Mr. P. K. Bahri, J. ( 1 ) I have heard arguments in order to decide whether thispetition seeking a winding up order against respondent No. 3 company shouldbe admitted or not. ( 2 ). Facts of the case, inbrief, are that respondent No. l, Sh. I. D,kansal, floatedrespondent No. 3 company which was incorporated on 19/02/1987 andcertificate of Commencement of its business was obtained on 12/03/1987. Theobjects of the company were manufacture, produce, refine, preserve, distributeand deal in import and export of all kinds of processed foods, etc. In early part of1988 respondent No. 1 approached M/s Food Specialities Limited (later onconverted as Nestle India Limited ) for setting up a joint venture. Nestle Indialimited is one of the major manufacturers, producers and sellers of food productsand it has the brand backing of Nestle SA, petitioner No. 1, which is amultinational company incorporated in Switzerland. ( 3 ) UNDER the then prevailing law in India, petitioner No. 1 could acquire only40% equity share holding and the management of the Nestle India Limited seeingthe possible viability of the project brought about the manufacturing license andtechnical assistance agreement between petitioner No. 1 and respondent No. 3. That agreement contemplated the provision of know-how and technical assistanceto be provided by petitioner No. 1 for commissioning the project and for efficientmanufacturing of high quality breakfast cereals. At that time Nestle India. Limitedmade it clear to respondent No. 1 that there would not be any equity participationon its behalf. Respondent No. 1 was, however, not agreeable and again the termswere negotiated between respondent No. 1 and Nestle India Limited andrespondent No. l wanted participation in equity share holding by Nestle Indialimited and assured that he would have no objection in manufacturing the finalproducts exclusively under the Nestle s brand name. ( 4 ). It is averred in the petition that petitioner No. 1 has been having jointventure collaboration agreements in different countries in which it normally holdsthe major part of the equity share capital and the ethos and principles behind thesame had been that wherever the petitioner company had entered into thecollaboration/joint venture which involves the usage of Nestle brand in thepromotion and sale of the final products, it ensures that it has an effective overallsuperintendence over the management and complete control on the manufacturing operation involving its technical impacts and sales policy of the companyinvolving use of its brand names. ( 5 ). ( 5 ). During the discussions with respondent No. 1, it was agreed that petitionerno. 1 would have 40% share holding whereas respondent No. 1 would have 26to 40% share holding whereas remaining shares would be issued publicly and thetotal paid-up capital envisaged at that stage was Rs. 2. 5 crore and it was also agreedthat petitioner No. 1 would have full control over the production of the finalproducts and its sale and distribution for ensuring quality of its products. It wasalso agreed that each of the group would have three Directors, later on changed totwo Directors, to be nominated by either parties and no decision could be taken atthe Board Meeting without at least one of the nominated Directors of either partiesbeing present and consenting to pass a particular resolution. ( 6 ). A joint venture agreement was executed between the parties on 24/10/1988. Some of the important clauses of the joint venture agreement provided thatthe principal object of the company was to manufacture, pack and sell theproducts under trade-mark acceptable to Nestle and plant shall be installed andconstructed in accordance with the standards acceptable to Nestle and the equityshare holding of respondent No. 1 was never to exceed the percentage of equityshare of petitioner No. 1 unless otherwise argeed to in writing and it also providedthat parties are not entitled to sell or assign their shares without first offering theirshares to the opposite party. It was also provided that in case of termination ofthe agreement for any reason whatsoever the promoters, i. e. respondent No. 1,guaranteed that it will, at the option of petitioner No. 1, acquire the shares heldby petitioner No. 1 at the relevant time at a price not less than book value of theshares. ( 7 ). This joint venture agreement was approved by the Government of Indiavide letter dated 30/11/1988. Then some addendum was added on 21/12/1988 which defined the products to be manufactured and sold tomean extruded foods including breakfast cereals and other related processed foods. It also contemplated for increasing the capital to Rs. 4 crores divided into 40 lakhequity shares of Rs. 10. 00 each and the paid up capital was increased from Rs. 13,30,000. 00 to Rs. 35 lakhs by creation of 31,97,000 new equity shares. It also contemplated for increasing the capital to Rs. 4 crores divided into 40 lakhequity shares of Rs. 10. 00 each and the paid up capital was increased from Rs. 13,30,000. 00 to Rs. 35 lakhs by creation of 31,97,000 new equity shares. Thepromoters were to have 60% of the said shares and Nestle was to have 40% pendingpublic issue and there were to be Directors of the each party. Respondent No. 1 wasappointed as permanent Director of respondent No. 2 D. K. Jain was appointed asnominee of respondent No. 1 as Director and R. N. Wahi and Jean Claudedegaudenzi as nominee Directors of the petitioner. Ranjit Raj was appointed asalternate Director of Jean Claude Degaudenzi. ( 8 ). It is the case of the petitioner that there took place some perceptionaldifferences between the petitioner No. 1 and respondent No. 1 as petitioner No. 1wanted the new project to be a Board managed company whereas respondent No. 1viewed the same as his sole proprietary concern. The petitioner s anxiety was toensure that the products which are to be manufactured and sold with which Nestlename is associated should be of high standard and quality and letter dated 2 3/01/1990 was issued by petitioner to respondent No. 1 emphasising the needfor team work, openness and transparency. Insubsequent letter dated 1 3/01/1990, again it was emphasised that as respondent No. 3 was to be part of thenestle group, it Was necessary to have team work, openness and transparency andrespondent No. 3 should embibe a Nestle system. These differences in perceptionwere again highlighted in letter dated 2/02/1990. ( 9 ). Respondent No. 1, vide his letter dated 19/02/1990, was not inclinedto accept any staff on deputation from Nestle for implementing the project and heonly expressed his desire to acquire more funds from the petitioner in the formof loan at subsidised rates of interest. ( 10 ). According to the petitioner, this letter depicted that respondent No. l wasnot treating the project as quasi-partnership and this letter brought about beginningof break down in the working relationship. The letter dated 23/03/1990 issuedby petitioner to respondent No. 1 is emphasised to show that it was necessary tohave revised financial structure because of lack of funds and the delay havingresulted in burdening the respondent No. 1 with heavy debt services liability and theonly way out was to increase the equity from Rs. 3. 5 crores to Rs. The letter dated 23/03/1990 issuedby petitioner to respondent No. 1 is emphasised to show that it was necessary tohave revised financial structure because of lack of funds and the delay havingresulted in burdening the respondent No. 1 with heavy debt services liability and theonly way out was to increase the equity from Rs. 3. 5 crores to Rs. 6 crores. During thenegotiations, it was emphasised by the petitioner that respondent No. 3 wouldbe a Board managed company and the petitioner No. 1 would have effectivecontrol over the production in order to maintain qualitative standards of the finalproduct and the Managing Director i. e. . respondent No. 1 would have to work underthe control of the Board of Management. On 9/04/1990, the Government ofindia granted approval to the fresh reconstructing of the capital of the respondent No. 3. ( 11 ). Respondent No. 1 in his letter dated 18/04/1990 expressed apprehensions about his powers as Managing Director being curtailed and he wanted thepetitioner No. 1 to agree to diversify the product line in this Joint Venture as thepetitioner No. 1 had at that time taken steps to enter into a Joint Venture formanufacturing chocolates in India and there being no bar in the Joint Ventureagreement, disabling the petitioner from entering into any such project withanyone else. The petitioner, vide his letter dated 30/04/1990 to respondent No. 1, again emphasised the necessity of petitioner No. 1 exercising control over the production of the end product as the products were to be marketed under the Nestle sbrand name and the petitioner was to have enough control over the qualityproducts of its reputed name and petitioner wanted amendment of Joint Ventureagreement so that said facts may be highlighted in the amended agreement. The respondent No. 1 wrote a letter dated 16/05/1990 in which heexpressed apprehension that perhaps his powers as Managing Director are beingcurtailed and the petitioner wanted to take over the whole of the management andhe wanted the petitioner to increase to product line. Respondent No. 1 again wrotea letter dated 9/12/1990 proposing reconstructing of the capital of therespondent No. 3 to have more new products added and petitioner shouldcontribute 76% of the equity while respondent No. 1 would contribute 26% of theequity and the respondent No. 3 need not go public. Respondent No. 1 again wrotea letter dated 9/12/1990 proposing reconstructing of the capital of therespondent No. 3 to have more new products added and petitioner shouldcontribute 76% of the equity while respondent No. 1 would contribute 26% of theequity and the respondent No. 3 need not go public. He also indicated that ifgovernment did not permit the same then ratio of equity should be 50-50 betweenthe petitioner and the promoter. ( 12 ). On 27/12/1990, the petitioner and respondent No. 1 agreed tocertain new terms which provided for equity of 3. 5 crore and loans of Rs-6. 5 crores. The petitioner was to have 40% equity while Nestle India was to have 10% equityand respondent No. 1 and his associates weretohave50% of equity and no interestsubsidy to be provided to promoters and there was no commitment for going public in future. The respondent No. 1 was to be Managing Director but was toreport to the Board and the Chairman was to have a casting vote and there werecertain specific matters indicated which were to be cleared by the Managingdirector only with the prior approval of the Board and it also provided for theproject Implementation Committee. After agreeing to these terms, respondentno. 1 started having reservation and wrote a letter dated 29/12/1990mentioning that he was having some doubts about dropping of public issue inview of Income-Tax and Wealth-Tax and required the petitioner to agree to newproduct lines and the chocolate project be also given to respondent No. 3 and he alsoexpressed his grievance of petitioner No. 1 not advancing a loan of Rs. 65 lakhs orinterest subsidy to the respondent. ( 13 ). It is the case of the petitioner that after lot of discussions and exchangeof letters dated 27/12/1990,29th December 1990 and 15/0115/01/1991, it was agreed to have an amended Joint Venture Agreement which was finallydiscussed and agreed on 5/06/1991 which inter-alia provided that the Boardwas given power to appoint a Project Implementation Committee. The authorisedcapital was increased from Rs. 6 crores to Rs. 10 crores though paid-up capital wasto remain as Rs. 6 crores. The Managing Director was to work under thesuperintendence Board and the petitioner was to appoint Production Managerand respondent No. 3 was to introduce Nestle system of accounting, reporting andother controls. The internal auditors were to be nominated by the petitioner and thebanking operations were to be under dual signatures. ( 14 ). 6 crores. The Managing Director was to work under thesuperintendence Board and the petitioner was to appoint Production Managerand respondent No. 3 was to introduce Nestle system of accounting, reporting andother controls. The internal auditors were to be nominated by the petitioner and thebanking operations were to be under dual signatures. ( 14 ). It is averred by the petitioner that amended Joint Venture Agreement wasprepared and signed by petitioner No. 1 on 24/08/1991 in Switzerland andwas sent to respondent No. 1 for his signatures. However, respondent No. 1 resiledfrom his previous commitments and refused to sign the said agreement on theflimsy ground that the Production Manager of the petitioner would permit sale ofsub-standard products. In this, he suggested that if at any time new products wereto be introducted, there should be enhancement of equity participation. Therespondent No. 1 wrote letter dated 20/09/1991 which indicated thatrespondent No. 1 was not keen to continue the relationship as co-venturer and heonly wanted to extract more finance and technical expertise from petitioner No. 1. The petitioner No. 1, then, vide his letter dated 20/09/1991, suggested amutual and amicable termination of the Joint Venture on account of basicdifferences having arisen between the petitioner and respondent No. 1 with regardto the management, production of the products agreed to be manufactured underthe Joint Venture Agreement and it also informed respondent No. 1 thatrespondent No. 1 can purchase the shares of the petitioner in terms of the Jointventure Agreement subject to all advances being refunded. Then there arosedifference with regard to nomination by the petitioner of another Directornamely Lakdawala in place of R. N. Wahi and respondent No. 1 not allowing suchchange in Director. ( 15 ). It is, hence, contention of the petitioner that there has occurred completebreak down between the parties and the company being in the nature of quasipartnership it is just and equitable that this company should be wound up. It is alsourged by the petitioner that as the terms of the Joint Venture Agreementcontemplated mutual termination of the agreement and respondent No. 1 at onepoint of time had agreed to such termination of agreement by offering to purchasethe shares of the petitioner on the book value in terms of the agreement, thepetitioner had offered to jointly terminate the agreement but respondent No. 1 hadgone back on his first offer and had not agreed to the mutual termination of theagreement. ( 16 ). ( 16 ). It is the case of the petitioner that petitioner had served a notice onrespondent No. 1 pointing out numerous lapses and breaches of the terms of theagreements on the part of the respondent No. 1 which may enable the petitionereven to terminate to said Joint Venture Agreement without consent of respondentno. 1. However, learned Counsel for the petitioner has pointed out that there arosevarious points for decision in this case that whether the respondent No. 3 had lost itssubstratum or abandoned its substratum or main objects or it has become totally. impossible to pursue them and secondly there has or has not occurred a deadlockin the management which was not capable of being resolved by the internalcompany machinery and whether there occurred lack of probity involving seriousoppression of the minority as proposed or in some other capacity and whether thecompany is in substance an incorporated partnership and there are grounds onwhich apartnership could be dissolved are available for winding up the companyor not and whether the petitioner is entitled to terminate the agreement in view ofthe fact that respondent No. 1 had earlier greed to acquire the shares of the petitionerat book value. ( 17 ). It is the case of the respondent, on the other hand, that the present petitionis a glaring example of a multi-national company using its dominant powerunlawfully and illegally and in breach of its commitments to destroy therespondents as the petitioner has committed various violations of the Joint Ventureagreement that petitioner had not contributed its remaining Rs. 100 lakhs towardsequity of respondent No. 3 and are not allowing the public issue and by enteringinto joint agreements with other parties and introducing new product of proteinand processed foods in Indian market and by not furnishing an undertaking toi. 100 lakhs towardsequity of respondent No. 3 and are not allowing the public issue and by enteringinto joint agreements with other parties and introducing new product of proteinand processed foods in Indian market and by not furnishing an undertaking toi. F. C. I. for non-disposal of shares during the pendency of loan of I. F. C. I. and notallowing Nestle India to execute the firm marketing agreement in lieu ofmemorandum of understanding and not allowing despatch of coating equipmentsto the factory of respondent No. 3 which had resulted in delay incompletion ofthe project It is averred that respondent No. 3 was in the process of establishinga plaint for manufacture of processed food and had placed order on parties abroadfor the supply of plant and maehinery for which necessary Letters of Credit hadbeen opened and established and thereafter negotations commenced between theparties and that it was suggested that the products to bemanufactured byrespondent No. 3 must be conforming to Nestle s standard and they would bemarketed under the brand name of nestle and at that time authorised capitalof respondent No. 3 was Rs. 150 lakhs and paid-up capital wasrs. 30,30,000. 00 andpeitioner No. 1 got interested in equity participation in about the first week ofmarch 1988. Then he has REFERRED TO the execution of the Joint venture Agreement. ( 18 ). Respondent No. 1 has also REFERRED TO various stages which had alreadybeen detailed out above and ultimately to the parties agreeing to increase theequity capital of respondent No. 3. According to the respondent, the petitioner wasto advance the loan to the respondent to the tune of Rs. 65 lakhs which was notadvanced. It is averred that only after the liberalisation of the Government of Indiapolicy on 24/07/1991, the petitioner No. 1 realised that it would be in a positionto exploit the Indian entrepreneurs by obtaining 51% equity holdings and also fullcontrol over the management of the company and that the petitioner starteddragging its feet and wanted to terminate the Joint Venture Agreement. Therespondent has pleaded that at no point of time the respondent had agreed to theterms incorporated in the amended Joint Venture Agreement which had beensigned unilaterally by petitioner No. 1 which respondent No. 1 has rightly declinedto sign. ( 19 ). Therespondent has pleaded that at no point of time the respondent had agreed to theterms incorporated in the amended Joint Venture Agreement which had beensigned unilaterally by petitioner No. 1 which respondent No. 1 has rightly declinedto sign. ( 19 ). It is the case of the respondent that petitioner had entered into jointventures with other local entrepreneurs and just wanted to wriggle out from the agreed terms which is not permissible in law and there are no grounds whatsoeveravailable to the petitioner for seeking winding up of the company. It is alsohighlighted in the reply that petitioner had made wild allegations for gettingthe show-cause notice issued in this petition as it is recorded in order dated 19/05/1992 that petitioner had made allegations that respondent had been divertingresources of the company into some other business and as a matter of fact there is notan iota of material placed on record by the petitioner to prove such allegations. ( 20 ). The short question which arises for decision in this case is as to whetherany primafacie case exists in favour of the petitioner or not for admission of thepetition ? ( 21 ). Under just and equitable ground, a company can be wound up if there is adeadlock in the management which cannot be resolved by internal companymachinery or it becomes impossible to pursue the main substratum or the Objects ofthe company and where a company is in substance an incorporated partnership andthere are grounds on which a partnership could be dissolved. ( 22 ). The learned Counsel for the respondent has aruged that there were nofeatures of partnership present in respect of the Constitution of the companyin asurnch as the company was incorporated much before the petitioner No. l cameinto picture and it was in contemplation of the company of issuing the public issue. If that is so, there could arise no question of any partnership being there in thepresent case. ( 23 ). The learned Counsel for the petitioner, on the other hand, argued that itmay be that initially there was no element of partnership present at the time ofincorporation of the company but the Court has to see the Constitution of thecompany at the time the petition is filed in order to see whether the company inquestion is in substance an incorporated partnership or not. It is significant tomention that the letter dated 27/12/1990, which contains the amendedterms of Joint Venture Agreement and has been signed by respondent No. 1, showsthat this company was to be owned by petitioner and respondent No. 1 by havingequal share holding and public issue was not contemplated by this letter. It isnot possible to believe respondent No. l that respondent No. l had not agreed tothe terms contained in this letter when he has signed the endorsement appearingin this letter agreeing to all those terms. ( 24 ). So, prima facie, there is much to say in favour of the petitioner thatpresent company is in substance a quasi-partnership. So, the principles whichare applicable for dissolution of partnership are available to the petitioner in thepresent case. ( 25 ). The respondents may be right, prima fade, in their contentions thatthere had been no mutual termination of the agreement in consonance with theterms of the Joint Venture Agreement and at present the petitioner had not takenany steps for unilaterally terminating the joint agreement on the basis of thegrounds available in the Joint Venture Agreement. However, primafacie, it appearsthat there had occurred a deadlock in the management of the affairs of the companyinasmuch as no decision could be taken by the Board of Management unless anduntil one Director of each party is consenting to such decision. When there is complete break-down of confidence between the two parties, so prima facie it would not be possible for the company to carry on its business in any effectivemanner. ( 26 ). The learned Counsel for respondent has argued that the Articles ofassociation, which contemplated consent of at least one Director of each party fora particular resolution, have been amended. Obviously, if such amendment hadtaken place the same is not agreed to by the petitioner. That would also show thatthere is complete break-down in the affairs of the company if we keep in view thegrounds of dissoultion available in any partnership. ( 27 ). A Division Bench of this Court in case of Smt. Abnash Kaur v. Lord Krishnasugar Mills Ltd. and Others, 44 (1974) Company Cases 390 has held that the powersof the Court under the just and equitable cause are not limited. ( 27 ). A Division Bench of this Court in case of Smt. Abnash Kaur v. Lord Krishnasugar Mills Ltd. and Others, 44 (1974) Company Cases 390 has held that the powersof the Court under the just and equitable cause are not limited. The Court will beguided by the rules of the equity and will do what justice demands keeping in viewthe facts and circumstances of each case and all the same the principles on whicha partnership is dissolved may be applied to a company which consists of twomembers only or where the shareholding is equal or where it is a family or domesticcompany with shareholding equally divided. ( 28 ). In Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla andanother, 44 (1976) Company Cases 91, the Supreme Court has held that whenshareholding is more or less equal and there is a case of complete deadlock in thecompany on account of the lack of probity in the management of the company andthere is no hope or possibility of smooth and efficient continuance of the companyas a commercial concern, there may arise a case for winding up on the just andequitable ground and in a given case, the principles of dissolution of partnershipmay apply squarely if the apparent structure of the company is not the realstructure and on piercing the veil it is found that in reality it is a partnership. ( 29 ). I have gone through the various documents produced on the record,particularly letters exchanged between the parties. I, prima facie, come to theconclusion that there has occurred differences between the parties with regard tovery basics as to how the management of the production in the factory of thecompany has to take place. The petitioner has been stressing in all its communications that petitioner would not allow any sub-standard products being manufactured under Nestle name and they would see that it is a Board managed companyand petitioner having control over the production of the products to ensure itsworld-wide quality but respondent No. 1, on the other hand, was not happy with thepetitioner having any control over the productions to be carried on in the factory ofrespondent No. 3 as he wanted to have his own way as Managing Director as faras management of the production was concerned. On account of these differences,it appears that later on a deadlock occurred inasmuch as after agreeing to certainterms on the basis of which amended Joint Venture Agreement was prepared by thepetitioner and signed by the petitioner but the respondent No. 1 having secondthoughts declined to sign the said agreements. So, it appears that this petitiondeserves to be admitted. However, it is even agreed by Counsel for the petitionerthat this petition may be decided without at first publishing any citations in thenewspapers. I, hence, admit the petition but I with-hold the publication of citations till the disputed questions raised in the pleadings of the parties are decided finally. I require the petitioner to file evidence by way of affidavits within six weeks. The respondents shall also file evidence by way of affidavits within six weeks thereafter and rebuttal affidavits shall be filed by the petitioner within three weeks thereafter. For directions, if any, and for arguments, the matter shall be listed in Court on 15/9/1994.