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TMI Blog1958 (1) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... only evidence led is documentary evidence, the same being relevant and necessary for the purpose of the decision herein. It is therefore not necessary to set out the contentions as contained in the pleadings of the parties. It will suffice to set out the facts which give rise to the disputes herein. The first defendant company is a private limited company. At all relevant times the plaintiff and the defendants Nos. 2 to 8 have been directors of the first defendant company. The first defendant company are the managing agents of two public limited companies, being the Kamani Metals and Alloys Ltd. and the Kamani Engineering Corporation Ltd. The plaintiff and the eighth defendant are directors of another private limited company called the Shanta Brothers Private Ltd., the plaintiff being also the chairman of the board of directors, thereof. A finance agreement which is recorded in writing dated 14th May, 1954, was arrived at between the said Shanta Brothers Private Ltd. and the first defendant company, whereby the former agreed to lend to the latter a sum of Rs. 28 lakhs on the terms and conditions recorded in that writing. That agreement in writing is exhibit F before me. Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be appointed a director; (e) see that the respective holders of the said shares shall cast their votes at any meeting of the said Kamani Brothers Ltd., Kamani Metals and Alloys Ltd. and Kamani Engineering Corporation Ltd. in accordance with the directions of the lenders and not otherwise and give their proxies to such person or persons as they the lenders may nominate and procure to the lenders an undertaking in that behalf from the respective holders of the said shares." In pursuance of the said finance agreement the said Shanta Brothers Private Ltd. lent and advanced to the first defendant company the aggregate sum of Rs. 28 lakhs and created the stipulated pledge and equitable mortgage. Towards the end of February, 1956, the said Shanta Brothers Private Ltd. nominated and the first defendant company accepted the plaintiff as a director of the first defendant company under the provisions of clause 7(b) of the said finance agreement and similarly the said Shanta Brothers Private Ltd. nominated and the first defendant accepted the eighth defendant a director under the provisions of clause 7(c) of the said finance agreement. The said respective appointments of the plaintiff an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Directors may appoint managing directors and/or executive director. The directors may from time to time appoint any one or more of their body to be managing director or managing directors and/or executive director for such period and upon such terms as they think fit, and may vest in such managing director or managing directors and/ or executive director such of the powers hereby vested in the directors generally as they may think fit and such powers may be exercisable for such period or periods and upon such conditions and subject to such restrictions, and generally upon such terms as to remuneration and otherwise as they may determine. The remuneration of a managing director and/or executive director may be by way of salary or commission or participation in profits, or by any or all of those modes." "100. Special position of managing director and/or executive director. A managing director or managing directors and/or executive director shall not while he continues to hold that office be subject to retirement by rotation and he shall not be taken into account in determining the rotation of retirement of directors, but he shall, subject to the provisions of any contract betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the work of the Kamani Engineering Corporation Ltd. with immediate effect. A meeting of the board of directors of the first defendant company was scheduled to be held on September 21, 1957. An agenda for the said meeting as also a supplementary agenda for the same were circulated amongst the directors of the first defendant company. The said agenda and the supplementary agenda have been put in as exhibit D collectively. In view of the case as argued such agenda and supplementary agenda are not at all relevant. For certain reasons which are not relevant the said board meeting stood adjourned to September 23, 1957. On September 23, 1957, the said adjourned board meeting was held. Agreed portions of the minutes of that meeting have been put in as exhibit 5. As appearing from the said minutes the said meeting passed the following resolution: "In view of the consensus of opinion of the majority of the board of directors that the arrangements earlier resolved of division of responsibilities between the managing director and joint managing director having not worked as desired by the resolution dated June 24, 1957, the resolution of the board of directors dated June 24, 1956, appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of 10,450 shares whereas the group of the plaintiff and the defendants Nos. 7 and 8 effectively control the voting rights in respect of 4,550 shares. At the hearing of the suit, after the pleadings were read, five issues only were raised originally, the same being as suggested by Mr. Munshi on behalf of the first, defendant company. The respective counsel appearing for the defendants Nos. 2 to 6 joined in these issues. A reading of the pleadings shows that the same contains statements of fact on which the plaintiff wants to rely. But there are very few submissions of law which would clearly indicate what exactly is the plaintiff's cause of action. Undoubtedly it was not necessary that the plaint should contain any submissions of law. The result, however, was that the contesting defendants did not know what would be the exact cause of action which the plaintiff would formulate at the hearing on the basis of this plaint. Paragraph 17 of the plaint does contain certain submissions of law on behalf of the plaintiff. From these submissions and the prayers in the plaint at least one thing is clear, viz., that the plaintiff challenged the said resolution dated September 23, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this suit. According to him this suit is under section 42 of the Specific Relief Act, that the plaintiff is entitled to a "legal character," that that legal character of the plaintiff has been denied and that therefore the plaintiff is entitled to the declaration and injunction prayed for. He stated that the cause of action as read in the plaint by Mr. Munshi was not the correct cause of action. Inasmuch as Mr. Munshi had however advanced the said arguments, Mr. Bhatt advanced an argument to distinguish the same by stating that the wrong complained of in the plaint was an individual wrong, that the arguments advanced and the authorities cited by Mr. Munshi had no application and that therefore the plaintiff was in any event entitled to maintain the suit. In support of this contention that the wrong suffered by the plaintiff was an individual wrong and that, therefore, the plaintiff was in any event entitled to maintain the suit Mr. Bhatt cited another string of authorities. When Mr. Bhatt however stated that the only cause of action, according to the plaintiff, was under the said section 42 of the Specific Relief Act, Mr. Munshi pointed out that in view of that contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is whether the plaintiff is entitled to a "legal character" within the meaning thereof in section 42 of the Specific Relief Act. The said section 42 provides that any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right. This section therefore applies when a person is entitled to any legal character or to any right as to any property. The phrase "legal character" occurs in two statutes, viz., in section 42 of the Specific Relief Act and in section 41 of the Indian Evidence Act, but that phrase has not been defined in either of the said two Acts. There appears to be no decided case which defines "legal character" or lays down general principles for determining the same. I will therefore first reproduce the arguments of Mr. Munshi and Mr. Bhatt as to what is legal character and then proceed to see whether it is possible to define what is "legal character" or whether there are any general principles which would help in determining what is "legal character." Mr. Bhatt in his opinion relied upon paragraphs 9 to 14 of the plaint and exhibits 3, B, articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property. As regards section 2(26) of the Indian Companies Act, 1956, Mr. Munshi pointed out that the entrustment of the smallest power, e.g., like signing cheques or being sent to Indore for buying 100 bales of cotton, to a director of the first defendant company would make him a managing director within the meaning thereof under section 2(26). He further argued that the definition of "officer" under section 2(30) of the Indian Companies Act, 1956, would not include a managing director and that this shows that the office fundamentally is that of a director only, that there is no separate office of a managing director and that only when certain extra powers are delegated to a director that the director is for certain purposes termed a "managing director." As regards the meaning of "legal character" Mr. Munshi relied upon Ramakrishna Pattar v. Narayana Pattar [1914] ILR 39 Mad. 80, which is a judgment of a Division Bench of the Madras High Court. One of the contentions in that suit was that the plaintiff's suit to declare that he had contractual rights as against the first defendant did not fall under section 42 of the Specific Relief Act because it was not a suit to declare a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racter or any right as to any property. This case again shows that "legal character" under section 42 is the same as legal status. Mr. Munshi also cited two other cases, viz., Deokali Koer v. Kedar Nath [1912] ILR 39 Cal. 704 and Sheoparasan Singh v. Ramnandan Prasad Singh [1916] ILR 43 Cal. 694. Although the said two cases relate to section 42 of the Specific Relief Act, the decisions therein are confined to the facts of the particular case. The judgments do not contain any general discussion as to the meaning of "legal character" nor do they lay down any general principles for guidance as to what would amount to "legal character" under the said section 42. Mr. Munshi then referred to section 41 of the Indian Evidence Act which provides as under: "A final judgment, order or decree of a competent court, in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction, which confers upon or takes away from any person any legal character, or which declares any person to be entitled to any such character, or to be entitled to any specific thing, not as against any specified person but absolutely, is relevant when the existence of any such legal character, or the title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Munshi agreed with Mr. Munshi that it was difficult to define "legal character." As regards the said three tests mentioned by Mr. Munshi, he stated that as regards the test that an interest in property would not be included in "legal character", he pointed out that the same was obvious from the said section 42 itself, because that section provides for a declaration being made for two categories of rights, viz., legal character and any right as to any property, and, therefore, the said two categories of rights were obviously meant to be separate and distinct from each other. As regards the said second negative test suggested by Mr. Munshi, he pointed out that the same also could not be correct because under most systems of law marriage is a contract and therefore the status of husband and wife would be the result of a contract and yet, even according to Mr. Munshi, the status of husband or of wife would be legal character. He argued that therefore all rights arising under a contract were not in any event excluded from "legal character" As regards the said test suggested by Mr. Munshi that legal character would include only such status a declaration whereof would be a Judgment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal ownership would vest in the trustee and that the trustee may, therefore, sue for a declaration under section 42, because he would be entitled to a right as to property and not because he was entitled to a legal character was not proper, because courts have made declarations under the said section 42 even in the case of persons who did not own any property but were entitled only to a right to management of property, e.g., a director of policy-holders in a life insurance company in Subramania Aiyar v. United India Life Insurance Co. Ltd. AIR 1928 Mad. 1215, a mutawalli in Mahommad Jafar Husain v. Mohammad Taqi AIR 1933 Oudh 517, and in AH Shah v. Fateh Mohammad Mutwali AIR 1935 Lah. 657, and a trustee of temple who was entitled only to management, the ownership being in the deity, in Swaminatha Iyer v. Ramier AIR 1925 Mad. 421. Mr. Bhatt also cited Chapsey v. Jethabhai [1907] 9 Bom. LR 514, where the plaintiff and the defendants were trustees appointed under a deed of trust executed by members of a caste. The defendants, relying upon a resolution said to have been passed by the general committee of the caste purporting to remove the plaintiff from the trusteeship, excluded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s", "legal rights" and "legal status"? Now, what is a "right"? According to Salmond (Salmond on Jurisprudence, 10th Edition, page 229): "A right is an interest recognised and protected by a rule of right. It is any interest, respect for which is a duty, and the disregard of which is a wrong. All that is right or wrong, just or unjust, is so by reason of its effects upon the interests of mankind, that is to say, upon the various elements of human well-being, such as life, liberty, health, reputation, and the uses of material objects. If any act is right or just, it is so because and in so far as it promotes some form of human interest. If any act is wrong or unjust, it is because the interests of men are prejudicially affected by it. Conduct which has no influence upon the interests of any one has no significance either in law or morals. Every wrong, therefore, involves some interest attacked by it, and every duty involves some interest to which it relates, and for whose protection it exists... The interests which thus receive recognition and protection from the rules of right are called rights." According to Holland (Holland's Elements of Jurisprudence, 12th Edition, page 82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correlative duty are persons in general, for a right of this kind avails against all the world. The content of the right consists in non-interference with the purchaser's exclusive use of the land. The object or the subject-matter of the right is the land. And finally the title of the right is the conveyance by which it was acquired from its former owner." But, as pointed out by Holland, there are rights, in which the third element, viz., object or subject-matter, may be absent. For example, B is A's servant. Here A is the "person of inherence", reasonable service is the "act" to which he is entitled, and B is the "person of incidence" against whom the right is available. Now, the possible modes of classifying rights as also legal rights are almost infinite, but only some are of greater importance. Various modes of classifying rights would, it should be observed, have nothing to do with one another; they would be only cross divisions. If a certain type of distinguishing characteristics is taken as the basis of classification, the rights would divide themselves into two classes as judged by their distinguishing characteristics. For example, based on the incidence of correlative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that a legal right must be either proprietary, i.e., in the nature of property, or personal and it is only the latter that creates a status. For a better understanding of what is meant by "status," and to find out what is the demarcating line between a right which is a proprietary right and a right which is a personal right I will now turn to Holland. A right, as stated above, has four elements, two of which are "the person of inherence" and "the person of incidence", i.e., the person in whom the right resides and the person against whom the right is available. Holland says (page 94): "Persons are the subjects of duties as well as of rights...Persons, i.e., subjects of rights or of duties, are in general individual human beings ; but, in imitation of the personality of human beings, the law; recognises certain groups, of men or of property, which it is convenient to treat as subjects of rights and duties; as persons in an artificial sense. A 'natural', as opposed to an 'artificial', person is such a human being as is regarded by the law as capable of rights or duties ; in the language of Roman law as having a 'status'. As having any such capacity recognised by the law, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be considered under the law of persons, we must ask whether landlords as a class have any juristic peculiarities unconnected with the acts which they are entitled to demand from their tenants; such as the payment of rent, the observance of covenants, etc. They clearly have not. A landlord merely means a person who is entitled to these acts. On the other hand, suppose the landlord to be an infant; here at once a whole set of characteristics are present, modifying the right to rent, etc. and quite unconnected with it. Nor is it only because the same person sustains the two characters of infant and landlord that this is the case; a man may be a pawn-broker and landlord, but the rights as landlord will not be affected by his occupation as pawn-broker. The personality recognised in the law of persons is such as modifies indefinitely the legal relations into which the individual clothed with the personality may enter. Of such affections of personality there are two classes: (1)The person may be 'artificial', i.e., may be not a human being. (2)The person may be under disability, or may enjoy exemption, on account of age, sex, mental incapacity, crime, alienage, or public statio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not as being in any way representative of the sovereign power in the State. In public law, however, which possesses the characteristics of law in a lower degree of development, the distinction is but faintly traceable. What is analogous to the law of persons here consists in a description of the State as a whole, of its ruling body, of bodies of persons enjoying delegated ruling power, and of its constituent members as such; in short what is usually known as "constitutional law." On the other hand, the residue of public law consisting of the administrative law and the criminal law has its analogies to the law of things. Legal status of a subject may, therefore, arise in relation to private law or in relation to public law. A person's franchise or right to vote or right to a public office would constitute his status in relation to public law and it was such status which was the subject-matter of the said case of Sat Narain v. Hanuman Parshad AIR 1946 Lah.85, and was held to be "legal character" within the meaning of section 42 of the Specific Relief Act. As seen earlier, status arises by reason of some peculiarity of the person of inherence or the person of incidence. The person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts, are the powers entrusted to the managing director as mentioned in the above definition. It is the company which is the person of incidence, that is the person against whom the powers or rights as managing director would be available. It may be that not only the company, that is, the first defendant company, but even the plaintiff's co-directors may perhaps fall within the category of persons of incidence. I do not think it necessary to analyse and ascertain whether the plaintiff's co-directors would or would not be persons of inherence. I will assume that they do fall within that category of persons of incidence. But to my mind it is quite clear that whatever powers or rights the managing director is entitled to are by reason of the particular entrustment. It is the particular entrustment, that is, the particular agreement or resolution or memorandum or articles of association mentioned in the said section 2(26), which fully determines the nature and extent of that power or right of the managing director. The personality of a managing director has no peculiarity, and certainly no peculiarity unconnected with or independent of his said right or power as a managing director, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llustration have a legal status, as they have a peculiarity of personality as in the case of a minor which exists independently of any particular right which they claim and which they can enforce against the persons of incidence. It is in this sense that "official position" or "office" has been used in the said 8th variety and as seen earlier, managing directorship cannot fall within it. On the general test mentioned above, it is clear that when rights were claimed under a contract the same would not amount to "legal character" under section 42 as held in some of the cases I have referred to above. Nor is the question whether the judgment in a particular case would amount to a judgment in rem a test of "legal character" as argued by Mr. Munshi, because the division of legal rights into rights in rem and rights in personam is of no relevance in judging legal status or legal character. Indeed, section 43 of the Specific Relief Act itself states that the declaration under Chapter VI of that Act, i.e., under section 42, would be binding only on the parties to the suit and those claiming through them, which means that it is not a judgment in rem. Nor is the ownership of any property or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenge the validity of the resolutions dated 23rd September, 1957. It is the plaintiff's case, as made out in the plaint, that on a true construction of the articles of association of the first defendant company and particularly article 100, the board of directors of the first defendant company had no power to pass the said resolutions and that the said resolutions are invalid because of that reason. Mr. Bhatt however argued that reliance has to be placed on the articles of association of the first defendant company, not by the plaintiff to complete the cause of action, but by the defendants to justify the plaintiff's removal from his managing directorship. He pointed out that it has been stated in the plaint that the plaintiff was appointed as a joint managing director and it is further stated in paragraph 17 that "the plaintiff continues to be the joint managing director of the first defendant having the powers and responsibilities assigned to him under the said resolution dated 24th June, 1957". He argued that once the plaintiff's appointment is admitted, it is for the defendants, who allege termination, to prove that there is a valid termination of that appointment. He argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such appointment of the plaintiff was capable of being terminated, and if so, in what manner; and in order to prove the same the plaintiff must rely on the articles of the first defendant company. Next, it is common ground that the plaintiff at any material time was not a shareholder of the first defendant company. Now, even between a member and the company, the articles of association constitute a contract only in respect of his rights and liabilities as a shareholder, but not in respect of rights and liabilities which he has in a capacity other than that of a member. But as between the company and outsiders, i.e., persons who are not shareholders, the articles do not in any circumstances constitute a contract of which that person can take advantage. This position in law is too clear to require reference to any authorities or even text books. The plaintiff not being a member of the first defendant company is therefore not entitled to place any reliance on the articles of the first defendant company. What is more, the plaintiff's cause of action is not, as already observed by me earlier, on the basis even of an implied contract between him and the first defendant company so that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of this argument the following passage from the judgment in the above case appearing at page 96 is relevant: "Mr. Thiruvenkatachari has sought to draw a fine distinction between the case of a person who has been removed by an authority incompetent to do so and by a person wrongfully removed by a competent authority. In the present case, however, the incompetence of the board of directors is sought to be inferred from the articles of association themselves, which plaintiff cannot, for this purpose, invoke so as to give him a cause of action." In my opinion this passage applies with equal force to the identical arguments advanced by Mr. Bhatt. I may repeat that in my opinion the plaintiff is not entitled to place any reliance on the articles of association of the first defendant company in support of any cause of action in this suit. Prayer (c) of the plaint asks for an injunction. The injunction as prayed for therein really divides itself into two parts. The first part is to restrain the defendants from acting upon or in pursuance of the said resolutions dated September 23, 1957; and the second part is to restrain the defendants from interfering with the plaintiff's rights an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the plaintiff is such that it has merely to be stated to be rejected. The declaration as well as the injunction are both of them reliefs and both are based on the plaintiff's claim that he is entitled to legal character. If that claim to legal character itself is negatived, how can the plaintiff get either of the two reliefs? It must be remembered that the whole claim in suit is based on the plaintiff's claim to legal character and that only. It is not the plaintiff's case, nor has it been argued, that the plaintiff has any claim otherwise than that on the basis of legal character under section 42. That being so, once it is held that the plaintiff is not entitled to legal character, the plaintiff would not be entitled not only to the declaration but also to the injunction prayed for. It is quite likely that because of this clear position Mr. Bhatt did not develop his argument in this behalf and rested content only by citing the said case. But even that case is not an authority in anyway supporting the present contention of Mr. Bhatt. I am inclined to infer that this argument was not intended to be seriously pressed. But whether intended to be seriously pressed or not, as I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be for such period and upon such terms as the directors think fit. Article 99 deals with the appointment of a person who is already a director as managing director and with vesting of powers in him. So far there is no controversy between the parties as regards the interpretation of the relevant article. The controversy is as to how a managing director is to be removed from his office as managing director and how are the powers vested in him as the managing director to be removed. A managing director is, as already seen, a director with certain additional powers vested in him as the managing director and the controversy before me is confined only to the question of the removal of such additional powers vested in him as managing director. The question is to be judged on the basis-which basis is common to both the sides-that upon the removal of the managing director as managing director, that is, upon the removal of his additional powers as managing director, he would be relegated to his original position as a director and would continue to be such director with the same rights and powers and obligations and liabilities which attached to his directorship immediately before his appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of article 114 is to be read as if it was bodily reproduced and incorporated in article 100. If so read, article 100 is to be construed as providing that a managing director shall be subject to removal by the company by an extraordinary resolution. The plaintiff further contended that since April 1, 1956, when the Companies Act, 1956, came into force the said words "extraordinary resolution" have, by reason of section 651 of that Act, to be read as "special resolution," such special resolution being defined by section 189 of that Act. The plaintiff therefore contended that article 100 so construed provides that it is the company which has the power, by a special resolution, to remove a managing director in the said sense of taking away his additional characteristics and powers as a managing director leaving his original appointment as a director unaffected and that therefore the said resolutions dated September 23, 1957, which were passed by the board of directors are of no effect, the board having no such power to remove a managing director. On the other hand, according to the first defendant company, the said construction placed by the plaintiff on article 100 is incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral meeting resolves that his tenure of office of managing directorship be determined but that there is no such specific provision contained in article 100 and that is because the same has been provided for by providing that a managing director shall be subject to removal as the other directors of the company and thereby providing for the removal of a managing director the same mode as is provided by article 114 for the removal of a director. It was argued that on the parallel of regulation 72 article 100 must be construed as containing a provision for the removal of a managing director. This argument is intended to meet the argument on behalf of the first defendant company that article 100 does not in any way provide for the determination of managing directorship at all. In my opinion this argument urged on behalf of the plaintiff is not well founded. Undoubtedly regulation 72 must have been used as a basis or as a precedent for drafting articles 99 and 100. To a certain extent the subject dealt with, the provisions, and even the wording of regulation 72 and articles 99 and 100 are common. But the wording is materially altered and what I have to construe is the actual provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd/or executive director" were absent. Article 100 divides itself into three parts which, without any change or omission would read as follows: "A managing director or managing directors shall not while he continues to hold that office be subject to retirement by rotation and he shall not be taken into account in determining the rotation of retirement of directors, but he shall, subject to the provisions of any contract between him and the company be subject to the same provisions as to recognition and removal as the other directors of the company, and if he ceases to hold the office of directors he shall ipso facto and immediately cease to be a managing director." The said first and third parts clearly provide as to the directorship of a person who is a director and also a managing director. Articles 107 and 108 provide for retirement by rotation and, therefore, the first part of the article 100 provides that a managing director while he continues to hold the office as managing director shall not be subject to retirement by rotation and shall not be taken into account in determining the rotation of retirement of directors. A managing director, as already seen, is first a dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectorship automatically results without anything else being required to be done thereafter. Therefore on the happening of such contingency the director can be said to cease to be capable of being recognised as a director of the company. It is in this meaning that the word "recognition" has been used in the second part of article 100, and recognition of a director would mean the person's continuation in office as a director. It appears to refer to the stage when a person continues to be in his office of a director and which stage terminates when he ceases to be a director under article 98 of the articles of association of the first defendant company. This appears to be the only possible meaning because both recognition and removal deal with a common subject, viz., determination of the directorship, and at the same time the two would not overlap, as "recognition" would apply in cases where such termination is brought about automatically without requiring a voluntary act of an outside agency to bring it about, whereas "removal would require a voluntary act of an outside agency." "Recognition" of a director refers to the stage when a person continues to be a director and has not cease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would include at least the said three types of directors, and the agency which can remove and the method of removal are different in the case of each of them. If so, there is no justification for singling out only that which is applicable to the removal of an ordinary director only and omit that which is applicable to the removal of the other two types of directors. Why read the relevant provisions of only article 114 into article 100 and not those of article 93(a) or article 93(b)? And that raises a further question as to why this second part of article 100 contains such a vague provision when it mentions "other directors" without specifying "ordinary director," if it was "ordinary director" which was intended to be referred to here? I think this vagueness or confusion results because the very foundation of the argument of the plaintiff is incorrect. This second part is not, in my opinion, at all intended to provide for the removal of a person from his managing directorship. The whole article 100, that is all its three parts, provides as to what is the position of a person as a director when that person is a director and also a managing director. As article 100 divides itself into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The first part says "a managing director shall not while he continues to hold that office be subject to retirement by rotation". The question arises "retirement by rotation" as what? Certainly not as a managing director. Neither the Companies Act, old or new, nor the articles of the first defendant company provide for retirement by rotation of a managing director. It must mean "retirement by rotation" as a director. A retirement by rotation as a director is provided for both by the Companies Act and even by articles 107 and 108 of the articles of association of the first defendant company itself; and even Mr. Bhatt did not dispute that the "retirement by rotation" in the first part must be as a director. But what is more, the words, "as a director" are, as I said, present here in the first part by implication because the subsequent words in the first part itself are "and he shall not be taken into account in determining the rotation of retirement of directors". The use of the last word "directors" makes it clear that the retirement by rotation mentioned in the first part is retirement by rotation "as a director." There is also a still further reason why the second part must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as: "the words 'from time to time' are words which are constantly introduced where it is intended to protect a person who is empowered to act from the risk of having completely discharged his duty when he has once acted, and, therefore, not being able to act again in the same direction. The meaning of the words 'from time to time' is that after he has made one order he may make a fresh order to add something to it, or take something from it, or reverse it altogether." The Act did not specifically authorise the Lord Chancellor to revoke the order, but the words were construed to include the power to "reverse it altogether". On the same analogy and reasoning the use of the words "from time to time" in article 99 indicates that the directors have been given the power not only to appoint a managing director and to vest powers in him as mentioned in that article, but also to reverse the same, i.e., revoke his appointment or withdraw all or some of the powers vested in him. Article 99 is merely a delegation by the company to the directors of its powers to appoint a managing director. In Foster v. Foster [1916] 1 Ch. 532, article 99 of the company in that case contained, so far as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the exercise of powers the relationship is that of principal and agent and sub-agent as mentioned above. Looked at in that perspective, under section 193 of the Indian Contract Act, the agent, namely the board of directors, stands in the position of a principal in relation to the sub-agent, namely, the managing director; and under section 203 of that Act, subject to the exceptions and conditions mentioned in that section, with which exceptions and conditions we are not concerned in this case, a principal can revoke the authority given to the agent and, therefore, the board of directors as the principal of the managing director can always revoke the authority of its agent, the managing director. A revocation of all powers is tantamount to removal and, therefore, even on this position the board of directors of the first defendant company has, under article 99, a power to remove the managing director, although such a power of removal has not been expressly given by that article. I will now turn to the said case of Foster v. Foster [1916] 1 Ch. 532 which I have mentioned earlier. The articles of association of the company in that case contained an article No. 89 which was si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay it is argued that the appointment of the plaintiff as sole managing director was for such time as he should be a director. Here the question depends on article 99, under which 'The directors may, subject to the preceding clauses, from time to time appoint any one or more of their body to be managing director or directors, for such period, at such remuneration, and upon such terms as the directors think fit.' In this case, also, it appears to me that the directors have power from time to time to appoint any one or more of their body to be managing director or directors, and it does not involve as a consequence that if they are dissatisfied with the person whom they have appointed managing director, or think that another of their body would fill the position more adequately, they are unable to substitute a new managing director in place of the old one." From this passage it is clear that when the learned Judge used the words "substituting a new managing director in place of the old one" it was meant removing the old managing director and appointing a new one in his place. It is not disputed even on behalf of the plaintiff before me that the provisions of that article 99, so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im by Tomlin K.C. that it was the company and not the board who had the power to remove the plaintiffs from his managing directorship. This case is, therefore, a direct authority for the proposition that on that article, the wording whereof was materially the same as that of article 99 of the first defendant company, even though there is no specific power granted to the directors for the removal of the managing director, such a power has been impliedly granted to them by that article. Mr. Bhatt relied upon the case of Nelson v. James Nelson and Sons Ltd. [1914] 2 KB 770. The articles of association of the company in that case contained article 84 which empowered the board to exercise all the powers of the company subject to the limitations mentioned in that article, and article 85 empowered the board to appoint from time to time any one or more of their number to be managing director and with such powers and authorities, and for such periods as they deem fit, and to revoke such appointment. In construing those article Lord Reading C.J. says in his judgment at page 776 as follows: "One of those powers is to appoint a managing director-I draw particular attention to these words-'fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But to my mind it does not in any way detract from the said judgment of Peterson J. It is quite possible that the above remarks of Lord Reading being mere obiter dicta and not being the result of a full argument in the case or a considered opinion of the learned Judge were not cited in Foster v. Foster [1916] 1 Ch. 533. Therefore, if it was necessary, I would have held that the board of directors of the first defendant company did have the power to revoke the appointment of the plaintiff as joint managing director and that, therefore, the said resolutions dated 23rd September, 1957, were not ultra vires the powers of the board of directors. I may mention that there were certain other points argued both by Mr. Munshi and by Mr. Bhatt. These were, however, in the nature of further alternative arguments and in view of my above judgment, I do not think it necessary to complicate my judgment further by dealing with such further alternative arguments. One of such further alternative arguments, which was advanced by Mr. Munshi, was that even if I were to hold that the plaintiff was entitled to a legal character within the meaning of section 42 of the Specific Relief Act, I should not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the circumstances my answers to the issue are: Issue No. 1: Not pressed by Mr. Munshi. I may repeat that some time after this issue was raised Mr. Bhatt made it clear that the cause of action in the plaint was on the basis of a claim to a legal character under section 42 of the Specific Relief Act and thereupon Mr. Munshi did not press this issue. Moreover, to avoid any possible misunderstanding, I may note that this issue was raised immediately after the pleadings were read and does not cover and was not even intended to cover the contention that the plaintiff is not entitled to rely upon the articles of association of the first defendant company for the reliefs claimed in the suit. This latter contention was urged by Mr. Nathwani at a much later stage in the case and it was some time thereafter, that a further issue, being issue No. 11, was raised to cover this contention. Issue No. 2: Unnecessary to decide. See judgment. If necessary I would have answered this issue in the affirmative. Issue No. 3: Unnecessary to decide. See judgment. If necessary, I would have answered this issue in the negative. Issues Nos. 6, 7 and 8: Unnecessary to decide. See judgment. If necessary, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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