TMI Blog1993 (11) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... e chairman of the company. It is also stated in the plaint that one Bharath Bhushan Narang became the deputy managing director. It is further alleged that these persons have been in management and control of the company and as such committed several illegal acts, benefiting themselves, etc. Therefore, the plaintiff lodged with the company a notice under section 284 read with section 190 of the Act giving notice of his intention to move four resolutions at the ensuing annual general meeting to be held on September 30, 1993. The notice was lodged on September 13, 1993. The plaintiff also got published a public notice relating to the matter in the Times of India, dated September 15, 1993. According to the plaintiff, a letter dated September 20, 1993, was issued to the plaintiff rejecting the application of the plaintiff which was received, by the plaintiff on September 22, 1993. A notice was also issued by counsel for the defendants dated September 20, 1993. It is further stated in the plaint that the plaintiff had given a notice under section 257 of the Act proposing the name of one Harban Singh Nagpal for election as director of the company at the ensuing annual general meeting. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion regarding the maintainability of the suit before considering any other I. As. According to the defendants, the suit was not maintainable and the plaintiff at the most could have invoked the forum created under the provisions of the Companies Act for the redressal of his grievances. The rights and liabilities of the parties are governed by the said Act and, therefore, the same shall have to be considered only by the court on which the jurisdiction has been conferred by the Act. On September 29, 1993, the trial court rejected I. A. No. 3 but allowed I. A. Nos. 1 and 2. The defendants challenged the orders on I. A. Nos. 1 and 2 in M. F. A. Nos. 1800 and 1801 of 1993, respectively, in this court. The present revision petition is against the order rejecting I. A. No. 3. The two appeals were presented before a learned judge of this court dealing with such appeals at 9.20 p.m. on the very day of pronouncement of the order by the trial court ( i.e. , on September 29, 1993). The learned judge directed the posting of the appeals on the next day at 10.30 a.m. and directed the postponement of the general body meeting till 3.00 p.m. of September 30, 1993. Thereafter, on September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial court. The civil revision petition was filed on October 19, 1993, though dated October 18, 1993. The affidavit of the second defendant filed in support of the I. A. for stay of further proceedings is also dated October 18, 1993. I. A. No. 2 for dispensing with the production of the certified copy of the trial court's order is supported by the affidavit of the secretary of the company calling himself the first petitioner, wherein he stated that the certified copy of the order had already been filed in the M.F.As and that the trial court records were not in the trial court. These affidavits are silent about the non-availability of the alleged detailed order. The affidavits are also silent about the factum of the certified copy of the detailed order made by the trial court which was produced by learned counsel for the plaintiff in the appeals along with a memo dated October 14, 1993. However, in the memorandum of civil revision petition, as if by an afterthought a ground called an "additional ground" is raised in para 21 stating that no separate order other than the order sheet existed on September 29, 1993, and no other order was signed and that the only order which was prono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt categorically observed that I.A. Nos 1 to 3 were rejected by a detailed order; this statement is not specifically challenged in the grounds of appeal. The trial court had to despatch the records immediately on September 30, 1993, and it is quite obvious that whatever records were available in the record section were despatched. There is a presumption that statements of fact in judgments and orders of the court are correctly recorded and that the legal requirements have been complied with by those who discharge public functions. A reading of the order sheet also indicates that it was not possible to make such an order before considering the respective contentions in detail. In view of the above, it is not possible to accept the contention of learned, counsel for the petitioners (defendants) that there was no speaking order at all made by the trial judge when he pronounced the order on September 29, 1993. It is also necessary to note that the petitioners filed an I.A. in the trial court for staying the operation of the order and in the said I.A. also there is no reference to the present contention. If the speaking order was not available the first reaction of any party to the liti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management may not be harassed by frivolous suits and petitions ; therefore, the law contemplates that a member should have the backing of 10 per cent, of the shareholding to agitate for the matters provided under the Act and the said agitation can be only through the forum created under the Act. The present suit involves the enforcement of a right claimed by the plaintiff to elect directors and to remove the existing directors. Electing a director or removing a director, no doubt requires the support of the majority, as otherwise the candidate for election would not muster sufficient strength to get elected. Similarly, a director cannot be removed unless the majority votes him out. The manner of notifying the candidature as well as the proposal to remove any director are specifically provided for under these provisions. With regard to the respective subjects, both sections 257 and 284 are self-contained. No other provision of the Act was brought to my notice requiring any further compliance by the person invoking these provisions. Section 188 provides for the circulation of members' resolution. But the said provision has nothing to do with sections 257 and 284. On this aspect I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons subject to judicial review. It is true that under section 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent, if any, the secretaries and treasurers if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words it is necessary to show that the facts are such that normally the company could be sought to be wound up under the "just and equitable" clause but such winding up would unfairly prejudice the members. Therefore, I am of the view that section 397 is not an effective forum to grant any relief to an individual member under all circumstances. Similar is the situation under section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdiction of the courts. Further, the Act nowhere specifically excludes the jurisdiction of the civil courts. It was contended that the rights and liabilities under the Act are statutory and the same could be enforced only in the manner provided under the Act. Dkulabhai v. State of Madhya Pradesh, AIR 1969 SC 78, was cited in this regard. At page 89, the Supreme Court summarised the various principles. The Supreme Court held as follows : "The result of this inquiry into the diverse views expressed in this court may be stated as follows : (1) Where the statute gives the finality to the orders of the special tribunals the civil court's jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unless the conditions above set down apply." Mr. Vijayashankar contended that, in the instant case, the Act creates a special right or a liability and provides for the determination of the said right or liability and relied upon the second principle stated above. I don't think that the right to elect a director of a company is a special right. Such a right is inherent in the shareholder of the company. It is true that the company itself is the creation of law. It is an artificial person. But that does not mean that everything connected with the company and all matters governing the constitution and the management of the company are special rights or liabilities. When a person has contributed to the shareholding of the company, which is the very basis of the company, a right to participate in the matter of electing or removing a director should be considered as a right inherent in such a member. No individual member can directly participate in the management of the company, therefore, the company law provides for the board of directors. This inherent right of the member cannot be considered as the creation of the statute though the statute provides for the incorporation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of a minority at being outvoted on some issue of domestic policy'." A few more decisions require to be referred to as they have been cited before me. In British India Corporation Ltd. v. Robert Menzies, AIR 1936 All 568, a Bench of the Allahabad High Court held that the company judge alone has jurisdiction to enforce compliance with the provisions of the Companies Act, though such power is not expressly conferred on the judge by the provisions of the Act. It was also held that the company judge may issue a mandatory injunction to ensure compliance with the mandatory provisions of the Act, even though the proceedings are of a summary nature. It was a case where the shareholder filed an application before the company for a copy of the register of members which was denied and, therefore, he moved the company court. The court said that there was no particular remedy provided under the Act and, therefore, it should be assumed that such a remedy is available and therefore the company court had jurisdiction. The court was not considering the exclusiveness of the jurisdiction anywhere. The court was not concerned in the said case whether the ordinary court had jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above definition clause does is to indicate that wherever other provisions of the Act contain the term 'the court' with respect to any matter relating to a company, that has to be understood as the court having jurisdiction under section 10 with respect to that matter. And section 10, dealing with 'jurisdiction of courts' lays down that the High Court of the territory where the registered office of the company is situate is to have jurisdiction over all matters except to the extent such jurisdiction has been conferred by notification on District Courts. Take, for example, section 107. This section provides that dissentient shareholders 'may apply to the court' to have the variation cancelled. The shareholders concerned will have to find out which court they should resort to. It may be the High Court of one State or of another, depending upon where the head office of the company is situated. It may be the District Court of one place or another, again depending upon the notifications issued under section 19(2). The purpose of section 2(11) read with section 10 is only to enable the shareholders to decide as to which court they should approach for remedy, in respect of that particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ladli Prashad Jaiswal, AIR 1958 Punj 190 and (2) Public Passenger Service Ltd. v. M.A. Khadar [1966] 36 Comp. Cas. 1 ; AIR 1966 SC 489. Both these cases arise under section 155 of the Act. In Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, Tirupathi [1987] 62 Comp. Cas. 301 (AP) the view taken by the Kerala High Court, aforesaid, was followed. A civil suit was filed involving disqualification of the director of the company. The question was whether the suit was maintainable. Justice M. Jagannatha Rao (as he then was) held that when the case deals with an individual right then the suit filed by him is maintainable. There may be some regulatory provisions in the Act but from it it cannot be inferred that the general right of suit is taken away. In M.G. Kadali v. A. Krishna, ILR 1990 Kar 3446, a learned judge of this court also took a similar view. A suit questioning the rejection of nomination papers by the management of the company was held as maintainable. The learned judge observed at page 3465 that no particular provision of the Act barred the jurisdiction of the civil court from entertaining a suit for granting the reliefs of the nature sought for in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
