TMI Blog1984 (8) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... was and still is a shareholder of the Titagarh Paper Mills and he is holding 32,179 fully paid-up ordinary shares of Rs. 10 each in the capital of the Titagarh Paper Mills. Respondents Nos. 2 to 9 are acting and/or holding themselves out as directors of the Titagarh Paper Mills. His further case is that A. B. Majumdar and Kanak Ghosh are purporting to act as whole time directors of the company without the appropriate sanction of the Central Government. Industrial Development Bank of India, Industrial Credit and Investment Corporation of India Ltd., Industrial Financial Corporation of India and Life Insurance Corporation of India have advanced substantial loans to Titagarh Paper Mills and due to mismanagement by the directors, the loans of the financial institutions could not be paid in accordance with the schedule and as a result whereof the delinquent management converted a part of the loan into equity share capital in the said Titagarh Paper Mills. The other defendants, the petitioner alleges, are the nominees of the different financial institutions named before but most of them, it is stated, are engaged in their own business or not mindful of the business of the defendant comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly mentioned in a statement annexed to the notice of the meeting. His main grievance is also that it will appear from the director's report that for the year 1982-83, the approval of the Central Government sanctioning the terms of appointment of Kanak Ghosh as wholetime director has not been obtained from the Central Government as required under the mandatory provisions of law and in order to bypass the said mandatory provision, it was sought to be done under the garb of ordinary business. In the language of the petitioner (paragraph II(1V)): "The wholetime directorship of defendant No. 3, Sri Kanak Ghosh, is sought to be smuggled in the agenda without giving the shareholders the minimum information that is required to be given under the provisions of the Companies Act. In fact, in the said notice, not only the factum of such non-approval has been suppressed but the deliberate misleading and tricky agenda has been inserted in an innocuous manner to mislead and hoodwink the shareholders including the petitioner." The petitioner's case is that the explanatory statement does not at all explain the material facts in any explanatory way. Mr. Prabir Sen, counsel for the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice and to avoid such irreparable injury, an order of injunction prayed for should be granted as it would be just and equitable in the facts and circumstances of the case. I should state here that the petition was affirmed on September 30, 1983. That means the date of the meeting and the application for ad interim injunction was sought for after the meeting was over. It may also be noted that the petitioner did not appear in the said meeting. I say all these things which I shall deal with later on for my finding whether the application is a bona fide one and whether any relief can be granted in the facts and circumstances of the case as made out in the petition. Mr. Prabir Sen, counsel for the petitioner, in order to show that Kanak Ghosh could not be appointed as a wholetime director because of the absence of the Central Government approval cited a judgment in Titagarh Paper Mills Co. Ltd. v. Union of India [1984] 1 CLJ 422 ; [1986] 59 Comp. Cas. 94 (Cal.) where Titagarh Paper Mills under an application under article 226 of the Constitution challenged the withholding of the approval regarding reappointment of three wholetime directors including Kanak Ghosh and lost the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transacted at the meeting, it should specify the nature of such business in the notice. Mr. Nag, appearing for the respondents, drew my attention to item No. 4 of the explanatory statement and I find that the figure of rupees forty crores sought to be borrowed as stated in the petition does not indicate the correct state of facts regarding this amount to be borrowed. The company has specifically stated : " Item No. 4 : Section 293(l)( d ) of the Companies Act, 1956, provides, inter alia , that except with the consent of the company in a general meeting, the board of directors shall not borrow moneys, if the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans, obtained from the company's bankers in the ordinary course of business) exceed the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for specific purposes. The proposed resolution is intended to satisfy the said requirements of the law. By a resolution passed by the company at its annual general meeting held on September 29, 1978, the board of directors of the company was authorised to borrow in excess of its paid-up sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such a case refused to grant an order of injunction. The ratio of the said judgment has been accepted by D. K. Sen J. I have dealt with the same in the concluding portion hereinafter. In Maharani Lalita Rajya Lakshmi v. Indian Motor Co. Hazaribagh Ltd. [1962] 32 Comp. Cas. 207 , 213; 67 CWN 63, 68 ; AIR 1962 Cal 127, 130 and 131, Justice P. B. Mukharji, presiding over a Division Bench, following the Privy Council judgment in Parashuram Detaram Shamdasani v. Tata Industrial Bank Ltd. [1928] LR 55 IA 274; [1928] ILR 52 Bom. 571 ; AIR 1928 PC 180, observed that a shareholder who by his conduct shows that he knew the real effect of the work to be transacted at a meeting, cannot complain of a notice on the ground of insufficiency. Here also he knew about all these facts but he did not choose to attend the meeting, but instead, after the meeting was over, moved the court. By such conduct, relief as sought for cannot be granted. P. B. Mukharji J., in the said Division Bench judgment, observed (at pp. 213 and 214 of 32 Comp. Cas.) : "besides, we are not satisfied on the facts here, that there has been any failure to comply with the substance of section 173(2) of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still. Therefore, on the balance of convenience too, it does not appear to me that the facts of this case prima facie justify an order for injunction. Mr. Nag has successfully met all the challenges including item No. 6 of the notice (page 23 of the petition). The criticism of Mr. Sen that section 81(3) of the Companies Act had not been complied with has been refuted by Mr. Nag by arguing that it was done in conformity with the rules made by the Government in this regard by Notification No. S.O. 2577, dated July 30, 77 (See [1977] 47 Comp. Cas. (St.) 225), as amended by Notification No. S.O. 1328, dated May 8, 1978 (See[1978] 48 Comp. Cas. (St.) 107), as it would appear from page 24 of the petition. As I said before, the excess payment to Sri Kanak Ghosh which was sought to be argued by Mr. Sen fails as the Central Government approval issued by the Ministry of Law, Justice and Company Affairs dated December 31, 1983, is produced before the court wherein Sri Kanak Ghosh's wholetime directorship has been approved from January 1, 1980. I may also refer here to an unreported judgment of Justice D. K. Sen in Suit No. 1073 of 1980 (Dipak Mazumdarr v. Calcutta Chemicals Co. Ltd.). ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
