Supreme Judicial Court of Massachusetts, Middlesex
GEORGE T. KOSHY
Heard: May 2, 2017.
case was heard by Bruce R. Henry, J., and a complaint for
contempt, filed on March 2, 2015, was also heard by him.
Supreme Judicial Court on its own initiative transferred the
case from the Appeals Court.
Charles M. Waters for the plaintiff.
Maureen Mulligan (Timothy M. Pomarole also present) for the
J. Carey, Jr., for Brian JM Quinn & others, amici curiae,
submitted a brief.
Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, &
Cypher, JJ. 
called upon in this case to construe for the first time G. L.
c. 156D, § 14.30, the corporate dissolution statute.
That statute allows a shareholder to petition a judge of the
Superior Court to dissolve a corporation in the event of a
deadlock between its directors. See G. L. c. 156D, §
14.30 (2) (i) .
T. Koshy and Anupam Sachdev are the sole shareholders and
directors of Indus Systems, Inc. (Indus). After years of
deepening dissension and acrimony between the two, Koshy
filed a petition in the Superior Court in 2012, pursuant to
the corporate dissolution statute, seeking to dissolve Indus.
Koshy also brought claims against Sachdev for breach of
fiduciary duties and, after a jury-waived trial had taken
place, but prior to the issuance of the judge's decision,
filed a separate claim for contempt of court. The judge
rejected all of Koshy's claims and Sachdev's
counterclaims, and dismissed Koshy's complaint for
contempt. Koshy appealed, and we transferred the matter to
this court on our own motion.
conclude that the utter impasse as to fundamental matters of
corporate governance and operations shown to exist in these
circumstances gave rise to a state of "true
deadlock" such that the remedy of dissolution provided
by the statute is permissible. See comment to G. L. c. 156D,
§ 14.30, 25A Mass. Gen. Laws Ann. at 71 (Thomson/West
2005). Since dissolution is a discretionary remedy, however,
we remand the matter to the Superior Court for a
determination whether it is the appropriate remedy in these
circumstances. In addition, because a number of the claims in
the complaint for contempt were not raised at trial, we
vacate and set aside the judgment dismissing that complaint,
and remand the matter for consideration of the allegations in
the complaint concerning conduct that occurred after the
recite the facts found by the trial judge,  supplemented with
references to undisputed facts in the record.
Formation and growth of Indus.
of the motion judges observed, "[t]his case concerns the
demise of a longstanding business relationship between two
men who were once close friends." The parties formed
Indus in April, 1987, after working together for several
years at another company. Indus provides "computer aided
design" (CAD) services, creating and storing digital
renderings of "existing manual drawings, sketches and
other information supplied by client organizations."
Koshy and Sachdev each own fifty per cent of Indus's
shares and serve as its sole directors. They are both
authorized to act on the company's behalf.
a few years of growing pains, Indus developed a steady market
for its services. By the end of 1997, the company was
generating revenues of approximately $700, 000 annually. In
June, 1999, Indus was awarded a United States Government
Services Administration contract, which allowed it to bid on
projects for agencies of the Federal government. To help meet
the new wave of demand created by this contract, the parties
established eSystems Software Pvt. Ltd. (eSystems), an Indian
corporation, to provide support services to
upon its success, Indus obtained a Federal "streamlined
technology acquisition resources for services" contract
(STARS contract) in 2004. It allowed government clients to
purchase products and services from Indus without having to
go through a competitive bidding process. The STARS contract,
which was effective through November 30, 2011, gave Indus
access to a new client base and provided approximately sixty
per cent of the company's revenue from 2004 to 2010. By
2007, Indus's revenues exceeded $2 million annually.
Sometime in the late 2000s, the relationship between the
parties began to fall apart. They developed a fundamental
difference of opinion concerning the future of Indus. While
Koshy wanted the company to focus primarily on its existing
services for government agencies, Sachdev believed that it
should explore new markets. Both parties viewed their
counterpart's vision of Indus's future as gravely
flawed. Koshy saw Sachdev's efforts to develop new
markets as quixotic and costly, while Sachdev considered
Koshy's focus on existing clients myopic and
shortsighted. This difference in viewpoints bred growing
distrust as well, as is evident from a dispute arising around
2010 in connection with payments made from Indus to eSystems.
While Sachdev preferred to make prepayments to eSystems for
services to be performed, Koshy favored payments only for
services rendered. Koshy believed that prepayments, which
could not easily be recovered due to jurisdictional
obstacles, provided Sachdev with a means clandestinely to
direct company resources into new projects. Notwithstanding
Koshy's stated concerns, Sachdev routinely made
prepayments to eSystems without consulting with Koshy.
these disagreements strained the parties' relationship,
an incident in the fall of 2011 furthered its disintegration.
At that time, Indus had approximately $1.4 million in
retained earnings. Koshy wanted this money to be paid out to
himself and Sachdev as a distribution, while Sachdev did not.
In November, 2011, Koshy wrote himself a check from
Indus's corporate account, in the amount of $690, 000, as
a distribution, without Sachdev's consent. Koshy
encouraged Sachdev, who was in India at the time, to take a
matching distribution. Sachdev instead reacted by effectively
locking Koshy out of the company. He initiated a lawsuit
against Koshy on behalf of Indus, seeking a return of the
distribution; stopped payment of Koshy's salary;
terminated his company credit cards; and changed the locks on
the door of Indus's offices. He also refused to consent
to a tax distribution to the parties, as had been the
practice in prior years. Koshy subsequently placed the $690,
000 in an escrow account.
dispute was ongoing, each party offered to buy out the other,
based on evaluations of Indus's worth created by
consultants that each had hired. Sachdev offered to purchase
Koshy's shares for $480, 000. Koshy rejected that offer
and tendered his own offer to purchase Sachdev's shares
for approximately $2.8 million; Sachdev rejected that
proposal. Ultimately, the $690, 000 was returned to Indus,
and in June, 2012, the complaint was dismissed. Koshy's
salary, company credit cards, and access to his office were
restored. The relationship between the parties however,
continued to spiral downward.
parties' welling antipathy for and toxic distrust of each
other inevitably began to impinge upon the day-to-day
operations of Indus. In December, 2011, without consulting
Koshy, Sachdev hired Michael Xifaras to help with the
company's sales. Xifaras replaced Roger Geilen, a
long-time Indus salesperson, who had worked largely with
Koshy. Koshy and Xifaras did not get along, as Koshy believed
that Sachdev had hired Xifaras, in effect, as his
replacement. The hostility between the two broke out into
open conflict when Xifaras sent an extremely critical
electronic mail message to Koshy, with a copy to Sachdev,
which included a variety of insults. In response, Koshy informed
Sachdev that he would be firing Xifaras, and provided Xifaras
notice of the termination. Sachdev responded by saying that
he agreed with Xifaras's criticisms and that Koshy had no
authority to fire employees without Sachdev's consent;
Xifaras retained his position at Indus. A few months later,
Koshy again attempted to terminate Xifaras, with the same
result. At the time of trial in October, 2013, Xifaras still
worked for Indus.
in June, 2012, Koshy commenced in the Superior Court the
underlying action in this case. The complaint asserted that
Sachdev had committed a breach of his fiduciary duty to
Koshy, as well as the implied covenant of good faith and fair
dealing; the complaint also asserted that the parties were
deadlocked and sought corporate dissolution on that ground.
Sachdev filed counterclaims alleging breach of fiduciary
duties by Koshy and abuse of process.
also sought a preliminary injunction enjoining Sachdev from
taking certain actions purportedly intended to freeze out
Koshy. A Superior Court judge (who was not the trial judge)
granted the motion in part, enjoining Sachdev from (1)
blocking or impeding regular tax distributions to Koshy; (2)
making any non-payroll-related disbursement or expenditure in
excess of $5, 000 on behalf of Indus without providing
written notice to Koshy in advance; (3) hiring or firing any
employee without providing written notice to Koshy in
advance; (4) making any payments on behalf of Indus to
eSystems for services not yet performed without Koshy's
prior written consent; and (5) taking any action for the
purpose of "forcing or pressuring [Koshy] to sell his
shares for less than fair market value." Shortly
thereafter, Sachdev approved a tax distribution to the
parties. In September, 2012, Sachdev sought to have the
preliminary injunction dissolved. The judge denied the
motion, and instead modified the order such that the same
provisions also were applicable to Koshy.
March, 2015, nearly one and one-half years after the trial in
October, 2013, and while a decision on the issues raised at
trial was still pending, Koshy filed a complaint seeking a
judgment of contempt against Sachdev for asserted repeated
violations of the preliminary injunction. The trial judge
ultimately dismissed the ...