TMI Blog1948 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation are contained in Ex. P-29. The Memorandum of Association prohibits the division of profits by way of dividend amongst the members, and they have to be utilised only for the purpose of the club. There are two classes of members, namely, club members and stand members. There are about 260 club members, and they alone are entitled to vote, while the stand members have certain other privileges, but not the right to vote. The management of the business of the Club is vested in six Stewards who must be club members. They occupy the position of the directors of a company and discharge similar functions in respect of the Club. The Articles provide as usual for the qualification for Stewards, for their retirement by rotation, filling up of vacancies, and also their powers and duties. After every annual general meeting of the club the senior Steward is elected at the first meeting of the Stewards, who is to preside at every meeting of the Stewards. The quorum for a meeting of the Stewards is fixed at three. They are charged with the duty of calling for a general meeting annually and also, on the requisition of a prescribed number of members, calling for an extraordinary general me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... altered without the previous approval of the Government having been obtained in that behalf, the licence granted by the Government shall be deemed to have become void." In view of this requirement the special committee directed the solicitors of the Club to draft the necessary resolutions in proper form altering the Articles of Association in the manner suggested, and at a subsequent meeting of the 26th of September, 1947, in which some more alterations were suggested, the Club's solicitors were also requested to further revise the draft and send it to the Government for approval. The solicitors sent the revised draft to the Government on the 29th of September, 1947 (Ex. P-5). On the 11th of October, 1947, the Government approved the revised Articles of Association proposed by the Club but with one modification relating to Article 69. The Government also pointed out that the revised Articles of Association should be adopted by passing a special resolution under section 81(2) of the Indian Companies Act. Section 20 of the Indian Companies Act also requires a special resolution to alter or add to the existing Articles. On the 15th of October, 1947, the special committee at its meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and jockeys; and ( d ) That arrangement be made to serve Refreshments also. N.B. (1) A print of the proposed amended Articles of Association will follow shortly. (2) Each nomination of a Club member as a candidate for election to the Managing Committee should be signed by two Club members and sent to the Secretary fourteen clear days before the date of meeting." This notice, it is common ground, was posted at Guindy on the 16th October. About the same time notice of the annual general meeting of the Club fixed to 18th November, 1947, was also issued to the members. The extraordinary general meeting was also advertised in the Hindu of 18th October, 1947, (Ex. P-10) and the Madras Mail of even date (Ex. P-11.) In pursuance of this notice, Ex. P-8, the Club received 24 nominations for the membership of the Managing Committee which was communicated to the members by notice, dated 27th October, 1947 (Ex. P-12). By 29th October, 1947, the Club received notice of amendments to the Articles of Association from Messrs. T.T. Krishnamachari, G. Narasimham, A.R. Srinivasan and the Raja of Vizianagaram, and these were notified to the members by a notice of 29th October, 1947 (Ex. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vember, 1947, asked the solicitors whether the revised set of Articles was adopted by a special resolution at the meeting of the 7th, and that, if so, a copy of the resolution and a copy of the notice convening the meeting should be sent to him for reference. It was also pointed out by the Registrar that if the Articles were adopted by a special resolution, prior sanction of the Government ought to have been obtained and the Government might have to be addressed to condone the omission. To this the solicitors replied by their letter of 15th November, 1947, pointing out that there was no such necessity. The general meeting was held on the 18th at which some formal business was transacted, and the members were informed that there was no necessity to elect the Stewards as at the first meeting of the Managing Committee held on 10th of November, 1947, Mr. P. Natesan was elected Chairman and five persons were elected as Stewards. Mr. Annamalai Chettiar wrote to the Registrar of Joint Stock Companies on the 18th (Ex. P-20) that the proposed special resolution had not been put to the meeting at all by the Chairman, Mr. Natesan, on the 7th of November, 1947, and that it had not been passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is also a relief for an injunction against defenants 2 to 13. The grounds on which the reliefs claimed in the plaint were sought to be sustained before us may be catalogued as follows: (1) The meeting of the 7th of November, 1947, was not convened by the proper authority under the Articles, viz., the Stewards. (2) The notice of the meeting (Ex. P-8) which was posted on the 16th October, 1947, contravened the provision of section 81 (2) of the Indian Companies Act as 21 days were not allowed between the date of the meeting and the receipt of the notice. (3) The notice of the meeting did not contain the necessary particulars as it did not comply with the requirement that the general nature of the business should be indicated in it, the proposed amended Articles of Association not having been sent along with the notice so as to give notice thereof of 21 clear days. (4) Item No, 2 in the agenda, the special resolution relating to the proposed amendment of the Articles, was not moved or put before the meeting for being voted upon. (5) In any event even if the voting of 66 members at that meeting was in support of the special resolution, that did not constitute the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was informed that the written statement signed by him merely adopted the written statement filed on behalf of the Club. On the 15th January, 1948, Mr. Vijayaraghavan by his letter protested against this action of the solicitors and pointed out that paragraph 5 of the first defendant's written statement was highly misleading and even incorrect. According to him, when the resolution was put to vote at the meeting, 66 persons voted for, one member said he was neutral and about 30 to 35 other members did not vote either way. He pointed out that the statement in paragraph 5 of the written statement of the Club that only 67 members were present at that time was not true and that therefore he could not subscribe to it. After this protest when the written statement of the defendants 2 to 8, 10, 12 and 13 was returned the solicitors scored out his name. Mr. Vijayaraghavan filed a separate written statement engaging another counsel. Mr. Vijayaraghavan in his written statement denied the allegations in paragraph 5 of the written statement, reaffirmed the facts as stated in his letters and left other questions to be decided by the Court. Annamalai Chettiar also filed a separate written statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er even in a representative action brought by him. If the majority however act in an oppressive manner, it is not as if the minority are without a remedy. This possibility was foreseen by Sir James Wigram, Vice-Chancellor who delivered the judgment in Foss v. Harbottle [1843] 2 Hare 461 . At page 492 the Vice-Chancellor says : "If a case should arise of injury to a corporation by 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 Wallwonh v. Holt [1841] 41 ER 238, 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." In such a case where action by a shareholder is permitted, the plaintiffs would not have a larger right to relief than if the company itself were the plaintiff and are not entitled to complain of acts which are valid, if done with the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff to institute a suit questioning such resolution were to be enforced, the shareholders by a bare majority could defeat and prevent the minority from using the name of the company. The result of such a course would be indirectly to uphold the validity of a special resolution which was otherwise invalid. To avoid this result this exception was recognised in the two decisions. The rule and the exceptions thereto are also stated in Palmer's Company Law, 17th Ed., at pages 236 and 237 and Halsbury's Laws of England (2nd Ed.), Vol. 5, page 445, paragraph 728. The appellants' learned advocate placed before us the authorities bearing on the rule and the exceptions, and the respondents learned advocate did not challenge the position contended for by the appellant. It is needless to consider the authorities in detail as the substance of the decisions is as stated above. The attempt of the learned advocate for the appellants is to bring the present case under the two exceptions, namely, that the acts complained of are illegal acts, and secondly that if the special resolution was not passed or was passed illegally the effect of applying the rule in Foss v. Harbottle [1843] 2 Hare 46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their Lordships concluded." We, therefore, hold agreeing with the contention of the plaintiffs that the special resolution was not put to the meeting and was not passed. If the special resolution was, in: fact, pat to the meeting a passed by 66 voting for, we have no doubt on the evidence adduced even by the plaintiffs that there were no more than about 10 or 20, members who did not take part in the voting and therefore the 66 would constitute the required majority for declaring the resolution carried. In, view, of the finding that the special resolution was not passed, the amendment of the Articles and the consequent election of the members of the Managing Committee are wholly void. This really disposes of the suit in favour .of the plaintiffs. In fnis view it may not be necessary to consider the other objections to the meeting. However we will deal with the other objections also, as in our opinion, some of them are well founded. We now proceed to consider them in the order in which they wore enumerated earlier. The first of the objections is that the meeting was not convened by the proper authority. The Stewards constitute the, authority under the articles (Article 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, In re [1900] 2 Ch. D 230 and State of Wyoming Syndicate, In re [1901] 2 Ch. D 431 . Where the directors however met aad decided to convene a general meeting but the meeting of the directors itself was not properly convened, it was held in Browne v. La Trinidad [1887] 37 Ch. D 1 , that by reason of the irregularity of the Board meeting the general Meeting was not incapacitated from acting. In the case in Harhenv. Phillips [1883] 23 Ch. D 14 , a Board meeting of the directors was held which decided to convene an extraordinary general meeting. At the Board meeting the plaintiffs who were the directors were refused admittance to the meeting by the Secretary under the direction of persons in possession of the Board room. The plaintiffs protested and withdrew. The persons in possession of the Board room purporting to act as a Board adjourned their meeting to the next day to a different place, the office of their solicitor, and on the requisition presented to the meeting on the next day which was attended by three of the defendants, appointed a special committee to convene an extraordinary general meeting. At the meeting of the Board there was unquestionably a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of others. Section 81(2) of the Indian Companies Act provides: "A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not less than twenty-one days' notice specifying the' intention to propose the resolution as a special resolution has been duly given. Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed, and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given." It is obligatory to serve notice of the meeting of a company with a statement of the business to be transacted at the meeting on every member in the manner laid down for service of notice under the Articles. Article 49 of Table A of the Indian Companies Act which is the same as Article 50 of the Articles of the Club lays down; "Subject to the provisions of sub-section (2) of section 81 of the Indian Companies Act, 1913, relating to special resolutions fourteen days' notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Mortgage Company [1896] AC 461 , and Halsbury's Laws of England. Vol. 5, Second Edition, Page 292, para. 504 were referred to. There cattle no dispute that the principle of construction contended f6r On behalf of the respondents is correct. As Article 49 is expressly made subject to the provisions of sub-section (2) of section 81 it cannot be inferred that in construing that sub-section the Legislature intended to include the date of the meeting within the period of 21 days. It cannot be assumed that because that date was included, in other cases the Legislature intended to include it also in case of special resolutions covered by sub-section (2) of section 81. The very fact that a specific reference is made in Article 49 to include the date of the meeting within 14 days in cases in which a notice of 14 days is required is a clear indication that it was not intended to apply to cases of meetings which require 21 days' notice. Under the corresponding provisions of the English Companies Act of 1929 the Court of Chancery had to consider a similar question. Sub-section (2) of section 117 of the English Act corresponds to sub-section (2) of section 81 of the Indian Act, and Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of post, and this would be the 17th in the case of at least half the number of the members. This extraordinary contention is not supported by any decisions. Form No VIII in which a special resolution has to be communicated to the; Registrar of Joint Stock Companies was relied on. In the form one of the columns is "Date of dispatch of notice specifying the intention to propose the resolution as a special resolution or extraordinary resolution." We do not think that it is permissible to rely on the language of the form to interpret the section and the article. The date of the meeting and the date of service of notice are therefore to be excluded, and in-between the dates there should be an interval of 21 days, The notice issued to all the members therefore was inadequate and did not comply with the statutory requirement and is therefore illegal. The meeting therefore was not legally convened. The next branch of argument on behalf of the respondents in., this part of the case was that as none of the members including the plaintiffs, who though absent appointed proxies on their behalf, objected at the time of the, meeting, it must, therefore be deemed that the members Present eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate character. The proviso to section 117(2) of the English Act was added for the first time in 1929 in view of the decision in Oxford Motor Co., In re [1921] 3 K.B 32 , which decided that it was competent for the shareholders of the company acting together to waive the formalities required by section 69 of the Companies (Consolidation) Act, 1908, as to notice of intention to propose a resolution as an extraordinary resolution. In that case all the shareholders met and passed a resolution without objection and it was held that the want of notice could be waived. The Indian Companies (Amending) Act of 1936 introduced a similar proviso in section 81 (2). Under this proviso, it would be seen that the requirement as to 21 days' notice may be dispensed with by an agreement of all the members entitled to attend and vote and not merely of all the members entitled to vote and present in person or proxy at the meeting. It requires therefore an agreement of all the members of the Club in order to dispense with the requirement of 21 days' notice. The proviso in other words indicates the intention on the part of the Legislature that the provision in sub-section (2) is mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact; and in some cases it may be deemed expedient to Send printed copies of the proposed new articles with the notices. According to the decision of Kekewich, J., in Normandy v. Ind Coope Co [1908] 1 Ch 84 , the notice should Call attention to any material alterations; and in Baillie v Oriental Telephone and Electric Co [1915] 1 Ch 503, the Court of Appeal held that a notice of a proposed resolution to alter articles involving a large increase in the remuneration of the directors was invalid on the ground that the proposed increase was not fully and frankly disclosed . The notice should state that a copy of the new articles is enclosed, or that a copy of the proposed new articles may be seen at the company's office." In this case in the notice it was stated that the proposed articles would be sent shortly, and they had been posted within six days from the date of posting of the notice. In the light of the principles stated above we think that there is substantial compliance with this requirement of law and that the notice was not bad on this ground. Nor is there any force in the objection that the amendments moved relating to the proxies were not within the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated bypassing a special resolution, but that is not the question. Here is an instance where the chairman was in the position of a quasi-judicial officer, and he had to be a judge in his own cause. There was clearly a conflict between his duty and his interest. In the normal course he should have vacated the chair and requested another member who was not a candidate to take it, and this was not done. That a person cannot be a judge in his own cause is an elementary rule, and if an authority is wanted it is to be found in R ag v. Owens [1858] 28 LJ QB 316, at p 318. In Fanagah v. Kernan [1881] LR (Ireland) 8; CP 44,at pp 48,49 , it is stated: There is no more sacred maxim of our law than that no man shall be a judge in his own cause, and such force has that maxim that interest constitutes a legal incapacity to a person being a judge in every case ... It is impossible for a Court of law to allow him to exercise the function of presiding at that election of which he could influence the result. No man can preside at his own election and return himself. See The Queen v . White [1867] LR 2 QB Cas 557, at p 561 . These principles are well established, and it is unnecessa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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