Just and Equitable Winding Up

In one line

The just and equitable ground is a residual, discretionary and independent head on which the Tribunal may wind up a company, not confined by the other grounds, but in Indian practice a remedy of last resort requiring more or less equal shareholding, complete deadlock, lack of probity and no hope of the company continuing.

In exam wording: under section 271(e) a company may be wound up by the Tribunal if the Tribunal is of the opinion that it is just and equitable that the company should be wound up.

Why the law has this at all

Every list of grounds is incomplete, and a court asked to end a company needs a residual head for the case the draftsman did not foresee. The just and equitable clause is that head, and it has been in company legislation since the middle of the nineteenth century.

Its content, however, is not left at large, and three things shape it.

It is equitable, so it looks behind the corporate form. The clause allows the court to consider the understandings on which the members came together, not merely the rights the articles record. That is the insight of Ebrahimi v. Westbourne Galleries Ltd., [1973] AC 360, as Hind Overseas reports it: behind the company there may be individuals with rights and obligations of good faith which the just and equitable clause lets the court enforce.

It is discretionary, so it is refused where another remedy will serve. Winding up a solvent company destroys value, and the Act itself supplies an alternative in s.241, whose whole origin, as [Oppression: the Concept] explains, was the unfairness of winding up a company that was otherwise solvent.

And it is residual, so it is not construed by reference to the other grounds. That is the point Rajahmundry settles: the words are not read ejusdem generis with the clauses that precede them.

Section 271(e) and its interpretation

The ground is stated in a single line, and its meaning comes from the cases. Two Indian decisions do the work, and two English ones supply the material they discuss.

Rajahmundry: the ground is independent. In Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao, AIR 1956 SC 213, shareholders applied for winding up, or alternatively for relief under s.153-C of the 1913 Act, alleging that the vice-chairman grossly mismanaged the company and that directors misappropriated its funds. The Supreme Court held that, the charges being established, a case for winding up was made out, and that the words just and equitable are not to be read ejusdem generis with the other clauses. It also held that an application validly presented does not fail because some consenting members later withdrew their consent.