SALIL K.ROY CHOWDHURY, J. - (1.) THIS is an application under Sections 397, 398, etc., of the Companies Act, 1956, for the appointment of a Special Officer and/or Administrator and for an order or direction to be given for regulation of the conduct of the affairs of the respondent -company in future and if necessary an appropriate scheme of management to be framed by this court and also for a declaration that respondent No. 2, Bishnu Pada Dutta, respondent No. 3, Krishna Pada Dutta, respondent No. 6, Sunder Lal Dutta, and respondent No. 7,Madhu Sudhan Dutta, are not entitled to act as managing directors of the respondent -company and for various other incidental declarations and orders.
(2.) THE company is really a family concern of the Duttas, who are divided into two groups each group holding 50% shares in the company as would appear from para. 14 of the petition. The genealogical table of the family to which the Duttas belong is set out in para. 9 of the petition from which it appears that one Sri Bhola Nath Dutta, who had four sons and the present Dutta petitioners and respondents, are the descendants of the third and fourth sons of Sri Bhola Nath Dutta, being Sri Bireswar Dutta and Sri Bibhuti Bhusan Dutta both since deceased. The petitioners' group really constituted of the descendants of Sri Bireswar Dutta along with petitioner No. 2, a private limited company in the name of Bireswar Dutta Estate Pvt. Ltd., and they together hold half share in the capital of the respondent -company being Sri Bhola Nath Paper House Limited and the sons of Sri Bibhuti Bhusan Dutta, being respondents Nos. 2 to 5, hold the other half shares in the capital of the respondent -company. The respondent -company was incorporated on the 29th of March, 1943, as a private company limited by shares but subsequently on and from 1st of July, 1976, the said respondent -company became a public limited company under the provisions of Section 43A of the Companies Act, 1956. The registered office of the company was situated at No. 21, Beadon Street, Calcutta, which was shifted later on in or about 1977 to the premises No. 32A, Brabourne Road, Calcutta. The company, inter alia, carries on business of all sorts of paper and stationery goods as would appear from its memorandum of association which is annexed to the petition and marked with the letter 'A'. It is admitted that at all material times the principal business of the company was to carry on business in all kinds of paper, paper boards, stationeries and printing ink. The company had its head office at No. 32A, Brabourne Road, Calcutta, and shop rooms and godowns and branch offices at No. 167, Old China Bazar, Calcutta, also there is a shop room and a godown at No. 134/135, Old China Bazar, Calcutta, a shop room and a godown at No. 64, Mahatma Gandhi Road, Calcutta, and a branch office. At all material times the company had four managing directors, being Sri Sundar Lal Dutta, respondent No. 6, Sri Madhu Sudhan Dutta, respondent No. 7, Sri Bishnu Pada Dutta, respondent No. 2 and Sri Krishna Pada Dutta, respondent No. 3. That is, two belong to one group and the other two to the other. The shareholdings of the company are set out in para. 11 of the petition and the said two groups have equal shares, as I have already stated as set out in para. 14 of the petition. It is admitted that from the inception of the company the said four respondents have been jointly acting as managing directors of the company and they were not liable to retire at any annual general meeting so long as they hold their office as managing directors and each of the managing directors received a sum of Rs. 1,000 per month as their remuneration. The relative provisions of the articles of association, being Articles 42, 43, 43(a), (b), (c), 44 -56, are set out in para. 17 of the petition. The premises in which the registered office of the company is situated, being No. 32A, Brabourne Road, Calcutta, belongs to petitioner No. 2, Sri Bireswar Dutta Estate Private Limited, and the defendant company is a tenant along with other portions being let out to the other tenants. The company is now in occupation of about 5,000 sq. ft. in the ground floor of the said premises No. 32A, Brabourne Road, Calcutta, having a godown and a shop room there. It appears that the said two groups which have been described as group 'A' and group 'B' in the petition were participating in the management and, amongst themselves, by arrangement, respondents Nos. 2, 6 and 7 used to sit and work as managing directors of the said company in the said registered office at No. 32A, Brabourne Road, Calcutta, and the petitioner No. 1 has been looking after the sales in the head office and respondent No. 4 was in charge of the branch office at No. 64, Mahatma Gandhi Road, Calcutta, and respondent No. 5 who used to sit at the branch office had been jointly acting and respondent No. 3 was in charge of the godown and the shop room at No. 167, Old China Bazar, Calcutta, The other shop room at No. 134/135, Old China Bazar, Calcutta, was in charge and control of the head office through the employees employed therein. The company suffered a set back in 1969 and it is alleged that the same was due to the floating and formation of a new paper manufacturing company under the name and style of East India Paper Industries Ltd., out of the assets of the respondent -company and also the assets of the other shareholders of the said company who contributed by purchasing shares therein for having a controlling interest in the said paper manufacturing unit which is a duly constituted public limited company. The said company was initially in the hands of the parties in these proceedings but later on was handed over to the Jatia Group when prolonged and continuous labour trouble started therein. It is alleged that in or about 1967 -68 disputes arose in the head office and stocks worth about Rs. 12 -13 lakhs were transferred from the head office to the branch office and respondent No. 4 was in charge of the said stocks. The said stocks were taken for the purpose of forming capital and for facilitating the business of the branch office. In or about 1972, respondent No. 4 left the said branch office and respondent No. 3 thereafter remained in sole charge of the said branch office and one Sri Bidyut Dutta, the youngest son of respondent No. 2, along with Sri Amit Dutta, the eldest son of respondent No. 3, were posted at No. 167, Old China Bazar, Calcutta. The said Sri Bidyut Dutta has been in control of the godown and shop room there. One Sri Samit Dutta, the son of respondent No, 6, was posted and was looking after the affairs of the shop room and godown at No. 134/135, Old China Bazar, Calcutta. Sri Pradyut Dutta, the eldest son of respondent No. 2, along with Sri Rajesh Dutta, the youngest son of respondent No. 3, also started sitting in the branch office at No. 64, Mahatma Gandhi Road, Calcutta, where respondent No. 5 also used to sit. The overall management was in charge of respondent No. 3, Sri Krishna Pada Dutta. It is alleged that since then there was a total lack of co -ordination in the internal management of the company and loss of mutual confidence and trust amongst the two groups and that gradually deteriorated for the last five or six years. The company suffered tremendous financial loss and also the disputes between the parties was aggravated. From the facts pleaded in the petition and admitted by respondents Nos. 2 to 5, it now appears that the two groups, who are holding equal shares in the said company, have fallen out and there is a complete deadlock and it has become impossible to carry on the business in the present state of affairs as it is now prevalent in the management, as there are allegations of mismanagement and misappropriation against each other and, consequently, the banker of the company served a notice on the company for payment of its overdraft loan in respect of the cash credit account and all the acts of such mismanagement, misappropriation and acts prejudicial to the interest of the company and shareholders and prejudicial to the public interest has been set out in the petition and are Summarised in para. 68 and various sub -paragraphs therein and the present petition was presented on the 21st of December, 1979, and an interim order was passed in the application and, thereafter, on the representation of the parties to keep the company going in a smooth manner, the interim order was varied appointing one from each group as the administrator but it appears that that also did not work out smoothly and from time to time variation of the said interim order was asked for and at my request the matter being a family concern and one of the oldest company in Calcutta, which is very well -known and has a goodwill, the parties tried to settle the matter and to suggest a workable order to this court so that the business of the company may be smoothly carried on by both the parties and for that purpose the matter was adjourned from time to time after being part -heard, but, ultimately, the attempt failed on some flimsy grounds and the matter was heard at length on various questions which were raised in this application as I am now summarising hereinafter.
(3.) REGARDING the question that both the groups cannot carry on the business and affairs of the company together any longer is beyond any doubt and in fact admitted by both the parties. It also appears that the business has been bifurcated and the two groups are controlling and in charge of the business, one the head office and the Old China Bazar shop room and godown and the other the Mahatma Gandhi Road branch office and other shop room and godown. It is also admitted that there is a guarantee by petitioner No. 2 for the loan granted to the respondent -company, and the banker of the company, United Industrial Bank Limited, has called upon the company to pay or liquidate the overdraft amount in the cash credit account. Therefore, there is some jeopardy so far as the guarantor, which is petitioner No. 2 company of which petitioner No. 1 and respondent No. 6 are the directors. It also appears that petitioner No. 2 is the landlord in respect of the premises No. 32A, Brabourne Road, Calcutta, and it has already filed an ejectment suit against the defendant -company which is still pending. In this state of affairs the best course, to which also the petitioner group and the respondent group agreed, that the business and assets of the respondent -company may be divided equitably so as to make it viable units and the confrontation and conflicts between the two groups will come to an end, and for that purpose both Mr. S.B. Mukherjee, appearing for the petitioners' group, being -group 'A', and Mr. P.C. Sen, appearing for the respondents' group, being group 'B', have suggested certain divisions which after careful consideration appears to the to be very reasonable and the differences seem to be not unsurmountable. Therefore, on a careful consideration of the facts of this case and the submissions on behalf of both the parties, I am of the view that the only solution and remedy available in this application is to divide the business and its assets including shop rooms, godowns, tenancy rights, etc., among the said two groups in a manner so that the company may carry on business without further difficulty.;