1. ' This order will govern the disposal of abovenoted two miscellaneous applications filed by plaintiff and defendant No,5 in the suit respectively for appointment of a receiver in respect of properties of a public limited company known as Progressive Tobacco Limited, (defendant No,1).
2. ' The suit of the plaintiff is for declaration and injunction. According to statement made in the plaint, plaintiffs 1 to 3 and defendants 2 to 5 (who hereinafter will be referred in this order as the "plaintiff and "defendant group" respectively) are the promoters and were also the first directors of defendant No,1 (company). It is alleged that the issue and paid up capital of the company was to be subscribed and held by the "plaintiff group" and the "defendant group" in equal shares. That until 30-6-1975 the plaintiff group held and represented the share holding of the company to the extent of Rs, 2,00,000 while the defendant group held and represented Ets.3,26,000 shares of the company. It is alleged that on 30-6-1975 the share capital of company amounting to. Rs, 1,23,500 which was to be issued in favour of plaintiff group according to the understanding between "plaintiff group" and the "defendant group", was illegally issued by defendant No,2 to himself and his associates the creating an absolute majority in favour of "defendant group". The plaintiff has challenged this allocation of share capital of company in the sum of Rs, 1,23,500 in the meeting of board of director held on 30-6-1975 as illegal and against the agreement between the parties. The plaintiffs have also challenged the annual general meeting of the company held on 13-3-1976 and all subsequent steps taken by them in pursuance thereof as illegal and ultra vires. In the application for appointment of receiver the plaintiff has alleged that the annual general meetings of the company held on 31-8-1977, 27-7-1978, 13-3-1979, 11-6-1980 and 30-7-1981 were not held within the time allowed by law and therefore, these meetings were of no consequence. It is alleged that defendants 2 to 5 and 9 to 11 who are in illegal possession of the company have caused heavy losses to company as they failed to implement the project and the company at present is heavily indebted to various financial institutions which have advanced loan to the company from time to time. It may be mentioned here that the above suit was filed by the plaintiffs on 11-2-1977 but, the application for appointment of receiver was made on 18-11-1981 after about 4 years and 8 months of the filing of the suit. This application was opposed by the defendants including defendant No,5 and counter-affidavit to this application was filed on 4-2-1982. In the counter-affidavit, the defendants besides denying various allegations made by the plaintiff against them in their application under Order XL, rule 1, C.P.C. Alleged that in fact plaintiff No,1 who was also appointed as secretary of the company was responsible for creating difficulties for the company as he entered into unauthorized commitment for purchase of Raw Material with different parties even before construction of factory building and also attempted to earn secret commission. It is also alleged that plaintiff No,1 wrote letters to S.I.T.E. To withhold grant of lease to company besides, approaching financial institution to withhold financial assistance to the company. The defendants further alleged in their counter-affidavit that through the sole efforts of defendants 1 to 5 the factory premises has been completed, lease of the land has been granted in favour of company bank loans have been sanctioned to company against personal properties of defendants (directors) and agreement have been entered into with financial institution to provide financial assistance of or running the factory which is likely to go into production very soon. No rejoinder is filed by the plaintiff to deny the above statement made in the counter-affidavit, dated 4-2-1982.
3. Defendants 6 to 8 also filed their separate counter-affidavit opposing the application of plaintiff for appointment of receiver on 6-4-1982 but no rejoinder to this counter-affidavit also was filed by the plaintiff. Defendant No,5 filed application for appointment of receiver on 3-4-1984 and the main ground for appointment of receiver taken in the application, is, that the liabilities on account of loan against the company is increasing day by day. Separate counter-affidavits to the application of defendant No,5 were filed by defendants 6 to 8 and defendants 1 to 4 and 6 to 11 to which no rejoinder is filed. In the counter-affidavits to the application of defendant No,5 it is disclosed that the factory has started production.
4. ' It is not disputed before me that at the time of filing of the present suit, the factory was not complete in any manner and had not gone into production. From the material placed on the record so far it is quite clear that major finances were raised and construction of factory and installation of machinery therein was completed during pendency of the suit by the defendants who have raised loans from various financial institutes after placing their personal properties as securities. None of the statement made in the counter-affidavits of defendants in this regard is denied by the plaint. It is admitted before me by the learned counsel for the plaintiff that the factory has commenced production although it is also alleged that the present production is very negligible as compared to the capacity of the plant. Since the factory has started production very recently it is natural that it will take sometime to attain its maximum production capacity. After considering the statement made in the counter-affidavits of defendants no acts of waste or malversation is established against the defendants. The company has obtained heavy amount of loans from financial institutions who have strenuously opposed appointment of receiver. The defendant No,1 is a public limited company and the present directors claim that they were elected for 3 years on 10-3-1982 which will expire on 10-3-1985. There is no doubt that appointment of receiver at this stage will completely jeopardise the working of company which has recently gone into production. The plaintiffs and defendant No,5 in these circumstances should have positively established acts of waste and malversation on the part of present directors of company in order to succeed in their application. The plaintiffs not only failed to establish acts of waste or malversation on the part of defendants but also failed to controvert the allegations made against them in the counter-affidavit of defendants in these regards. I, therefore, find no case for appointment of receiver. However, as the company is heavily indebted at present and the status of defendants 1 to 5 and 8 to 11 as directors is also challenged by the plaintiffs in the suit, I direct that no further encumberances on the properties of the company will be created by the present management of the company except with the leave of the Court. The present management of company will also obtain leave of the Court, in case they intend to issue any further share capital of the company during pendency of the suit. In view of the fact that the present suit was filed in the year 1977 and the dispute relates to the management of the company, I further direct that the suit may be fixed for regular hearing in April, 1985. Subject ,to the above observation the applications for appointment of receiver are dismissed.