India: Power of the Court Under the "Just & Equitable Clause"

Last Updated: 1 July 2002

By Duvva Pavan Kumar* & M. Chandana**

The just and equitable clause confers very wide discretionary powers on the court1. In ordering a company to be wound up under this clause, the courts have to take into consideration the interest of the company, its employees, creditors, shareholders and the general public2.

For a long period of time the term ‘just and equitable’ were read ejusdem generis. In Cowasjee v. Nath Singh Oil Co.3, the court held that "though the court is not bound to construe this clause ejusdem generis, as only covering grounds of a like nature with those specified in Clauses 1 to 5, yet it will require grounds of a like magnitude before acting under the clause."

In Kilpest (P) Ltd. v. Shekhar Mehra4, the court observed that the term 'just and equitable' has undergone a radical change in the social and economic conditions in our country. The term 'just and equitable' has lost its technical meaning and has acquired a more meaningful and pragmatic one.

The courts have thus held the words ‘just and equitable’ to be words of the widest significance and as not limiting the jurisdiction of the court to any case. It is a question of fact and each case must depend on its own circumstances5. No general classification can be made to show under what circumstances the court can invoke the ‘just and equitable clause’. However, the courts have taken the assistance of this clause wherever it was of the opinion that the running of the company was not viable or beneficial to the shareholders.

The court does not get jurisdiction only because of the provisions of law mentioned by the applicant. At the foundation of applications for winding up, on the just and equitable rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. This lack of confidence must be based on the conduct of the directors, not in regard to the private life or affairs, but with regard to the company's business. Furthermore, the lack of confidence must spring, not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on the lack of probity in the conduct of the company's affairs, the former is justified by the latter, and ‘just and equitable’ that the company be wound up6.

The relief under the ‘just and equitable’ clause is discretionary and the court may refuse to make an order of winding up if it is of the opinion that some other remedy is available to the petitioner and that the petitioner is acting unreasonably in seeking to have the company wound up instead of pursing the other remedies7. It is therefore necessary for a contributory seeking the discretionary powers of the court under Section 433(f) not only to establish that the circumstances prevailing in the company are such that a winding up of the company is the only alternative but also to show that there are no other remedies available8. Where an alternative remedy is available, section 433(f) cannot be invoked and also the principle of dominus litus cannot be applied9.

Before passing an order of winding up under the ‘just and equitable’ clause the court has to take into account a number of considerations such as the opinion of the majority shareholders10, interest of the workers11, public interest12, etc.

The various cases under which the just and equitable clause may be invoked are:

1. Deadlock between the directors of the company. There need not be a paralysing dead lock in the management, a justifiable lack of confidence in the management of the company is sufficient for the court to invoke the just and equitable clause to order its winding up13. Where the relation between the directors is such that they would not speak to each other except through the secretary, the court found it ‘just and equitable’ to order winding up14.

In Veeramanchineni Seethaiah v. Venkatasubbiah15, the Madras High Court held that mere difference between the majority directorate and the minority directorate should not be a ground to invoke the just and equitable clause for ordering winding up of the company. Similarly, in the case of Hind Overseas Ltd, Re16, the Calcutta High Court observed that winding up cannot be ordered on the ground of friction and disputes between directors.

2. Where the main object for which the company was incorporated has failed or where the company has lost its substratum. The Supreme Court in Seth Mohan Lal v. Grain Chanbers Ltd17, observed that the substratum of a company can be said to have disappeared only when the object for which it was incorporated has substantially failed, or it is impossible to carry on the business of the company except at a loss, or the existing and possible assets are insufficient to meet the existing liabilities.

In Rajab Nagindas Doshi v. British Burma Petroleum Co.18, the Bombay High Court held, where a petition for winding up has been made on the ground of loss of substratum, even if the company has thereafter embarked upon a subsidiary business as mentioned in the Article of Association, there is no reason why an order of winding up should not be passed, as the subsequent developments need not be taken into account.

Following the above rule, winding up ordered where the affairs of the company came to a stand still19 or where the company did no business for seventeen years20, etc.

3. Where the company cannot carry on its business without incurring losses. A mere apprehension by the shareholders that the company might incur losses instead of profits is no ground to order winding up21. The Allahabad High Court in Registrar of Companies v. M.K. Bros. Ltd22, observed; it will be needless, indeed, for a company to carry on business where there is no hope of achieving the object trading at a profit. This view has been supported by the Bombay High Court in the case of Shah Steamship Navigation Co, Re, wherein it was observed; "the court will not be justified in making a winding up order merely on the ground that the company has made losses; and is likely to make further losses".

4. Where the company is being run by the majority shareholders in a manner which is detrimental to the minority shareholders, ie., the majority have adopted a very aggressive and a squeesing policy. In R. Sabapathi Rao v. Sabapathi Press Ltd.23, the court held that where the directors of a company are able to exercise a dominating influence on the management of the company, and the managing director is able to outvote the minority of the shareholders and retain the profits of the business between members of the family and there are several complaints that the shareholders did not receive the balance sheet, nor was the auditors report read in the annual general meeting and dividends were not regularly paid, it would constitute a sufficient ground for winding up.

5. If the company has been formed by fraud or for illegal purposes. In Poor Housing Association v. Thopa Naidu24, the Madras High Court held that where the main object of a company is the conduct of lottery, the mere fact that some of its objects were philanthropic will not prevent the company from being ordered to be wound up as being one formed for an illegal purpose. However, where the majority of the shareholders waive the fraud then there can be no action for winding up25.

6. Public interest. The courts have in a large number of cases wound up companies on this ground. Where the company posed danger to investing public it was ordered to be wound up26. This ground has also been used to prevent the companies from being wound up. In Manjulalbhai v. Jayanth Vitamins Ltd27, on the ground that winding up would result in unemployment to 700 workers on muster rolls, the court refused to pass an order of winding up.


The ‘just and equitable clause’ confers very vast powers upon the courts. The courts have observed that, the non-mention of the provision of law will not prevent the court form passing an order of winding up28. However, the courts have laid down certain parameters within which this power is exercised. The paramount consideration of the court however remains the proper functioning of the company i.e., in the interest of the stake holders. Where the court is of the opinion that the company is only a fraud upon the shareholders or that the object of the company is to defraud the creditors or that the company is not functioning in the manner it is expected to, then there is nothing preventing the court from invoking this clause and order winding up. The courts have, however, used this clause with great circumspection and caution.

* V Year, NALSAR University of Law, Hyderabad.

** V Year, NALSAR University of Law, Hyderabad.

1 Section 433(f) of the Companies Act, 1956.

2 Veeramachineni Seethiah v. Venkatasubbaiah, AIR 1949 Mad 675.

3 (1921) 59 IC 524.

4 [1997] 5 Comp. LJ 303 (MP).

5 Bleriot manufacturing Aircraft Co. Ltd., In Re, [1961] 12 TLR 253.

6 Loch v. John Blackwood Ltd., [1924] AC 783 (PC).

7 Gadadhar Dixit v. Utkal Flour Mills (P) Ltd., [1989] 66 Comp. Cas. 188 (Ori).

8 Malabar Industrial Co. Ltd. v. A. John Anthrapper, [1985] 57 Comp. Cas. 717 (Ker).

9 Id.

10 Mohanlal Dhanjibhai Mehta v. Chunilal B. Mehta, [1962] 32 Comp. Cas. 970 (Guj).

11 Narendra Glass Works (P) Ltd. V. M.P. Beer Products (P) Ltd., [1989] 65 Comp. Cas. 396 (MP).

12 State Bank of India v. Hegde & Golay Ltd., [1987] 62 Comp. Cas. 239 (Kar).

13 Loch v. John Blackwood Ltd., 1924 AC 783.

14 Yenideje Tobacco Co. Ltd, Re, [1916] 2 Ch 426.

15 AIR 1949 Mad 675.

16 [1962] 2 Comp. LJ. 95.

17 [1968] Comp. LJ. 275.

18 (1972) 42 Comp. Cas. 197 (Bom).

19 S. Sundereasan v. Plasto-o-Fibre Industries (P) Ltd, (1993) 76 Comp. Cas. 38 (Mad).

20 A. Ramachandra v. Narsaraopet Electric Corporation Ltd., (1972) 42 Comp. Cas. 182 (AP).

21 Mahonmadai Shastra Prakashik Samiti Ltd, Re, (1917) 15 All LJ 193.

22 (1977) 47 Comp. Cas. 314 (All).

23 AIR 1925 Mad 489.

24 AIR 1933 Mad 16.

25 Oriental Navigation Co. v. Bhanaram Agarwal, AIR 1922 Cal 365.

26 Walter L Jacob & Co Ltd, Re, 1989 BCLC 345 CA.

27 (1991) 71 Comp. Cas. 443 (MP).

28 Registrar of Companies v. Chauhan Brothers Industries (P) Ltd., [1973] 43 Comp. Cas. 525 (Pat).

The content of this article does not in any way constitute legal advice by the author and should not be relied on in that way. Specific professional advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions