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TMI Blog2010 (8) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... Letters Patent and has sought the following reliefs for the ultimate benefit of the company : "(a)A scheme be framed for the management and administration of Bengal Brick Field Owners' Association having its registered office at 23A, Netaji Subhas Road, 3rd Floor, Kolkata-700 001 ; (b)Declaration that the amendments to the memorandum of association and the articles of association of the Bengal Brick Field Owners' Association carried out on 18-8-2007, are illegal, null and void ; (c)Declaration that all resolutions passed in the meeting of 18-8-2007, with regard to the amendment of the memorandum of association and the articles of association of Bengal Brick Field Owners' Association are illegal and null and void ; (d)Declaration that the notice dated June 18, 2008, is illegal, null and void ; (e)Decree for perpetual injunction restraining the defendants and their servants and agents from holding the 64th annual general meeting of the association on July 21, 2008, in terms of the notice dated 18-6-2008 ; (f)Decree for perpetual injunction restraining the defendants and their servants and agents from taking any steps or any further steps on the basis of the notice dated June 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g eroded the fundamental authority of the members of the company to choose the office-bearers and extended the tenure of office of both executive committee members and office-bearers by two years. 6. The second challenge of the plaintiff as to the validity of the annual general meeting for the year ended 31-3-2007, then convened to be held on 21-7-2008, at the time of institution of the suit, is on the premise that an annual general meeting of a company may only be held in accordance with section 166 of the Companies Act or not at all. The plaintiff says that the company obtained an extension from the Registrar of Companies for holding its annual general meeting for the year ended 31-3-2007, by 31-12-2007, but no such annual general meeting was held within such extended time. The plaintiff contends that the company has no authority to hold an annual general meeting other than in accordance with the provisions of section 166 of the Act. 7. The contesting defendants furnish an answer to the first limb of the challenge, on facts. The second challenge gives rise to a pure question of law upon admitted facts. 8. The contesting defendants say that the plaintiff and some other similarl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approaching the court without any plausible grounds therefor, the interim orders sought in respect of the extraordinary general meeting held on 18-8-2007, are declined. Further, there is substantial nexus established between the plaintiff and the said Ghosh and Goswami. In any event, section 172(3) of the Act provides that the accidental omission to give notice to, or the non-receipt of notice by, any member who was entitled to notice shall not invalidate the proceedings at a general meeting of a company. The plaintiff here has not been able to demonstrate that those in control of the company had deliberately failed to issue notice of the extraordinary general meeting to the plaintiff. The document produced by the company relating to the service of notice carries a stamp of the postal authorities, prima facie, establishing despatch. The amendments approved by the general members of the company at the said extraordinary general meeting have subsequently been approved by the Central Government as is required in case of companies governed by section 25 of the Companies Act. The Central Government's approval was accorded by a letter dated 28-12-2007, by the Regional Director of the Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge as to the legality of the company having convened the 64th annual general meeting of the company for the year ended 31-3-2007, on 21-7-2008, has to be assessed. 15. The parties have brought several authorities to bear on such legal issue. The plaintiff relies on an unreported judgment of this court in Suit No. 137 of 1994 (Bajarang Prasad Jalan v. Shree Hanuman Properties and Finance (P.) Ltd. delivered on 11-7-1994. On an interlocutory application in that suit, the authority of the defendant-company and its directors to hold an annual general meeting of such company beyond the period prescribed under section 166 of the Act was questioned. The interlocutory court recorded the submission on behalf of the company and its directors that despite their best efforts they could not hold the annual general meeting within the time as extended by the Registrar. They claimed that they had sought a further extension from the Registrar but the official did not respond to the subsequent request. On such facts and after noticing two previous judgments on the aspect, the court held as follows : "In my prima facie view, section 168 of the Act would underline the mandatory nature of the requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l general meeting within a period of not more than eighteen months from the date of its incorporation ; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year : Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months. (2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate : Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose : Provided further that- (a)a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not stand in the way of the company being left with no authority to hold the annual general meeting once the hold-by date is passed. The contesting defendants refer to section 167 of the Act and submit that the right to apply thereunder has been specifically conferred on members of the defaulting company but not on the company itself. They contend that there can be a situation where, despite the best diligence on the part of the company and its officers, the meeting is not possible to be held or completed due to some supervening circumstances or acts beyond the control of the company and its directors. They submit that in such a situation the company would be helpless as it would have neither any authority to convene the meeting nor any right to approach the Company Law Board for an extension beyond three months and wait for a member to apply to the Company Law Board for a direction on the company to hold the annual general meeting. 19. The plaintiff says that it would be evident from section 167(2) of the Act that an annual general meeting held pursuant to a direction by the Company Law Board at the behest of the member is, by a legal fiction in such sub-section, to be regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or to file statutory annual returns or balance-sheets or profit and loss accounts. 23. The opposing defendants rely on a judgment reported at (Hungerford Investment Trust Ltd. v. Turner Morrison & Co. Ltd. ILR 1972 1 Cal 286) and adopt as part of their submission, the following discussion at paragraphs 220 and 221 of the report : "220. The question then arises : What is the appropriate and proper interpretation to be put upon this time limit under section 166 of the Companies Act, 1956 ? Is it to be interpreted by saying that if the meeting is held in violation of the time specified under section 166, then it is invalid or void or illegal for all purposes ? Or, whether this prohibition of time limit only makes the directors who commit default liable only to fine or penalty under provisions like section 168 ? Section 168 of the Act provides for the penalty but does not make the meeting illegal. To make the meeting illegal would be, in such circumstances, to perpetuate an endless deadlock with endless penalty without remedy. That is a construction which should be avoided unless the court is compelled to adopt that construction by reason of the language of the relevant sections of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sections 166, 167 and 168 of the Companies Act." 24. The judgment in Hungerford Investment Trust Ltd., (supra) rendered in proceedings under sections 397 and 398 of the Act, was reversed in appeal in the unreported decision in (Hungerford Investment Trust Ltd. v. Turner Morrison and Co. Ltd., Appeals Nos. 251, 252, 253, 259 and 255 of 1970 dated 21-5-1981. These defendants refer to the appellate order to show that the view on a company's authority to hold its annual general meeting beyond the period prescribed by statute in the trial court order was not specifically reversed. The contesting defendants rely on a judgment reported at (World Wide Agencies P. Ltd. v. Mrs. Margaret T. Desor [1990] 67 Comp. Cas. 607 SC) which, at paragraph 20 of the report, relied on a trial court judgment in an English case notwithstanding the judgment having been reversed on other grounds in appeal. The contesting defendants next cite a judgment reported at (Armstrong v. Sheppard and Short Ltd. [1959] 2 QB 384 (CA)) for the proposition that if a person proves the infringement of a right he is entitled to an injunction, but the grant of the injunction is subject to a qualification; if the wrong done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the unreported judgment of Bajarang Prasad Jalan's case (supra) and in the Division Bench judgment in Bejoy Kumar Karnani's (supra). 27. In view of the binding precedents, it is not open to hold at this stage that a company has the suo motu authority to hold its annual general meeting beyond the time prescribed by statute. The legal question may require to be revisited, but at a different level. 28. The next question that arises is as to whether a civil court is precluded from permitting or directing a company to hold its annual general meeting beyond the prescribed date. If the requirement of a company to hold its annual general meeting is seen as a duty cast on the company by the governing statute, as is evident from the provisions of the said Act, then it is necessary that such obligation be required to be discharged at the earliest. A puny member in a large company has been conferred a right by section 167 of the Act to approach the Company Law Board for a direction on the company to hold its annual general meeting. That would demonstrate that there is a duty cast on the company's part to hold its annual general meeting and even a solitary shareholder may enforce the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice and the resolutions relating to the 64th annual general meeting of the first defendant-company convened and held on 21-7-2008, are set aside. The first defendant-company is directed to hold and complete its 64th annual general meeting for the year ended 31-3-2007, within ten weeks from date by complying with the provisions as to issuance of notice and laying of the balance-sheet and profit and loss account of the company for the relevant financial year. Since the first defendant-company is now also in default in holding its annual general meetings for the financial years ended 31-3-2008 and 31-3-2009 and since there would be no time to hold the annual general meeting for the financial year ended 31-3-2010, the company is directed to hold and complete the annual general meetings for the relevant financial years within eight weeks of the previous annual general meeting. The amended articles of association of the company would apply and the injunction sought in respect of the business transacted at the extraordinary general meeting of 18-8-2007, is declined. 31. G.A. No. 2281 of 2008 and G.A. No. 4009 of 2008 are disposed of. There will be no order as to costs. 32. Urgent certi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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