that which either never existed or has ceased to exist has been the physical substratum of the company, or something equivalent to it, yet where the subject-matter of the company is gone there the Court will wind up the company, not because some shareholders desire it, and some not, but because that which the company was formed to do can no longer be done; and if the Court comes to the conclusion that is the real state of the case, then it has jurisdiction, and is bound to exercise jurisdiction to wind up the company.”
9. At the end of his judgment, Kekewich J., asked himself the question (page 717):
“Is the substratum of the company gone? Is the subject-matter of the company gone?”
and he came to the conclusion (page 718):
“I must not forget that this is a bank. I must not forget—one must know, does know — what are the essentials of carrying on a banking business satisfactorily. There may be a further struggle; but I cannot conceive it as possible—I say it is impossible for the company to continue its business satisfactorily because it has not that without which a banking business cannot be carried on.”
10. Therefore on the authorities the position seems to be that the substratum of the company is deemed to be gone when (a) the subject-matter of the company is gone, or (b) the object for which it was incorporated has substantially failed, or (c) it is impossible to carry on the business of the company except at a loss which has been construed by the Privy Council to mean that there is no reasonable hope that the object of trading at a profit can be attained, or (d) the existing and probable assets are insufficient to meet the existing liabilities. None of these four tests can apply to the facts of the present case. It cannot be suggested that the subject-matter, of the company is gone or the object for which the company was formed has failed when the company is actually in the course of producing three films. I am not in a position to say that it is impossible to carry on the business of the company except at a loss when, according to the company, it is going to produce three films which are likely to realize as much as Rs. 11,00,000, nor am I in a position to hold that the existing and probable assets of the company are not sufficient to meet the existing liabilities. It has to be remembered that no creditor is pressing for his debt. There is no dispute as to what the existing assets of the company are. As regards the probable assets, the company and the petitioning shareholder take divergent views, but it is not disputed that there are probable assets, the only dispute being what the assets will realize.
11. Mr. Daphtary has urged that he has made out a strong case for investigation into the conduct of the directors. He urges me to investigate into that conduct in winding up rather than leave it to the company to do so. In the first place, it is alleged against the directors that they have exceeded their borrowing powers given to them under the articles of association. An extraordinary general meeting of the company was held on 27th September, 1941, three days after this petition was presented, and the shareholders present at the meeting unanimously sanctioned and confirmed the borrowings by the directors of the company. On a poll being demanded, the resolution confirming the borrowings was declared to have been carried by 1212 votes against nil. It is significant to note that the petitioner who is so anxious that the Court should investigate into this mismanagement was absent from the meeting. Now this question of exceeding the borrowing powers is essentially a question of internal management of the company and the company has taken the view that the directors acted in the best interests of the company. It is suggested by the petitioner that the resolution was carried by a packed majority. We have before us the particulars of the shares held in this company, and we find that only three hundred and fifty shares are held by the directors, three hundred shares are held by Maneklal Chunilal, ex-director, one hundred and sixty shares are held by C.M Trivedi, and fifty shares are held by Patel and Ramdutt, the rest of the shares being held by persons who have no connexion with the management of the company. One of the suggestions made by Mr. Daphtary was that if I wind up the company, the resolution passed at the extraordinary general meeting of the company ratifying the conduct of the directors would be of no effect and, therefore, the company might escape the liability of paying monies to the directors from whom it had borrowed monies in excess of their borrowing powers Mr. S.T Desai for the creditors has characterised this suggestion as scandalous, and I do not think the characterisation is too severe. There is nothing before me to show that these monies have been utilised by the directors for any purpose other than the purpose of the company, and yet the Court is being asked to be a party to an attempt to deprive the directors of monies which they have lent to the company for carrying it on. If in fact the monies have been not utilised by the company, the company is not liable for them and proper proceedings can be taken; but I am not aware of any authority which lays down that because the directors lent to the company in excess of the borrowing powers conferred upon them by the articles of association and all these monies were in fact utilised by the company still the company is not liable to pay that amount.
12. I am further asked to investigate in the winding-up the conduct of C.M Trivedi, who, as I have stated, was the managing director till 16th April, 1941. In the petition it has been alleged that his management has been highly prejudicial to the interests of the company and the company has been put to loss of large sums of monies on account of his mismanagement. He has been further charged with having secured to himself illegal pecuniary advantages to the knowledge of the other directors to the detriment of the company. Absolutely no particulars whatsoever are given of these very serious allegations. The facts with regard to C.M Trivedi as appearing from the affidavit on behalf of the company are that he was the ex-officio managing director of the company and under the supervision and control of the board of directors he was in de facto management and conduct of the day to day working of the company's business and productions no to April 1941. It turned out, according to the company, that C.M Trivedi's management and schemes were over-ambitious and over-enthusiastic and the results and returns did not come up to his expectations and the expectations of the board. The board of directors, therefore, came to the conclusion that in the interest of the company Trivedi should be stopped from further managing the day to day management and supervision of the company and, therefore, the directors began to attend themselves to the management of the company from 16th April, 1941. The result of the directors taking over charge was that three incomplete pictures, viz., Tulsi, Vanmala and Swami were duly completed and sold.
13. The company had already entered into contracts with well-known and famous artists whom they had secured with great difficulty and influence, and in order to utilise the services of these famous artists, the directors proceeded with the production of pictures like Apna Ghar, Bhalcta Vidur and Nai Duniya which, as I have already stated, are in the process of production. The company admits that during the regime of C.M Trivedi, it had incurred very heavy losses, but the directors were of the opinion that, in view of the monopoly which the company had of the services of famous and reputed artists and the earning possibilities of the subjects which had been selected for films, if sufficient monies were brought in, the company would within a few years not only tide over its monetary difficulties but make good profits. After 16th April, 1941, the directors and their friends brought in Rupees 7,00,000. The company spent about one lakh of rupees in completing the three pictures Tulsi, Vanmala and Swami. They settled the past claims of Messrs Shah Mehta & Company, who is a secured creditor, for a smaller sum. They spent some money in the construction of the studio, and they also settled old debts which were originally about Rs. 2,25,000 for Rs. 1,49,000 and they spent a sum of Rs. 3,50,000 in the preparation of the three new pictures Apna Ghar, Bhakta Vidur and Nai Duniya. In the petition itself the only two grounds mentioned why the Court should enter upon an investigation into the mismanagement of C.M Trivedi are, first, that a sum of Rs. 90,000 was paid to Miss Shanta Apte for working as heroine in a single film. The sum, according to the petitioner, was unreasonably high and extravagant and the film for which Shanta Apte had been paid has not been still completed. The second ground is that a sum of Rs. 1,20,000 was due to the company by the New Theatres Ltd. The directors settled this claim for Rs. 80,000 which they received from the New Theatres Ltd.
14. With regard to Miss Shanta Apte, it seems that in March 1940, she was under a contract with the Prabhat Film Co. of Poona, but it appears that she was not satisfied with that company and was not likely to renew her contract with them. Several producers were anxious to secure her services for their future productions and the company thought that it was not advisable to wait till the period of her contract with Prabhat Film Co. had expired and secured her services even at the risk of having to pay her waiting salary for the unexpired period with the Prabhat Film Co. This gave the company the advantage of advance publicity, and the very fact that the company had secured the services of Miss Shanta Apte was an item of considerable advertisement value to the company. It is further pointed out that while her remuneration works out at Rs. 6250 per month, she is going to be paid Rs. 10,000 per month by another company which has secured her services after her contract with the Cine Industries and Recording Co. Ltd., has expired.
15. As regards the second charge, it is pointed out in the affidavit on behalf of the company that there had been a serious fire in the godown of the New Theatres Ltd., which had suspended production of Hindi pictures and confined itself only to Bengali pictures. As the directors thought that the position of the New Theatres Ltd., was shaky, they accepted the immediate payment of Rs. 80,000 for a debt of Rs. 1,20,000. It would be futile to expect any Court to come to the conclusion on these allegations that so serious was the mismanagement by Trivedi that an investigation is called for by the Court in winding up proceedings. It is not as if the present directors have done nothing with regard to the allegations against Trivedi. They have appointed Messrs K.S Aiyer & Co., Registered Accountants' and Auditors, to investigate into the management and affairs of C.M Trivedi, and they state that they are awaiting the report after which they will be in a position to decide what steps should be taken against him. I refuse to assume that if the report shows that C.M Trivedi has been guilty of misapplication or misappropriation of the funds of the company, the directors or the company will not take the necessary action against him. Further the petitioner has failed to show that the misconduct of C.M Trivedi or other directors can only be successfully investigated in a winding-up by the Court.
16. Mr. Daphtary made an application to me that I should allow him an opportunity to cross-examine the deponents who made affidavits in these proceedings on behalf of the company on the following points: (1) the actual financial condition of the company; (2) how far the company has proceeded with the production of the three films; (3) how much has been spent on the films and what amount has been lost; (4) what were the auditors Messrs K.S Aiyer & Co., asked to investigate as far as the affairs of Trivedi are concerned; and (5) dealings of C.M Trivedi. This is nothing more or less than holding an inquisition on the directors. The petitioner has got to make out a case for winding up on the petition and he cannot be allowed to fish out a case by cross-examination of these deponents. After carefully analysing the petition and after giving full weight and consideration to the arguments of Mr. Daphtary, I find that the two broad grounds on which the winding-up order is sought are (1) alleged misconduct of the directors and (2) business has been carried on at a heavy loss. These are per se not grounds on which the Court would order a winding-up. I am of opinion that in this case it would not be just and equitable for the Court to make the order asked for.
17. There is another important fact to be borne in mind. This is a shareholder's petition. It is true that as the law stands today, he is under no disability as compared with a contributory nor is he under any obligation, as he at one time was, to satisfy the Court that on a winding up there would be surplus assets. But there is a special rule that the Courts have laid down in exercising their discretion in winding up a company on the petition of a shareholder. The Court constantly bears in mind that the internal management of the company is its own concern, and it is a much better judge of business prospects of a trading venture than the Court can ever hope to be. If, therefore, the majority of the shareholders show confidence in the management of the company and have faith in its future prospects, the Court has rarely interfered. In 39 Bom. 168, Macleod, J. stated that a shareholder's petition must be scrutinized much more carefully that a contributory's. In (1867) 2 Ch. A. 737, Cairns L.J refused to wind up the company against the wishes of the majority of shareholders of the company because the business had been carried on at a loss and appeared likely to continue as a losing concern. In (1871) 6 Ch. A. 6419, the great body of shareholders were opposed to a winding-up, and there too the order was refused. The principle of these decisions is well stated in (1880) 14 Ch. D. 10410, where James L.J stated (p. 109):
“Here a great majority of the shareholders are opposed to a winding-up, and desire to be left to manage their affairs for themselves. We ought not to disregard the wishes of so large a majority unless we see in their conduct something unreasonable, something like tyranny, something amounting to an injury of which the minority have a right to complain.”
18. In this case the shareholders at the meeting held on 27th September, 1941, to which I have already referred, unanimously passed a vote of confidence in the board of directors and in their management and expressed satisfaction with the progress of the company. I have before me Mr. Parikh who represents 1246 shareholders who are opposing this petition. Mr. Parikh at the bar states on behalf of his clients that he has every confidence in the present management and future progress of the company. I am, therefore, really asked to override the considered opinion of the shareholders who were present at this meeting, and of the shareholders who are represented by Mr. Parikh before me as regards the future prospects of this company in favour of the petitioner who holds five shares. His attitude may be expressed in the language of Chitty J. in (1889) 60 L.T 47711 (p. 479):
“Now, with regard to companies, it is right to let those who have embarked in a company manage their own affairs, and it is not right for the Court to intervene because one shareholder is dissatisfied—one who appears during the progress of the argument to have found a few associates—because that one and a small number of associates think that they know more about it than the majority.”
19. In this case also we have only one shareholder, and as regards his finding a few associates except the statement of Mr. Daphtary I have nothing more on the record. At the end of his arguments counsel for the petitioner made four separate and distinct applications. These applications are an object lesson in how ingenious advocacy will try to save a desperate situation. Counsel for the petitioner realized that the petition as it stood must fail. This was a skilful attempt at supplementing the extremely nebulous allegations in the petition by securing fresh material by every conceivable procedure known to company law. These four applications are: (1) that the petitioner should be allowed to cross-examine the deponents who have made affidavits; (2) that he should be allowed to lead evidence of defalcations and the value of assets; (3) that he must be given inspection of the accounts of the company; and (4) that the petition must be allowed to stand over till the investigation by the auditors is complete. With regard to the first application, I have already dealt with it earlier in my judgment. With regard to the second application, I have already pointed out that there are absolutely no particulars given of the defalcations alleged to have been committed by the directors. As regards the value of the assets, as I have already stated, the probable assets of the company in this case are three films in the process of production, and I am asked to give the petitioner an opportunity to value these assets because he does not accept the figure put upon them by the company. Now films are not commodities in the ordinary sense of the term which have a marketable value. They essentially depend for their success or failure upon how the public appreciate their merit. I cannot understand how I would be in a better position to judge of the value of these films after Mr. Daphtary has called before me several experts and after Mr. Munshi has called others who, as experts usually do, are sure to contradict each other. As regards the third application, inspection of accounts, it stands, on the same footing as the application for cross-examining the deponents who have made affidavits. It is nothing more or less than trying to fish out a case which the petitioner has failed to make out on the petition. As regards the fourth application for the petition to stand over till after the investigation by the auditors is complete, I do not see why I should keep this sword hanging on the head of the company. The petitioner must succeed or fail on the petition as it stands today on the materials he has adduced before me. If after the auditors had made their report and if the company and the directors failed to take necessary steps if any steps are called for, it would always be competent to the petitioner to present a fresh petition on such materials as he might have succeeded in gathering by that time. I therefore dismiss the petition with costs. Counsel certified.
20. Having dismissed the petition, the question arises as to what proper order I should make for costs. It is clear that when a petition for winding up a company is dismissed, the company is entitled to its costs. The shareholders are entitled to one set of costs, and the creditors are also entitled to one set of costs. In this case Mr. Daphtary draws my attention to the fact that the counsel for the company Mr. Munshi and counsel for the shareholders Mr. Parikh are instructed by the same solicitors, Messrs Kamdar & Co., and he relies on the practice prevailing in England that where the company and the shareholders appear by the same? solicitor separate counsel should not be briefed. The authority for this proposition is in (1897) W.N 1212. Mr. Parikh, counsel for the shareholders, draws my attention to a later case reported in (1910) W.N 8113, where Neville, J., following the same practice, made it clear that in proper cases it did not in any way fetter the discretion of the Court to grant the costs of separate counsel although instructed by the same solicitor. The question therefore is whether I should exercise my discretion in favour of Mr. Parikh. Mr. Parikh contends that in this case the overwhelming majority of the shareholders were opposed to the petition, and it was desirable that they should appear before the Court through a separate counsel. He also relies on the fact that it was alleged by the petitioner that the shareholders constituted a packed majority, and it was essential for the counsel who appeared for them to repudiate that charge. I should have attached considerable importance to the arguments of Mr. Parikh if he had pat in an affidavit on behalf of the shareholders drawing the attention of the Court to the falsity of the allegations made by the petitioner. But as far as he is concerned, he has solely relied on the affidavits made by the directors on behalf of the company, and I really do not feel that any case has been made out by the counsel for the shareholders why I should depart from the usual practice as stated in such well known text books as Palmer's Company Precedents, Edn. 15, Part 2, page 109, and also Porter on Costs, Edn. 13, p. 566. I would therefore allow only one set of costs as between the company and the shareholders.
21. As regards the creditors, Mr. S.T Desai appears for them. Mr. Fazalbhoy also appears for one of the creditors; but when the petition was called on, he made it clear that he did not want to take up a contentious attitude. But when questioned by the Court, he replied that he would rather oppose the petition than support it. The opposition obviously was very half-hearted. Gentlemen who take up a non-contentious attitude should not expect costs and therefore. I think that Mr. S.T Desai representing the creditors is entitled to one set of costs. Mr. Fazalbhoy must bear his own costs.
22. As regards Mr. M.P Amin, he has taken no part in the argument of the petition and, according to him, he was merely there to look after the interests of Shah Mehta & Co., secured creditors. He must also bear his own costs. Mr. Engineer, who appears for the receiver and the manager appointed by Shah Mehta & Co., secured creditors, must bear his own costs. As regards the petition for the appointment of a provisional liquidator which was made to stand over as directed by Kania J. till after the disposal of this petition for winding up, that petition most also be dismissed and the petitioner must pay the costs of the petition to the company. I certify counsel.
G.N/R.K
23. Petition dismissed.
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