Power of the Court Under the 'Just & Equitable Clause'

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...