TMI Blog1960 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... verned by the provisions of the Companies Act, 1956 (hereinafter called the "Act"). It is stated in the petition that Messrs. Ram Narain Prem Sukh and Sons (consisting of Birmadutt Premsukh and Keshavdeo Premsukh) were appointed managing agents of the company for a period of 31 years from the date of the incorporation by virtue of an agreement in writing dated September 3, 1938. The managing agents were entitled to appoint and remove and re-appoint from time to time two persons as directors (ex officio). They were also given power to appoint an ex officio chairman of the board of directors. The ex officio directors nominated by the managing agents were to hold office until retired by the managing agents; they were not bound to retire by rotation. In 1940, the managing agents appointed Birmadutt as an ex officio director and Seth Pratap Seth alias Motilal Manik Chand as the ex officio chairman. Motilal Manik Chand resigned whereupon Shri Umadutt Nemani was appointed ex officio chairman. In or about 1956, the managing agents intimated to the company that with effect from April 30, 1956, Birmadutt alone would be the sole ex officio director of the company. The seventeenth ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le q6 deprives a member from voting or to be present at any general meeting whilst any money due from him "in respect of any share or shares in the company" remains unpaid. It is clear to me that article 96 is irrelevant here. There is no allegation that there is any outstanding money in respect of his share. Article 97 of the company no doubt entitles only those shareholders to be present and to vote at a meeting who hold at least 5 shares in the company. But this article must be held to be inoperative as it is in conflict with section 182 of the Act. It is enacted in that section that a company shall not prohibit any member from exercising his voting right on any ground except on the grounds set out in ' section 181. And section 181 enables the company to provide in its articles that no member shall exercise any voting rights in respect of any shares registered in his name on which any loans or other sums presently payable by him have not been paid or in regard to which the company has or will exercise any right or lien. Section 181 does not allow any restriction to be imposed on the basis of the number of the shares. As such, the mandatory provisions in section 181 render arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practicable" and "impossible "are not the same. This distinction was considered in In re El Sombrero Ltd. [1958] 3 All. ER 1; [1958] 28 Comp. Cas. 619, 621 at page 4 and it was observed: "Examine the circumstances of the particular case and answer the question whether, as a practical matter, the desired meeting of the company can be conducted, there being no doubt, of course, that it can be convened and held." It is undoubted that here all the parties have themselves made out a clear case of "impracticability". In re Lothian Jute Mills Co. Ltd. [1951] 21 Comp. Cas. 290; 55 CWN 646, Indian Spinning Mills Ltd. v. Madan Shumshere Jang Bahadur [1952] 22 Comp. Cas. 162 ; AIR 1953 Cal. 355 and Bal Krishna v. Uma Shankar [1947] 17 Comp. Cas. 216; AIR 1947 All. 361 may also be seen. Shri K.L. Mishra candidly admits that having regard to the circumstances of this case, no one can reasonably object to a meeting of the company being called. This brings me to the question whether a meeting, if held by an order under section 186 of the Act, will serve any useful purpose. When I read sections 167 and 186 side by side, there is no doubt that in the present Act there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il certain formalities. In the case of an extraordinary general meeting all business, irrespective of the categories, is deemed special. In other words, whatever business is transacted at an extraordinary general meeting is "special" and requires the aforesaid preliminaries. But it is altogether a different question what business can be transacted at an extraordinary general meeting and, in particular, whether directors can be appointed at an extraordinary general meeting. This has to be determined from the relevant provisions in the Act and in the articles of the company. Shri K.L. Mishra calls attention to sections 210, 224 and 256. Under section 210, the board of directors of a company is required to lay before the company a balance-sheet and a profit and loss account at "every annual general meeting". Section 224 requires every company to appoint an auditor at an annual general meeting. Section 256 deals with the ascertainment of the directors retiring by rotation and the filling of vacancies. The argument is that a director who is liable to retire by rotation can retire only at an annual general meeting and the vacancy so created can also be filled up only at the annual gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "A" as varied by article 22 of the company's articles of association, there were thereafter no de jure directors. It is stated in Buckley on Companies Act (12th edition, page 882): " ............ if in any calendar year an annual meeting is not held under an article in this form, those directors who would have retired at the meeting had the same been held will vacate office on the last day of the year." The dictum laid down in the above authorities was followed by Rajamannar C.J. and Venkatarama Iyer J. in Anantalakshmi Annual v. Indian Trades and Investments Ltd. [1952] 29 Comp. Cas. 324; AIR 1953 Mad. 467. The Madras decision has recently been followed in Krishna Prasad Jwaladutt Pilanl v. Colaba Land and Mills Co. Ltd. [1959] 29 Comp. Cas. 273, 278; AIR 1960 Bom. 312. In that case the annual general meeting for the year 1955 of the Colaba Land and Mills Co. Ltd. was held on March 20, 1956. The annual general meeting for the year 1956 was not called although the time for holding that meeting was extended by the Registrar up to March 31, 1958. Two directors (Jaintilal Patel and Solomon Moses) would have retired if a meeting was held in 1957. It was contended bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept this contention of the learned advocate as it seems to me that it would be unreasonable to hold that this is the true meaning of the articles of association." The Bombay High Court has dissented from this view. In the Indian Companies Act, 1913, under which the Madras case was decided, there was no provision corresponding to section 256 of the 1956 Act but regulation 78 of Table A read with section 17(2) of that Act laid down substantially the same law. In that case, however, the High Court was not considering the question of appointment of directors. Nor did that question arise in the Bombay case. In the case before me the question precisely is whether I can order the appointment of new directors on the assumption that there are vacancies in the board of directors because of the automatic retirement of the former directors. Section 255 provides that not less than two-thirds of the total number of directors of a public company shall be persons whose period of office is liable to terminate by retirement or rotation. Such directors are to be appointed in a general meeting, save as otherwise provided in the Act. The remaining one-third of the total number of directors shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Great Northern Salt and Chemical Works [1890] 44 Ch. D. 472 it was held that the true meaning of such an article only is that if for any reason either the first meeting or the adjourned meeting does not proceed to fill up the places of the vacating directors, then they are to continue in office. Astbury J. in Spencer's case ( supra ) made a passing observation suggesting that such an article applies only where the retirement of a director by rotation and the necessity of his re-election or replacement has been entirely lost sight of at the annual meeting. But this view was not acceptable to Maugham J. in Holt v. Catterall [1931] 47 TLR 332 . However, in Batcheller' case ( supra ) Romer J. was inclined to agree that the operation of such article, was confined to cases of accidental omission to fill up vacancies of retiring directors. Romer J. dealt in detail with the word "deem" in his judgment. In view of the clear provisions contained in section 256 of our new Companies Act no such problem arises here. Whatever may be the reason for omission to elect fresh directors in place of those who retire, either there must be an election at the same annual general meeting or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or an appointment of an auditor nor the laying of balance-sheets or profit and loss accounts. And if the above business cannot be transacted it will be futile and merely ceremonial to hold a meeting of the company, when no meeting has been held for the last four years, no accounts have been asked by the shareholders, serious disputes have arisen regarding directorship and transfer of shares and in a word the whole thing has been in a mess. The chief object of this petition is that an extraordinary general meeting of the company be convened and called "to elect and appoint a board of directors of the company". That relief I am unable to give to the petitioner as discussed above. Then it is prayed that I should direct the meeting "to transact such other business as may be determined by this court". This prayer is too vague to be allowed. At the hearing Shri Gupta did not address me as to what other business the petitioner wanted to be transacted. Since I have reached the conclusion that I have to deny the petitioner the main and substantial relief which he wanted but which I cannot give him, the question of granting ancillary and incidental reliefs does not arise. The prayer th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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