TMI Blog1945 (11) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... passed at the general meeting of the said society is also null and void and for further and other reliefs. The resolutions dated October 8, 1944, enacted certain changes in the constitution of the said society and the plaintiffs allege that the said resolutions are void inter alia as being ultra vires the said society and constituting a fraud on the rights of the minority who voted against the said resolutions, and that the minority of the members of the said society was overborne by the vote of the majority who were acting in their own interests illegally, fraudulently and contrary to the interests and objects of the said society and the rights of the minority of the members of the society present at the meeting and voting against the resolutions. The resolution of January 21, 1945, sanctioned the agreement for sale of the Shenwewadi property belonging to the said society and the agreement for purchase of another property situate at Bangadwadi. The plaintiffs alleged inter alia that the resolution was passed by the majority in fraud of the rights of the minority and against the interests of the society. The plaintiffs further alleged that the managing committee of the said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to an averment of fraud of which any Court ought to take notice." These observations of Lord Selborne have been quoted with approval by their Lordships of the Privy Council in Gunga Narain Gupta v. Tiluckram Chowdhry [1888] L.R. 15 I.A. 119, at p. 121 and in Bal Gangadhar Tilak v. Shrinivas Pandit [1915] L.R. 42 I.A. 135, at p. 151 He also referred me to the later decision of the Privy Council reported in Bharat Dharma Syndicate v. Harish Chandra [1937] L.R. 64 I.A. 143 , where it was held that litigants who prefer charges of fraud or other improper conduct against persons should be compelled to place on record precise and specific details of those charges even if no objection is taken on behalf of the parties who are interested in disproving the accusations. Their Lordships went so far as to observe that in the case before them the petitioner ought not to have been allowed to proceed with his petition and to prove fraud unless and until he had upon such terms as the Court thought fit to impose amended his petition by including therein full particulars of the allegations which he intended to prove, and that such cases would be much simplified if this practi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion contrary to that of the plaintiffs. The plaintiffs, however, filed this suit in a representative capacity on behalf of themselves and all other members of the society, which would mean that all the members of the society and therefore the society itself is in the position of the plaintiffs. The first defendant is the president of the society and has been sued as representing the society, which means that the society is the defendant in this suit. Mr. R. S. Billimoria contended that the plaintiffs being an admitted minority of the members of the society could not by any stretch of imagination purport to represent all the members of the society and could not even by availing themselves of the procedure laid down in Order I, rule 8, of the Civil Procedure Code, claim to file this suit as representing all the members of the society, the majority of the members of the society being admittedly against their persuasion. The society had not sanctioned the filing of this suit. No meeting of the society had been called for considering the advisability or otherwise of the institution of the suit. Mr. R.S. Billimoria stated and it was not disputed that if a meeting of the society were cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her for carrying on business in partnership. Even in the case of a partnership it would not be competent to file a suit on behalf of or against a partnership as such but for the enactment of Order XXX of the Civil Procedure Code, which enables a suit to be filed by or against a partnership in the firm name. That is a statutory enactment which enables the firm name being used for the purpose of filing a suit by or against a partnership. The society of the character we have before us is, however, quite distinct from a partnership. It has nothing in common with a partnership. A corporation or a limited company which is incorporated under the Indian Companies Act has a corporate existence apart from the members constituting the same. A corporation has been defined as a collection of individuals united into one body under a special denomination having perpetual succession under an artificial form and vested by the policy of law with the capacity of acting in several respects as an individual, particularly of taking and granting properties, of contracting obligations and of suing and being sued, of enjoying privileges and immunities in common and of exercising a variety of political righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not capable of suing or being sued except by statutory provisions in that behalf as in the case of partnership firms, corporations or companies incorporated under the Indian Companies Act, could it be said that a society registered under the Societies Registration Act, XXI of 1860, becomes a legal entity such as can sue or be sued in the name in which it is registered? The Societies Registration Act, XXI of 1860, is an Act for the registration of literary, scientific and charitable societies, and the object of the Act as stated in the preamble is to make provision for improving the legal condition of societies established for the promotion of literature, science, or the fine arts, or for the diffusion of useful knowledge, or for charitable purposes. Under the provisions of the Act seven or more persons associated for any literary, scientific, or charitable purpose, or for any such purpose as is described in section 20 of the Act may form themselves into a society under the Act by subscribing their names to a memorandum of association and filing the same with the Registrar of Joint Stock Companies. The memorandum of association is to contain the name of the society, the objects of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is made for the adjustment of their affairs, but no member of the society is entitled to receive any profit upon the dissolution of a society ; whatever surplus that remains after satisfaction of all its debts and liabilities is to go to some other society as may be determined by the votes of three-fifths of the members present personally or by proxy at the time of the dissolution, or, in default thereof, by the Court having jurisdiction in that behalf. Do these provisions of the Societies Registration Act, XXI of 1860, constitute the society as registered with the Registrar of Joint Stock Companies a legal entity capable of suing or being sued? Has the society as registered with the Registrar of Joint Stock Companies a legal existence apart from the members constituting the same ? It is significant to observe that the members of the society are a fluctuating body. A member of the society is a person who having been admitted therein according to the rules and regulations thereof has paid the subscription or signed the roll of the members thereof and has not resigned according to the rules and regulations. The governing body of the society is the governors, council, director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same and is capable of suing or being sued. It may, however, be urged that there are provisions in the Societies Registration Act which would go to show that suits by or against the society have got to be filed in a particular manner, viz., every society registered under the Act may sue or be sued in the name of the president, chairman, or principal secretary, or trustees, as shall be determined by the rules and regulations of the society, and, in default of such determination in the name of such person as shall be appointed by the governing body for the occasion ; provided that it shall be competent for any person having a claim or demand against the society to sue the president or chairman, or principal secretary or the trustees thereof, if on application to the governing body some other officer or person be not nominated to be the defendant. These provisions and the provisions for the non-abatement of suits and enforcement of judgments against the society would go to show that the society even though registered with the Registrar of Joint Stock Companies would not be able to sue or be sued in the name of the society but could sue or be sued only in the name of the president, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action, any more than a tradesman could sue a defendant in the name of a West-end club for goods supplied by him to that club, for the simple reason that the name of a club is not the name of a corporation nor of an individual nor of a partnership, which, apart from statute, are the only entities known to the law as being capable of being sued. In order, there fore, that this action can be maintained against the defendants in the name of 'The Amalgamated Society of Railway Servants,' there must be some statute enabling this to be done either by creating the society a corporation or enacting that it may be sued in its registered name; and this, as the learned Judge states and in this I also agree depends upon the true con struction of the Trade Union Acts of 1871 and 1876 . When once one gets an entity not known to the law, and therefore incapable of being sued, in our judgment, to enable such an entity to be sued, an enactment must be found either express or implied enabling this to be done, and it is incorrect to say that such an entity can be sued unless there be found an express enactment to the contrary. Where in the Trade Union Acts is to be found any enactment, express o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of many thousands of separate individuals, which no longer exists under any other name. The very omission from the statute of any provision authorizing and directing that it shall sue and be sued in any other name than that given to it by its registration appears to me to lead to no other reasonable conclusion than that in so creating it, it was intended by the Legislature that by that name and by no other it should be known, and that for all purposes that name should be used and applied to it in all legal proceedings unless there was any other provision which militated against such a construction, as, for instance, in the case of trustees, by section 9 of the same Act, who hold real and personal property of the society." Lord Lindley observed (pages 444, 445): "The Act does not in express terms say what use is to be made of the name under which the trade union is registered and by which it is known. But a trade union which is registered under the Act must have a name...It may acquire property, but, not being incorporated, recourse is had to the old well-known machinery of trustees for acquiring and holding such property, and for suing and being sued in respect of it (sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade union as a "species of quasi corporation." [See also note ( q ) in Halsbury's Laws of England, Hailsham Edition, Vol. VIII, page 2, "Registered Trade Union is not a Corporation but a legal entity governed by special rules," and also Halsbury's Laws of England, Hailsham Edition, Vol. XXXII, page 486, para. 776, "A registered trade union is not a corporation nor an individual nor a partnership ; but it becomes by registration a legal entity distinct from an unregistered trade union. Its registered name is to be used and applied in all legal proceedings, unless there is any provision inconsistent with such use."] I am of opinion that the provisions contained in sections 6, 7 and 8 of the Societies Registration Act are not inconsistent with the user of the registered name of the society in connection with legal proceedings. As Lord Lindley observed in Taff Vale Railway Company's case [1901] A.C. 426, "I do not say that the use of the name is compulsory but it is at least permissive." If this is the true legal position of a society registered under the Societies Registration Act, the objection of Mr. R. S. Billimoria that the plaintiffs and the defendants are one and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration with the Registrar of the Joint Stock Companies under the provisions of the Societies Registration Act. Every member of a corporation or an incorporated company joints the same on the basis that prima facie the majority of its members is entitled to exercise its powers and control its operations generally. The same would be the position in the case of unincorporated associations of individuals whether the same be registered under the Societies Registration Act or not. The rule of the majority is the normal basis of these associations. The members of these associations do join these associations whether incorporated or unincorporated, whether registered or unregistered, knowing full well that the affairs of these associations would be conducted normally by the vote of the majority of the members thereof. In the absence of any specific rules and regulations governing the conduct of these affairs, this would be the normal presumption, and no member who joins any association would be heard to contend to the contrary. If unanimity of opinion were needed for the passing of any proposition, it would have to be expressly provided for. In the absence of any such provision the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by Mr. R.S. Billimoria. According to my reading of the authorities if the Court came to the conclusion that the acts complained of fall within the latter category, the plaintiffs would under those circumstances be entitled to institute a suit on behalf of themselves and all other members of the society except the defendants making the society and the defendants party defendants to this suit and it would not be necessary to obtain the previous sanction and consent of the society for the institution thereof, simply because the control of the affairs of the society is in the hands of the majority whose acts are complained of and it would be futile to attempt to obtain the sanction and consent of the society for the institution of the suit, it being an absolute certainty that no such sanction and consent would ever be available to the plaintiffs. Two principles emerge clearly from the authorities and they are (1) that the Court will not interfere with the internal management of the companies acting within their powers and in fact has no jurisdiction to do so, and (2) that in order to redress a wrong done to a company or to recover money or damages alleged to be due to a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters, and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v. Holt [1840] 4 Myl. Gr. 619, at p. 635; see also Adlev v. Whitstable Company [1809-10] 17 Ves. 320, per Lord Eldon and other cases, would apply, and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations are required to sue. But, on the other hand, it must not be without reasons of a very cogent character that established rules of law and practice are to be departed from, rules, which, though in a sense technical, are founded on general principles of justice and convenience, and the question is, whether a case is stated in this bill, entitling the plaintiffs, to sue in their private character. ..but the majority of the proprietors at a special general meeting assembled, independently of any general rules of law upon the subject, by the very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 800): "The bill expressly alleges that a large majority of the shareholders are of the same opinion with them (the plaintiffs); and, if that be so, there is obviously nothing to prevent the company from filing a bill in its corporate character to remedy the evil complained of." Finally he relied on the ground that it was without precedent for the Court to interfere "solely on the ground of the supposed invalidity of the title of persons claiming to be corporate officers." In Lord v. Governor and Company of Copper Mines [1848] 2 Ph. 740, demurrer of a bill by one of the shareholders of an incorporated mining company on behalf of himself and all other shareholders except the members of the governing body who were the defendants, impeaching several transactions of that body which it appeared had been sanctioned by majorities at general meetings of the shareholders and amongst which was a project to vest all the property of the company in trustees for the purpose of liquidating its affairs was allowed notwithstanding some vague and general charges of fraud and misconduct on the part of the defendants and an allegation that by the constitution of the company no one but the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has been laid down in the case of Goodfellow v. Nelson Line (Liverpool) Ltd. [1912] 2 Ch. 324 which has been approved by the Judicial Committee of the Privy Council in British America Nickel Corporation v. M. J.O' Brien [1927] AC 369 . In the latter case Viscount Haldane observed (pages 371, 373): "There is, however, a restriction of such powers, when conferred on a majority of a special class in order to enable that majority to bind a minority. They must be exercised subject to a general principle, which is applicable to all authorities conferred on majorities of classes enabling them to bind minorities; namely, that the power given must be exercised for the purpose of benefiting the class as a whole, and not merely individual members only. Subject to this, the power may be unrestricted. But their Lordships do not think that there is any real difficulty in combining the principle that while usually a holder of shares or debentures may vote as his interest directs, he is subject to the further principle that where his vote is conferred on him as a member of a class he must conform to the interest of the class itself when seeking to exercise the power conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable that a majority, on failing to purchase the shares of a minority by agreement, can take power to do so compulsorily. ...In default of further capital the company might have to go into liquidation. The plaintiff is willing to risk that...It is merely for the benefit of the majority. If passed, the majority may acquire all the shares and provide further capital. That would be for the benefit of the company as then constituted. But the proposed alteration is not for the present benefit of this company." This discussion as to the power of the majority to bind the minority contains within itself the limitations on the power of the majority. Subject to those limitations, however, the powers of majority are supreme in matters of internal management of the company. As was observed by James, L.J., in MacDougall v. Gardiner [1875] 1 Ch. D. 13: "I think it is of the utmost importance in all these companies that the rule which is well-known in this Court as the rule in Mozley s case ( supra ) and Lord v. Copper Mines' Company [1848] 2 Ph. 740 and Foss s case ( supra ) should be always adhered to; that is to say, that nothing connected with internal disputes between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rule should be adhered to that if it is a thing which the majority are the masters of, the majority in substance shall be entitled to have their will followed? If it is a matter of that nature, it only comes to this, that the majority are the only persons who can complain that a thing which they are entitled to do has been done irregularly; and that, as I understand it, is what has been decided by the cases of Mozley s case ( supra ) and Foss s case ( supra ) . In my opinion that is the rule that is to be maintained. Of course if the majority are abusing their powers, and are depriving the minority of their rights, that is an entirely different thing, and there the minority are entitled to come before this Court to maintain their rights; but if what is complained of is simply that something which the majority are entitled to do has been done or undone irregularly, then I think it is quite right that nobody should have a right to set that aside, or to institute a suit in Chancery about it, except the company itself." This supremacy of the majority is therefore subject to the following exceptions which are laid down in the authorities, viz., (1) where the act complaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be within the powers of the company and the intention of the majority of the shareholders is clear. This may be illustrated by the judgment of Mellish, L.J., in MacDougall v. Gardiner [1875] 1 Ch. D. 13, at p. 25 . There is yet a third principle which is important for the decision of this case. Unless otherwise provided by the regulations of the company, a shareholder is not debarred from voting or using his voting power to carry a resolution by the circumstance of his having a particular interest in the subject-matter of the vote. This is shewn by the case before this Board of North-West Transportation Company v. Beatty [1887] 12 App. Cas. 589 . In that case the resolution of a general meeting to purchase a vessel at the vendor's price was held to be valid, notwithstanding that the vendor himself held the majority of the shares in the company, and the resolution was carried by his votes against the minority who complained." This position is further emphasised by another decision of their Lordships of the Privy Council reported in Dominion Cotton Mills Company, Limited v. Amyot [1912] AC 546 . In that case Lord Macnaghten observed (page 551): "The principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jessel, M.R., proceeded to observe (page 480): "That I take to be the correct law on the subject. It remains to consider what are those exceptional cases in which, for the due attainment of justice, such a suit should be allowed. We are all familiar with one large class of cases which are certainly the first exception to the rule. They are cases in which an individual corporator sues the corporation to prevent the corporation either commencing or continuing the doing of something which is beyond the powers of the corporation. Such a bill, indeed, may be maintained by a single corporator, not suing on be half of himself and of others, as was settled in the House of Lords in the case of Simpson v. Westminster Palace Hotel Company [1860] 8 HLC 712 ...But that is not the only case. Any other case in which the claims of justice require it is within the exception. Another instance occurred in the case of Atwool v. Merryweather [1867] 5 Eq. 464 N in which the corporation was controlled by the evildoer, and would not allow its name to be used as plaintiff in the suit. It was said that justice required that the majority of the corporators should not appropriate to themse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y passed special resolution. In such an action the plaintiffs have no larger right to relief than the company would have if plaintiff; they cannot complain of acts which are valid if done with the approval of the majority of shareholders, or are capable of being confirmed by the majority, and can only maintain their action when the acts complained of are of a fraudulent character or are ultra vires of the company, mere irregularity or informality which can be remedied by the majority being insufficient." The reason for this exception is very forcibly brought out in the observations of Sir W.M. James, L.J., in Menier v. Hooper's Telegraph Works [1874] 9 Ch A 350, at p. 353: "It is said, however, that this is not the right form of suit, because, according to the principles laid down in Foss v. Harbottle 45 , and other similar cases, the Court ought to be very slow indeed in allowing a shareholder to file a bill, where the company is the proper plaintiff. This particular case seems to me precisely one of the exceptions referred to by Vice Chancellor Wood in Atwool v. Merryweather [1867] 5 Eq 464 N, a case in which the majority were the defendants, the wrongdoers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd principle, viz., that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. I shall now turn to the facts of the present case, having regard to the principles enunciated above. The resolutions dated October 8, 1944, and January 21, 1945, which are complained of by the plaintiffs have been challenged inter alia on the ground that the same have been passed in fraud of the rights of the minority and against the interests of the said society. Even though when arguing issue No. (4- a ) at the commencement Mr. M.V. Desai gave me to understand that he was not relying upon fraud as such in support of his contentions as regards the said resolutions, it became abundantly clear whilst arguments proceeded, that the statement which he made to me on the earlier occasion was due to some misapprehension. He made it clear that he was relying upon fraud alleged to have been perpetrated by the majority of the members of the society upon the minority consisting of the plaintiffs and several others in the matter of the passing of the said resolutions and expressed his w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on behalf of themselves and all other members of the society. I may observe that for the purposes of this decision of mine I am not discussing any further the nature of the fraud which is alleged to have been perpetrated by the majority on the plaintiffs and the other members who constitute the minority of the members of the society. The fraud alleged is not particularised with such detail as it should have been done and it is necessary that the plaintiffs should furnish to the defendants the particulars of the fraud alleged by them in paras. 4( b ) , 4( c ) and 16 of the plaint. I may none the less refer to the observations of Marten, J., in Vadilal v. Maneklal [1925] 49 Bom. 291: "Where fraud is alleged, and where consequently it is alleged that the suit is within one of the recognised exceptions to the principles laid down in Foss s case ( supra ) , it will, I think, in general be found that the case is allowed to go to trial to ascertain the facts before it is finally determined whether the action of the majority can in fact bind the minority. This is because until the facts are ascertained with some distinctness, it is difficult to say what is the precise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Chancery, 5th edition [1847], at page 414, instances where suits were allowed to be filed even though the defendants were also included in the category of the plaintiffs, as for example: "Where a suit is instituted for the payment of a sum of money, in the nature of a debt, due to the whole body of the shareholders of a company, the suit may be instituted by one of the shareholders on behalf of himself and all the other shareholders. And in such a case, although the payment may be claimed from the directors, who are made defendants for that purpose, it is correct not to except them out of the number of shareholders on whose behalf the bill is expressed to be filed ; because they are not sued as shareholders, but as directors, and, in their character of shareholders, they would be entitled to participate in the fruits of the suit: Mocatto v. Ingilby [1836] 5 LJ Ch. (N.S.) 145 . And in like manner where two or more shareholders in a numerous joint-stock company sue on behalf of themselves and all other shareholders, and one of the shareholders has acted as the agent of the company, the plaintiffs may sue on his behalf in his character as shareholder, although they may mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the plaint discloses any cause of action against them and whether they are necessary parties to the suit. In this connection it may be observed that in para. 1 of the plaint they have been described as "some of the members of the managing committee of the said society," and are stated there to have been sued on behalf of themselves and all members of the managing committee of the society. In para. 16 of the plaint it is alleged that the managing committee are about to complete the sale of the Shenwewadi property and purchase of the Bangadwadi property, and in para. 17 of the plaint the plaintiffs have submitted that defendants Nos. 2 to 4 should be restrained from completing the said sale of Shenwewadi property and purchase of Bangadwadi property and from acting on the said resolution dated October 8, 1944, and carrying the same into effect. The prayer ( c ) of the plaint is based on these allegations against defendants Nos. 2, 3 and 4. When one turns to the written statement of defendants Nos. 2 to 4, they merely aver that the plaint discloses no cause of action against them and that they are unnecessarily made parties to the suit. There is no denial of the allegations which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amin. (1) In the affirmative. (2) In the affirmative. As regards issue No. (4- a ) it is clear that the defendants are entitled to the particulars of the fraud which has been pleaded by the plaintiffs, and I cannot allow the suit to proceed in the absence of such particulars furnished by the plaintiffs. Mr. M.V. Desai strenuously urged that the various allegations which had been made by the plaintiffs in the plaint were sufficient to constitute fraud and that there were sufficient particulars of fraud available in the plaint itself. A careful perusal of the relevant paragraphs of the plaint, however, reveals that there are no sufficient particulars of fraud which could be culled out from the various allegations contained therein and that on the vary statement of the case made by Mr. M.V. Desai in his opening there were various facts which were relied upon by him as constituting fraud which did not find their place in the various paragraphs of the plaint relied upon by him for the purpose. I have therefore come to the conclusion that the plaintiffs are bound to furnish to the defendants the particulars of the fraud which they want to rely upon in support of their contentions set ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
