TMI Blog1971 (1) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. The capital of the company is Rs. 4,99,000. It is alleged in the petition that the shareholders felt that in future owning and managing private industrial estate is not an economical proposition and therefore a resolution was passsd on 20th March, 1970, to reduce the authorised share capital of the company from Rs. 4,99,000 divided into 4,990 equity shares of Rs. 100 each to Rs. 4,990 divided into 4,990 equity shares of Re. 1 each. It is to confirm this reduction that this petition has been filed. The Registrar of Companies has taken objection to confirmation on the ground that, as required under section 171 of the Act, there was no notice of 21 days before the resolution was considered. In answer to this objection, the petitioner-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting that was held on March 20, 1970, did not give 21 clear days. The notice was dated February 26, 1970, and when it was served on the shareholders, the requisite interval of 21 days was not there for the meeting that was held on March 20, 1970. Subsequently, all but one shareholder gave consent letters agreeing for the resolution that was passed on March 20, 1970, with shorter notice. The question is whether this consent is sufficient to satisfy the requirement of section 171. Mr. Suresham, appearing for the Registrar of Companies, contended that a valid notice giving 21 days is a pre-requisite for a valid meeting and that having regard to the language employed in section 171, post consent by the shareholders would not validate the mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 171 of the Companies Act corresponds to section 133 of the English Act, in which the provision regarding notice is almost similar. Under the English Act, cases have arisen in which the question has been considered whether or not consent given subsequent to the meeting would be valid. In Express Engineering Works Ltd., In re [1920] 1 Ch. D. 466 (CA) , the company consisted of 5 persons who were the sole shareholders. The meeting was convened as a directors meeting. It was attended by all the five shareholders. A resolution for the sale and issue of debentures was carried out at the meeting of the five who appointed themselves as directors. The articles of association of the company provided that no director should vote in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company and honest the sanction of all the members of the company, however expressed, is sufficient to validate it, especially if it is a transaction entered into for the benefit of the company itself. " At page 984, the learned judge again said: "Now the view I take of both these decisions is that where the transaction is intra vires and honest, and especially if it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. I do not think it matters in the least whether that assent is given at different times or simultaneously. The plaintiffs contend that the two directors acted throughout as if they were partners, and cannot now turn round and shelter themselves behind the company la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id cases, it is observed in Palmer's Company Law, 21st edition, at page 492: "If a majority in number of the members having the right to attend and vote and holding together not less than 95 per cent, of the shares carrying votes agrees, the requirement of twenty-one clear days' notice may be dispensed with or reduced in time......The consenting members, must, however, appreciate that the resolution is being passed without due notice, though such consent may be given at a later date." It would thus be seen that the foregoing decisions are directly in point having considered a similar provision in the English Act which deals with the length of notice for calling for meetings. The principle underlying these decisions is that it is open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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