TMI Blog2012 (6) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be carrying on business in Singapore. After his appointment, defendant No. 2 returned to India, but had not attended any board meetings thereafter – Held that:- provision in section 313 with regard to the absence of the director from the State in which the meetings of the board are ordinarily held until the director returns to the State in which the meetings of the Board are ordinarily held as set out in sub-sections (1) and (2) thereof respectively would show not only a temporary return, but an intention to stay in that State so as to able him to transact the business of the company in the State where board meetings are ordinarily held. If a director such as defendant No. 2 merely comes to the State and leaves India again he would not be able to transact business. Hence, the alternate director would require to continue until the director appointing him would have continued. In instant case it would be permanently or until defendant No. 2 resigns or is removed is as director or otherwise vacates office under section 283. even if defendant No. 2 came to India for a week on his holiday or to visit his family, the defendant No. 12 would ipso facto vacate his office is wholly un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bricated, fraudulent and not binding on the Plaintiff. The Board Meeting of 5-8-1993 was convened and conducted inter alia in presence of the Plaintiff. Unanimous resolutions are shown to have been passed. The material resolution which dealt with the asset of the Company was authorising Defendant No. 6, the father of Defendant No. 2, to obtain vacant possession of a flat on the ground floor of the Company's building from one Pushpa Kadambande along with one garage and servant's room and upon obtaining such possession to let it out to Defendant No. 6 after he carried out external repairs and renovations to the entire building as per the offer made by him. The challenge to that meeting is essentially in respect of the said resolution. 6. The suit is, therefore, for a declaration that Defendant Nos. 6 has no right, title and interest in the suit flat, is a trespasser therein, for recovery of possession and for other incidental reliefs of damages, mesne profits and injunction. The suit also claims declaration with regard to the validity of several other Board Meetings with which this Notice of Motion is not concerned. 7. Pending the suit the Article 51( f ) and ( e ) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3 and Defendant No. 12 who was the alternate Director to Defendant No. 2. The Plaintiff admittedly left the meeting soon thereafter and before the resolutions of the Board could be passed. She submitted an objection letter and refused to sign the attendance register. It is her case that she was ridiculed and jeered on in the meeting which constrained her to leave the meeting before the business was transacted. 14. The Minutes of the Meeting show that due to the non-cooperative attitude of the Plaintiff and her regular objections for all activities at every Board Meeting the Company could not comply with statutory requirements of filing the statutory documents with the Registrar of Companies (ROC) or holding AGMs. Surprisingly the Plaintiff herself has taken exception to the Board passing resolutions for filing the statutory documents required to be filed by the Company, but remaining unfiled for as many as 9 years - a circumstance which would itself result in winding up the company under section 433( g ) of the Companies Act. The Board, in fact sought to make amendments and bring the stalemate to an end in that behalf. Several businesses came to be transacted at that meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act, 1956 which deal with meetings of Board do not make any provisions in that regard. Section 287(2) only requires 1/3 of the total strength of the Board or two Directors whichever is higher to be the quorum. However the provisions of the Companies Act, 1956 being subject to the Articles of Association of the Company and in the case of Defendant No. 1 Company there having been the aforesaid peculiar Article requiring the full strength of the Board to pass resolutions would necessitate the full strength to be the quorum. 21. Section 174 of the Companies Act, 1956 sets out the quorum for General Meetings which are members' meetings. Under section 174(4) a meeting would stand adjourned for want of quorum to the next week at the same time and place or as the Board may determine when if the quorum was not present within an hour the members present would constitute the quorum. Such a provision is absent for Board Meetings. Board meetings being meetings of Directors who act on behalf of the Company as their Agents are required to take place essentially every quarter for transacting various businesses. Hence understandably the provisions applying to the General Meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he businesses which were sought to be transacted thereat. The Plaintiff would have then been entitled to vote against the resolution sought to be passed and the resolution could not have been passed by a unanimous vote as required by the Articles of Association of the Company. The Plaintiff has called upon the Court to do what she could have done but failed to do. The Plaintiff has seen that despite her attendance there would be no quorum. 24. In the case of Hartley Baird Ld., In re [1955] 25 Comp. Cas. 386 a similar case was considered. The argument that such a conduct would bring about an absurd situation, because that would enable a person to wreck a meeting where a quorum was present at the beginning of the meeting by leaving before the business of the meeting was transacted and thereby reducing the meeting to a number below a quorum required was considered and accepted in that case. The article relating to the transaction of business in a general meeting with regard to quorum was considered. A member who was opposed to the resolution left the meeting before the vote was taken. It was held that Article 52 was complied and the resolution passed was a valid class resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a Board Meeting. The three signatures of the three Directors required to transact the business unanimously are not shown. A separate sheet of paper cannot be termed as minutes of the meeting of the board which are required to be kept as per the specific mandate contained under section 193 of the Companies Act, 1956. Mr. D'vitre on behalf of the Plaintiff concedes that aspect. However he contended that the signature of Defendant No. 2 would show his presence in the State of Maharashtra and merely by such presence, Defendant No. 12 would ipso facto cease to be the alternate director of Defendant No. 2. 28. It has been argued by Mr. Rao on behalf of the Defendant that the interpretation of section 313 must be made such that the requirement for the alternate Director to cease to be the Director would be not when the Director appointing him merely returns to the State, but when the Director actually attends the Board Meeting held in that State. 29. A reading of section 313 shows that that specific requirement is not made. For the alternate Director to cease to be a Director, the actual attendance at Board Meeting of the Director appointing him is not contemplated under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the Board Meetings are ordinarily held ( i.e., where the registered office is generally situate) not for a temporary period e.g., on a holiday or on vacation. It will imply the intention akin to the intention required to be domiciled in the State. Therefore, when the original Director returned to India and the State in which the board meetings were held to carry on his business in India that the alternate Director would vacate his office under section 313(2) of the Companies Act, 1956. 33. Consequently, the interpretation sought to be put by Mr. D'vitre that even if Defendant No. 2 came to India for a week on his holiday or to visit his family, the Defendant No. 12 would ipso facto vacate his office is wholly unacceptable. Similarly the interpretation put by Mr. Rao that only when Defendant No. 2 actually attended the Board Meetings of Defendant No. 1 that Defendant No. 12 would vacate his office as alternate Director cannot be accepted. It would be when Defendant No. 2 ceased to have the global business that he is stated to have in Singapore and would commence his business in India, in the State of Maharashtra so that he would be available for attending Board Meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. relating to a mortgage decree did not apply to a compromise decree as that would be taking advantage of one's own wrong and putting a premium on the defaulter under the decree. ( See in the case of Rabindra Narain Lall v. Smt. Nirmala Sinha AIR 1978 Patna 162). 38. Consequently, reliance by Mr. D'vitre on behalf of the Plaintiff upon the judgment in the case of Ranjit Sinh V. Patil v. Collector 2004(3) Mh. L.J. 642 that for a meeting to be valid it must begun with the minimum number of persons fixed by provisions of law, rules or Bye-laws constituting the quorum and to continue the same to business and to validly transact its business would not apply in the case of an ulterior action meant to frustrate the board meeting. Of course, in the normal case a board meeting cannot be held such as to have the quorum only at the time of its commencement and later to continue the meeting of the board by passing resolutions in the absence of the minimum number of Directors required to constitute the quorum. Consequently, in a given case if it does so happen that if some of the Directors have left the venue of the meeting upon understanding that the proceedings at the meeting ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, it followed that there was mismanagement of the company amounting to oppression of one group by the other 'whichever way it may be looked at'. It was observed that the grounds were made out for the intervention of the court by exercising its extraordinary power under sections 397-398 of the Companies Act, 1956 to put an end to the matter complained of, so that 'no further prejudice could be caused to any of them'. 41. The case of Yashovardhan Saboo v. Groz-Beckert Saboo Ltd. [1995] 83 Comp. Cas. 371 (CLB) also had two rival groups having unequal shareholding, but equal participation under the articles. The requirement of unanimous resolution resulted in an impasse on issues resulting in consequent deadlock in management. The reliefs under sections 397 and 398 of the Companies Act were held grantable. 42. In fact in this case also the Court suggested a fair settlement between the parties by paying off/selling off between the Plaintiff and the Defendants. However, the Court cannot allow the parties who do not call it a day despite the deadlock created by at least one of them and seek relief to perpetuate the deadlock. If the company were to be a going conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Bom. 20/[1995] 82 Comp. Cas. 5 (Bom.) relied upon by Mr. Rao, the prejudice caused by a shorter notice came to be considered. In that case instead of the notice of 21 days the notice was sent 20 days prior to the meeting. Since no prejudice was shown to have been caused to the Plaintiff no relief was granted. It was held that the requirement of the service was directory and not mandatory. 47. Consequently, none of the meetings have been invalidly convened or held and no resolution passed at any of the meeting can be injuncted by the Court. 48. The Plaintiff has also sought an injunction against Defendant No. 6 being restrained from acting as the Director of the Company. Defendant No. 6 has been appointed Director of Defendant No. 1 Company also under the resolution passed at the board meeting held on 6th August 2009. His appointment also does not come up for challenge. 49. In fact strangely the Plaintiff has sought to restrain the convening and holding of all forthcoming meetings of Defendant No. 1 Company also. It need hardly be said that that would tantamount to bringing about and complete deadlock without the company being wound up, without any proceedings having b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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