TMI Blog1992 (4) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above suit. The short facts which are culled out from the affidavit, filed in support of the application, are as follows : The applicants/plaintiffs herein are the shareholders of the respondent/first defendant company which is more than 100 years old, having been incorporated under the Companies Act and that the applicants had been elected as directors of the respondent at the annual general body meeting held on December 24, 1990, and that since then onwards, they are functioning as the directors of the first respondent company and that defendants Nos. 2 to 5 in the suit were the directors of the respondent company, earlier to the election held on December 24, 1990, and they were to retire by rotation by the abovesaid 120th annual general body meeting and that accordingly, defendants Nos. 2 to 4 stood for being re elected as directors of the first defendant company as well as to fill up the vacancy caused by the retirement of one of the directors by name V. Karthikeyan. Defendants Nos. 4 to 13 in the suit are the requisitionists who had requisitioned an extraordinary general meeting of the first respondent and notice had been given for the holding of an extraordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, held on December 24, 1990, and the election of directors was taken up on voting by show of hands, the plaintiffs/applicants were declared had elected as directors, as the chairman directed a poll suo motu to be conducted on the same date, the poll was conducted and the consequent counting was taken up on December 26, 1991, and the results were announced on December 29,1991, wherein all the applicants were declared to be duly elected. Consequently, resolutions were passed to that effect and the same were entered in the minutes book of the company as contemplated by law. While that was so, on January 2,1991, the applicants were duly intimated about their having been elected as directors and, accordingly, they had given their consent letters and the necessary returns to the Registrar of Companies on January 7, 1991, have been filed since then, the applicants had been acting as directors till this date. Frustrated at this, defendants Nos. 4 and 5 in the suit having lost the election held, had been writing certain letters to the first respondent stating falsely that they had mustered some support to call for an extraordinary general body meeting on April 2, 1991, and for which a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as such, the resolutions declared to have been passed are void under the provisions of sections 169 and 263 of the Companies Act. It was the substratum of the main contention of the defendant that this defendant and others had to requisition a general meeting as the scrutineers appointed for the poll had manipulated the poll result and the chairman and the board of directors had accepted the poll result without taking into account the objections taken by this defendant and other retiring directors. The said requisition is in accordance with section 169 of the Companies Act and in accordance with the articles of association of the company and they had called for an extraordinary general body meeting held on April 2, 1991. In short, the alleged resolutions entered in the books of the respondent are void by virtue of the provisions of the company law and that, therefore, no proceedings are necessary for the removal of any of the directors and that since the requisition given for calling the extraordinary general body meeting has been provided by the provisions of company law, the demand for calling the extraordinary general body meeting by these respondents and another were deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove circumstances, the only question which arises for consideration is as follows : "Whether the applicants in the above Applications Nos. 2597 and 2598 of 1991 have established a prima facie case to seek the indulgence of this court to modify the order of ad interim injunction passed on March 26, 1991?" O.A No. 289 of 1991 in C.S. No. 421 of 1991: The applicants/plaintiffs have filed this application under Order 14, rule 8 of the Civil Procedure Code, read with Order 39, rules 1 and 2 and section 151 of the Civil Procedure Code, against the respondents for an order of interim injunction and thereby restraining the respondents, their men and agents from in any manner conducting the extraordinary general body meeting on April 2, 1991, or any other date for. considering the subjects proposed in the notice dated March 7, 1991, pending disposal of the suit. The short facts as culled out from the affidavit filed in support of the above application are as follows : The applicants being the shareholders of the first respondent company which is one incorporated under the Companies Act carrying on business of accepting deposits and advancing loans for a long time as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted at the 120th annual general body meeting held on December 24, 1990, that the resolution proposing re-appointment of this respondent as a director must be deemed to have been passed in accordance with section 189 of the Companies Act, as there were no votes cast against the resolution by the persons present or by proxy at the said meeting and that thereafter, there was no vacancy for proposing any resolution for the appointment of a director in his place and that as such, the resolutions declared to have been passed by the respondents are void, under the provisions of the Companies Act. While admitting the averments made in para 3 of the affidavit, he contends further that the scrutineers appointed for conducting the poll had since manipulated the poll themselves and that the chairman of the meeting and the board of directors had accepted the poll results without taking into account the objection taken by these respondents and other retiring directors, the said results claimed by the applicants effecting the appointment of new persons are not valid in law and binding on him and that, therefore, this respondent wants not only the application to be dismissed but also for v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fs/applicants and for a permanent injunction restraining the first respondent and their men from holding an extraordinary general meeting either on April 2, 1991, or on subsequent dates pursuant to the notice dated March 7, 1991, issued by the first respondent. This suit was filed by Mr. B. Sivaraman and four others who are the newly elected directors of the first respondent and identical reliefs were asked for in C.S. No. 421 of 1991 by Dr. N.V. Krishna, P.S. Ananthakrishnan and S. Muruganandan in their capacity as shareholders of the. first respondent company. The reliefs claimed in all the above applications are also identical with each other and involve a common question of law and facts to be considered. The fact that the first respondent company has been incorporated on 20th January, 1882, and that the applicants and the respondents are the shareholders of the company and that to elect the directors in order to fill up the vacancy that arose, the 120th annual general meeting was held on December 24, 1990, and that at which carrying on with other subject-matters as per agenda, it was decided that the applicants were to be elected as directors and that, for the said purpose, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eath of one director, it was decided in the annual general meeting held on December 24, 1990, under the chairmanship of Thiru K.D. Parekh, while transacting several other businesses notified in the agenda by show of hands, that the five applicants should be elected for the five vacancies as directors of the board of the first respondent and on an explanatory mode or procedure to be followed by the first respondent, all the members were present and the poll was conducted as ordered by the chairman and counting had taken place on December 26,1990, and after due scrutiny by the respondents, result of the poll was announced on December 29, 1990, and in and by which, all the five applicants were elected as the directors of the board of the first respondent which fact has been duly recorded in the minutes book of the first respondent, maintained for the general meeting as signed by the chairman and in implementing thereof, Forms Nos. 29 and 32 were also prepared with the consent of the newly elected directors, viz. , the applicants and the Registrar of Companies was intimated of the change in the composition of the board of directors and that in which the respondents who contested for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91, sent by the secretary of the first respondent, calling for the extraordinary general meeting, issued under section 169 of the Companies Act, to be held on April 2, 1991, to discuss and carry out the resolutions pertaining to the result of the poll and the consequent resolutions passed on the appointment of the applicants as directors at the 120th annual general body meeting of the company announced on December 29, 1990, to be declared as void and that in their places, Thiru C.A. Ramakrishnan, Thiru N. Seshachalam, Thiru P. Obul Reddy and Thirumathi Yamuna Reddy have to be declared as directors and this notice forms the basis for the filing of the above suit and applications by the applicants. The plaintiff in C.S. No. 421 of 1991 also filed the printed memorandum and articles of association covered under exhibit A-1; the printed annual report of the 120th annual general body meeting of the first respondent for the year 1989-90 was also filed by the plaintiffs and marked as exhibit A-2; exhibit A-3 dated December 24, 1990, is the same copy of the proceedings of the 120th annual general meeting of the shareholders, which was marked in the other suit; exhibit A-4 is the copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... votes polled in person are 33,501 and by proxy 35,081; itemising the votes polled for the respective candidates who stood for contest, firstly, between Thiru C.A. Ramakrishnan and the first applicant, Thiru B. Sivaraman, it seems that the first applicant, Thiru B. Sivaraman, obtained 34,557 votes and Thiru C.A. Ramakrishnan obtained 30,783 votes, that, secondly, among the two candidates, Thiru N. Seshachalam and Thiru T.T. Selvam, the second applicant, Thiru T.T. Selvam, obtained 35,074 votes as against 30,260 votes obtained by Thiru N. Seshachalam; that between Thiru P. Obul Reddy and Thiru R.S. Jeevarathinam, Thiru P. Obul Reddy obtained 29,661 votes as against 35,683 votes obtained by Thiru R.S. Jeevarathinam, the third applicant; that between Tmt. Yamuna Reddy and Thiru M.A. Mohanakrishnan, Thiru M.A. Mohanakrishnan, the fourth applicant, secured 34,557 votes as against Tmt. Yamuna Reddy who secured 30,790 and that the fifth applicant, Thiru C.R. Vedachalam, alone contested and for whom among the shareholders of the first respondent company who have participated in the poll on that date cast their votes in favour of Thiru C.R. Vedachalam numbering 36,743 and against him 28,088 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,683 than the former who secured 29,661; and that between Tmt. Yamuna Reddy and Thiru M.A. Mohanakrishnan, the latter has secured more votes, that is 34,557 than the former who secured 30,790 and that as such, the contestants who have secured more votes than their rivals were declared as duly elected. The votes were polled in person and by proxy and the total number of votes polled are 65,347 and the voters by casting the votes preferred the said applicants to the contesting respondents. In the cases of two persons contesting the election, it is he who secured more votes who was declared as duly elected, but in the case of a contest for one post of directorship, the question of votes polled against the candidates does not arise, as was contended by learned senior counsel. For example, Thiru C.R. Vedachalam, the fifth applicant herein, is the only one candidate who stood for contesting the election for directorship and among the total number of votes both in person and proxy, 36,743 votes were polled in his favour and 28,088 were polled against him. That virtually means, 28,088 were against him but the majority of 36,743 votes were polled in his favour which are more than the vote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiff in C.S. No. 421 of 1991, that the election has been conducted and held lawfully and in keeping with the legal norms as contemplated by law and procedure being followed by the respondents, as advised by their legal adviser and as such, the said aspect was proved and recognised by the resolutions passed and entered in the minutes book which was duly intimated to the Registrar of Companies as contemplated by law. All the above facts have been clearly fortified by the minutes of the annual general body meeting held on December 24, 1990, prepared by the chairman of the first respondent company. On a careful perusal of the entire documents relied on behalf of the applicants/plaintiffs in both the suits, I am fully satisfied to hold that there are no infirmities or laches or any malpractices committed by the scrutineers on behalf of the applicants/plaintiffs in conducting the elections and electing of the applicants herein as abovereferred. Accordingly, the recomposition of the board of directors on the basis of the election results was duly intimated to the Registrar of Companies, as contemplated under the provisions of the Companies Act, after having entered the said re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been duly called, held and all proceedings thereat have duly taken place and the consequent appointment of director or directors has been validly made. If the minutes are not recorded or signed within the prescribed period, then it is to be presumed that it is not properly kept and it will not be receivable in evidence. Keeping the above legal norm provided in section 195, based on sections 193 and 194 of the Companies Act to the facts of the present one, with reference to exhibit A-4, the proceedings of the minutes, covering the 120th annual general body meeting of the first respondent held on December 24, 1990, at a place called Swami Sankaradoss Kalai Arangam, T. Nagar, Madras, from 9.30 a.m. till the evening, as was signed by its chairman, Thiru K.D. Parekh, duly passed and entered in the minutes book, it is manifest that the same squarely comes within the legal limbs of the above provisions of law. The legal presumption arising out of this minutes as was entered in the books of the annual general body meeting of the company by its chairman and which was duly intimated to the Registrar of Companies, as contemplated under section 264 of the Companies Act, clearly and totall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the meeting then ordered the poll and, consequently, the legal adviser of the first respondent, viz. , learned counsel, Thiru T. Raghavan, explained the various procedures and modes to be followed in conducting the poll for electing the five directors of the board of the first respondent company to all the shareholders and members of the first respondent, who were on the eve of the election and thus everyone was apprised of the mode and that at the meeting, the contesting respondents Nos. 4 and 5 as well as the other defeated candidates were also present. It has to be seen that it is not the case of the respondent that they were not aware of the mode of election followed by the chairman of the annual general meeting or the manner in which the poll was conducted on the subsequent dates. It is the undisputed case among the parties that pursuant to the decision taken in the annual general meeting held on December 24, 1990, by appointing the scrutineers, the poll was conducted on December 26, 1990, and that following the poll, the scrutineers had taken charge and they completed their job and the chairman announced the result of the poll on December 29, 1990. Therefore, with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 1956, for the purposes of convening the extraordinary general meeting to consider the business set out in the agenda by means of carrying out the resolution, viz. , ( i ) to declare that the result of the poll on the resolutions on the appointment of directors held on 24th December, 1990, at the 120th annual general meeting of the company and announced on 29th December, 1990, and ( ii ) to declare that Thiruvalargal C.A. Ramakrishnan, N. Seshachalam, P. Obul Reddy and Smt. Yamuna Reddy, the defeated candidates, as the directors of the company. This notice has been given in compliance with the legal terms provided under section 169 of the Companies Act. On receipt of this notice on February 18, 1991, the first respondent company sought legal opinion and gave an explanatory statement. It was on the basis of this notice that the proposed calling for the extraordinary general meeting of the first respondent by the requisitionists of this notice has been stayed by the order of this court, on moving the abovesaid applications, urgently. Thiru G. Subramaniam, the learned senior counsel appearing for the respondent, contends by relying on this section, viz. , section 169 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (7)( a ) has some relevance to be referred to which is as follows : " ( a ) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the board; but ( b ) shall not be held after the expiration of three months from the date of the deposit of the requisition," Thus, it has been made clear that if the respondent company received a notice from the required number of shareholders, under this section, that they intended to move resolutions for. the removal of the applicants who were the directors and also to move resolutions for appointment of other persons as directors, then it was for the company to circulate the notice to all the directors and that upon doing so, the company should call for an extraordinary general meeting for the purpose of carrying on the business specified in the said notice and in the event of not convening the extraordinary general meeting, it was provided in this section that the requisitionists may by themselves convene the extraordinary general meeting after and within the stipulated time and carry out the resolution. It has to be seen that a legal obligation is placed on a company to convene th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requisition, but if the object for which the requisition was made is not for carrying out a valid purpose, then it may provide a speculation or a deadlock in this context. It is only at this juncture, that the applicants had approached this court for their redressal, by means of granting interim injunction and that accordingly, on finding a prima facie case, this court had granted the order and the same is in force. Here is a case in which it has been candidly established that the election of the applicants/plaintiffs was lawfully and legally conducted pursuant to all the legal formalities and lawful modes accepted and adopted and entered in the minutes book of the company and followed by duly intimating to the Registrar of Companies in compliance with all the legal formalities which would virtually mean that the resolution carried in the annual general meeting held, has been fully implemented and accordingly, all the applicants and plaintiffs have been working constituting the board of directors of the first respondent and discharging their duties in carrying out the administration of the first respondent. Then the question that remains to be solved is what is the remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "9. Courts to try all civil suits unless barred.- The courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Explanation I . A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies. Explanation II . For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place ". A mere reading of this section visualises the fact that in so far as the jurisdiction of the civil court is concerned, there shall be a presumption in favour of its jurisdiction and to have it otherwise, the exclusion of the jurisdiction of the civil court is not to be readily inferred and that such exclusive jurisdiction must be explicitly expressed or merely implied. It, therefore, follows that there must be a clear provision of law available ousting the jurisdiction of the civil court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the directorship of the first respondent, but to declare them as self-styled directors of the first respondent. At best, in my firm view, the respondents can wait till the next vacancy arises either by rotation or otherwise in the board of directors of the first respondent and that before the same occurs, they are not entitled to convene the extraordinary general meeting for the purpose mentioned in the notice covered under exhibits A-6 and A-25 in the respective suits and for which there is no law recognising the activities of the respondent in dislodging the applicants from their duly elected board of directors and declare themselves as directors of the first respondent company which may at the extreme amount to a self-styled one. In the context of the pleadings raised in the affidavit as well as the pleadings narrated in the plaint and by the documentary evidence relied on behalf of the applicants/plaintiff in both the cases, Thiru Harikrishnan and Thiru V.S. Subramanian, learned counsel appearing for the applicants/plaintiffs, would strenuously and justifiably contend that if the order of ad interim injunction granted already is not made absolute or vacated, then it would c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-affidavit as well as the arguments advanced by learned counsel, Thiru G. Subramanian on behalf of the respondents that the election was vitiated by fraud. Then learned counsel, Thiru V.S. Subramanian and Thiru Harikrishnan, appearing for the plaintiff in both the suits have cited the following text books and case-laws in support of the contentions and arguments advanced on behalf of the applicants. (1) Gold Company, In re [1874-1880] All ER (reprint) 957 at 964; [1879] 11 Ch 701 (Ch D), (2) Palmer's Company Law, 22nd edition, at page 530, (3)Sections 193, 195, 177, 179, 257, 195 and 505 of the Companies Act, (4) Shackleton on Meetings ( Company Law ) , 6th edition (1977), at pages 198 and 199, (5) Holmes v. Keyes ( Lord ) [1958] 28 Comp Cas 414; [1958] 2 All ER 129 (CA), and (6) Shaw v. Tati Concessions Ltd. [1913] 1 Ch 292. Per contra, relying on sections 169, 177, 178, 179 and 184 of the Companies Act, Thiru G. Subramaniam, appearing for the respondent, added the following case-laws in support of the arguments advanced by him on behalf of the respondents : (1) Isle of Wight Railway Company v. Tahourdin [1884] 25 Ch 320, 334 (Ch D), (2) Cricke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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