TMI Blog2001 (12) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ting alleged to have been held on 4-9-1999, by stating that Sri S.B. Sidnal is removed from the directorship. The said resolution is illegal, arbitrary and a created one. The defendant has again called for an annual general meeting on 30-9-1999. Sri S.B. Sidnal Chairperson of the company addressed the said meeting and after his representation the members voted against the resolution alleged to have been passed on 4-9-1999 and nullified the alleged false resolution of the removal of Sri S.B. Sidnal and Shashikant Sidnal from the directorship and Sri Sidnal was requested to continue as director of the company. In view of the resolution dated 30-9-1999, Smt. Vidya Murakumbi cannot claim as Chairperson of the company; as such the meeting notice issued by the defendant calling for the fifth meeting on 30-12-2000, is illegal. Smt. Murakumbi was not accepted as the Chairperson or president of the company, therefore, the contents of the notice are all false and any proceedings under the Chairmanship of Smt. Vidya Murakumbi are all illegal. 3. It is further contended that the defendant had called for the meeting on 30-12-2000, at 9 a.m., and notice of the meeting has been received or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stated that the suit filed by S.B. Sidnal seeking such declaration is still pending and the Court has not granted stay of the resolutions. The defendant also denied the allegation that on 30-9-1999, the shareholders have passed resolutions and S.B. Sidnal was requested to continue as director of the company. The defendant has further stated that it is absolutely false that the Chairperson of the company Smt. Vidya N. Murkumbi was not accepted as Chairperson of the company. It was asserted that Smt. Vidya Murkumbi is the Chairperson of the defendant-company since last more than two years. It was contended that prior notice of 21 days is not required to hold a meeting and the said provision is not applicable to the annual general body meeting. The defendant denied the allegation that notice of the annual general meeting has been served upon the plaintiff on 19-12-2000. It was asserted that the plaintiff has received the notice before 21 days of the meeting. The allegation that the meeting called on 30-12-2000 is illegal and against the provisions of law, is denied. The allegation that the defendant has purposely fixed the time of meeting at 9 a.m., in order to have thin representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solutions were passed with reference to the agenda in the said notice. In order to understand the scope of the aforesaid interim order, it is necessary to have a look at the notice of the meeting. The said notice is dated 4-12-2000, which reads as under : "Notice is hereby given that the fifth annual general meeting of Shree Renuka Sugars Ltd., will be held on Saturday, 30-12-2000 at Millennium Garden, Shukrawarpeth, Tilakwadi, Belgaum-590 006 at 9 a.m., to transact the following business. Ordinary Business : 1.To receive, consider and adopt the audited balance-sheet as at 30-9-2000 and the profits and loss account for the year ended on that date and the reports of the directors and auditors thereon. 2.To appoint a director in place of Mrs. Vidya M. Murkumbi who retires by rotation and being eligible, offers herself for re-appointment. 3.To appoint a director in place of Mr. Jayant G. Herwadkar who retires by rotation and being eligible, offers himself for re-appointment. 4.To appoint auditors and fix their remuneration. Special Business : 5.To consider and if thought fit to pass with or without modification the following resolution as a special resolution. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meeting till the disposal of the suit. In coming to the said conclusion, the trial court has held that section 171(1) of the Act is mandatory and there was no clear 21 days notice after the same was served on the plaintiffs and the defendant has not produced any documents to show how many members were served notice before 21 days and notices were not served on the shareholders as per mandatory requirement. Aggrieved by the said order, the defendant preferred miscellaneous appeal before the Principal Civil Judge, Belgaum, in M.A. No. 13 of 2001. The Appellate Judge held that the trial court has basically erred in coming to the conclusion that section 171(1) is mandatory by overlooking the principles enunciated by the High Court of Bombay in Shailesh Harilal Shah v. Matushree Textiles Ltd. [1995] 82 Comp. Cas. 5 . The notice was served on the plaintiff on 19-12-2000, he approached the Court on 27-12-2000, barely three days before the meeting and in the absence of any explanation there is a delay on the part of the plaintiff in approaching the Court which disentitles the plaintiff for the relief of injunction. Section 171(1) is not mandatory and in the light of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meeting and moreover when admittedly he was served on 19-12-2000, with notice, he chose to move the Court two days prior to the date of the meeting, namely, December 27 and, therefore, because of delay and laches on his part in approaching the Court, he is not entitled to the discretionary relief of temporary injunction. The plaintiff does not disclose in the plaint what is the prejudice caused to him in attending the meeting and what are his objections to the proposed resolutions and what is the valuable right of his which he has been deprived of by non-service of notice 21 days before the date of the meeting. The trial court did not consider the effect of section 172(3) where it has been clearly stated that the accidental omission to give notice or non-receipt of notice by any member or other person to whom it should be given shall not invalidate proceedings at the meeting. In the instant case, notice has been served and the plaintiff had an opportunity to attend the meeting and espouse his cause and, therefore, section 171 cannot be held to be mandatory in view of the language employed in section 172(3). In view of the postal strike which commenced on 5-12-2000, the company ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral meeting may be called after giving shorter notice than that specified in sub-section (1), if consent is accorded thereto ( i )in the case of an annual general meeting, by all the members entitled to vote thereat; and ( ii )in the case of any other meeting, by members of the company ( a ) holding, if the company has a share capital, not less than 95 per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting, or ( b ) having, if the company has no share capital, not less than 95 per cent of the total voting power exercisable at that meeting: Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter." 15. The contents and manner of service of notice and persons on whom it is to be served is dealt with under section 172 which reads as under : " Contents and manner of service of notice and persons on whom it is to be served. (1) Every notice of a meeting of a company s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and ( b )such service shall be deemed to have been effected ( i )in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and ( ii )in any other case at the time at which the letter would be delivered in the ordinary course of post. (3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address within India for the giving of notices to him. (4) A document may be served by the company on the joint holders of a share by serving it on the joint holder named first in the register in respect of the share. (5) A document may be served by the company on the persons entitled to a share in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 973] 43 Comp. Cas. 197 (Delhi); ( v ) Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers (P.) Ltd. [1988] 64 Comp. Cas. 19 (Punj. Har.). 19. The third category of cases are those cases where a notice was issued and the said notice gave 21 clear days and the same was served on the shareholders but there was no clear 21 days between the service of such notice and the meeting. The cases relied on under this category, where it has been held section 171 is not mandatory but directory, are : ( i ) Maharaja Exports v. Apparels Exports Promotion Council [1986] 60 Comp. Cas. 353 (Delhi); ( ii ) Shailesh Harilal Shah s case ( supra ); ( iii ) Calcutta Chemical Co. Ltd. v. Dhiresh Chandra Roy [1985] 58 Comp. Cas. 275 (Cal.); 20. In the instant case, admittedly, the company has issued notice dated 4-12-2000, fixing the date of the fifth annual general meeting on 30-12-2000. There is a clear 26 days gap between the date of notice and the date of the meeting. It is also demonstrated that the said notice is sent by the secretary on 6-12-2000, i.e., there is a gap of 24 days between the date of despatch and the date of the meeting. The plaintiff unequivocall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any difference." (p. 365) 22. In the case of Shailesh Harilal Shah ( supra ), a Division Bench of the Hon ble High Court of Bombay has held as under : "It is, therefore, necessary to examine the object, purpose and scope of section 171 of the Act to determine whether the requirement is mandatory or directory. The recommendations of the Company Law Committee in paragraphs 75( i ) and 78 of the Report indicate that the period of 21 days was provided instead of 14 days as earlier fixed, to enable the shareholders to campaign and canvass the proxies if they so desired. The shareholders required reasonable time to canvass opinion in favour or against the particular resolution proposed to be considered at the meeting of the company. The object, therefore, is obviously to give proper and reasonable opportunity to the shareholders for participating effectively in the meeting. The length of notice, the contents and the manner of service of notice have all been prescribed with this end in view. The fact that sub-section (2) of section 171 of the Act enables the shareholders to consent for shorter duration of notice is an indication that the Legislature never thought the length of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings at the meeting. If we have to uphold the contention of the respondent, we shall have to hold that if the notice to a shareholder is not accidentally posted at all, the proceedings at the annual general meeting of a company will be valid. But if the notices were posted accidentally less than 21 days before the meeting, the proceedings at the meeting will be void even though the shareholder received the notice in good time before the meeting was held and actually attended the meeting. If Mr. Dhiresh Chandra Roy did not receive the notice at all, the company could have invoked the protection of the provisions of section 172(3) of the Act. In our opinion, such a construction would lead to absurdity and should be avoided. We are aware of the dictum that law is not always logic. But the court should be very slow to give a construction to a section which would lead to absurdity and will cause injustice. We are unable to accept the contention that a short notice served on a member will invalidate a meeting altogether but non-receipt of the notice by a member will not have the same effect." (p. 279) 24. It is also useful to refer to a passage from Maxwell on the Interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other. . . ." 27. The following observation of the Judicial Committee of the Privy Council in Montreal Street Railway Company v. Normandin AIR 1917 PC 142, in Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur AIR 1965 SC 895 is as under : "The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at...When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done." (p. 899) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain even if Government gave its sanction See Scadding v. Lorant [1851] 3 HLC 418, affirming Sub Nom, Lorant v. Scadding [1849] 13 QB 706 and Joshi Kalidas v. Dakor Town Municipality ILR 7 Bom. 399. Conditions which promote despatch or provide for ministerial operations are usually directory and although compliance with them is also necessary it is sufficient if the compliance is substantial." (p. 904) 30. In the background of the aforesaid legal principles, if we look into the provisions of sections 171 and 172, it becomes clear that a general meeting of a company may be called by giving not less than 21 days notice in writing. However, the Legislature provides for calling of a general meeting by giving shorter notice than specified under sub-section (1) in the manner provided under section 171(2), thereby meaning this 21 days notice is not sacrosanct. Thus, the Legislature, by insertion of section 171(2) made its intentions very clear that this requirement of section 171 is not mandatory if the conditions mentioned under section 171(2) are fulfilled. Section 172 deals with contents and manner of service of notice and the persons to whom it is to be served and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 171(2) and posting of such notice are all within the reach of the company. Therefore, all these requirements are to be complied with by the company and to that extent they are mandatory. 32. Once the notice is posted through an agency, the company loses its control over such notice. The company has to necessarily depend upon that third party agency for due service of notice and if that notice is not served on the shareholders in time, the company cannot be made to suffer. It is also possible that if the addressee is not available at the time of service even that agency to whom this work has been entrusted will be helpless in serving the notice on the shareholders. If the shareholder intends disrupting the meeting and wants to invalidate the resolutions passed in the meeting, he could cleverly avoid receiving the said notice within the stipulated period and he could choose to receive the notice so as to make it appear that after service of notice, he or she had no clear 21 days notice. Under these circumstances, if it is to be held that section 171 is mandatory and that 21 days must be calculated from the date of service of the notice on the shareholders, it would be humanl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely on the technical ground that there was no clear notice of 21 days from the date of service of the notice and the meeting neither the meeting nor the proceedings of the meeting could be invalidated. If such a thing is permitted one shareholder can virtually blackmail the company and prevent the company from holding its meeting or passing any resolution, thus, successfully obstructing the proper functioning of the company itself. Certainly that is not the intention of the Legislature in enacting section 171. 34. Coming to the case on hand, the company has issued a notice under section 171. Further the said notice contains all the particulars which are mentioned in section 172. The notice is dated 4-12-1999 and the date of the meeting is fixed on 30-12-1999, thereby giving 26 clear days between the date of the meeting and the date of the notice. The said notice was posted through courier and the plaintiff, according to him, received the said notice on 19-12-2000. Therefore, sections 171 and 172 have been substantially complied with. His grievance is from 19-12-2000, he did not have clear 21 days notice of the meeting and, therefore, the meeting is illegal and the resolutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from reaching the venue of the meeting has remained only as an assertion without any material on record to substantiate the said contention. It is not the case of the petitioner that because of the holding of the meeting at 9 a.m. he was in any way inconvenienced. Again he is pleading the case of those unknown shareholders who are inconvenienced by such fixing of time. This is yet another circumstance which demonstrates that the petitioner s case is not of a personal injury to him and he is pleading the case for and on behalf of others who are not before this Court. While the trial court granted permission to hold the meeting on 30-12-2000, no attempt was made to get this time changed. In any event that cannot have the effect of invalidating the meeting and the resolutions passed in such meeting without any proof of inconvenience or mala fides. Therefore, I do not find any substance at this stage in the said contention. 37. It was further contended that the Allahabad, Calcutta, Punjab and Haryana and Madras High Courts have held that section 171 is mandatory and following the said view the trial judge has granted an order of injunction and the Appellate Court could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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